RE:RE:An Interesting Week so farIf you have read every bit of public disclosure since 2004, chatted endlessly about it over 17 years of arguably abusive treatment of a junior JV partner ... it might well move contrary to its peer indexes because if there ever was a “special situation” surely ETG is a poster child.
Strike one is the Mongolian pillaging of Khan Resources and South Goni Energy. Strike two is political shenanigans and reversals going back to the sudden imposition by dark of night of the punitive windfall profits tax as a blunt threat right during the critical initial IA negotiations way back in the time leading up to the extraordinary (for Mongolia) political compact of 2009. Strike three is multiple reneging by various claims of illegality, invalidity, misunderstanding, all complete BS, lading to at least 2 lengthy shut-downs of all development at OT, and renegotiations of additional assurances and concessions (The Dubai Agreement, the subsequent cavilling about OTLLC approvals and financing, now once again in play before Rio will commit to the Hugo North initial undercut production). Well,three and you’re out with most prudent portfolio advisers, but add in the choking of TRQ by RioT, a very public squabble about funding, extremely convenient for Rio as the bare-majority shareholder to create discounting financial uncertainty when they themselves are by far the most likely buyer of the minority equity.
Bottom line, Mongolia and Rio Tinto have taken turns trying to make an absolute peach look like a prickly pear, and to a large extent they have succeeded. All early projections, the complete halting of meaningful exploration drilling all around the existing resources when it remains an open camp play ... liability shy analysts base opinions of value of public disclosures and projections that can be highly variable and based on many opinion projections (metal prices, discount rates, production decisions, financing costs) ... they lap it up as delivered and come out with brave projections like the recent brokerage that stuck their neck out and suggested TRQ at $24. Recall this stock, before a ten to one rollback, was trading at $28 or so in and around 2010 (??) Ah the beguiling power of Bobby Friedland promotion compared to the dour and dire self-serving Rio Tinto doom and gloom.
While it is true there is a high threshhold for new resources to displace the grades available and capes expended already on targeting Hugo North/HNE ... just suppose there were some higher grade shallower targets on the JV, cheaper to mine with higher NSR’s. And let’s say you knew if the Mongolians realized they could go it alone with open-pit technology and reduced capex, there was a not immaterial danger of revealing such mineral resources before they were well and truly contractually and internationally bound to their partnership terms. Look at the long section of OT and how the deposits are bedded and dip along a northerly axis ... all those kilometres North of the currently disclosed extent of HNE ... that’s prime exploration and drilling target country. Same goes to the Southwest beyond Heruga, and the East and West of OT where, until the sell-out, or was it sell-in of the Earn-In Agreement in 2004, there were juicy shallow gold targets, for example the X-grid high was recommended for follow up drilling high never seemed to occur. The IVN geologists as early as 2002 in discussions with the world-leading massive porphyry geologists knew and speculated that a halo area around a high-pressure fluid emplacement of copper-gold-moli such as OT was highly prospective for shallow precious metal deposits as well. It’s true erosion Andy subsequent folding/faulting might obliterate such deposits if they were ever in place, but there are targets, and essentially there has been no major exploratory drilling for the last ten years.
There is nothing like this. Buried under years of political wrangling, focus on the existing mine and underground plans in hand, by no means fully explored or delineated, this punter says vastly undervalued by the market, and as soon as they start mining at Hugo North the results are going to surprise on the upside.
Do your own DD, but accumulate and hold TRQ and ETG is my best guess, if you can stand the political uncertainty. There aren’t many cusp of production projects being traded at such low valuations in the copper sphere. So if you believe in leverage to copper with generous gold inputs ... fill ‘er up!
Yeah I drank the Yak-aid years ago. Burp. Holding a stupid size position.
cg