RE:RE:RE:RE:RE:major haircut I’m not a major holder of TRQ but am swimming in overweight ETG. I know it has particular risks related to the non-IA status still to be resolved, but to me the much smaller capex and the valuation being given to the JV makes ETG the more likely substantial gainer.
i also don’t believe either company won’t be bid out by some combination of Rio and Mongolia and perhaps one other entrant. The big cash flows aren’t going to the public market is my best guess, the big question is at what price will it all be taken private.
As for TRQ, there has been a pretty good cyclical trade back and forth between ETG and TRQ for those that played OT that way. I have a soft spot for TRQ because the stock tanked during the great financial crisis and I really stick my neck out and made a bundle in the following two years thanks to RF’s promotion. It looks pretty deeply undervalued to me again in light of projected copper and gold demands, subject to the ever-present risk of Mongolian self-inflicted implosion.
I’m in an ETG “sit tight be right” posture as my OT play for the time being.
Rio has a real problem with having to stick by their contractual agreement to underline to Mongolia a deal is a deal. Cost overruns alone don’t justify amendment - presumably the risks of cost overrun were baked in the cake, and the fact Mongolia, RioT and the TRQ minority would share the same by thirds each was the assurance that was agreed to. Even if Rio wasn’t 100% competent or chose the most economical solutions, too bad, they were the manager and that’s the way it went down. Mongolia has to understand when you make a deal and it assigns risks you don’t get to renegotiate after the fact just because your expectations weren’t met - what matters is how you contracted to bear the burden of risks in the event they arose. As for them expertks reports and second-guessing about how somebody else would have been so much better and cheaper ... sure hypothetical armchair opinions bought and paid for by Mongolia to exert leverage. So what.
We’ll just have to wait and see how long it takes for the parties to understand they are stuck with each other and had better get mining under the terms of the deal they re-struck and reconfirmed in 2014.
cg