Saturday, January 19, 2013

On Mongolia

Be careful on the emerging countries like this one:

1. Do not trust most of the financial statements. They do not have an organization like SEC and the audit firms are working for the companies. They learn the tricks from some fraudulent Chinese companies.

Mining companies are hard to evaluate. You need to compare how much mines they have and how expensive to extract, ship and market, not counting the current price of the commodity.

2. Do not know whether the government wants to 'nationalize' the company when they see appropriate.

3. Mongolia is a land-locked place. It depends on Russia and China. Russia has not been nice to Mongolia (due to the invasion from Khan whom the Russians still remember even after several drinks of Volka) and set it up a buffer zone when China was weak.

China wants its coal and other resources. Throughout history they were aggressors (if you read the long history of China and the Great Wall) as it used to produce nothing except some cattle and loots from the travelers and Chinese. Now, they have the natural resources discovered recently. Today's Mongolians are exceptionally friendly though.

Disclaimer: I had profited from Ivanhoe Mine before. I got out early to have a good sleep.

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