10/27/2012
December 3, 2017
10/09/2012
December 3, 2017

10/17/2012

Thought you might find this interesting.

24 min video on conflict in Northern Myanmar…

http://www.aljazeera.com/programmes/peopleandpower/2012/10/20121031172469210.html

I had no idea about a civil war going on. Just shows how little most people know about Myanmar.


Kuppy

Just an observation: I think there is a possibility that AYR is acquired at some point. The asset heavy nature of its balance sheet makes it very attractive to certain buyers (e.g. Mitsubishi UFJ Lease’s acquisition of Jackson Square Aviation for about $1.3bn last week and Sumitomo Mitsui Financial Group’s acquisition of RBS Aviation Capital for $7.3bn in January).

The conversations I’ve had with the Japanese trading houses and banks indicates their continued appetite for businesses of this type (to spend some strong Yen and exploit their low cost financing).

Thanks for the idea

Could happen. The whole world wants yield.


” it has to travel 250 kilometers by truck to the Chinese border.” Kuppy, Wouldn’t it be cheaper to build a railroad from the mine to the Chinese border in order to move the coal?

Hehe—that’s a bit piece of my Mongolia thesis. They are building this railroad and when it’s complete, Mongolian coal will be substantially cheaper than Australian coal.


Kuppy,

Where do they get the water used to process the coal?

The water comes from underground aquifers. Water availability is a serious risk to all of these wash plants. However, they are designed to use less water than most wash plants and to re-use water.


Hi Kuppy,

You recently wrote about a trade in Boart Longyear. Looks like the CEO has just left (or was pushed out):

http://www.reuters.com/finance/stocks/BLY.AX/key-developments/article/2617032

Just curious to know if you have any thoughts on it, and if you think this is a sign for the drilling industry (and EGD) or if it’s just something specific with Boart (their stock hasn’t exactly done well in the past 5 years…).

I think the CEO was pushed out because he’s overseen a pretty severe destruction of capital since the IPO. Buying assets at cyclical tops and then raising equity at the lows to finance these acquisitions isn’t how to create value….

I think EGD might have a few weak quarters, but I don’t see anything that will impact them long term.


Do you have any lessons learned to share from the 2008 global financial crisis?
Here’s a quip from Steve Cohen (found while I was searching for something else):
His lessons from the market tumult in 2008?

“Leverage, concentration and illiquidity are the three things that can kill you,” he said. SAC’s big losses came from new areas that they had entered, like corporate debt. The firm got bigger for the sake of getting bigger, he lamented, and now realizes that they can’t do everything. Quoting his father, Mr. Cohen said, “A shoemaker makes shoes. You have to stick with what you’re good at.”

Lessons from the 2008 crisis;

Small companies are fragile and in a downturn, you lean just how fragile they are.

In the short run, shares can trade at any price or valuation. Never use leverage, because you’ll always be forced to sell at the lows.

Junior mining is a business that only works if there is liquidity to raise more capital

Stay liquid and keep your illiquids to less than half of your portfolio

Always keep cash reserves, don’t get tricked into going ‘all in’ ever. Prices can always get cheaper.

There are just so many lessons.


Astounding photos, Harris.  No matter how clear, and no matter how much scale one tries to put in either the foreground or background, the sheer size of these projects must be even more immense in person.  Thanks for sharing.  

Has the government in UB looked into better ways of turning this coal bounty into alternative energy sources?  Specifically, has there been any thought of inviting Sasol (SSY) into Mongolia to use its Fisher-Tropsch process for turning coal into synthetic fuels and chemicals? (  http://en.wikipedia.org/wiki/Fischer%E2%80%93Tropsch_process).  Sasol has been turning South African coal into fuels for decades and they also have a division which will partner with other countries to build similar plants.  Of course, this process is capital intensive and takes years to bring online, but the upside is more foreign investment in Mongolia and cleaner air over time.  Just a thought.

Stay warm upon your return to UB, Harris!

Trust me, the size and scale of these projects is much more impressive when you are equipped with something more substantial than an iPhone 4… lol

I know that a number of companies in Mongolia have spoken about coal to liquids technology, but I don’t believe that it has progressed very far.

I just landed in UB and it’s 20 degrees Fahrenheit—guess that’s warm for October…


Gold took a tumble today, how did you know to sell the highs?

I didn’t. It’s just risk management. Up 200 points in a month means it’s time to harvest some gains. It’s pretty rare that I get the top or the bottom.


I get the ‘don’t fight the Fed’ advice but historically there must be a precedent for when monetary easing/QE no longer work to support asset prices. Do you have any insights, examples or metric you would look at to see if we have hit an inflection point. Thanks.

If the Fed wants to create inflation and a bigger asset bubble to bail out the las one (which they have repeatedly said is their objective), then they will succeed.


Recently there was some talk about renegotiating the contract regarding the Oyu Tolgoi mine ownership and or the general rules for direct foreign investments (DFI). Some in the the Mongolia Government are pushing to get more of a slice. The new PM, Norovyn Altankhuyag, seems like he understands what is at stake and appears he is pro foreign investment. My take is that this is just political rhetoric. I know how to gauge rhetoric here in the USA based on who says it, and what is going on at the time, i.e. the election cycle. Do you sense any underlying material forces that could change the existing rules for DFI in Mongolia?

I don’t see much change coming. Remember, Mongolia is a democracy. You need a majority of the votes to get things changed. When parliament members say things that are scary to foreign capital, it tends to get picked up by foreign papers. However, the guys looking for a bigger piece of OT are in the minority in the government.


http://www.sun-sentinel.com/business/fl-foreclosed-investment-20121009,0,2949263.story

Maybe the free market does work…..?

Lower prices are the solution to most problems in the economy. I wish the Fed would just understand how economics works.