Profit from Mongolian Coal Stocks

Written By Christian DeHaemer

Posted July 30, 2010

Over the past few months, I’ve been telling you about the world’s most undervalued oil company.

It’s up 727% since I recommended it, and is still undervalued by more than 1,000%…

And this play, dubbed Stalin’s Lost Oil, still has plenty of room to run.

But today, I’d like to tell you about a company that could be the next big energy winner.

It’s the world’s most undervalued coal producer. 

And the value numbers are staggering

In fact the next sentence sums it up:

This 45-year-old company has more than 100 million tonnes of high quality, thermal coal, and yet it has a market cap of only $20 million.

That’s right. The company produces more than 500,000 metric tonnes of coal per year, and currently boasts a reserve base of 100 million tonnes (or more) of high quality thermal coal — the very type of coal that China covets.

This is no flash-in-the-pan startup… This outfit employs 1,200 workers and supplies about 15 percent of Mongolia with high quality coal.

So, why is a coal company that is usually valued at $5 per tonne of reserve now trading at twenty cents per tonne?

I’ll tell you why. 

This company is cheap for a number of reasons, the first of which is, that it is in Mongolia — which, as you know, is a euphemism for the middle of nowhere. 

But as we’ve seen with the 727%-plus gains from Stalin’s Lost Oil play, the story is getting out.

Mongolia is the next major commodity hotspot.

Pre-IPO pricing

The coal company you are researching used to be owned by the government, and has a forty-five year history of production. They were privatized and listed on the Mongolian Stock Exchange in 2003 after a pro-capitalist, democratic, free market government took over.

But just a few months ago, a private New York-based hedge fund acquired 54% of the company. This company has been near the top of list in Barron’s for profitable hedge funds. It makes its living by buying undervalued companies in frontier markets and unlocking that value.

This time, the plan is to take the company public in Hong Kong…

Which means you can buy today before it IPOs on a major international exchange.

In order to list the company on a major global exchange, the company hired a Western drill company to substantiate the amount of coal and produce a Joint Ore Reserve Committee (JORC) compliant reserve statement. 

Stick with me, this is important…

JORC is sponsored by the Australian mining industry and is a widely accepted professional reporting standard in Asia. This would qualify the company for a listing in Hong Kong.

(For the record, the last Hong Kong IPO, The Agricultural Bank of China, was oversubscribed and made $21 billion.)

This is what the JORC found:


This Mongolian Coal company is now trading at a low valuation of 20 cents per tonne of coal reserves. 

Other Mongolian companies like SouthGobi and Mongolian Energy trade at an average of $5 per tonne of coal reserves. So there’s a massive upside here — just as with Stalin’s Lost Oil

But you want to be in before the Hong Kong listing. 

The company recently traded at US$ 2.95 per share with only 7 million shares outstanding, which means if the company starts to move, it will move fast.

And there are lots of positives here. The Mongolian Currency (MNT) is appreciating against the U.S. dollar:

And the Mongolian stock exchange was the best performing market this year — up 68%.

The way to buy this stock is at pre-IPO prices and wait for the listing in Hong Kong.

But this stock is not for slackers; you might have to send a few faxes…

That said, I’ve worked with this New York hedge fund before, and my readers have made a great deal of money on company’s like Hurricane Hydrocarbons, and on an Australian uranium company that was bought out by Paladin Energy for a high triple-digit gain.

(Please note that I am in no way affiliated with this fund, nor have I received payment or benefit.)


The basic catalyst for this Mongolian Coal company is that word of its basic value will get out — as a result of exports to China, promotion by the hedge fund, a Hong Kong listing, and the rising awareness of Mongolian stocks in general. 

You have to understand the value here. 

The company is so inexpensive that the rail spur it owns to the Trans-Mongolian Railway is worth $40 million alone. 

Again, this company has a market cap of $20 million and is sitting on 100 million tonnes of coal. It would have to go up by 25 times to be of fair value even to its Mongolian peers!

But you can’t wait. The shares are starting to move. It was up 11% last week to 4,001. (USD1 = 1352.5 Mongolian Turgid (MNT))

That puts your per share price at $2.95.

This is one of those trades that comes along once a decade. It’s not for the herd. 

But if you have what it takes, join us and get rich.

Christian DeHaemer
Editor, Energy and Capital

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