The advanced marketing technologies of the international stock exchanges, the modern ideas of financing derivates of the snow covered assets of mines is now a reality. It converts the future gold production into recognized financial instruments and cash.
I discovered Gold Indexed Bonds 25 years ago.
It works.
The Mongolian government, the Mongolian Parliament are the willing victims of an unnecessary dilemma. Mongolia is a very rich country. Mongolia's future is bright. The political campaign that is being waged today designed for the merits of the current and future generation of Mongolia can be resolved by ordinary mathematics by application of advanced investment techniques. These solutions are the proper application of the vast progress the international stock markets have made and the modern financing techniques which are available to every country in the universe. A rich country like Mongolia could be the Number One Customer.
Let us now concentrate on the beginning!
1. Mongolia's assumed gold reserve is 32 million ounce. The estimated 1 million ounce gold production in a full year of mining with the assumption of $1,000 price per ounce of gold is $1.0 billion.
2. According to classical theories, this would represent a total value of $32 billion. Assuming no particular dramatic increase in the price of gold, simultaneously with the discounted value of the yearly production, we could conclude that Mongolia can produce 32 billion ounces of gold. If we assume that the discounted value and the future increase of price of gold will equal one another, the total value of the reserve is about $30 billion to $40 Billion.
For mathematical illustration, we assume an equal split between the producing companies - RTZ and Ivanhoe, commonly called The Ivanhoe Group, and Mongolia - the value of gold reserves of Mongolia is about $16 billion. However, Mongolia is projected to draw only $300 M in 2010 and $500 M in 2011.
I would like to mention that these numbers are not politically accurate. I simply produce the underlying tables to illustrate as a starting point for our presentation.
It should, however, be pointed out that there have been several years of negotiations for the so-called Investment Agreement, that it would take two years to get to production, that it would cost $1 billion to the Ivanhoe Group to get the mines into the production stage, and we are disregarding the usual vagaries accompanying the mining industry which can cause very serious dislocation.
3. The following tables summarize what I call the starting point for a corporation. Let us call is Mongolian Gold, and let us list it on the NYSE, with the ticker MGG. Let us designate and refer to as the way business is conducted in the 20th century. My report to the Mongolian people, to the Mongolian Cabinet and Parliament is a cheerful presentation of the methods available in the 21st century.
4. In the 21st century, the international stock markets have advanced, and it is possible to discount future values to create early cash receipts. It is expected, however, in no uncertain near-terms, that every contract between any at all parties are legally set and binding.
5. Going back to our original numbers, valuing the gold reserves at $32 billion of which $16 would then belong to Mongolia, it is quite possible to form a public company and place the entire gold reserves and future products of Mongolia into this company. This company will have international status; it will be in the billion dollar class; therefore, it can be listed on the New York Stock Exchange, on the London Stock Exchange, in China, in Hong Kong, and possibly in Zurich, Switzerland. We name it MONGOLIAN GOLD.
6. Assuming that such a company is being formed, its initial market value will not be called excessive if we call it $13 billion. After all, gold production is 2 years away.