Mongolian debt, copper mining a play on Chinese construction, consumption
Back in June Batbayar Balgan, director general of the financial and economic policy department of Mongolia, spoke of the country's plans to raise $500 million selling bonds in 2010, while the remainder of a planned $1.2 billion program would be sold according to market conditions. Bloomberg notes that the government scaled back its plans for global bond sales after Europe's debt
crisis drove up borrowing costs, and that investment banks have been advising Mongolia to issue debt with maturities of 5 years to 10 years. Per the country's Finance Minister, Sangajav Bayartsogt, said securities may yield between 8 to 11 percent.
Mongolia is still a fringe play on commodities, and specifically copper, coking coal and uranium, though if the copper industry's fundamentals in particular indeed shift, and the country's stock market develops further (currently only 300 listed companies with a total market capitalization of only $1 billion, per the Mad Hedge Fund Trader) it will likely garner increased attention as a steadier play on risk amidst stabilizing cash flows and increased liquidity. This should bode well for its debt. Moreover, the “spillover” effect on GDP is likely to draw further capital stock investment and create a postive feedback loop for future, near-term growth levels. Per the secular demand for copper (driven chiefly by China; see graph inset), analysts with Goldman Sachs recently wrote that “the combination of lower copper-exchange inventories, robust demand largely driven by emerging-market urbanization and a constrained copper-supply outlook will sustain copper deficits large enough to mostly deplete exchange inventories by the end of 2011.” To that end, Barclays Capital agreed, writing to investors this month that it was “reiterating [a] long-held bullish call on copper as supply constraints in the copper industry have intensified due to a variety of issues including declining grades, increasingly difficult geology, and rising geopolitical risk in copper-rich regions of the world.”
Copper dropped for the first time in four days on Friday from a 27-month high, its rise during that time further fueled by the falling dollar. Furthermore, The Macro Man, a London-based money manager, noted that Ivanhoe Mines' (NYSE: IVN) Deputy Chairman and Director (one of two firms along with Rio Tinto slated to develop the world's largest undeveloped copper resource, the Oyu Tolgoi mine in Mongolia ) Bob Friedland described Chiquicamata and other mature Chilean mines as “a little old lady in bed, waiting to die” during a recent conference, hinting at the very impending, structural changes in the supply chain explicitly highlighted by the major investment banks. Even the IMF agrees, stating last week that ”deteriorating mine productivity (copper and tin) and the impact of policies targeted at reducing the impact of metal smelting on the environment (lead) are among the most important constraints on supply.”
crisis drove up borrowing costs, and that investment banks have been advising Mongolia to issue debt with maturities of 5 years to 10 years. Per the country's Finance Minister, Sangajav Bayartsogt, said securities may yield between 8 to 11 percent. 
Mongolia is still a fringe play on commodities, and specifically copper, coking coal and uranium, though if the copper industry's fundamentals in particular indeed shift, and the country's stock market develops further (currently only 300 listed companies with a total market capitalization of only $1 billion, per the Mad Hedge Fund Trader) it will likely garner increased attention as a steadier play on risk amidst stabilizing cash flows and increased liquidity. This should bode well for its debt. Moreover, the “spillover” effect on GDP is likely to draw further capital stock investment and create a postive feedback loop for future, near-term growth levels. Per the secular demand for copper (driven chiefly by China; see graph inset), analysts with Goldman Sachs recently wrote that “the combination of lower copper-exchange inventories, robust demand largely driven by emerging-market urbanization and a constrained copper-supply outlook will sustain copper deficits large enough to mostly deplete exchange inventories by the end of 2011.” To that end, Barclays Capital agreed, writing to investors this month that it was “reiterating [a] long-held bullish call on copper as supply constraints in the copper industry have intensified due to a variety of issues including declining grades, increasingly difficult geology, and rising geopolitical risk in copper-rich regions of the world.” Copper dropped for the first time in four days on Friday from a 27-month high, its rise during that time further fueled by the falling dollar. Furthermore, The Macro Man, a London-based money manager, noted that Ivanhoe Mines' (NYSE: IVN) Deputy Chairman and Director (one of two firms along with Rio Tinto slated to develop the world's largest undeveloped copper resource, the Oyu Tolgoi mine in Mongolia ) Bob Friedland described Chiquicamata and other mature Chilean mines as “a little old lady in bed, waiting to die” during a recent conference, hinting at the very impending, structural changes in the supply chain explicitly highlighted by the major investment banks. Even the IMF agrees, stating last week that ”deteriorating mine productivity (copper and tin) and the impact of policies targeted at reducing the impact of metal smelting on the environment (lead) are among the most important constraints on supply.”
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