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Tuesday, September 7, 2010

Ivanhoe (NYSE:IVN) and Politically Unpredictable Mongolia

Mongolia is dealing with issues it hasn't had to face in the past, and it is leading to unpredictable situations in regard to mining companies, and Ivanhoe Mines (NYSE:IVN), which has a huge project in Mongolia called Oyu Tolgoi, they'll have to keep a close watch on their investment as the continuing narrative unfolds.

The major problem involves building out their infrastructure needed to make mining in the country feasible. All the mineral resources in the world won't help if there isn't the transport facilities in place to move the ore where it needs to go.

Other factors are geopolitical, with China and Russia attempting to exert great pressure on the land-locked country in order to secure many of the resources for themselves.

Mongolia is also starting to understand the economic situation they're in, and corruption has emerged in some cases where existing laws have been changed on a whim, causing licenses to be revoked, as in the case of subsidiaries of Khan Resources Inc (TSE:KRI).

Ivanhoe shouldn't be affected by the volatility, as it seems Mongolia is focusing on new projects and how to frame their resource policy and strategy.

Those in the middle of securing projects or wanting to in the future, could have a long and uncertain ride until these things are ironed out and a stronger rule of law is enacted.

It's like Mongolia has been unsuspectingly awakened from a long sleep and they're trying to figure out how to use their economically atrophied muscles.

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