By John Miller, editor, The ASIA Miner
DESPITE the well-documented suffering experienced by Mongolia’s mining industry, newly-listed Tian Poh Resources has great confidence in the country’s future and is investing heavily in its undoubted mineral potential. While many resource companies are in hibernation during this difficult time, Tian Poh sees it as a time of great opportunity to raise funds and secure mineral properties with plenty of upside.
Since IPO listing on the Australian Stock Exchange (ASX) last November with a production-ready coal project as its flagship asset and nine other advanced Mongolian exploration prospects, Tian Poh has backed-up its strategy of advancing highly prospective resources assets and fast-tracking production by securing an option to acquire 51% of the Zuun Mod Molybdenum-Copper Project.
Earlier this year, Tian Poh signed an agreement with Canadian resource company Erdene Resource Development Corp giving it an exclusive option until June 11 to acquire 51% of Zuun Mod. The project has an NI 43-101 compliant measured and indicated resource of 218 million tonnes @ 0.057% moly and 0.069% copper for 273.5 million pounds of contained moly and 330.7 million pounds of contained copper, making it one of the largest moly deposits in Asia. There is also an inferred resource of 168 million tonnes @ 0.052% moly and 0.065% copper for 191.8 million pounds of contained moly and 240.5 million pounds of contained copper.
Zuun Mod is within 100km of Tian Poh’s Huabei Kuangye Coal Project which offers the company the possibility of generating power for future Zuun Mod operations. It is in Mongolia’s ‘elephant country’ in the South Gobi region, not too far from the massive Oyu Tolgoi project, 180km north of the Chinese border and 126km from the railhead. It consists of two mining licences with a total area of 6399 hectares.
Zuun Mod potential
Tian Poh is carrying out due diligence which it hopes will lead to a feasibility study to support formulation of development plans for Zuun Mod. It believes there is significant potential for increasing mineral resources and making additional discoveries with mineralization open to the north, south and down dip of the current resource.
Geophysical surveys, geological mapping and surface geochemical surveys elsewhere in the project have identified several other prospective areas, including anomalous copper, moly and gold in soils to the west and north of Zuun Mod porphyry.
Tian Poh Resources’ CEO Poh Kay Ping said: “Zuun Mod is very strategic to Tian Poh and will add significantly to the company’s assets due to its outstanding copper and molybdenum prospectivity, the closeness to our coking coal mine and proximity to the Chinese border. For us this is a fantastic opportunity to be able to use our energy source, coal, to generate power to produce copper and moly. We are excited about the acquisition of what we believe to be a world-class asset and are looking forward to bringing it into production. It will add significant cost competitive advantages if we go into production.”
Of the due diligence process, Poh Kay Ping says it is progressing well. “We are transferring all information into our data room and doing a checklist. There was a huge volume of information generated by previous owners. Once complete we will begin the remainder of the due diligence. The legal process has commenced and we are working through the Mongolian due diligence with the licences and local tax authority processes.
“The work carried out by Erdene has been professional and is very thorough. We are, therefore, confident that the due diligence process will not be a problem and we do not expect any surprises. If we indeed proceed with Zuun Mod, we expect to do a little more work on the copper side of the project, which we believe has good potential. Work to date shows a low copper grade which is okay as a by-product, however we will do additional work to determine if it is feasible for us to invest further in the copper side.”
Future for copper
Although the price has fallen in recent months, Poh Kay Ping says he is confident about the future demand for copper. “The commodity is under pressure due to oversupply and slowing economies. However, China is still growing and there are signs of recovery in other markets, so demand should pick up.
“India is a wild card in the current market situation. With the progressive policies of the government we expect India to invest heavily in infrastructure which will drive up demand for resources like copper and ensure strong demand for steel.
“I believe we are at a very low level of the commodity price cycle but we must not forget that we had a huge boom before this, which makes the decline more difficult. The production overcapacity situation is adjusting by itself because some producers are unable to produce below the selling price. We don’t know whether there will be a quick rebound or a gradual recovery but I believe recovery is imminent and now is a good opportunity for Tian Poh to acquire strategic assets, such as Zuun Mod.
“My family has been in business for more than 60 years in Singapore and has seen many cycles. The strange thing is that when things are very good and the cycle is near the top, people rush in, but when it is low, people stay away and don’t look at the opportunities that abound. It takes brave people to take advantage of these counter-cyclical situations.
“It is a commonly held belief that it is best to buy low and sell high, but this tends not to occur in resources markets. These periods present opportunities for entrepreneurs – those who are financially strong and who have survived this period of decline are in a very good position for the future upturn.”
When Tian Poh listed on the ASX last November, it had 10 assets in Mongolia. Huabei Kuangye has a 30-year mining licence with a Chinese standard resource of 61 million tonnes of semi-soft coking coal, and the company is converting this to JORC standard. Of the other nine concessions, several are strategic and close to Oyu Tolgoi and Tian Poh has had encouraging results from preliminary survey work.
Huabei Kuangye is in Bayankhongor province, adjacent to Shinejinst coking coal mine, which has about 95 million tonnes of JORC reserves.
The project is 270km by road from the Chinese border town of Ceke with rail access planned. Nineteen holes were previously drilled and Tian Poh is planning a new drilling program.
The IPO raised more than $2.396 million and the prime purpose was to fund development of Huabei Kuangye. The IPO enabled Tian Poh to complete the acquisition of Poh Golden Ger Resources which held 100% interest in nine exploration licences and one mining licence spanning about 125,000 hectares. The licences are grouped into four project areas across the south of Mongolia – Amulet in Govi-Altai province, Mandal-Urgukh and Khangailand projects in Omnogovi province and Huabei Kuangye in Bayankhongor province.
Tian Poh has conducted Induced Polarization surveys over a number of tenements with at least eight geophysical targets delineated, including four on one concession in the Khangailand area. The company plans to undertake a geophysical survey this year in that area to target potential mineralized intrusions at depth.
“One of the geologists working with us was involved with the discovery of Oyu Tolgoi and is very familiar with the area. He believes we should concentrate on several areas that show promise and where he has gathered rock samples containing 4% or 5% copper. We still have preliminary work to do but he thinks we should punch a few holes in these areas after winter as he is confident of their prospectivity,” the Tian Poh CEO said.
“He is one of several experienced, out-sourced consultants we are using as they have expertise in the area and with the commodities we are seeking. We will use local expertise wherever possible, including with geology and drilling. During the mining downturn in Mongolia a lot of drilling companies have gone bust while there are also a lot of exploration professionals looking for work.
“Interestingly, we have already discovered water at one of our concessions which also boasts a very strong copper anomaly. Water is a very precious resource in the South Gobi.”
Confidence in Mongolia
Poh Kay Ping says Mongolia is an interesting story but, unfortunately too many people concentrate on the negatives and for many investors it is a case of once bitten twice shy. “The government has gone down the protectionist path, like many other governments, but has come to understand that overdoing this is not healthy. Last year, it reversed some of these policies and has now resolved the mining licence issue, opening the resource-rich country up again for exploration.
“The way ahead is straight forward and the government now appears to be aligned with the business community in terms of foreign direct investment (FDI). It is determined to improve the standard of living, but to do that it must have businesses investing heavily in the country, creating jobs and export opportunities.
“The mineral prospectivity is still there but from time to time every country has domestic issues to take care of, sometimes to the detriment of development. For Mongolia this has been part of the learning process, but the country is ready to move forward. I believe the government is looking forward to working with us along with other businesses to help put the country back on track.
“An investment in any country has to be a win-win - there must be benefits for the investor as well as for the country. Investors have to ensure they are aware of local, sensitive issues and are prepared to engage with locals to find solutions. Mongolia needs investment but locals also need to share the benefits – it should be a partnership.”
He says Singapore and Mongolia have a long relationship and citizens of either country do not need visas to travel in or out. “Our governments have favourable tax regimes and an investment guarantee agreement which means we are well positioned to support each other. There is a lot of trust between Singaporeans and Mongolians, and many companies in both countries have been doing business together for 30 or 40 years.
“This stands Tian Poh in good stead and I believe we will progress very well in Mongolia. We are excited about Zuun Mod and once due diligence is completed we will move forward quickly and aggressively to develop it.”
Khan Investment Management, a Mongolian focused investment house with offices in Singapore and Ulaanbaatar, was instrumental in identifying the Mongolian opportunity and introducing the parties. Khan’s founder Travis Hamilton said: “We’re delighted to have played a role in what is a tremendous value creating opportunity for two of our portfolio companies and secure much-needed FDI for Mongolia.
Thanks to strong bi-partisan support for economic growth and FDI under Prime Minister Saikhanbileg, Mongolia appears set for a rebound. Tian Poh and Erdene are well positioned to benefit.”
“Tian Poh is not a speculative commodity company,” Poh Kay Ping said. “The objective has always been long-term and we want to develop into a bricks and mortar type of business. Once we complete our Zuun Mod due diligence, we will swing into action to see how feasibly we can produce moly-copper at current prices, which are fairly low. I believe that with the engineering expertise the company has gained through its experience with other major projects, we will be able to find a good solution and develop the property.”
In February, Tian Poh completed a private placement raising Aus$1.62 million which covers the consideration payable in the first few years for the acquisition of 51% of Zuun Mod from Erdene. The placement involved the issue of 9 million ordinary shares at $0.18 each with an attached warrant expiring on February 16, 2016 and with a strike price of $0.20. The warrants have the potential to raise an additional $1.8 million if all are exercised. “The placement success shows the confidence of our shareholders,” he said. “Funds raised in the IPO will always be used for their original intention and the placement was held to raise funds for the acquisition.
“Tian Poh is focused on Mongolia because we believe there are many opportunities. If it proceeds, our investment in Zuun Mod will not be small-scale, it has to be large-scale if it is to be competitive in today’s pricing structure but this will be subject to our ability to raise funding.
“As far as engineering is concerned we have the experience and have advanced mega projects in partnership with a large Chinese state-owned enterprise (SOE), with whom we have a long-standing and strong relationship. This will help our Mongolian projects and gives us the edge on many other mining companies wanting to move into production.
“I look forward to contribute my expertise and experience in mega-engineering projects to bring Zuun Mod to fruition. Tian Poh will continue to look for strategic assets with the intention to generate cash flow as early as practically possible. The significant Zuun Mod addition will bring us closer to our objective.
“Mongolia is the most resource-rich country in the world and I want to develop that side of the business. Besides being an owner of resources, of course, my ultimate aim is to have an engineering element introduced,” he said.
“Today’s market is tough for resources companies so the fact we have listed on the ASX and our share price has remained fairly steady when others are falling, demonstrates that we have a promising future. The volume has not been exciting with market sentiment for most resource sectors remaining poor, but I believe it will improve once investors see our strengths.
“Although our price has remained fairly steady I believe it is very cheap as we don’t have debts, have quality assets, have a strong business background in Singapore and plenty of potential for growth. There are many other companies in the resources sector struggling with little capital, low share prices and no investment. Many of these have no option but to sell off some assets in order to survive and we are in a good position to take advantage of any good opportunities that present themselves.”
Part of Poh Group
Tian Poh has an experienced board with established Mongolian relationships and in-country management. The strategic shareholder is Singapore-based Poh Group, which is one of a handful of Singapore companies to invest in resources in Mongolia. Apart from Mongolia, Poh Group has also invested in a 512sqkm gold exploration concession in Cambodia. The concession is surrounded by several known gold deposits controlled by listed companies in Australia and Canada.
Poh Group has grown its engineering business segment through establishing successful strategic alliances with large Chinese SOEs, including the Wengfu International Joint Venture formed with Wengfu Group, one of China’s largest SOEs with turnover of more than US$4 billion in 2014. The JV was involved in completion of a US$430 million phosphate beneficiation plant’s engineering, procurement and construction contract in Saudi Arabia. The Group’s other business activities include aquaculture, power generation, residential, industrial property development and IT product distribution.
Poh Kay Ping is also chairman of Poh Group and a non-executive director of Poh Tiong Choon Logistics, listed on the main board of the SGX, which is one of the largest logistics companies in Singapore.
He said, “I believe we are near the bottom of this cycle with the value of some commodities already below production cost. This will see the market adjust and consolidate, which means lower cost producers will survive and higher cost producers won’t. That’s why I listed the company on the ASX. I believe now is the right time to go to the public market, get the structure ready and tap opportunities.”
“Today a lot of commodity companies are struggling, so it’s a very good chance for us, as the new kid on the block, to take up some good assets through mergers and acquisitions, and I believe we are ideally positioned to pick up some good, undervalued assets.