The Promoter by Nathan Vardi (Forbes Mag), 11.24.03
forbes.com
Once again, Robert Friedland is talking up a huge strike. This time it's copper and gold in Mongolia.
These are mighty days for Robert Friedland. The 53-year-old natural resources billionaire has been racking up miles on his corporate jet, charming investors at conferences from Hong Kong to New Orleans, cajoling Japanese and Korean bankers, working with the repressive governments of China and Burma. It helps that commodity prices, as recorded by the Reuters-Commodity Research Bureau index, are up 30% in the last two years.
But the real attraction is Friedland himself and his tales of copper and gold deposits buried under the Gobi Desert. This Mongolian mother lode is in a remote place called Turquoise Hill, or Oyu Tolgoi, as the locals refer to it. Friedland calls it "the treasure chest," and claims it contains perhaps as much copper as Falconbridge's rich Collahuasi mine in Chile. Turquoise Hill is right on the doorstep of China, which last year sucked up 2.5 million tons of copper, making it the world's largest consumer. Indigent Mongolia, Friedland says, has pledged to do everything necessary to help develop the site. "I'm not in the business of giving investment advice," Friedland recently told Bloomberg News. "On the other hand, this is one of the major copper and gold discoveries in the world." His evidence: core samples taken over the last two years, but no comprehensive engineering studies yet.
Investors have been hearing what they want to hear. Shares of Friedland's Singapore-based Ivanhoe Mines--which trade on the Australian and Toronto stock exchanges, and (at $9) on the Pink Sheets in the U.S.--are up 318% in the last year, making his 41% stake worth $940 million. This notwithstanding that Ivanhoe Mines last year lost $30 million on revenue of $87 million, largely from mining iron in Australia, copper in Burma and gold in Kazakhstan. Mutual funds like Tocqueville Gold and Scudder Gold & Precious Metals have made Ivanhoe Mines their biggest single holding because they believe Friedland is on to something in Mongolia.
The stock is also being cheered on by stock analysts and newsletter writers (see box, p. 132), who are brushing aside the self-dealing through which Friedland has increased his stake. Shareholders also seem to be dismissing Friedland's past legal battles with the U.S. government, his cozy relationship with the thugs running Burma and the lack of in-depth engineering analysis of Turquoise Hill. "Everybody gets excited when Bob Friedland is pumping some stock, whether it makes sense or not," says Ryan Bennett, principal at Resource Capital Funds, a Denver private equity group, who just returned from Mongolia.
No one questions Friedland's promotional skills. Born in Chicago, he bought into penny mining stocks and pitched them on the Vancouver Stock Exchange--until prospectors of his Diamond Fields Resources looking for diamonds in Voisey's Bay, Newfoundland happened upon a vast nickel deposit. That was in 1994, when Friedland was best known by critics as "Toxic Bob," after another of his ventures, Galactic Resources, tried to develop a gold mine near Summitville, Colo. using heap leaching, an extraction process that dips ore in cyanide to extract gold. Galactic went bankrupt and left the mess for the Environmental Protection Agency to clean up. (The Department of Justice went after Friedland in 1996; he settled, paying $20 million.) |
