Replies to post #95 on Mongolian Mining Corp. (MOGLF)

[Ponch73]

Obviously, you can never rule anything out entirely, but I do think the odds of equityholders getting wiped out because of the bankruptcy proceedings are extremely low. I would also refer you to many of the helpful prior articles OMOLIVES has linked on the subject.

1. This is not a typical bankruptcy proceeding. Creditors don't have much leverage because there is no viable alternative recovery case. Apparently, there has never been a successful asset recovery with a bankruptcy in Mongolia.

2. The brother co-owners of MMC are powerful and very well-connected in Mongolia. It would not be particularly easy to seize their marquee asset and extract value out of it. And, if you think it is, look at all the roadblocks the prior Mongolian government put on MMC's operations when the rival party was in power.

3. BNP Paribas fought for better terms on their US$93 million of debt, but the bankruptcy court sided with the MMC scheme. The MMC restructuring plan is supported by 96% of creditors, and the threshold is 75% in the Cayman courts.

I think the far bigger risks with this investment are:

A. Collapse in hard coking coal prices for any of a number of reasons (substantial reduction in overall or specialized Chinese steel demand, cleaner and cheaper steel-making alternatives to HCC-fed blast furnaces like direct reduced iron, etc.)

B. Operational Disruption/ Mismanagement

C. Mongolian Government Incompetence (historical precedents abound)

D. Geopolitical Risk

E. Diplomatic Risk (e.g., breakdown in Sino-Mongolian governmental relations)

The way I justify this investment in my mind is because of the asymmetric payoff if things play out well.

I think the probabilities are roughly as follows:

-- 10% chance of being a 10-bagger
-- 10% chance of being a 3-bagger
-- 10% chance of being a double
-- 10% chance of being dead money
-- 30% chance of being down 30%
-- 20% chance of being down 50%
-- 10% chance of going to zero

Probability-weighted expected value of the investment is a 90% return, but the odds of losing money are greater than 50%.