My contact is reasonably experienced, although not from an operating standpoint, but from an outside management standpoint. I don't think he's unintelligent, but he might not have a ton of investing experience. And he's clearly negatively disposed toward MMC.
Your other points, in sequence:
3. He was saying that we should not expect a TT deal with the Shenhua/Sumitomo/MMC working group to ever happen, despite the change in the composition of the GOM parliament. We might not like hearing that sentiment, but that's what he believes based on his work in the country.
4. I don't understand your point here. We tend to think of the MPP as a unified, monolithic party. Apparently nothing could be farther from the truth. Obstructionist PM's loyal to Russia could still block a TT deal with Shenhua even if there were no Russian bidders. The calculus is simple -- the Mongolian people hate China, so obstructing a deal with China would be very politically-expedient. They apparently hate Russia far less.
5. To be fair, of those four customers listed, only one was located in Inner Mongolia (Baotou) whereas the other three were located in Tangshan (on the eastern coast). His bigger point was that, by virtue of having to sell through middlemen all the way from the Mongolian border through Inner Mongolia to Tangshan, MMC is forced to accept a more discounted price. He thought in a more normalized pricing environment (e.g., no supply disruptions in Australian coal country), MMC would have trouble generating much of a gross margin on their sales. In other words, he didn't think they could price their coal much higher than their fully-loaded cost per ton of $60.
6. Look at the price action in HK over the last week. Stock up 7-9% on what was effectively a production miss with 30M shares trading. The next day, stock down 9% with 30M shares trading. Do allegations of insider trading at MMC really sound that far-fetched?
7. His point here was that Chinese coking coal buyers will always prefer Australian coking coal over Mongolian coking coal because it was of higher quality (higher carbon content, I believe). He also was saying that Mongolia needed China, but China didn't really need Mongolia (they could get coal elsewhere). The only disagreement I might have with him is that it appears that China is committed to reducing its internal coal production by no longer propping up state owned enterprises. This, by definition, requires additional importation. And the Chinese are very savvy and long-term oriented. Why wouldn't they want to encourage multiple sources of supply? Cultivating Mongolia allows them to have more leverage against Australia.
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