Commodities trading giant Noble Group, which has been mum on reports it recently plucked two copper traders from Goldman Sachs, already has a stake in a coal project in northern Mongolia. Could Hong Kong-based Noble now be making a play to mine profits from Mongolia’s vast yet unexploited copper reserves?
President Tsakhia Elbegdorj, who is credited with advancing the landlocked nation’s economic growth spurt, won slightly more than 50% of the vote in Wednesday's elections, avoiding a runoff and gaining a second four-year term.
Campaigning ahead of the presidential election had stalled the untapped potential in one of the world’s fastest-growing economies where nearly 40% of 2.8 million people live below the poverty line. The Mongolian government slammed the breaks on shipments by Rio Tinto of Australia and Turquoise Hill Resources of Canada from the massive $6.2 billion Oyu Tolgoi copper mine ahead of the election, demanding that more proceeds are kept at home.
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Elbegdorj’s contenders Badmaanyambuu Bat-Erdene, a champion wrestler representing the Mongolian People’s Party, and Natsag Udval of the Mongolian People’s Revolutionary Party and a supporter of former President Nambar Enkhbayar, have both challenged the terms of Rio Tinto’s contract for the mega mine.
Oyu Tolgoi is expected to triple Mongolia's economy by 2020, with annual output expected to average 330,000 tonnes of copper and 495,000 ounces of gold in the first decade. The World Bank expects Mongolia's economy to grow around 13% this year, after slowing to 12% last year from nearly 18% in 2011.
Building Ranks in Silence
Bloomberg reported April 30 that Noble Group, Asia’s biggest commodity trader by sales, hired former Goldman Sachs Group metals trader Scott Evans, a month after bringing in David Freeland, a copper trader at Goldman Sachs.
Noble Group and Goldman Sachs did not immediately respond to requests for comment.
Noble’s physical and derivatives metals trading business is managed by Mark Hansen, who was poached last year from hedge fund Brevan Howard to run the global metals business from London. Noble last year hired Paul Wilkes, formerly the head of industrial metals at Macquarie Group.
Australian-listed shares of Aspire Mining, which backed by Noble Group is working on a coal project in northern Mongolia, have tumbled 73% percent over the last year amid regulatory uncertainty and crumbling coal prices.
Meantime, Noble’s stock has been slipping after the company reported a 62% slide in first-quarter profit, blamed on a loss at its agricultural unit.
Is betting on copper a potential turnaround that could create trading jobs across the globe or at least compel Noble to step up its search for talent?
Earlier this month, Goldman Sachs cut its copper forecast to $7000 a ton for 2013 from $8000 a ton. In April, Goldman dismissed a sell-off of copper as “overdone” and said a bearish approach to copper simply shows how speculation over future pricing can affect a market. Copper purchases from China have been on the downturn, but that’s just cyclical, Goldman said in April.
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