Stalin’s Lost Oil — Mongolia

By Travis Johnson, Stock Gumshoe, July 22, 2010

I’ve gotten so many questions about this Mongolia oil teaser that’s circulating in a few different iterations that I’m republishing an older Friday File article about the stock today — this originally appeared on the Irregulars site (for paying members) back in April, and it has not been udpated or revised in any way, though the stock is currently up hugely from that time and trades much more actively on the pink sheets than it did then, probably thanks almost entirely to this newsletter recommendation and to the company’s more recent results that have raised its profile. For an updated disclosure, I personally continue to have no interest in the stock and have never owned it.

The teaser ad that has been buoyant enough to float to the top of the tank today is a good one for a Friday File treatment — it’s a stock that trades in low volume and has a low market cap, and I always worry about writing about such stocks when sharing things with the broader Stock Gumshoe audience on the free site (not that I don’t do so sometimes) … but for you, the few, the proud, the Irregulars, well, there’s not too much risk that we’ll drive a stock crazy just by discussing it among ourselves here, even if it does sound kind of interesting for a nibble.

So what is it?

We’ve had some mixed experiences following the far-flung resource ideas of Christian DeHaemer, from the collapsing Range Resources (the Australian company, not the big US gas company) in Somalia to the buoyant Dragon Oil in Turkmenistan (one I found very intriguing but foolishly never bought) — which is to be expected, I suppose, when you’re prospecting in dangerous waters as he tries to do with his Crisis and Opportunity newsletter, looking for great opportunities in war zones, political crises, or far-flung frontiers.

And today is no different — another little company, operating in a remote area in the developing world, with a geopolitical “crisis” story behind it. He calls this tease “Stalin’s Lost Oil,” and he helps ramp up our interest by spinning a little tale of Russian/Mongolian history …

“In the post World War II period, Mongolia was a puppet state of the Russians.

“The strange thing is that even though the Soviets knew that Mongolia contained vast amounts of mineral and oil wealth, they inexplicably ignored it.

“Stalin owned Mongolia. He executed a Prime Minister in Moscow for not following orders. He trained the next leader, Tshoibalsan, in his own image.

“Why, then, would Stalin order his Mongolian puppet to run purges of his own and destroy all Buddhist monasteries in the country… but spare a vast amount of oil?”

That oil is the target of several companies who’ve been surveying a lot of long-dormant exploration blocks in Mongolia for the last few years, thanks in part to the nearby Chinese demand … but there’s one company in particular that DeHaemer is teasing us about today:

“Untouched for 57 years, this $0.64 cent company is sitting on $49 billion worth of oil… And you stand to make 55 times your money from one of history’s greatest oddities.

“The country recently got ten bids on a new refinery. There are also Chinese companies successfully pumping oil out of North-West Mongolia.

“But there is one tiny company that most people have never heard of that is sitting on 638 million barrels of oil.

“My readers have already made 129% gains from this company in the past three months. And this massive profit run is just getting started…

“This company is one of — if not the — cheapest stock I’ve ever found. But the word is starting to leak on this company, and its stock is only going to go up.

“Right now the market value of this company is $80 million U.S…. But the value of its 638 million barrels, at $80 a barrel, equals $51 billion! …

“This Mongolian oil company I’m talking about would have to go up by 612.5 times to equal the value of its oil reserves….

“The upside on this is so large… I’m not going to even do the math. The number would seem unbelievable.

“And the company has two more large exploration blocks that it hasn’t even gotten serious about yet!

“At this point, you can probably see why it’s my favorite stock — one you can’t afford to pass up.

“Don’t kick yourself next month when it doubles again.”

So who is our little Mongolian friend?

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