“How Steve Jobs’ Mentor Turned a $5-Million Pipe Dream into a $340-Billion Reality”

Sniffing out some answers from the latest Oxford Club tease

By Travis Johnson, Stock Gumshoe, September 10, 2012

This one may not be entirely loaded with secret stocks, since I suspect quite a few ardent Gumshoe readers have already figured out who they’re talking about as “Steve Jobs’ Mentor” … and therefore figured out which company they’re teasing … but, well, I’m still getting a lot of questions every day on this one, so we’re going to dig in for just a moment and check it out.

The pitch comes in from Jeff Yastine for the Oxford Club, whose teaser ads we’ve covered many times over the years (toward the end of the letter they even re-tease one of their oldies, the “Black-Ops Resource that’s 51X more valuable than gold” — we covered that one in January in a Friday File for the Irregulars if you’re curious). This time around it’s another resource-related stock, despite the technology implications of that Steve Jobs connection.

Here’s a bit of the ad to give you a taste:

“Days from now, the man who inspired the legendary tech CEO will FINALLY step from the shadows of his famous protégé…

“Here’s how you can make thousands when his story ‘goes public….

“For years, this brilliant, reclusive entrepreneur has taken a back seat to his protégé…

“Even though it was his apple farm where Jobs worked in college, inspiring the company’s name.

“‘He turned me on to a different level of consciousness.’ – Steve Jobs And when Jobs revealed in a best-selling biography that this man served as his “spiritual mentor,” he garnered no praise from critics.

“And despite achieving great success, like becoming a self-made billionaire and appearing on Forbes 400 list, he still lives in the shadow of his old protégé.

“In fact, I’d guess not 1 in 1,000 people on the street even know his name.

“But all that’s about to change…

“Because a special project that Jobs’ Mentor had been developing for 10 years is nearly complete.”

Oooh … sounds very secretive and exciting, doesn’t it? Don’t worry, you’re almost “in the know!”

More temptation first:

“… the company he founded – the future ‘Apple’ of its industry – is sitting on an estimated $340-BILLION fortune according to engineering consulting firm AMEC.

“What’s even crazier:

“Jobs’ Mentor originally spent just $5 million to fund his secret project…

“As The Wall Street Journal recently confirmed: ‘It could be worth some $300 billion…’

“No gadget or computer has ever seen this kind of return on investment… Almost nothing in history compares….”

And yes, the clues keep coming … we’re told that this firm is tiny (compared to Apple, at least) with a market cap of about $7 billion, and that they’re just about to start getting attention …

“… by November of this year, every financial media outlet in the world will be reporting on this.

“Which may explain why the investment houses are already quietly buying in on a massive scale…

“Goldman Sachs snatched up nearly 8 million shares of the company. Tradewinds has just over 5 million. Janus Capital Management took a hefty 24 million shares. And Fidelity purchased a whopping 25 million.”

So we can leave aside for a moment the fact that if it’s already been in the Wall Street Journal then certainly anyone who invests any amount of money has already learned of this special project. What on earth are they teasing?

Well, we learn that this secret “mentor” to Steve Jobs took an interest in mining and metals early on, developing a nickel deposit in North America, a rhenium mine in Australia, and a gold discovery in Kazakhstan, but that his thirst for something “historic” led him to our top secret stock pick today …

“The Company Took a Huge Risk and Hit the Jackpot! ….

“He was going to have to look for precious metals in places that other less-daring companies wouldn’t even consider.

“So when one of the world’s largest mining companies put up a “worthless” piece of property for sale, he decided to make a bid.

“It was located in a strange desert inside the borders of a safe (if undeveloped) democratic country. The temperatures ranged anywhere between -40 at night and 120 degrees Fahrenheit during the day.

“You could walk for miles in any direction and never see a human being.

“But this guy also knew to follow his instincts…

“He had seen the land… And knew the surrounding rocks were covered in blue dust – a good sign that large metal deposits sat beneath the surface. Of course, it was a long shot, but he was a gambling sort of guy.

“So he put up the modest offer of $5 million.”

So that’s where we get the “$5 million to $340 billion” bit … what, then, did they find in this godforsaken place?

“Forgotten Treasure Buried Beneath Asia’s Coldest Desert…

“The initial resource audit, performed by independent engineering consultants AMEC, confirmed 9.1 million ounces of gold and 4.6 billion pounds of copper….

“After several months, the confirmed resources were up to 13.8 million ounces of gold and 6.9 billion pounds of copper…

“Shortly after that report was released, the reserve of gold had swollen to 18.7 million ounces and the copper increased to 27.8 billion pounds.

“Then, 25.7 million ounces of gold and 59.1 billion pounds of copper!

“And based on the most recent estimate, the mine contains more than 81 billion pounds of copper and 46 million ounces of gold.”

So that’s where the $340 billion comes from — that’s roughly what that much copper and gold would be worth at today’s prices (though copper has risen a bit since the tease was written, it was $3.30 then and is around $3.60 now).

And yes, we’ll stop dancing around the point here and tell you that this is indeed Ivanhoe Mines (IVN).

Except it’s not anymore … they renamed themselves last month, so it’s now Turquoise Hill Resources (TRQ in NY or Toronto) — An appropriate name, since their major asset is the copper and gold mine that’s just starting up in Mongolia called Oyu Tolgoi, and Oyu Tolgoi is, roughly speaking, translated as “Turquoise Hill” from the Mongolian.

And Ivanhoe hasn’t just changed its name this year, it’s also finally been absorbed into Rio Tinto (RIO) — so TRQ is now officially a subsidiary of Rio Tinto, which owns 51% of the company, though it’s also, of course, publicly traded on its own. Rio Tinto had been the major partner of Ivanhoe Mines for a long period, with often disputed rights to take over the project — some court decisions over the winter, the culmination of a long fight over rights and financings and poison pills, led to the final settlement just recently of Rio funding Ivanhoe through to production and taking a controlling stake.

And, ironically enough, as part of the settlement … I assume because of the bad blood and the infighting … the company had to drop the Ivanhoe name long associated with Robert Friedland, the charismatic leader of Ivanhoe Mines. In fact, his name has essentially been eradicated from the company’s history books and cut out of the firm as much as possible. I don’t know if he owns any shares personally, but he is the person who is credited in this tease as “Steve Jobs’ Mentor”, and he’s now no longer involved in Turquoise Hill — he’s moved on to focus on some African mining projects with his Ivanplats exploration company that will probably go public once resource markets turn around.

Robert Friedland is certainly a fascinating figure — “mentorship” is probably a strong word for his relationship with Steve Jobs, but Jobs did really credit him, according to the Isaacson biography, for, as I interpret it, some of his ability to use force of will and charisma to lead people and “distort reality” … though the “reality distortion field” of Robert Friedland probably refers just as much to his work as an LSD dealer, the two met at Reed College after Friedland had gotten out of prison for his previous LSD career. There’s an interesting quick note on that here.

So yes, Friedland is the guy with the Jobs connection — and Jobs did indeed spend a summer at Friedland’s free love commune/apple orchard in his college years and get the Apple Computer name from that experience. But Friedland is probably not where he wanted to be at this point, astride one of the world’s largest market-changing copper mines at the point that it starts production — he’s certainly credited with much of the development, and I assume his billions of dollars will assuage the hit that his ego probably took, but it sounds like Rio Tinto is happy to be rid of him.

Which doesn’t mean that the stock can’t be a good investment, of course — it just means that the story isn’t quite as clean and tidy as it sounds from those snippets of the Oxford Club ad. Gasp! An ad that doesn’t tell the whole story? Egads!

The bigger deal with Turquoise Hill is that they’re ramping up for mega-production of copper now, they’re run by Rio Tinto with a major partner in the Mongolian government, which took essentially 1/3 ownership in exchange for letting the project move forward, and there seems to be some stability with the Mongolian government now that certainly wasn’t there a few years ago when Ivanhoe was trying to get permits and deal with threats of extremely high tax rates or royalties (though there’s still plenty of talk in Mongolia about “renegotiating” the Oyu Tolgoi deal).

You can imagine that the mine will continue to be followed extremely closely by all in the Mongolian parliament and, really, by pretty much everyone in the country, because Oyu Tolgoi itself is by far the largest capital investment in Mongolian history and will account for roughly one third of Mongolian GDP when it’s producing at the expected rate. Oyu Tolgoi is both the catalyst for Mongolia’s emergence on the world stage, and the flashpoint for political debate that essentially ends up being the argument for and against resource nationalism (ie, do we allow the private companies who found and developed this resource to profit from it, or do we seize it for “the people” … who always seem, interestingly enough, to want nicer palaces for the ruling party?). Mongolia is a democracy that has been pretty stable for years, it’s true, but that was before they had much money to fight over.

So the mine is just about ready to begin production of a considerable amount of copper and gold, building up to what they’re projecting as their “full speed ahead” production in about five years, and the mine is big enough to produce these massive piles of copper for probably 50 years, if not longer. What’s going to happen to Turquoise Hill?

Well, the short answer is, “whatever Rio Tinto and the government of Mongolia want to have happen” — you can see the latest update from the company here for their take on operations. You can see from that update that the major issues still to come are the financing package to finish the production ramp-up (they say they have enough equity funding, largely from Rio, but need $3-4 billion more in project funding to get through Phase 1), and the finalization of the plan for electrical supply — TRQ has promised to build their own power plant, probably using Mongolian coal, to power Oyu Tolgoi within four years, but until then they’re relying on power they want to purchase from China … the infrastructure is now in place, and China is likely to buy all the copper so they seem likely to happily supply the electricity, but the power purchase agreements are apparently also up for political approval.

So what you get with Turquoise Hill right now is a company that’s 51% owned by RIO, and which owns a few resources around the world but is dominated by their crown jewel, which is now 66% ownership of Oyu Tolgoi (the other 34% is owned by the Mongolian Government, who are apparently now full partners). And TRQ is at a pivotal point right now, as you would expect for a major mine that’s just about to begin producing — analysts think they’ll boost revenue by at least 500% next year with commercial production beginning in the first half of 2013, and that’s probably enough for them to turn a profit, so the shares have a forward PE of somewhere in the neighborhood of 50 right now.

No one is buying TRQ for earnings, though, they’re buying them for what they hope will be a sustainable and profitable mine that becomes a consistently profitable cash flow machine for decades — not unlike the massive Grasberg Gold/Copper Mine in Indonesia, which has been a company-maker for Freeport McMoran (and a profitable mine for Rio Tinto, which is a 40% partner) despite several waves of local controversy and political wrangling. And if the regulatory regime holds and production begins and they really ramp up to their next level of production in 2013, well, today’s price will probably turn out to be a ridiculous bargain.

Unless, of course, copper goes to $1 a pound. Which seems unlikely, given that inventories are low in London and the price has already dipped to as low as it was back in 2008. But you never know — the story for copper is all about global economic growth and infrastructure expansion, particularly in China, so be ready for the commodity price and the stock price of TRQ to react to anything that changes future expectations of copper demand in China.

I’ve never owned this stock and I’m not exactly champing at the bit to buy a large cap commodity producer right now (though RIO and VALE are dirt cheap and interesting contrarian ideas to consider these days), but I’ve been tempted by Ivanhoe from time to time as the easiest way to bet on Mongolia. They also control the SouthGobi coal project, a takeover of which by Chalco seems to have fallen through. In past years I couldn’t get a handle on the regulatory concerns and the fight for control that seems to have been going on forever, so maybe other investors are also seeing their charts clouded by those past developments and are missing an opportunity to buy a world class mine just as it begins development, that seems to be the argument of the Oxford Club folks. Do you buy it? Let us know with a comment below.

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21 Comments on "“How Steve Jobs’ Mentor Turned a $5-Million Pipe Dream into a $340-Billion Reality”"

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Fred Dodini
My son spent two years in Mongolia (2007-2009) and is an economics major in college and very familiar with the Mongolian culture (knows the language fluently). He is familiar with the TRQ mines and how important they will be to the future of the Mongolian economy. He also said that he feels the Mongolian people are on the verge of real growth as a culture. They have high levels of literacy and when the men can finally get meaningful jobs and stop drinking, the whole culture will start to improve. Right now it is the women who are holding the… Read more »
Fred Dodini

PS. I bought some TRQ stock too.

Marc P

This stock (IVN) has been sitting in my portfolio for quite a while and has been a real stinker, so do your due diligence and tread carefully before you make any investment of substance. There are a lot of great mining stories available without the risk involved in this project.

Thomas Lepere
Before you revealed the tease, I bought my membership in the Oxford Club and I don’t think it has been a mistake! With a company like Rio Tinto at the helm and the people’s government being the Government of Mongollia and the RELATIVELY FEW people being represented in the Gobi Desert, Torqoise Hill looks to have a very bright destiny ahead of itself especiallly with the nearby Commodity Hogging Chinese government supplying the mining sector its electrical power for all the copper and gold purchasing power it can get. China is blessed by the prospects of 50 plus years of… Read more »
Jimmy James

You sound like a shill


Someone from the US accusing another country of “commodity hogging”.

Thanks, that made my day.

Allan Robinson

As always, a pleasure to read your great and thorough analyses, from which one can learn so much. Thanks for the interesting good work


Mongolia is going through a political upheaval. (The former president was arrested and jailed and the new government is unstable.)
24 Members are asking to re-negotiate the agreement between Rio Tinto and the govt, jumping to 50% ownership, and skipping the thirty year period previously negotiated for Rio Tinto to recoup and make some profits on this massive investment.
They are still 5 years from production.
This story of resource nationalism, greed and change in government direction is too risky for my taste.


worked this one out for myself good one for the future i think …are you buying

Like Travis I had been from time to time interested in Ivanhoe Mines and was aware of the Mongolian project for more years than I care to remember. The main reason I never bought the stock was the volatility and uncertainty evident from the corporate infighting and its location, which still seems to be at the top of readers concerns. An unstable Mongolian govt. that like other impoverished nations has little concept of what it takes to build a successful and profitable enterprise is still a wild card. When I read the story (promo) I quickly figured out what the… Read more »
I have been an Oxford subscriber for two years and consider their advisory to be one of the most solid financial newsletters out there, plus they have a wealth of resource information for the new investor. This teaser, if “Gummie” is correct (which seems to be the consensus) must have been for one of their high end products, which I do not subscribe to, as it is not listed in any of their basic Oxford portfolios nor mentioned in their monthly advisories for Aug and Sept of this year. There seems to be some disagreement among readers regarding the stability… Read more »
Bill M

“Unless, of course, copper goes to $1 a pound. Which seems unlikely, given that inventories are low in London and the price has already dipped to as low as it was back in 2008.”

Chinese have so much copper in invetory it’s piling up in slabs outside warehouses. The fact that London inventories are low doesn’t seem to be a big item…

I’ve liked Oxford and Porter Stansberry letters for the past 2 years though I dont take their stock advice very often. I do like their overall sentiment and analyses. Gumshoe makes for a good balance. Interestingly We share only one stock in our portfolios—SDRL! I have alot of gold and silver stocks, a couple of oils (STO, DNR), and 3 pharmas–ARIA, VRTX and vvus which i have held forever. I dont understand hi-tech and have only one NUAN which I have held forever. I have also had a few stinkers best forgotten. You have taught me a lot. SAM

I have watched ivanhoe for a long time and did not invest because of the uncertainty of the government, however another mining company that caught my eye was buchans minerals which has the largest manganese deposit in north america,stable government,mining freindly and cheap @0.05c a share,bmc-tsx-v.The deposit is worth over 35billion,not bad for a company thats market cap is 8 million.I think that this is a better deal to sit on than risk money with unstable governments.


travis: please give me your opinion on binary options. your reply would be appreciated.thanks ken.

francois mercier
Check those guys before you put any cent in Mongolia: tugsoyun@apipcorp.com They are physically checking the market there. I believe thay are the best advisors in Ulan Bator. What do I understand from them? Simple. If you bet less than US$35,000.00, consider it lost overnight. If you come up with enough money to buy a safe position – you are eligible to humongous profits. Anything in between will vanish at a speed inversely proportional to the amount. Got millions? Go there with them. you will get more millions. If you do not have that time and money, think about something… Read more »
John S Harbut

If one were to look at the three year daily chart of Ivanhoe Mines, one would see that it reached about $30. a share in Nov/Dec 2010. Thereafter it steadily declined. In about the past ten trading days, it bounced off the $8.00 level about eight times. Today, it traded at around $9.50 with no gap opening to the upside. It would say that the upside potential is much greater then the downside risk at this point. The “Buy low, sell high” admonition of, was it Jesse Livermore, seems to apply here.

Let’s be fair here: would you bet on ANY start-up enterprise based in the middle of Mongolia? This company does not need to be studied for the potential value of the deposits it is projected to mine, but for the politics in the locations at which it operates. The Chinese have run transmission lines for electricity to the Mongolian location, in anticipation of a reliable source of copper and other minerals. Which ought to build confidence, BUT, China will want something in return for its investment. That could mean anything from minerals delivered at a reduced price to outright nationalization… Read more »
I too had TRQ on my radar… I even had a thread on A.D.V.F.N, dedicated to it (IVN) anyway, but the board takover caused me some concern, and the lastest information regarding the Mongolian Gov’t sounds pretty much like many developing nations the world over. Politicians get elected by making promises to the electorate, and as long as they get their share the deal goes through. Woe betide you though if you get caught with your hands in the cookie jar, and end up in jail, because the next lot will want their cut too. Hugo Chavez, Christine Kisrchner et-al…… Read more »
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