Our Call Option on Mongolia - Ivanhoe Mines (IVN)

We are initiating a Speculative Long position on Ivanhoe Mines (IVN).

Ivanhoe is part owner of the massive Copper Gold Oyu Tolgoi project in Mongolia with Rio Tinto. This is one of the world's largest copper gold deposits, but unfortunately it has been set off track by you guessed it, boneheaded government.

In May of 2006, the government of Mongolia decided that it could impose up to a 70% profits tax on copper and gold projects and demand up to a 51% stake in "strategic" projects.

By February 1, 2009 there is to be an announcement regarding Oyu Tolgoi. As per our friends at Casey Research coal projects currently face a 5% Royalty tax and 25% corporate profit tax.

We view Ivanhoe as a call option on Mongolia. It is a special situations stock which warrants our attention.

Readers should remember that we allocate a total of 10% of our portfolio to special situations and smaller speculative stocks. We recommend at least 10 individual positions. Speculators should step in to their positions gently and not risk more than feel comfortable losing.

We are perfectly able to sleep at night with the idea that we could lose up to 75% of capital on our speculative book and not impair our total capital too greatly.

For our core we have Japanese indexes, a gold fund, Japanese small caps, I Shares Singapore, Korea Fund, physical gold and silver, pre 1921 Morgan silver dollars, and pre 1933 gold coins. Of course we always keep 15-20% in cash. Great opportunities arise frequently and we want to be able to take advantage.

http://finance.yahoo.com/echarts?s=IVN#symbol=IVN;range=2y