Ann: MAK:Bidders Statement Completion of Despatch, page-4

re: Ann: MAK:Bidders Statement Completion of ... Seals, Hi
Further to your comment on the MAK thread, I do believe Mehdiabad even as just a legal play is good value. If it takes 2 Mehdiabad-like exploration projects to find one economically and technically feasible Mehdiabad, then spending $18m on Mehdiabad on high risk drilling should return at least double that to pay for the drilling cost on the dud project. The directors of UCL are totally wrong to downplay expectations of the value of Mehdiabad in its current state, IMO.

It is completely normal in my experience for people along the Silk Road to try to rip off the economic rent of a mine for themselves. (Wikipedia from memory says economic rent is the surplus over that strictly necessary to bring a mine into production after taking into account all the risks: I have no idea what supernormal profits are but economic rent sounds not too dissimilar).

Uzbekistan has a number of similarities with Iran: both countries just want dirt cheap foreign investment, both countries have repressive dictatorships and both take hostages when they want something. When Newmont Mining (the largest gold mining company in the world?) threatened arbitration, the Uzbeks issued arrest warrants for key employees (their way of bargaining?). When Oxus Gold put in its $400m claim, they arrested the Chief Metallurgist for carrying a USB key with gold mining data on it and sentenced him to 12 years for espionage (It is a state secret what a state secret is in Uzbekistan: http://freesaidashurov.com/). The scams they pulled to ensure that Oxus always had one-off exceptionals that destroyed recurring profits over many years during the greatest gold bull market of all time were astonishing: the more the gold price rose, the more agitated they got, and of course it was a big joke how they tried to bankrupt Oxus in a roaring bull market. Just before seizure of the last mine, they forced Oxus to build a gold/silver dore mountain by denying them the right to refine the metal overseas (a revenue deprivation scam - I am still a shareholder!). With Metal-Tech, the Israeli Molybdenum processing company they classified repatriation of a loan payment as a dividend payment and therefore demanded the Uzbek 50% equity partner be paid a corresponding $10m dividend payment. When the directors refused, the company was made bankrupt (Uzbek courts not independent). It is not an anti foreigner thing what the Uzbeks do: the powers that be there do it to their own people. Below is an excerpt from an announcement by MetalTech regarding their arbitration case:

"Further to the announcement on 7 December 2011, Metal-Tech is pleased to announce that its ongoing arbitration case before a Tribunal of the International Centre for Settlement of Investment Disputes (the "Tribunal") against the Republic of Uzbekistan (the "Respondent") is to proceed as scheduled on 23 January 2012 following the Tribunal's decision to reject the Respondent's request to postpone the hearing.

Metal-Tech is seeking damages because it claims that Uzbekistan breached its obligations by denying Uzmetal Technology necessary inputs of molybdenum concentrate in mid-2006, thereby forcing the joint venture to become idle for lack of raw materials to process. The damage to Metal-Tech was exacerbated when Uzbekistan and its state-owned companies (which owned the other 50 percent of Uzmetal Technology) later forced the joint venture into bankruptcy and eventual liquidation. "

Anyway, to cut a long story short, the Iranians are little different in my experience: they just use outright confiscation. I have had that experience with Marakand Minerals - the company proved up a massive zinc mine and it was confiscated outright by the Uzbeks because it was too profitable. Oxus is claiming for the loss of Marakand too in its gold mine arbitration case. (The Marakand exploration work was a way of getting much needed exploration work done and keeping gold profits from being repatriated?). Unfortunately finding a mega zinc mine with the gold profits meant they had to wheel out plan B: outright confiscation?

Anyway Drummond's patter about offering higher liquidity in share trading just makes me fall off my chair laughing: I am not giving him a stake in a legal play that will take 5 years to sort out and that will cost $2m in legal fees only to see him get back $36m and me have to share that with those impoverished MAK shareholders. They can take a frigging hike.

If you have difficulty believing me about all the scams that go on to redirect the economic rent of a mine in those parts of the world you might check out the business dealings of Gulnara Karimova (and her sister, Leila). Gulnara is the most hated woman in Uzbekistan. She looks like a catwalk model (low cut dresses, etc.) but is if you read Foreign Policy magazine, just someone who sends round the thugs when she wants to buy a business at a below-market price. B. Olsen at the US Embassy in Tashkent had a lot of interesting things to say in the Wikileaks about Oxus, Zeormax and Gulnara.

http://www.letemps.ch/cables?id=07TASHKENT2029

http://www.foreignpolicy.com/articles/2009/08/04/the_worlds_worst_daughters



Drummond has been very clever, IMO, talking about liquidity, etc. but as far as I am concerned he is about to rip us off about $36m and maybe even more, taking into account the comments our directors have made about Sandpiper dilution.

P.S. I see the Iranians are going to allow inspections at Parchin now and that they've backed down on executing an Iranian American who was just visiting his Grandparents while on leave from the US army in Afghanistan. Unfortunately that lengthens the time to regime change, IMO.