Ivanhoe Mines (IVN -NYSE)

Dear Bottarelli Research Member,

In past small-cap alerts, I’ve mentioned that now is the perfect time to add exposure to a small-cap mining stock. After all, with gold approaching new highs at $1,000, you’re now seeing substantial investment dollars flowing into metals. With copper, silver, steel, and coal all strong as well, you better believe that small-cap mining stocks will soon become “in play.” And of all the small-cap mining stocks, today’s newest pick could arguably be one of the most powerful small-cap miners on Wall Street.

I’m not exaggerating when I tell you that this tiny $14.00 stock could be the very best small-cap miner you can buy today. I’ve been following this company for many years, so I’m quite familiar with who they are and what they do. Through many joint ventures and partnerships, they have high impact projects in coal, gold, silver, copper, and other base metals. In fact, I’ve been waiting for all my trigger points to align — and now that those targets have been hit. So, the time to move is now!

If you’ve watched CNBC in the last 3 weeks, I’m sure you’ve heard about the incredible upside run in coal and gold. Coal is (by far) the cheapest way for emerging countries to produce electricity — and we all know the insatiable need for energy across the globe. But what is not known in everyday investing circles is the vast resources of coal, copper, and gold in the country of Mongolia. If you look at the map below, you’ll see that Mongolia sits geographically at the doorstep of China. This is a tremendous advantage for Mongolia, and, up until now, it’s an advantage that has not been exploited. But now, that could all change.

You see, the trigger for this week’s pick was the recent approval and backing by Mongolian Prime Minister Sanjaa Bayar of the investment thesis for a major coal find in Mongolia. Up until now, Mongolia’s political problems have kept most investors away from profiting off their vast resources and deposits. But now that these political problems have been overcome, Mongolia becomes “in play” for a potentially world-class gold, copper, and coal deposit. This completely un-tapped investment opportunity is exactly the situation we’re presenting to you today.

One look at this company’s projects, and you’ll see why you need to own this little gem. To tell you the truth, I don’t think it’ll be too long before Wall Street catches wind of what’s happening, so the time to act is now.

This week’s pick is Ivanhoe Mines (IVN -NYSE). I must tell you straight up, I’ve researched a lot of very interesting picks, but this one has stood out for many months. But before making the official recommendation, I wanted to make darn sure we didn’t have another political obstacle like Hugo Chavez to deal with. Luckily, that’s not the case. The coast is clear, so it’s time to step in and establish a new position under $14.00 per share. All signals point to much higher prices in the future.

UPDATES

China Precision Steel (CPSL – NASDAQ): This niche steel maker is making all the right moves, so I would be adding (or buying) shares of CPSL at these levels. They were just awarded the “High-Tech Enterprise” certification by the Science and Technology Commission of Shanghai Municipality, and the stock should really benefit as they expand their boarders. Hold.

SiRF Technology Holdings (SIRF – NASDAQ): We used an apparent Wall Street over-reaction to buy the tremendous dip in shares of SIRF, so do not commit any more capital until we see what happens with their lawsuits. Shares continue to hover around the $7.00 level, but if any good news surfaces, they could pop very quickly. Hold.

Minera Andes (MNEAF.OB) & Polymet Mining (PLM – AMEX): A few weeks back, I mentioned to add to your small-cap resource positions. I believe this advice will now begin to pay off, as these resource stocks become “in play.” With gold and silver hitting new highs, MNEAF is our copper play and PLM is working towards the final stages of a substantial copper and nickel ore-body. I can hardly wait to see these results, so continue holding both positions.

Origin Agritech Limited (SEED – NASDAQ): On Wednesday, SEED reported earnings that were disappointing at best. Even though they have the first new genetic corn seed, the guidance going forward is not nearly as strong as I had expected. It’s a shame too, because SEED was a pure play on feeding emerging countries that was really starting to pick up some momentum. With planting season around the corner and soft commodities in high demand, SEED should be hitting on all cylinders. But for whatever reason, the company can’t pull it together. Therefore, there is no sense hanging around any longer. Let’s use any bounce in the days ahead close out our position for good. Sell.

Metalline Mining (MMG – AMEX): They just reported their silver essay report! And the findings revealed what I had suspected all along. Aside from their zinc deposit, nobody is giving MMG credit for the amount of silver they have. If you do not own MMG, I’d like you to buy it now. They are going to continue drilling with more results coming soon, so establish a position to capture the coming upside move! Buy.

China Finance Online (JRJC – NASDAQ): We all know how well our E*TRADE Financial (ETFC – NASDAQ) pick worked out. And now, I like to think of JRJC as our pseudo-E*TRADE position. We’re using the same investing thesis to profit off the investing wave in China, and this little gem is China’s top financial research firm. Just today, JRJC announced fantastic earnings. They came in between $10 to $10.5 million for the first quarter of 2008, which is a 150% to 163% increase from the corresponding period in 2007! Based on these numbers, and how quickly this stock can move, it’s worthwhile to own some exposure. When JRJC gets momentum, it can move rapidly. And as you can see from the chart below, we could be seeing a true breakout right now! Things look very promising. Hold.

I’ll turn things over to Bryan in just a moment, but before I sign off, I wanted to quickly cover some questions about how we rate our picks.

• If we have a pick listed as a BUY, it means that we consider the current prices attractive to enter a position.
• If we have a pick listed as a HOLD, it could mean one of two things. One, it could mean that prices have already moved too high, and it’s not worthwhile to add to your position at current levels. Therefore, simply hold the stock and let the position continue running higher. HOLD could also mean that we don’t want you adding any more shares to your ledger at current levels — either because shares are stagnant or because we’ve already made our full investment and it’s time to let the position make its move.
• If we have a position listed as SELL HALF, that means we’d like to you lock in half of your profits and then hold the remaining half for further upside gains. We’ll give you guidance on when to lock in the remainder of your profits.
• And finally, if we have a position listed as a SELL, that means that we’ve closed the position off and it’s officially not in our active holdings anymore.

Now, as I alluded to last week, I think this “dark cloud” over the markets may soon break, so make sure you have some powder dry to capitalize on the tremendous small-cap companies we have in store for you.

Have a great week!

Sincerely,

After 5 Years of Negotiations, the World’s Largest Un-developed Copper and Gold Deposit is Being Made Available to this $14.00 Small-Cap Mining Stock

As Mark mentioned, today’s play is based on the massive potential of un-tapped coal, gold, and copper deposits in Mongolia.

So to begin today’s alert, let’s quickly familiarize ourselves with this amazing country.

Mongolia is a landlocked country located in East-Central Asia. It borders Russia to the north and China to the south, which offers Mongolia an incredible geographic advantage (as you’ll see below).

Mongolia is the nineteenth largest, yet least densely populated independent country in the world. Of its total population of 2.9 million, over 30% are nomadic. The predominant religion is Tibetan Buddhism, and the country itself contains very little arable land. Much of Mongolia is covered by arid and unproductive steppes — making it an ideal candidate for precious metal mining.

Mongolia is probably best known from the efforts of a chieftain named Temüjin. In the late twelfth century, Temüjin united the Mongol tribes and took on the name of Genghis Khan. Beginning in 1206, Genghis Khan expanded the Mongol Empire into the largest contiguous land empire in world history.

Now let’s skip several hundred years later. The decline of communism in the Soviet Union (combined with its collapse in Eastern Europe as well) helped lead to a peaceful Democratic Revolution in Mongolia in 1990. As a result, this allowed Mongolia (for the first time ever) to begin engaging in economic and diplomatic relations with the Western world. In fact, the nation completed its transition from a communist state to a multi-party capitalist democracy with the ratification of a new constitution in 1992. That’s only 16 years ago!

As it stands today, the government of Mongolia is characterized as a parliamentary democracy. It guarantees full freedom of expression, rights, and worship. A Mongolian Stock Exchange was established in 1991 in Ulan Bator, and as an interesting note, it’s currently the world’s smallest stock exchange by market capitalization. On November 21^st 2005, George W. Bush became the first-ever sitting U.S. President to visit Mongolia.

Now, the reason we’re having this little history lesson is because Mongolia’s economy is centered around rich mineral resources like copper, coal, molybdenum, tin, tungsten, and gold. Up until now, these valuable mineral deposits have yet to be mined. But that’s about to change in a big, big way. You see, in November of 2007, a major pre-election reorganization occurred in Mongolia — and this re-organization witnessed Mongolia’s governing party elect a new Prime Minister named Sanjaa Bayar.

Upon being elected, Prime Minister Bayar re-cast his entire lineup of cabinet ministers. And all of his new cabinet members overwhelmingly endorsed the idea of completing an investment agreement for development of Oyu Tolgoi.

What is Oyu Tolgoi, you ask?

Oyu Tolgoi is a project located in Mongolia’s Aimag province of Omnigov (which is situated in south-central Mongolia). It is the world’s largest undeveloped copper and gold deposit.

In his first major address to Parliament on December 13^th, Prime Minister Bayar said he wanted to finalize an agreement to clear the way for construction of the mine at Oyu Tolgoi “as soon as possible.”

That’s where Ivanhoe Mines comes into play…

Ivanhoe Mines’ primary asset is an ownership interest in Mongolia’s world-class Oyu Tolgoi project.

IVN also holds interests in the Tsagaan Tolgoi project comprising two coal licenses located in south-central Mongolia, the Cloncurry project in Queensland, Australia, and the Bakyrchik gold project in Kazakhstan.

But let’s get back to Oyu Tolgoi.

Just how vast could this deposit be? Consider this…

On October 18^th 2006, world mining leader Rio Tinto (RTP – NYSE) agreed to form a strategic partnership by investing in Ivanhoe. Through an Ivanhoe-Rio Tinto Technical Committee, the two companies will jointly engineer, construct, and operate Ivanhoe’s Oyu Tolgoi copper-gold mining complex in Mongolia’s South Gobi region.

The agreement allows Rio Tinto to make an immediate investment in the equity of Ivanhoe Mines for approximately $303 million. This amount can increase, under defined conditions, to up to approximately $1.5 billion.

Do you think Rio Tinto, arguably the best mining company in the world, would commit up to $1.5 billion to a project if they didn’t think that it carried world-class potential? Heck no.

That’s why IVN looks so promising…

In fact, Prime Minister Bayar is so committed to getting the development of Oyu Tolgoi going, that he went as far as sending a letter to Ivanhoe Mines and Rio Tinto on December 26^th 2007, which reiterated his intention to clear the way for the development of Oyu Tolgoi as one of his top priorities.

Prime Minister Bayar writes: "I would like to reiterate that my Government will continue to support private investment, including foreign investment, and intends to see the projects such as Oyu Tolgoi, that not only have a significant impact on the development of the country but also largely shape the perception of its investment environment, commence during its term in office.”

What Mongolia’s new Prime Minister knows that those before him failed to recognize, is that Oyu Tolgoi can single-handedly accomplish his vision of building social wealth and technology in Mongolia. And along the way, this will create a legacy for future generations through the development of Mongolia’s mineral resources.

IVN is the front-runner to make this all happen, and the $14.00 stock is in an amazing position. It’s like they’re getting the only set of keys to the castle straight from the king.

Just to follow up, Ivanhoe President and CEO John Macken wrote back to Mongolian Prime Minister Sanjaa Bayar, saying that he welcomes the assurances contained in his letter. The win-win relationship has certainly been established.

Now don’t get me wrong. Getting to this point wasn’t easy. In fact, Ivanhoe Mines and Mongolia’s government have been negotiating the details of this initiative for over five years. It wasn’t until June 27^th 2007 that they finally reached an acceptable agreement for developing the Oyu Tolgoi copper-gold project.

Under the terms of this deal, the Mongolian Government will own 34% of the Oyu Tolgoi project, as well as 34% of the copper smelting facility when Ivanhoe builds one. At least 90% of the employees will be Mongolians, and IVN will pay all taxes that are in effect in Mongolia. The Mongolian Government will also own 50% of the Tavan Tolgoi coal mine project.

This agreement works for both sides because the Oyu Tolgoi Project is the world’s largest undeveloped gold and copper deposit. Giving 34% to the Mongolian Government is well worth the price of exclusive mining rights. Plus, Oyu Tolgoi lies only 80 kilometers north of China. And as you know, China is the world’s largest producer of gold. They produced 276 metric tons of gold last year, a 12% increase from one year ago. Just imagine if China has a world-class gold supplier right at its doorstep! Who do you think will get the majority of China’s gold business? You guessed it, IVN!

In terms of timing, engineering at Oyu Tolgoi was substantially completed in December of 2007. All of the major equipment has been committed, which means that the site is ready to commence full-scale construction. In fact, shaft #1 is preparing to begin horizontal tunneling as we speak, and this will be the trigger that sparks an upside run in IVN shares all year long.

Not only that, but Ivanhoe also controls exploration rights in Mongolia, where additional discoveries of coal, copper, and gold are being delineated. For example, Ivanhoe Mines owns 84% of the Ovoot Tolgoi Coal Project approximately 45 kilometers north of the Mongolia/China border. A fleet of coal-mining equipment has already been purchased with plans to begin shipping coal in Q3 2008. That’s another powerful upside trigger for 2008 as well.

Looking at the stock chart, IVN is up 26% over the last 52 weeks. The company has $102.93 million in total cash versus $5.05 million in total debt. Plus, 93% of the shares are currently held by insiders or institutions, giving you a very strong investing base.

But the real play here is profiting off the new political events in Mongolia that now embrace Western capitalism. Now that Mongolia is ready to begin development of their enormously-powerful Oyu Tolgoi Project, IVN could be the prime beneficiary. Therefore, let’s go ahead and establish a new position now!

PLAY: Buy shares of Ivanhoe Mines (IVN -NYSE) at or under $14.00, good for the week.

Sincerely,