The Mongolian Stock Exchange occupies a single room inside a gray building that once housed a children’s movie theater, just off Sükhbaatar Square in the capital city of Ulaanbaatar. On any given day, it’s quieter than the nearby National Library, as 20 or so traders in cubicles click away softly on their laptops.
This muted bourse hardly seems a place to make a fortune, but James Passin, who needs no prompting to declare that he’s “super bullish on Mongolia,” swears it is. Passin, who’s just flown across 12 time zones from New York City, has as much reason to promote Mongolia’s potential as any foreign investor in the country. His future is riding on it.
Passin, 41, has at least $130 million in three funds that he oversees for his employer, Firebird Management, a Manhattan firm that specializes in emerging markets. Passin controls four companies listed on the Mongolian Stock Exchange—in coal, fluorite, and real estate—as well as an undisclosed number of private enterprises. His placements make Firebird one of Mongolia’s largest and most diversified foreign private equity funds.
Until a few months ago, many other international investors shared Passin’s enthusiasm for the Mongolian market. The country, with a 17.3 percent growth rate in 2011, had the fastest-growing economy in the world. A sparsely populated nation of 3.2 million run by communists until 1990, Mongolia has discovered a bounty of natural resources.
Lying on an ancient seabed, where sedimentary basins cooked carbon for millennia, the country has about 130 billion tons of coal. Iron, copper, uranium, silver, fluorite, and many other minerals are also in abundance. The estimated value of it all runs into the trillions of dollars.
In the last year, however, the Mongolian government decided to redraw its policies on mining and foreign investment. The Strategic Entities Foreign Investment Law, which the Mongolian Parliament passed last May, dictated, among other things, that any transaction of more than $75 million involving a foreign entity was subject to government approval.
In December the president’s office released the draft version of a minerals law that would introduce tougher regulations and higher taxes while giving the government free stakes in many mines. Among Mongolians, the new laws reflect a fateful debate: Are foreign companies and investors grabbing too much, swiping the nation’s birthright? At what price growth?
The new restrictions have halted the development of Oyu Tolgoi, Mongolia’s biggest industrial project and the largest untapped copper-gold mine on earth. Rio Tinto (RIO), the world’s second-largest mining company, has sunk $6.6 billion into its development. Oyu Tolgoi was scheduled to begin production this year, but the project is now in limbo. Many who recognized Mongolia’s potential have quickly retreated, unsure of how the country wants to proceed.
Yet here’s Passin, confidently strolling the floor of the exchange, predicting a boom. As the traders stare blankly into their monitors, where the odd transaction registers now and then, Passin looks on with a smile. “I think a multiyear bull market is starting,” he says.
The Soviets engineered Ulaanbaatar for a population of 400,000. Now the city holds three times that number. On the streets, you spend half your day in traffic. There are few stoplights. Cars crawl past crumbling Chinese and Russian buildings, which are reflected in the glassed facades of several new office towers. Although Ulaanbaatar lies 800 miles from the sea, a skyscraper in the shape of a sail sits in the middle of the city, as in most every other aspirational metropolis in the world.
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