Mining's bad boy sees lucrative haven in Mongolia

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Mining's bad boy sees lucrative haven in Mongolia
Robert Friedland has made himself rich, but not without controversy; his latest find could transform a nation
Sunday, November 06, 2005
BY RICHARD READ
NEWHOUSE NEWS SERVICE
OYU TOLGOI, Mongolia -- When Robert Friedland got out of prison, he met Steve Jobs. The duo bounced around 1970s India, teamed with Woodstock emcee Wavy Gravy and communed on Friedland's Oregon orchard, credited with inspiring Jobs to name his company Apple Computer.

All that, of course, was before Friedland parlayed an abandoned Oregon gold mine into high-flying Galactic Resources, which helped turn a Colorado river into a Superfund site, costing him more than $20 million.

And before his next company struck nickel in Labrador, making him more than $360 million.

And before he got his drug conviction expunged, denied responsibility for the environmental debacle and landed on the Forbes billionaire list.

Jobs' story is well-known. But the latest chapter in Friedland's saga of risk and reward is playing out in this remote stretch of Outer Mongolia's Gobi Desert, where he has staked a claim bigger than Greece. The 52,000-square-mile license area contains copper and gold Friedland says could be worth $100 billion at the Oyu Tolgoi, or Turquoise Hill, site. Coal and other metals add more value.

Once again, Friedland, a master dealmaker, has the chance to prove himself a hero or a villain as he links prospectors, investors and officials with miners, markets and precious metals. The mine, which could cost $2.7 billion, will alter the Gobi environment and turbocharge Mongolia's economy.

Here, camels stroll past drill rigs and yurts. Herdsmen speak warmly of the suave, self-assured 55-year-old executive whose company helped them to move off site with the lure of new water wells and college tuition for their children. The mayor of the nearest town expects a boom that could bring the nation its first McDonald's.

Friedland says he's helping to build Mongolia -- a landlocked, sparsely populated country -- into the next Asian "tiger" economy.

"Nothing of this scale has been found on Planet Earth in the last 30 years," Friedland told investors last spring about his latest find, which explorers are drilling for core samples. "We can't find the limits of it."

Friedland chairs Ivanhoe Mines of Vancouver, British Columbia. He and his second wife, Darlene, have sold their Sydney, Australia, mansion to live in Hong Kong and Singapore. Friedland, a dual U.S. and Canadian citizen, operates a network of companies from plush 37th-floor offices in Singapore's Millenia Tower.


PRISON AND BEYOND

Born in Chicago, Friedland was raised in suburban Boston and attended Maine's Bowdoin College. But in 1970, police arrested Friedland, then 19, in his Volkswagen camper at a Portland, Maine, shopping center. He and another Bowdoin sophomore were accused of selling 8,000 tablets of LSD to an undercover FBI agent, the Portland Press Herald reported.

Later, Friedland would describe the conviction for "unlawful disposition of LSD" as a Nixon-era miscarriage of justice, but the sentencing judge identified him as the ringleader. "You gave no thought to the consequences for others that could have resulted from this transaction,&quo
t; the judge said, "but only to the large sum of money that you could have obtained."

A six-month prison term behind him, the outgoing Friedland got into Reed College in Portland, Ore., where he met Jobs, won a student senate seat and was elected student body president.

Friedland discovered mining after graduation, according to "The Big Score," a 1998 book by Jacquie McNish, a Canadian journalist. Friedland searched the Northwest for mining properties, seeking Vancouver Stock Exchange cash to develop an abandoned Oregon gold mine. He met a broker who helped him reincarnate Galactic, a dormant company Friedland told investors would resuscitate the mine.

The Oregon gold didn't pan out, but the venture made Friedland a millionaire. Friedland profited by selling the mine property in 1981 to Galactic, McNish wrote, receiving shares whose value then soared through a private stock sale.

Friedland went on to pioneer a technique of launching mining ventures that made him money whether or not he hit paydirt, says David Baines, a Vancouver Sun business columnist. Baines says Friedland would acquire an inactive company, sell the firm mineral prospects in exchange for stock, sell more cheap shares to himself and associates, and make a fortune when the company went public at a higher price.

Friedland says he takes honest investment risks and does not bail out at market highs.

In the Colorado case, Galactic acquired the inactive Summitville gold mine in 1984. Friedland pitched the technique of heap- leach mining, in which sodium cyanide would be poured on crushed ore to dissolve gold.

But Summitville's containment system leaked. Galactic went bankrupt.

Activists and others labeled Friedland "Toxic Bob," but he blamed former partner companies and others. He did make a $20.7 million payment under terms of a personal settlement reached in 2000 with the federal government and the state of Colorado, ending litigation. Under the settlement, the U.S. government paid him $1.25 million to halt a countersuit.

Friedland, whose lawyers have recovered about $17 million from others involved in the mine, declined an oral interview for this story. In answers to e-mailed questions, he dismissed popular accounts of Summitville as "entrenched fictions and Internet garbage perpetuated by lazy reporters and truth-averse activists."

Fish and all other life died in 17 miles of the Alamosa River, according to Sonya Pennock, a U.S. Environmental Protection Agency communications manager, and Howard Roitman, environmental programs director for the Colorado Public Health and Environment Department.

But Ivanhoe Capital, the Friedland family's private Singapore- based venture-capital firm chaired by Friedland, says past mining and natural acidic runoff caused contamination. The firm also blames the state of Colorado for contributing to the pollution and bankruptcy by imposing an unattainable water-treatment standard. "Ridiculous," Colorado's Roitman says. He disputes Ivanhoe Capital's claim that Friedland had no responsibility for the mine's design and operation.



Whatever the case, the cleanup has cost more than $200 million with no end in sight.


GOING INTERNATIONAL

As Summitville unwound, Friedland moved on, pursuing Namibian diamonds and other ventures. But it was his handling of the Labrador nickel find that displayed what admirers describe as genius for creating value.

"The Big Score" describes Friedland wooing and pressuring corporate suitors, exposing his volcanic temper -- or unorthodox negotiating tactics -- as he pounded a shoe Khrushchev-style on a marble conference table. He engineered a bidding war that culminated in one of the biggest mining deals in history, Diamond Fields Resources' 1996 sale to Inco. Friedland pocketed hundreds of millions in stock.

These days, Friedland crisscrosses the globe in a Boeing 737 business jet on mining ventures ranging from Congo to Kazakhstan.

Ben Johnson, a Portland money manager and First Securities Northwest president, who has invested with Friedland since the early 1980s, says his friend has fallen for Mongolia and its people. &q
uot;That's his higher calling and what drives him now."

Friedland continues to recruit investment and partners for the Mongolia project. At 8 a.m. one Wednesday last spring, company managers and mining-exploration workers filled a charter flight in Ulan Bator, flying south above a barren landscape.

An hour and a half later, the Fokker 50 bounced along a gravel strip at Turquoise Hill, named for the formation where colored rock hinted at riches below.

"One nice thing about it here is that nobody shoots at you," said construction manager Larry Lobdell, who said he couldn't say the same for previous postings in Colombia and Indonesia. More than 650 workers brave blistering sandstorms and subzero winter temperatures at the claim, which BHP Exploration sold to Ivanhoe Mines after coming up dry.

Friedland was away rainmaking. But Charles Forster, an Ivanhoe geologist, explained the project using a computer-graphics display that superimposed a tiny Eiffel Tower on colossal subterranean ore bodies.

Friedland shows similar visuals to potential investors. At a conference earlier this year in Tampa, Fla., he said the Mongolian deposit could be worth more than $100 billion during four decades of production. No people, no jungles and no activist groups clutter the landscape, he said.

Mongolians express wary support for the project that an independent study says could boost the nation's Gross Domestic Product, currently $5 billion, by a third each year. But local activists said last spring that instead of the standard 2.5 percent royalty, their nation should get a 50-50 share. That idea, Ivanhoe Mines says, hasn't gained momentum.



Richard Read covers international affairs for the Oregonian of Portland, Ore. He may be contacted at richread@aol.com. Researcher Lynne Palombo contributed to this report.