Jim Rogers goes long on DPRK coins

The Wall Street Journal offers an interesting story on American investor Jim Rogers. Here is an excerpt from the article:

By Sunday, Pyongyang-based Korea Pugang Coins Corp. had sold its entire stock of coins, which included 20 one-ounce gold coins featuring mostly century-old generals as well as several hundred silver coins featuring North Korean sports achievements, cultural landmarks and national animals.

Most of the coins were purchased by Mr. Rogers, an American commodities investor now based in Singapore, said a Korea Pugang Coins representative, who didn’t give her name. The company knows Mr. Rogers from last year’s fair, when he bought the entire lot of North Korean coins offered.

Mr. Rogers, who started the Quantum Fund with George Soros in the 1970s, couldn’t be reached for comment, but had said in a previous interview: “Coins and stamps are the only way I can invest in North Korea.”

By invest in, Mr. Rogers means he wants to wager against the long-term prospects for the isolated, economically struggling country. He views his purchase as a bet on the collapse of North Korea.

“At some point down the line, North Korea will cease existing as a country. Then the value of the coins will go up,” Mr. Rogers said.

According to North Korea’s state-controlled news agency, a special series of gold coins were minted last year to commemorate Kim Jong Il, the country’s leader who died in late-2011. The inscription: “The Great Leader Comrade Kim Jong Il Will Always Be Alive.” However, none of those coins were put up for sale at the Singapore fair.

Mr. Kim was succeeded by his son, Kim Jong Eun.

Situated next to the American Numismatic Association, the North Korean stand drew immediate attention from many visitors, when the Singapore International Coin Fair opened its doors Friday morning. By lunchtime, the sales team, wearing Kim Jong Il pins on their jackets, hardly found time to finish their sandwiches and cans of Coca-Cola KO -0.59% .

Thirteen of the gold coins were purchased by an assistant of Mr. Rogers, said a representative of state-owned Korea Pugang Coins. “He wanted to buy more, but we only had 13 left,” she said. The company offered the gold coins for 2,500 Singapore dollars, or $2,014—well above Friday’s closing gold price of $1,598.25 an ounce.

Mr. Rogers is a fervent believer that the commodities bull-run will continue and that China and other Asian nations will set the global economic agenda for this century. He advocates investing in frontier markets such as Myanmar and Cambodia, and in 2007, sold his New York mansion and moved to Singapore, in part because he thinks it is crucial for his children to learn Mandarin.

Korea Pugang Coins has minted coins in Pyongyang since 1987, but the mintage is only around 2,000 each year, as North Korea’s own gold resources are limited.

The coins draw only a limited amount of buyers within North Korea and are mainly sold to international investors and collectors at fairs in Hong Kong, Beijing and Singapore, the company said.

Estonia-based Tavex Group, a company that specializes in gold and currencies, made a deal with Pyongyang in 2008 to sell North Korean gold coins.

But the North Koreans ended it after the first shipment of coins from a 2007 series featuring elephants, rhinos, owls, lions and buffalos.

“We sold them at a relatively high price to collectors, but demand was not big,” says Tomas Pavelson, who works in sales at Tavex Group.

“Actually, we still have one left.”

See some examples of DPRK coins here and here.

Here is some additional information from the Choson Ilbo:

In March last year, American investor Jim Rogers went to an international coin fair in Singapore and snapped up 13 rare North Korean gold coins each valued at 2,500 Singaporean dollars, as well as hundreds of silver coins worth 70 Singaporean dollars each.

The commemorative coins were produced by Pyongyang-based Korea Pugang Coins Corp., a subsidiary of Pugang Trading Corp.

Pugang Trading operates under the “guidance” of the Workers Party’s Munitions Industry Department but is believed to be run by Chon Song-hun, the son of the former North Korean ambassador to China, Chon Myung-su. The younger Chon is a former professor at Kim Il-sung University.

The firm imports and manufactures motorcycles and owns six subsidiaries involved in metals, machinery, chemicals, electronics and pharmaceuticals production. It also owns a gold mine that supplied the commodity for the coins.

Pugang Pharmaceutical has even exported health products to South Korea and runs a mineral water business. The group’s annual transaction volume amounts to US$150 million with 15 overseas branch offices, including in Beijing and Moscow.

Now Pugang Trading is on the UN Security Council’s blacklist, but the company is still very active in the North.

“Pugang is the North Korean equivalent of South Korea’s Samsung Group,” said Cho Bong-hyun of the IBK Economic Research Institute. “It appears to have been thriving even after Kim Jong-un stepped into power.”

Chon’s brother Yong-hun, meanwhile, apparently controls the import of diesel fuel into North Korea as the head of a company affiliated with the party’s Finance and Accounting Department. “North Korean businesses usually split their profits 50:50 with the party,” said a government source here. “The Chon brothers are believed to be worth millions of dollars.”

Another tycoon is Cha Chol-ma, a former diplomat who amassed a fortune worth millions of dollars by taking charge of business projects the North engages in overseas to earn hard currency.

“As a market economy evolves in North Korea, we are seeing early signs of monopolization of wealth,” said a researcher at the Korea Institute for National Unification here. “Tycoons have grown wealthy through collusion with high-ranking party members.”

Experts say North Korean businessmen also act as proxy investors on behalf of high-ranking party members, who cannot get involved in business, and often share the profits.

Read the full story here:
Executing a North Korean Coin Flip
Wall Street Journal
Jacob Gronholt-Pedersen
2012-3-29

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