SouthGobi Resources announces select first quarter 2014 operating results


SouthGobi Resources announced this week its select first quarter 2014 operating results.
“Consistent with the coal sales and production guidance provided in January 2014, coal sales and production decreased in the first quarter of 2014 compared to the fourth quarter of 2013. Sales volume is generally lower in the first quarter of each year due to the seasonal holidays of Mongolian Tsagaan Sar and Chinese New Year, which result in border closures at the Shivee Khuren-Ceke crossing at the Mongolia-China border and a general decrease in the level of economic activity at the Shivee Khuren Border Crossing,” the company said.
SouthGobi resumed operations at the Ovoot Tolgoi coal mine on March 22, 2013 after having been fully curtailed since the end of the second quarter of 2012. This resulted in higher coal production in the first quarter of 2014 compared to the first quarter of 2013.
As of April 21, 2014, the company had cash of 15.8 million USD. Included in the 15.8 million USD cash balance is an eight million USD customer prepayment for future coal deliveries.
SouthGobi said that changes in its cash position in certain periods are inclusive of cash interest paid on the China Investment Corporation (CIC) convertible debenture in the amount of 8.1 million USD in the fourth quarter of 2013, 4.1 million USD in the third quarter of 2013 and four million USD in the first quarter of 2013. The next cash interest payment on the CIC convertible is 7.9 million USD and is due on May 19, 2014.
Coal production in the second quarter of 2014 will be paced to meet contracted sales volumes, according to SouthGobi.
SouthGobi is listed on the Toronto and Hong Kong stock exchanges, in which Turquoise Hill Resources, also publicly listed in Toronto and New York, has a 56 percent shareholding. Turquoise Hill took management control of SouthGobi in September 2012 and made changes to the board and senior management. Rio Tinto has a majority shareholding in Turquoise Hill.
SouthGobi is focused on exploration and development of its metallurgical and thermal coal deposits in Mongolia’s South Gobi Region. It has a 100 percent shareholding in SouthGobi Sands LLC, the Mongolian registered company that holds the mining and exploration licenses in Mongolia and operates the flagship Ovoot Tolgoi coal mine. Ovoot Tolgoi produces and sells coal to customers in China.


The company said that it anticipates that coal prices in China will remain under pressure in 2014, which will continue to impact the company’s margins and liquidity. Based on its forecasts for the year ending December 31, 2014, SouthGobi said it is unlikely to have sufficient capital resources and does not expect to generate sufficient cash flows from mining operations in order to satisfy its ongoing obligations and future contractual commitments, including cash interest payments due on the CIC convertible debenture. Therefore, SouthGobi is actively seeking additional sources of financing to continue operating and meet its objectives.
If SouthGobi is unable to secure the additional sources of financing and continue as a going concern, then this could result in adjustments to the amounts and classifications of assets and liabilities in the company’s consolidated financial statements and such adjustments could be material, the company said.

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Posted by on Apr 24 2014. Filed under Business & Economics. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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