With its flagship Ovoot Tolgoi project shuttered from mid-2012 until March 22 this year, SouthGobi’s revenue was expected to be only a fraction of the $40.1 million from the same period last year.
The company’s coal sales volumes declined to 80,000 tonnes from 840,000t, at an average realised selling price of $45.02 per tonne to $56.79, when compared to the first quarter of 2012.
“The company’s sales volumes and average realized selling price continued to be negatively impacted by the softness of the inland China coking coal markets closest to SouthGobi’s operations,” the company said in its report released on Monday.
“Although the company signed contracts with customers in the first quarter of 2013 to sell the majority of its remaining thermal coal stockpiles, customers did not collect contracted volumes.”
SouthGobi, which is dual-listed on Hong Kong and Toronto stock exchanges, said it was yet to sign any sales contracts for second quarter of 2013.
The company only produced 20,000t of raw coal during the quarter, compared to 1.07 million tonnes in the March quarter of 2012.
But with Ovoot Tolgoi back in production, the company forecasts production of 3.2Mt of semi-soft coking coal for the full year.
“The 2013 mine plan assumes a conservative resumption of operations, designed to achieve a cost effective approach that will allow operations to continue on a sustainable basis and align production levels with forecast market conditions,” the company said.
SouthGobi reported a net loss of $24.9 million in the period, compared with profit of $3.1 million a year earlier.
The company’s adjusted net loss totalled $11.6 million, compared with adjusted income of $7 million in the same period a year earlier. It was negatively impacted due to $12.3 million worth of idled mine costs.
The company closed the quarter with cash reserves of $24.8 million and a workforce of 444 employees, almost half the strength of this time last year.
SouthGobi reported it was still subject to continuing investigations by the Mongolian Independent Authority Against Corruption and the State Investigation Office.
The IAAC launched an investigation last year into the divestment of some SouthGobi licenses to third parties and the involvement of government officials.
SouthGobi said neither the company nor any of its employees had been charged in connection with the investigations but certain former employees had been informed that they were suspects.
The company is also embroiled in an investment dispute with subsidiary SGQ Coal.
For the rest of the year, the company plans to ramp up production at its operational mine, continue its three development projects and “re-establish good working relationships” and the company’s reputation.
