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SouthGobi orders cut on licence suspension fears


The Mongolian government’s recent threats to suspend coking coal producer SouthGobi Resources’ mining and exploration activities have led some of its customers to cut orders.

“The announcement regarding a potential licence suspension has created significant uncertainty among the company’s customers,” the miner said on Monday May 14.

In April, the Mineral Resource Authority of Mongolia (MRAM) held a press conference to say that it wanted to suspend certain SouthGobi licences after the miner announced the sale of a majority stake to the Aluminum Corp of China (Chalco).

The MRAM said the suspension would allow the Mongolian government to review the proposed change of ownership.

As at Monday, SouthGobi has yet to receive any official notification to suspend its operations, and its mines are still up and running.

However, “concern over whether SouthGobi will be able to deliver contracted volumes in the second quarter of 2012 has in some cases led customers to reduce their coal purchase requirements”, the miner said.

In the three months ended March 31, SouthGobi sold 840,000 tonnes of coal, down from the 1.15 million tonnes in the previous quarter, but up 86% from the March 2011 quarter.

The miner sold 4.02 million tonnes of coal into the Chinese coking coal market in 2011, and is aiming to sell 5.5 million tonnes in 2012.

The March 2012 quarter saw SouthGobi generate a gross profit of $22.7 million, up from 16.6 million seen in the December 2011 quarter. Net income for the first three months of 2012 stood at $3.1 million, SouthGobi said.

Daisy Tseng

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