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SouthGobi Resources Announces Q and 2019 Unaudited Results

Coal News - Published on Mon, 06 Apr 2020

Image Source: SouthGobi Resources Coronavirus Outbreak
SouthGobi Resources Ltd announced its unaudited financial and operating results for the quarter and the year ended December 31, 2019. Operating Results – The Company’s sales volume increased from 2.8 million tonnes in 2018 to 3.7 million tonnes in 2019. The average selling price of coal in 2019 decreased from $37.1 per tonne in 2018 to $34.9 per tonne in 2019. The decrease in the average selling price was principally attributable to (i) a change of the Company’s product mix, as sales of premium semi-soft coking coal represented a smaller proportion of total sales in 2019; and (ii) a higher portion of sales made at the mine gate instead of transporting the coal to the Company’s Inner Mongolia subsidiary and selling to third party customers within China.

Financial Results – The Company recorded a $29.8 million profit from operations in 2019 compared to a $10.5 million loss from operations in 2018. The improvement in profit from operations was principally attributable to (i) a lower provision for doubtful trade and other receivables being made during the year ($0.5 million and $20.9 million for 2019 and 2018, respectively); and (ii) increased sales volume.

Impact of the COVID-19 Pandemic – The Company was informed that effective as of February 11, 2020, the Mongolian State Emergency Commission closed Mongolia’s southern border with China in order to prevent the spread of COVID-19. Accordingly, the Company suspended coal exports to China since February 11, 2020 as a result of the border closure.

On March 28, 2020, the Company learned that the Mongolian-Chinese border was re-opened for coal export on a trial basis, with a limit imposed on the total volume of coal that is permitted to be exported during this trial period. As of the date hereof, the Company has not received any formal communication from the Mongolian State Emergency Commission regarding the details of the re-opening of the border crossings on a trial basis, including the estimated length of the trial period and the proposed limitations on the coal export volume into China during this trial period. There can be no guarantee, however, that the Company will be able to continue exporting coal to China during this trial period, or the border crossings between Mongolia and China will be fully reopened in a timely manner or at all and, if the border crossing is fully re-opened in the future, the border crossings would not be the subject of additional closures as a result of COVID-19 in the future.

The border closure has had, and will continue to have an adverse impact on the Company’s sales and cash flows in the first and second quarter of 2020. In order to address the financial impact of the border closures and preserve its working capital, the Company ceased major mining operations (including coal mining activities), reduced production to only coal-blending activities and placed approximately half of its workforce on furlough effective as of February 2020 until further notice. The Company anticipates that its existing coal inventories are sufficient to satisfy expected sales demand for a period of at least 2 months as of the date hereof. The Company will continue to closely monitor the development of the COVID-19 pandemic and the impact it has on coal exports to China and its operations as a whole.

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Posted By : Yogender Pancholi on Mon, 06 Apr 2020
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