SouthGobi Energy making “very strong” margins at Mongolia mines, says CEO - News.MN

SouthGobi Energy making “very strong” margins at Mongolia mines, says CEO

Old News! Published on: 2010.04.22

SouthGobi Energy making “very strong” margins at Mongolia mines, says CEO

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CEO Alexander Molyneux has said SouthGobi Energy Resources Ltd., the Canada-listed mining company backed by China’s sovereign wealth fund, may post “robust” earnings starting next year as production expands, according to a report by Bloomberg. Earnings will be “neutral” this year, he said, without elaborating. Performance still depends on the price of coking coal, used in steelmaking.



SouthGobi, listed in Hong Kong since January, posted a bigger loss last year after the startup of its Ovoot Tolgoi mine in southern Mongolia increased costs. The company plans to produce about 14 million metric tons of unprocessed coal in Mongolia in 2013, compared with 1.3 million tons last year.



SouthGobi is making “very strong” margins at its mines in Mongolia, Molyneux said. Since April 1, the company has been selling unprocessed coal at USD40 a metric ton while the cost of extraction is about USD20 a ton, he said. “So you make USD20 a ton, and that’s pretty good money,” he said. “Our exploration and corporate overhead costs will remain relatively flat as the earnings grow from the mining business.”



Mongolia
’s coal exports to China may climb to about 12 million tons this year from 8.5 million tons in 2009, according to Molyneux. Shipments may increase as much as 50 million tons in three to five years, he said. “We want to have about 25 percent of that market by then.”



The coal producer currently has USD840 million in cash to fund expansion plans and does not have any financing needs for now. SouthGobi may spend USD590 million in the next three years to boost output.

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