SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878), (the "Company" or "SouthGobi")
today announced its financial and operating results for the three and six months
ended June 30, 2013. All figures are in U.S. Dollars unless otherwise stated.
SIGNIFICANT EVENTS
The Company's significant events for the quarter ended June 30, 2013 and
subsequent weeks are as follows:
-- Entered into a coal supply agreement with Winsway Coking Coal Holdings
Limited ("Winsway") for the sale of 1.2 million tonnes of Standard semi-
soft coking coal in 2013. Agreement reaffirms the Company's longstanding
relationship with Winsway, a key customer, as SouthGobi continues to
focus on its 2013 commercial objectives;
-- Announced the appointment of Enkh-Amgalan Sengee as President and
Executive Director of SouthGobi Sands LLC, the Company's indirectly
wholly-owned subsidiary, effective July 15, 2013;
-- Announced the appointment of Brett Salt as Chief Commercial Officer and
his resignation as a non-executive director, effective August 1, 2013;
-- Second quarter sales volumes and revenue declined to 0.04 million tonnes
and $0.4 million, respectively, in 2013, compared to 0.16 million tonnes
and $8.4 million in 2012.
REVIEW OF QUARTERLY OPERATING RESULTS
The Company's operating results for the previous eight quarters are summarized
in the table below:
-------------- ---------------------------- --------------
2013 2012 2011
-------------------------------- ---------------------------- --------------
QUARTER ENDED 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep
-------------------------------- ---------------------------- --------------
Raw coal
production
(millions of
tonnes) 0.17 0.02 - - 0.27 1.07 1.34 1.25
Sales volumes and
prices (i)
SouthGobi premium
semi-soft coking
coal
Coal sales
(millions of
tonnes) - 0.08 0.03 - 0.12 0.31 0.53 0.66
Average realized
selling price
(per tonne) $ - $45.81 $47.86 $ - $67.17 $67.59 $67.62 $66.83
SouthGobi
standard semi-
soft coking coal
Coal sales
(millions of
tonnes) - - - - 0.04 0.53 0.37 0.20
Average realized
selling price
(per tonne) $ - $ - $ - $ - $49.91 $50.40 $48.59 $48.17
SouthGobi thermal
coal
Coal sales
(millions of
tonnes) 0.04 0.00 - 0.31 0.00 - 0.25 0.51
Average realized
selling price
(per tonne) $14.40 $13.67 $ - $15.79 $38.80 $ - $40.30 $39.74
Total
Coal sales
(millions of
tonnes) 0.04 0.08 0.03 0.31 0.16 0.84 1.15 1.37
Average realized
selling price
(per tonne) $14.40 $45.02 $47.86 $15.79 $62.56 $56.79 $55.51 $54.01
Costs
Direct cash costs
of product sold
excluding idled
mine asset costs $10.36 $35.46 $33.11 $ 8.23 $22.57 $10.80 $22.14 $22.64
(per tonne) (ii)
Total cash costs
of product sold
excluding idled
mine asset costs $70.14 $40.52 $38.17 $12.12 $31.49 $15.04 $23.09 $23.17
(per tonne) (ii)
Waste movement and
stripping ratio
Production waste
material moved
(millions of
bank cubic
meters) 2.71 0.40 - - 1.16 2.20 4.58 4.10
Strip ratio (bank
cubic meters of
waste material
per tonne of
coal produced) 15.55 26.21 - - 4.31 2.07 3.42 3.28
Pre-production
waste material
moved (millions
of bank cubic
meters) - - - - - - - 0.39
Other operating
capacity
statistics
Capacity of key
mining fleet
Number of mining
shovels/
excavators
available at
period end 5 5 5 4 4 3 3 3
Total combined
stated mining
shovel/excavator
capacity at
period end
(cubic meters) 113 113 113 98 98 64 64 64
Number of haul
trucks available
at period end 24 31 27 27 27 27 25 16
Total combined
stated haul
truck capacity
at period end
(tonnes) 4,978 5,615 4,743 4,743 4,743 4,743 4,561 2,599
Employees and
safety
Employees at
period end 449 444 465 644 693 720 720 695
Lost time injury
frequency rate
(iii) - - 0.1 0.2 0.2 0.3 0.2 0.2
-------------------------------- ---------------------------- --------------
(i) The sales volumes and prices that have been previously disclosed as
raw semi-soft coking coal, raw medium-ash coal and raw higher-ash coal
have now been reclassified as SouthGobi premium semi-soft coking coal,
SouthGobi standard semi-soft coking coal and SouthGobi thermal coal,
respectively, to reflect the Company's new product strategy
(ii) A non-International Financial Reporting Standards ("IFRS") financial
measure, see Non-IFRS Financial Measures section
(iii) Per 200,000 man hours
On March 22, 2013, SouthGobi announced the resumption of operations at its
flagship Ovoot Tolgoi Mine. The Company recognized revenue of $0.4 million in
the second quarter of 2013 compared to $3.3 million in the first quarter of 2013
and $8.4 million in the second quarter of 2012. In the first half of 2013, the
Company's sales volume 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. Economic activity post transition in China's
leadership has been slower than expected. The Chinese steel industry has been
particularly affected and, as a result, demand and prices for coking coal have
been negatively impacted. Subsequent to the end of the second quarter of 2013,
SouthGobi entered into a coal supply agreement with Winsway, an integrated
logistic service provider, for the sale of 1.2 million tonnes of Standard
semi-soft coking coal in 2013.
For the three months ended June 30, 2013
For the three months ended June 30, 2013, the Company produced 0.17 million
tonnes of raw coal with a strip ratio of 15.55 compared to production of 0.27
million tonnes of raw coal with a strip ratio of 4.31 for the three months ended
June 30, 2012. In the second quarter of 2013, the Company primarily moved waste
material (overburden) and exposed coal in the pit, aligning its operating
activities to the significantly lower demand. The Company's strip ratio of 15.55
for the three months ended June 30, 2013 is not indicative of the Company's
strip ratio moving forward.
For the three months ended June 30, 2013, SouthGobi recorded revenue of $0.4
million compared to $8.4 million in the second quarter of 2012. Revenue
decreased primarily due to decreased sales volumes and a lower average realized
selling price. The Company sold 0.04 million tonnes of coal at an average
realized selling price of $14.40 per tonne in the second quarter of 2013
compared to sales of 0.16 million tonnes of coal at an average realized selling
price of $62.56 per tonne in the second quarter of 2012. SouthGobi's sales
volume and average realized selling price was negatively impacted by the
continued softness of the inland China coking coal markets closest to
SouthGobi's operations. SouthGobi's average realized selling price was also
negatively impacted by the Company's sales mix in the second quarter of 2013,
which consisted of thermal coal.
Direct cash costs of product sold excluding idled mine asset costs (a non-IFRS
financial measure, see Non-IFRS Financial Measures section) were $10.36 per
tonne for the three months ended June 30, 2013 compared to $22.57 per tonne for
the three months ended June 30, 2012. Direct cash costs of product sold
excluding idled mine asset costs primarily decreased in the second quarter of
2013 due to lower cost coal inventory being sold.
Mine administration cash costs of product sold excluding idled mine asset costs
(a non-IFRS financial measure, see Non-IFRS Financial Measures section)
increased to $59.78 per tonne for the three months ended June 30, 2013 from
$8.92 per tonne for the three months ended June 30, 2012 primarily due to mine
administration costs being allocated over lower sales volumes.
For the six months ended June 30, 2013
For the six months ended June 30, 2013, the Company produced 0.19 million tonnes
of raw coal with a strip ratio of 16.40 compared to production of 1.33 million
tonnes of raw coal with a strip ratio of 2.52 for the six months ended June 30,
2012. In the first quarter of 2013, the Company's production was significantly
impacted by the curtailment of mining operations until March 22, 2013. In the
second quarter of 2013, the Company primarily moved waste material (overburden)
and exposed coal in the pit, aligning its operating activities to the
significantly lower demand. The Company's strip ratio of 16.40 for the six
months ended June 30, 2013 is not indicative of the Company's strip ratio moving
forward.
For the six months ended June 30, 2013, SouthGobi recorded revenue of $3.6
million compared to $48.6 million for the six months ended June 30, 2012. The
Company sold 0.12 million tonnes of coal at an average realized selling price of
$34.62 per tonne for the six months ended June 30, 2013 compared to sales of
1.00 million tonnes of coal at an average realized selling price of $57.71 per
tonne for the six months ended June 30, 2012. Revenue decreased primarily due to
decreased sales volumes and a lower average realized selling price.
Direct cash costs of product sold excluding idled mine asset costs (a non-IFRS
financial measure, see Non-IFRS Financial Measures section) were $26.94 per
tonne for the six months ended June 30, 2013 compared to $12.67 per tonne for
the six months ended June 30, 2012. In the first quarter of 2012, direct cash
costs of product sold excluding idled mine asset costs were lower due to a
below-trend strip ratio.
Mine administration cash costs of product sold excluding idled mine asset costs
(a non-IFRS financial measure, see Non-IFRS Financial Measures section)
increased to $23.63 per tonne for the six months ended June 30, 2013 from $4.98
per tonne for the six months ended June 30, 2012 primarily due to mine
administration costs being allocated over lower sales volumes.
REVIEW OF QUARTERLY FINANCIAL RESULTS
The Company's financial results for the previous eight quarters are summarized
in the table below:
($ in thousands, except for per share information, unless otherwise indicated)
------------------------ ------------------------
2013 2012
--------------------------------------------------- ------------------------
QUARTER ENDED 30-Jun 31-Mar 31-Dec 30-Sep
--------------------------------------------------- ------------------------
Revenue $ 374 $ 3,259 $ 1,213 $ 3,337
Gross profit/(loss)
excluding idled mine
asset costs (6,337) (2,187) (6,894) (8,601)
Gross profit margin
excluding idled mine
asset costs -1694% -67% -568% -258%
Gross profit/(loss)
including idled mine asset
costs (12,092) (18,601) (25,336) (27,532)
Other operating expenses (14,877) (383) (18,664) (29,301)
Administration expenses (4,024) (3,733) (6,079) (5,178)
Evaluation and exploration
expenses (221) (273) (508) (958)
Income/(loss) from
operations (31,214) (22,990) (50,586) (62,969)
Net income/(loss) (33,662) (24,901) (51,818) (54,564)
Basic income/(loss) per
share (0.18) (0.14) (0.28) (0.30)
Diluted income/(loss) per
share (0.18) (0.14) (0.28) (0.30)
--------------------------------------------------- ------------------------
------------------------ ------------------------
2012 2011
--------------------------------------------------- ------------------------
QUARTER ENDED 30-Jun 31-Mar 31-Dec 30-Sep
--------------------------------------------------- ------------------------
Revenue $ 8,412 $ 40,153 $ 51,064 $ 60,491
Gross profit/(loss)
excluding idled mine
asset costs 1,778 22,674 16,637 17,635
Gross profit margin
excluding idled mine
asset costs 21% 56% 33% 29%
Gross profit/(loss)
including idled mine asset
costs (13,809) 22,674 16,637 17,635
Other operating expenses (3,803) (2,578) (24,644) (138)
Administration expenses (7,497) (5,882) (8,612) (7,993)
Evaluation and exploration
expenses (2,099) (5,033) (14,513) (10,908)
Income/(loss) from
operations (27,208) 9,181 (31,132) (1,404)
Net income/(loss) 237 3,126 (18,897) 55,921
Basic income/(loss) per
share 0.00 0.02 (0.10) 0.31
Diluted income/(loss) per
share (0.12) 0.02 (0.14) (0.02)
--------------------------------------------------- ------------------------
------------------------ ------------------------
2013 2012
--------------------------------------------------- ------------------------
QUARTER ENDED 30-Jun 31-Mar 31-Dec 30-Sep
--------------------------------------------------- ------------------------
Net income/(loss) $ (33,662) $ (24,901) $ (51,818) $ (54,564)
Income/(loss) adjustments,
net of tax
Idled mine asset costs 4,316 12,312 14,474 13,572
Share-based compensation
expense/(recovery) (21) 154 (1,144) 1,490
Net impairment
loss/(recovery) on assets 18,269 1,621 22,814 34,299
Unrealized foreign
exchange losses/(gains) 12 (38) 750 179
Unrealized loss/(gain) on
embedded derivatives in
CIC debenture (3,343) (748) (662) (12,856)
Realized loss/(gain) on
disposal of FVTPL
investments (i) 43 - 15 -
Unrealized loss/(gain) on
FVTPL investments 473 (5) 664 1,197
Adjusted net income/(loss)
(ii) (13,913) (11,605) (14,907) (16,683)
--------------------------------------------------- ------------------------
------------------------ ------------------------
2012 2011
--------------------------------------------------- ------------------------
QUARTER ENDED 30-Jun 31-Mar 31-Dec 30-Sep
--------------------------------------------------- ------------------------
Net income/(loss) $ 237 $ 3,126 $ (18,897) $ 55,921
Income/(loss) adjustments,
net of tax
Idled mine asset costs 10,966 - - -
Share-based compensation
expense/(recovery) 4,383 3,799 4,050 4,296
Net impairment
loss/(recovery) on assets 2,583 - 23,818 (2,925)
Unrealized foreign
exchange losses/(gains) (511) (950) 34 103
Unrealized loss/(gain) on
embedded derivatives in
CIC debenture (26,770) 776 (10,790) (62,058)
Realized loss/(gain) on
disposal of FVTPL
investments (i) 46 (85) - -
Unrealized loss/(gain) on
FVTPL investments 2,282 339 155 2,449
Adjusted net income/(loss)
(ii) (6,784) 7,005 (1,630) (2,214)
--------------------------------------------------- ------------------------
(i) FVTPL is defined as "fair value through profit or loss"
(ii) A non-IFRS financial measure, see Non-IFRS Financial Measures section
For the three months ended June 30, 2013
The Company recorded a net loss of $33.7 million in the second quarter of 2013
compared to a net loss of $24.9 million in the first quarter of 2013 and a net
income of $0.2 million in the second quarter of 2012.
Gross Profit/(Loss):
The Company recorded a gross loss of $12.1 million in the second quarter of
2013, $18.6 million in the first quarter of 2013 and $13.8 million in the second
quarter of 2012. SouthGobi's gross loss in these periods was negatively impacted
by idled mine asset costs. The Company recorded a gross loss excluding idled
mine asset costs of $6.3 million in the second quarter of 2013 and $2.2 million
in the first quarter of 2013 compared to a gross profit excluding idled mine
asset costs of $1.8 million in the second quarter of 2012. Gross profit will
vary by quarter depending on sales volumes, sales prices and unit costs.
The Company recognized revenue of $0.4 million in the second quarter of 2013
compared to $3.3 million in the first quarter of 2013 and $8.4 million in the
second quarter of 2012. In the first half of 2013, the Company's sales volume
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.
Based on the reference prices for the second quarter of 2013, the Company was
subject to an average 7% royalty based on a weighted average reference price of
$70.83 per tonne. The Company's effective royalty rate for the second quarter of
2013, based on the Company's average realized selling price of $14.40 per tonne,
was 34%. Effective October 1, 2012 (for a six month trial period) the royalty
was determined using the contracted sales price per tonne, not the reference
price per tonne published by the Government of Mongolia. Despite SouthGobi,
together with other Mongolian mining companies, engaging the appropriate
Government of Mongolia authorities, the six month trial period was not extended
and effective April 1, 2013, the royalty on all coal sales exported out of
Mongolia was once again based on a set reference price per tonne published
monthly by the Government of Mongolia. Although discussions have not been
successful to date, SouthGobi, together with other Mongolian mining companies,
continue the dialog with the appropriate Government of Mongolia authorities with
the goal of moving to a more equitable process for setting reference prices.
Cost of sales was $12.5 million in the second quarter of 2013 compared to $21.9
million in the first quarter of 2013 and $22.2 million in the second quarter of
2012. Cost of sales comprise the direct cash costs of product sold, mine
administration cash costs of product sold, idled mine asset costs, inventory
impairments, equipment depreciation, depletion of mineral properties and
share-based compensation expense. Of the $12.5 million, $21.9 million and $22.2
million recorded as cost of sales in the second quarter of 2013, the first
quarter of 2013 and the second quarter of 2012, $6.7 million, $5.4 million and
$6.6 million related to mine operations and $5.8 million, $16.4 million and
$15.6 million related to idled mine asset costs, respectively. Cost of sales
from mine operations in the second quarter of 2013 and the first quarter of 2013
included coal stockpile impairments of $4.0 million and $2.2 million,
respectively, to reduce the carrying value of the coal stockpiles to their
estimated net realizable values. Cost of sales from mine operations, exclusive
of impairments, decreased in the second quarter of 2013 compared to the second
quarter of 2012 due to lower sales volumes, partially offset by higher unit
costs.
Cost of sales from idled mine asset costs decreased in the second quarter of
2013 due to the recommencement of mining operations at the Ovoot Tolgoi Mine on
March 22, 2013. However, the 2013 production plan does not fully utilize the
Company's existing mining fleet, therefore, idled mine asset costs will continue
to be incurred moving forward.
Other Operating Expenses:
Other operating expenses in the second quarter of 2013 were $14.9 million
compared to $0.4 million in the first quarter of 2013 and $3.8 million in the
second quarter of 2012. In the second quarter of 2013, other operating expenses
primarily related to the following:
-- Available-for-sale financial asset - the Company recognized an
impairment loss of $3.1 million related to its investment in Aspire
Mining Limited ("Aspire").
-- Materials and supplies inventory - the Company recognized an impairment
loss of $6.9 million related to surplus materials and supplies
inventories not expected to be utilized with the Company's existing
mining fleet.
-- Property, plant and equipment - the Company recorded $4.3 million of
impairment charges to reduce various items of property, plant and
equipment to their recoverable amounts. The impairments relate to
surplus capital spares not expected to be utilized with the Company's
existing mining fleet.
In the first quarter of 2013, other operating expenses primarily related to $0.3
million of foreign exchange losses. In the second quarter of 2012, other
operating expenses primarily related to a $2.6 million provision for doubtful
trade and other receivables.
Administration Expenses:
Administration expenses in the second quarter of 2013 were $4.0 million compared
to $3.7 million in the first quarter of 2013 and $7.5 million in the second
quarter of 2012. The increase in administration expenses in the second quarter
of 2013 compared to the first quarter of 2013 primarily related to increased
legal expenses due to the ongoing governmental, regulatory and internal
investigations. The decrease in administration expenses in the second quarter of
2013 compared to the second quarter of 2012 primarily related to decreased
corporate administration, salaries and benefits and share-based compensation
expenses, partially offset by increased legal and professional fees due to the
ongoing governmental, regulatory and internal investigations.
Evaluation and Exploration Expenses:
Exploration expenses in the second quarter of 2013 were $0.2 million compared to
$0.3 million in the first quarter of 2013 and $2.1 million in the second quarter
of 2012. Exploration expenses will vary from quarter to quarter depending on the
number of projects and the related seasonality of the exploration programs. The
Company continues to minimize exploration expenditures to preserve the Company's
financial resources.
Finance Income & Finance Costs:
Finance costs in the second quarter of 2013 were $5.6 million compared to $4.0
million in the second quarter of 2012. Finance costs in the second quarter of
2013 primarily consisted of $5.1 million of interest expense on the China
Investment Corporation ("CIC") convertible debenture; whereas, finance costs in
the second quarter of 2012 primarily consisted of a $2.3 million unrealized loss
on FVTPL investments and $1.6 million of interest expense on the CIC convertible
debenture.
Finance income in the second quarter of 2013 was $3.4 million compared to $26.9
million in the second quarter of 2012. In the second quarter of 2013 and 2012,
finance income primarily consisted of a $3.3 million and $26.8 million
unrealized gain on the fair value change of the embedded derivatives in the CIC
convertible debenture, respectively. The fair value of the embedded derivatives
in the CIC convertible debenture is driven by many factors including: the
Company's share price, foreign exchange rates and share price volatility.
Taxes:
In the second quarter of 2013, the Company recorded $nil current income tax
expense related to its Mongolian operations compared to a current income tax
recovery of $3.7 million in the second quarter of 2012. The Company has recorded
a deferred income tax expense related to deductible temporary differences and
loss carry-forwards of $0.2 million in the second quarter of 2013 compared to a
deferred income tax recovery related to deductible temporary differences of $0.6
million in the second quarter of 2012.
For the six months ended June 30, 2013
The Company recorded a net loss of $58.6 million for the six months ended June
30, 2013 compared to net income of $3.4 million for the six months ended June
30, 2012.
Gross Profit/(Loss):
The Company recorded a gross loss of $30.7 million for the six months ended June
30, 2013 compared to a gross profit of $8.9 million for the six months ended
June 30, 2012. SouthGobi's gross profit/(loss) in these periods was negatively
impacted by idled mine asset costs. The Company recorded a gross loss excluding
idled mine asset costs of $8.5 million for the six months ended June 30, 2013
compared to a gross profit excluding idled mine asset costs of $24.5 million for
the six months ended June 30, 2012. Gross profit will vary by quarter depending
on sales volumes, sales prices and unit costs.
For the six months ended June 30, 2013, SouthGobi recorded revenue of $3.6
million compared to $48.6 million for the six months ended June 30, 2012. The
Company sold 0.12 million tonnes of coal at an average realized selling price of
$34.62 per tonne for the six months ended June 30, 2013 compared to sales of
1.00 million tonnes of coal at an average realized selling price of $57.71 per
tonne for the six months ended June 30, 2012. Revenue decreased primarily due to
decreased sales volumes and a lower average realized selling price.
Revenues are presented net of royalties and selling fees. Based on the reference
prices for the six months ended June 30, 2013, the Company was subject to an
average 6% royalty based on a weighted average reference price of $53.76 per
tonne. The Company's effective royalty rate for the six months ended June 30,
2013, based on the Company's average realized selling price of $34.62 per tonne,
was 10%.
Cost of sales was $34.3 million for the six months ended June 30, 2013 compared
to $39.7 million for the six months ended June 30, 2012. Cost of sales comprise
the direct cash costs of product sold, mine administration cash costs of product
sold, idled mine asset costs, inventory impairments, equipment depreciation,
depletion of mineral properties and share-based compensation expense. Of the
$34.3 million (1H 2012: $39.7 million) recorded as cost of sales for the six
months ended June 30, 2013, $12.2 million (1H 2012: $24.1 million) related to
mine operations and $22.2 million (1H 2012: $15.6 million) related to idled mine
asset costs. Cost of sales related to mine operations decreased for the six
months ended June 30, 2013 compared to the six months ended June 30, 2012
primarily due to lower sales volumes, partially offset by higher unit costs and
coal stockpile impairments totaling $6.1 million. Cost of sales related to idled
mine asset costs primarily consist of period costs, which are expensed as
incurred and primarily include depreciation expense. The depreciation expense
relates to the Company's idled plant and equipment.
Other Operating Expenses:
Other operating expenses for the six months ended June 30, 2013 were $15.3
million compared to $6.4 million for the six months ended June 30, 2012. For the
six months ended June 30, 2013, other operating expenses primarily related to
the following:
-- Available-for-sale financial asset - the Company recognized an
impairment loss of $3.1 million related to its investment in Aspire.
-- Materials and supplies inventory - the Company recognized an impairment
loss of $6.9 million related to surplus materials and supplies
inventories not expected to be utilized with the Company's existing
mining fleet.
-- Property, plant and equipment - the Company recorded $4.3 million of
impairment charges to reduce various items of property, plant and
equipment to their recoverable amounts. The impairments relate to
surplus capital spares not expected to be utilized with the Company's
existing mining fleet.
For the six months ended June 30, 2012, other operating expenses primarily
related to a $2.6 million provision for doubtful trade and other receivables and
a $2.0 million foreign exchange loss.
Administration Expenses:
Administration expenses for the six months ended June 30, 2013 were $7.8 million
compared to $13.4 million for the six months ended June 30, 2012. The decrease
in administration expenses primarily relates to decreased corporate
administration, salaries and benefits and share-based compensation expenses,
partially offset by increased legal and professional fees due to the ongoing
governmental, regulatory and internal investigations.
Evaluation and Exploration Expenses:
Exploration expenses for the six months ended June 30, 2013 were $0.5 million
compared to $7.1 million for the six months ended June 30, 2012. Exploration
expenses will vary from period to period depending on the number of projects and
the related seasonality of the exploration programs. The Company continues to
minimize exploration expenditures to preserve the Company's financial resources.
Finance Income & Finance Costs:
Finance costs for the six months ended June 30, 2013 were $10.6 million compared
to $4.7 million for the six months ended June 30, 2012. Finance costs for the
six months ended June 30, 2013 primarily consisted of $10.0 million of interest
expense on the CIC convertible debenture; whereas, finance costs for the six
months ended June 30, 2012 primarily consisted of a $2.6 million unrealized loss
on FVTPL investments and $1.8 million of interest expense on the CIC convertible
debenture.
Finance income for the six months ended June 30, 2013 was $4.1 million compared
to $26.2 million for the six months ended June 30, 2012. For the six months
ended June 30, 2013 and June 30, 2012, finance income primarily consisted of a
$4.1 million and $26.0 million unrealized gain on the fair value change of the
embedded derivatives in the CIC convertible debenture, respectively. The fair
value of the embedded derivatives in the CIC convertible debenture is driven by
many factors including: the Company's share price, foreign exchange rates and
share price volatility.
Taxes:
For the six months ended June 30, 2013, the Company recorded a $1 thousand
current income tax expense related to its Mongolian operations compared to a
current income tax expense of $1.1 million for the six months ended June 30,
2012. The Company has recorded a deferred income tax recovery related to
deductible temporary differences and loss carry-forwards of $2.1 million for the
six months ended June 30, 2013 compared to a deferred income tax recovery
related to deductible temporary differences of $0.7 million for the six months
ended June 30, 2012.
FINANCIAL POSITION AND LIQUIDITY
Cash Position and Liquidity
As at June 30, 2013, the Company had cash of $19.2 million compared to cash of
$19.7 million and short term money market investments of $15.0 million for a
total of $34.7 million in cash and money market investments as at December 31,
2012. Working capital (excess current assets over current liabilities) was $78.0
million as at June 30, 2013 compared to $127.2 million as at December 31, 2012.
Consistent with the Company's capital risk management strategy, the Company
expects to have sufficient liquidity and capital resources to meet its ongoing
obligations and future contractual commitments, including interest payments due
on the CIC convertible debenture, for at least twelve months from the end of the
June 30, 2013 reporting period. The Company expects its liquidity to remain
sufficient based on existing capital resources and estimated income from mining
operations. Estimated income from mining operations is subject to a number of
external market factors including supply and demand and pricing in the coal
industry. The Company continues to minimize uncommitted capital expenditures and
exploration expenditures in order to preserve the Company's financial resources.
In the first quarter of 2013, the Company was subject to orders imposed by
Mongolia's Independent Authority against Corruption (the "IAAC") which placed
restrictions on certain of the Company's Mongolian assets. The orders were
imposed on the Company in connection with the IAAC's investigation of the
Company. The Mongolian State Investigation Office (the "SIA") also continues to
enforce the orders on the Company.
The orders placing restrictions on certain of the Company's Mongolian assets
could ultimately result in an event of default of the Company's CIC convertible
debenture. This matter remains under review by the Company and its advisers but
to date, it is the Company's view that this would not result in an event of
default as defined under the CIC convertible debenture terms. However, in the
event that the orders result in an event of default of the Company's CIC
convertible debenture that remains uncured for ten business days, the principal
amount owing and all accrued and unpaid interest will become immediately due and
payable upon notice to the Company by CIC.
The orders relate to certain items of operating equipment and infrastructure and
the Company's Mongolian bank accounts. The orders related to the operating
equipment and infrastructure restricts the sale of these items; however, the
orders do not restrict the use of these items in the Company's mining
activities. The orders related to the Company's Mongolian bank accounts restrict
the use of in-country funds. While the orders restrict the use of in-country
funds pending outcome of the investigation, they are not expected to have any
material impact on the Company's activities.
Impairment Analysis
During the three months ended June 30, 2013, the Company determined that an
indicator of impairment existed for its property, plant and equipment related to
the Ovoot Tolgoi Mine. The impairment indicator was the continued weakness in
the Company's share price.
Therefore, the Company conducted an impairment test whereby the carrying values
of the Company's property, plant and equipment, including mineral properties,
related to the Ovoot Tolgoi Mine were compared to their "value-in-use" using a
discounted future cash flow valuation model as at June 30, 2013. The Company's
property, plant and equipment, including mineral properties, totaled $508.7
million as at June 30, 2013.
Key estimates and assumptions incorporated in the valuation model included the
following:
-- Inland Chinese coking coal market coal prices;
-- Life-of-mine coal production and operating costs; and
-- A discount rate based on an analysis of market, country and company
specific factors.
The impairment analysis did not result in the identification of an impairment
loss and no charge was required as at June 30, 2013. The Company believes that
the estimates and assumptions incorporated in the impairment analysis are
reasonable; however, the estimates and assumptions are subject to significant
uncertainties and judgments.
PROCESSING INFRASTRUCTURE
On February 13, 2012, the Company announced the successful commissioning of the
dry coal handling facility ("DCHF") at the Ovoot Tolgoi Mine. The DCHF has
capacity to process nine million tonnes of run-of-mine ("ROM") coal per year.
The DCHF includes a 300-tonne-capacity dump hopper, which receives ROM coal from
the Ovoot Tolgoi Mine and feeds a coal rotary breaker that sizes coal to a
maximum of 50mm and rejects oversize ash. The DCHF is anticipated to reduce
screening costs and improve yield recoveries.
The Company has received all permits to operate the DCHF. However, the 2013 mine
plan considers limited utilization of the DCHF at the latter end of 2013 due to
higher quality coals being mined that likely will not require processing through
the DCHF. 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.
The Company has delayed construction to upgrade the DCHF to include dry air
separation modules and covered load out conveyors with fan stackers to take
processed coals to stockpiles and enable more efficient blending. Uncommitted
capital expenditures have been minimized to preserve the Company's financial
resources.
To further enhance product value, in 2011, the Company entered into an agreement
with Ejinaqi Jinda Coal Industry Co. Ltd ("Ejin Jinda"), a subsidiary of China
Mongolia Coal Co. Ltd to toll-wash coals from the Ovoot Tolgoi Mine. The
agreement has a duration of five years from commencement and provides for an
annual wet washing capacity of approximately 3.5 million tonnes of input coal.
Pursuant to the terms of the agreement, the Company prepaid $33.6 million of
toll washing fees.
Ejin Jinda's wet washing facility is located approximately 10km inside China
from the Shivee Khuren Border Crossing, approximately 50km from the Ovoot Tolgoi
Mine. Primarily, medium and higher-ash coals with only basic processing through
Ovoot Tolgoi's on-site DCHF will be transported from the Ovoot Tolgoi Mine to
Ejin Jinda's wet washing facility under a separate transportation agreement.
Based on preliminary studies, the Company expected coals processed through Ovoot
Tolgoi's on-site DCHF to then be washed to produce coals with ash in the range
of 8% to 11% at a yield of 85% to 90%. However, the Company is currently
reassessing these preliminary studies. The Company continues to expect that
washed coals will generally meet semi-soft coking coal specifications. Ejin
Jinda will charge the Company a single toll washing fee which will cover their
expenses, capital recovery and profit.
Construction of Ejin Jinda's wet washing facility is now complete and it has
been connected to utility supply. The Company has delayed plans to commence wet
washing coals due to the current market conditions. The commencement of wet
washing coals will be aligned with improvements in market conditions. As at June
30, 2013, the delay in commencing wet washing coals has had no impact on the
carrying value of the Company's prepaid toll washing fees of $33.6 million.
REGIONAL TRANSPORTATION INFRASTRUCTURE
On August 2, 2011, the State Property Committee of Mongolia awarded the tender
to construct a paved highway from the Ovoot Tolgoi Complex to the Shivee Khuren
Border Crossing to consortium partners NTB LLC and SouthGobi Sands LLC (together
referred to as "RDCC"). SouthGobi Sands LLC holds a 40% interest in RDCC. On
October 26, 2011, RDCC signed a concession agreement with the State Property
Committee of Mongolia. RDCC has the right to conclude a 17 year build, operate
and transfer agreement under the Mongolian Law on Concessions. Construction on
the paved highway re-commenced in the second quarter of 2013 after a scheduled
demobilization in the fourth quarter of 2012 due to winter weather conditions.
Completion of the paved highway is expected in late 2013. The paved highway will
have an intended carrying capacity upon completion in excess of 20 million
tonnes of coal per year.
REGULATORY ISSUES
Governmental, Regulatory and Internal Investigations
The Company is subject to investigations by the IAAC and the SIA regarding
allegations against SouthGobi and some of its former employees and one current
employee. The IAAC investigation concerns possible breaches of Mongolia's
anti-corruption laws, while the SIA investigation concerns possible breaches of
Mongolia's money laundering and taxation laws.
While the IAAC investigation into allegations of possible breaches of Mongolian
anti-corruption laws has been suspended, the Company has not received notice
that the IAAC investigation is complete. To date, three former SouthGobi
employees and one current SouthGobi employee have been named as suspects in the
IAAC investigation and are subject to a continuing travel ban imposed by the
IAAC. The IAAC has not formally accused any current or former SouthGobi
employees of breach of Mongolia's anti-corruption laws.
The SIA has not accused any current or former SouthGobi employees of money
laundering. However, three former SouthGobi employees have been informed that
they have each been designated as "accused" in connection with the allegations
of tax evasion, and are subject to a travel ban. The Company has been
designated as a "civil defendant" in connection with the tax evasion
allegations, and it may potentially be held financially liable for the criminal
misconduct of its former employees, under Mongolian Law. The Company has shown
full cooperation with the investigation by providing relevant information. The
relevant authorities are yet to conclude on this information. Accordingly, the
likelihood or consequences for the Company of a judgment against its former
employees is unclear at this time.
The SIA also continues to enforce administrative restrictions, which were
initially imposed by the IAAC investigation, on certain of the Company's
Mongolian assets, including local bank accounts, in connection with its
continuing investigation of these allegations. While the orders restrict the use
of in-country funds pending the outcome of the investigation, they are not
expected to have a material impact on the Company's activities in the short
term, although they could create potential difficulties for the Company in the
medium to long term. SouthGobi is taking and intends to take all necessary steps
to protect its ability to continue to conduct its business activities in the
ordinary course.
Certain of the allegations raised by the SIA and IAAC against SouthGobi
(concerning allegations of bribery, money laundering and tax evasion) have been
the subject of public statements and Mongolian media reports, both prior to and
in connection with the recent trial, conviction, and appeal of the former
Chairman and the former director of the Geology, Mining and Cadastral Department
of the MRAM, and others. SouthGobi was not a party to this case. The Company
understands that the court process is now concluded following the decision of
the Supreme Court of Mongolia to uphold the convictions.
A number of the media reports referred to above suggest that, in its decision,
the Supreme Court in the above-mentioned case referred to two matters
specifically involving SouthGobi Sands LLC.
In respect of the first matter, being an alleged failure to meet minimum
expenditure requirements under the Mongolian Minerals Law in relation to four
exploration licenses, the Company is investigating these allegations, but
advises that three of the four licenses were considered to be non-material and
allowed to lapse between November 2009 and December 2011. The fourth exploration
license (license 9442X) was canceled on June 19, 2013 by the Supreme Court in
the appeal of the above-mentioned case and is no longer held by the Company.
Activities historically carried out on this license include drilling, trenching
and geological reconnaissance. The Company had no immovable assets located on
this license and it did not contain any of SouthGobi's NI 43-101 reserves or
resources. This license did not relate to the Company's Ovoot Tolgoi Mine and
SouthGobi does not consider this license to be material to its business.
The second matter referred to by the Supreme Court was an alleged impropriety in
the transfer of License 5261X by SouthGobi Sands LLC to a third party in March
2010 in violation of Mongolian anti-corruption laws. The Company understands
that the Supreme Court has invalidated the transfer of this license, and the
license is now held by the Government of Mongolia.
Through its Audit Committee (comprised solely of independent directors),
SouthGobi is conducting an internal investigation into possible breaches of law,
internal corporate policies and codes of conduct arising from the allegations
that have been raised. The Audit Committee has the assistance of independent
legal counsel in connection with its investigation. The Chair of the Audit
Committee is also participating in a tripartite committee, comprised of the
Audit Committee Chairs of the Company and Turquoise Hill and a representative of
Rio Tinto, which is focused on the investigation of those allegations, including
possible violations of anti-corruption laws. Independent legal counsel and
forensic accountants have been engaged by this committee to assist it with its
investigation. All of these investigations are ongoing but are not yet complete.
Information that has been produced to the IAAC by the Company has also been
produced by the tripartite committee to Canadian and United States regulatory
authorities that are monitoring the Mongolian investigations. The Company
continues to cooperate with all relevant regulatory agencies in respect of the
ongoing investigations.
The investigations referred to above could result in one or more Mongolian,
Canadian, United States or other governmental or regulatory agencies taking
civil or criminal action against the Company, its affiliates or its current or
former employees. The likelihood or consequences of such an outcome are unclear
at this time but could include financial or other penalties, which could be
material, and which could have a material adverse effect on the Company. Refer
to the Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") for the year ended December 31, 2012, which is
available at www.sedar.com, Section 13, Risk Factors, "the Company is subject to
continuing governmental, regulatory and internal investigations, the outcome of
which is unclear at this time but could have a material adverse effect on the
Company".
Pending the completion of the investigations, the Company, through its Board of
Directors and new management, has taken a number of steps to focus ongoing
compliance by employees with all applicable laws, internal corporate policies
and codes of conduct, and with the Company's disclosure controls and procedures
and internal controls over financial reporting.
NOTICE OF INVESTMENT DISPUTE
On July 11, 2012, SouthGobi announced that SGQ Coal Investment Pte. Ltd., a
wholly-owned subsidiary of SouthGobi Resources Ltd. that owns 100% of the
Company's Mongolian operating subsidiary SouthGobi Sands LLC, filed a Notice of
Investment Dispute on the Government of Mongolia pursuant to the Bilateral
Investment Treaty between Singapore and Mongolia. The Company filed the Notice
of Investment Dispute following a determination by management that they had
exhausted all other possible means to resolve an ongoing investment dispute
between SouthGobi Sands LLC and the Mongolian authorities.
The Notice of Investment Dispute consists of, but is not limited to, the failure
by MRAM to execute the PMAs associated with certain exploration licenses of the
Company pursuant to which valid PMA applications had been lodged in 2011. The
areas covered by the valid PMA applications include the Zag Suuj Deposit and
certain areas associated with the Soumber Deposit outside the existing mining
license.
Under the Notice of Investment Dispute the Company is entitled to commence
conciliation/arbitration proceedings under the auspices of the International
Centre for Settlement of Investment Disputes ("ICSID") pursuant to the Bilateral
Investment Treaty.
To date, the Company has not commenced conciliation/arbitration proceedings.
On January 18, 2013, MRAM issued the Company a PMA pertaining to the Soumber
Deposit; however, three valid PMA applications remain outstanding.
Activities historically carried out on the exploration licenses with valid PMA
applications include drilling, trenching and geological reconnaissance. The
Company has no immovable assets located on these licenses and the loss of any or
all of these licenses would not materially and adversely affect the existing
operations.
COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES
The Company has, throughout the six months ended June 30, 2013, applied the
principles and complied with the requirements of its corporate governance
practices as defined by the Board of Directors and all applicable statutory,
regulatory and stock exchange listings standards.
COMPLIANCE WITH MODEL CODE
The Company has adopted policies regarding directors' securities transactions in
its Corporate Disclosure, Confidentiality and Securities Trading policy that has
terms that are no less exacting than those set out in the Model Code of Appendix
10 of the rules governing the listing of securities on the Hong Kong Stock
Exchange.
The Board of Directors confirms that all of the Directors of the Company have
complied with the required policies in the Company's Corporate Disclosure,
Confidentiality and Securities Trading policy throughout the six months ended
June 30, 2013.
OUTLOOK
Economic activity post transition in China's leadership has been slower than
expected. The Chinese steel industry has been particularly affected and, as a
result, demand and prices for coking coal have been negatively impacted. Certain
coal price indices in China have reached four year lows and coal consumption and
production in regions close to the Mongolian border have dropped significantly
year on year. There has been a 36%(1) drop year on year to June 30 in Mongolian
coal exports to China. Current sentiment indicates that market conditions will
remain challenging for the remainder of the year. The longer term outlook is
more positive; however, the timing of any recovery in 2014 remains uncertain and
dependent on the Chinese economy.
The Company resumed operations at the Ovoot Tolgoi Mine on March 22, 2013 after
having been fully curtailed since the end of the second quarter of 2012. The
recommencement of operations has taken place without incident. In the second
quarter of 2013, the Company primarily moved waste material (overburden) and
exposed coal in the pit, aligning its operating activities to the significantly
lower demand. Subsequent to the end of the second quarter of 2013, SouthGobi
entered into a coal supply agreement with Winsway, an integrated logistic
service provider, for the sale of 1.2 million tonnes of Standard semi-soft
coking coal product in 2013. Pricing for the coal to be sold under this contract
will be based upon a floating monthly index. This agreement reaffirms the
Company's longstanding relationship with Winsway, a key customer, as SouthGobi
continues to focus on its 2013 commercial objectives. In addition, two small
spot market sales were concluded subsequent to the end of the second quarter of
2013 and discussions with other potential customers are ongoing.
The rate of production in the second half of 2013 is expected to increase as the
Company makes further sales and provides contractual tonnages under the Winsway
coal supply agreement. The Company is focused on delivering on its commercial
strategy and targets. However, as market conditions in China's coking coal
markets are expected to remain challenging in the short term, the Company is
withdrawing its production guidance of 3.2 million tonnes of semi-soft coking
coal for the current year.
Whilst SouthGobi has a predominantly two product strategy of a Premium and
Standard semi-soft coking coal product from the Ovoot Tolgoi Mine, the
capability to begin supplying a washed semi-soft coking coal product is an
important step in improving both SouthGobi's market position and access to end
customers. The Company has had to modify its plans and delay production of the
washed product. The timing for washing will be aligned with improvements in
market conditions for this type of product. SouthGobi is however planning to
mine some Premium semi-soft coking coal product as a raw coal in 2013.
The Company has been minimizing uncommitted capital expenditures, exploration
and operational expenditures in order to preserve its financial resources. For
at least twelve months from the end of the June 30, 2013 reporting period, the
Company expects its liquidity to remain sufficient based on existing capital
resources and estimated income from mining operations. Estimated income from
mining operations is subject to a number of external market factors including
supply and demand and pricing in the coal industry.
(1) China Coal Resource (en.sxcoal.com)
Longer term, SouthGobi remains well positioned, with a number of key competitive
strengths, including:
-- Strategic location - SouthGobi is the closest major coking coal producer
in the world to China. The Ovoot Tolgoi Mine is approximately 40km from
China, which is approximately 190km closer than Tavan Tolgoi coal
producers in Mongolia and 7,000 to 10,000km closer than Australian and
North American coking coal producers. The Company has an infrastructure
advantage, being approximately 50km from existing railway
infrastructure, which is approximately one tenth the distance to rail of
Tavan Tolgoi coal producers in Mongolia.
-- Premium quality coals - Most of the Company's coal resources have coking
properties, including a mixture of semi-soft coking coals and hard
coking coals. SouthGobi is also completing its investment in
infrastructure to capture more of the value from the products it sells.
-- Favorable cost structure - The long-term cost structure of SouthGobi
provides a strong base for sustainable growth when access to end-user
markets is obtained even though competition from other Chinese and
Mongolian semi-soft coals indicate that capturing margins relative to
other international coals is difficult.
-- Substantial resource base - The Company's aggregate coal resources
(including reserves) include measured and indicated resources of 533
million tonnes and inferred resources of 302 million tonnes.
Objectives
The Company's objectives for 2013 are as follows:
-- Resume production at the Ovoot Tolgoi Mine - The Company has reviewed
the overall structure of its workforce and market conditions and has
recommenced mining activities at the Ovoot Tolgoi Mine in March 2013.
The focus is to do this in a safe manner that provides a sustainable
long-term operating base.
-- Continue to develop regional infrastructure - The Company's priority is
to complete the construction of the paved highway from the Ovoot Tolgoi
Mine to the Shivee Khuren Border Crossing as part of the existing
consortium that was awarded the tender by the end of 2013.
-- Advance the Soumber Deposit - The Company intends to substantially
advance the feasibility, planning and physical preparation of the
Soumber Deposit in order to commence small-scale mining activities in
2014.
-- Value-adding/upgrading coal - Implement an effective and profitable
utilization of the wet washing facility contracted with Ejin Jinda to
toll-wash coal from the Ovoot Tolgoi Mine and further develop the
Company's marketing plans on product mix and seek to expand the
Company's customer base. The timing for washing will be aligned with
improvements in market conditions for this type of product.
-- Re-establish the Company's reputation - The Company's vision is to be a
respected and profitable Mongolian coal company. This will require re-
establishing good working relationships with all our external
stakeholders.
-- Operations - Continuing to focus on production safety, environmental
protection, operational excellence and community relations.
NON-IFRS FINANCIAL MEASURES
Cash Costs:
The Company uses cash costs to describe its cash production costs. Cash costs
incorporate all production costs, which include direct and indirect costs of
production, with the exception of idled mine asset costs and non-cash expenses
which are excluded. Non-cash expenses include share-based compensation expense,
inventory impairments, depreciation and depletion of mineral properties.
The Company uses this performance measure to monitor its operating cash costs
internally and believes this measure provides investors and analysts with useful
information about the Company's underlying cash costs of operations. The Company
believes that conventional measures of performance prepared in accordance with
IFRS do not fully illustrate the ability of its mining operations to generate
cash flows. The Company reports cash costs on a sales basis. This performance
measure is commonly utilized in the mining industry.
The cash costs of product sold may differ from cash costs of product produced
depending on the timing of stockpile inventory turnover.
Adjusted Net Income/(Loss):
Adjusted net income/(loss) excludes idled mine asset costs, share-based
compensation expense/(recovery), net impairment loss/(recovery) on assets,
unrealized foreign exchange losses/(gains), unrealized loss/(gain) on the fair
value change of the embedded derivatives in the CIC convertible debenture,
realized losses/(gains) on the disposal of FVTPL investments and unrealized
losses/(gains) on FVTPL investments. The Company excludes these items from net
income/(loss) to provide a measure which allows the Company and investors to
evaluate the results of the underlying core operations of the Company and its
profitability from operations. The items excluded from the computation of
adjusted net income/(loss), which are otherwise included in the determination of
net income/(loss) prepared in accordance with IFRS, are items that the Company
does not consider to be meaningful in evaluating the Company's past financial
performance or the future prospects and may hinder a comparison of its
period-to-period results.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Interim Statements of Comprehensive Income
(Unaudited)
(Expressed in thousands of U.S. Dollars, except for share and per share
amounts)
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
Notes 2013 2012 2013 2012
------ ----------- ----------- ----------- -----------
Revenue $ 374 $ 8,412 $ 3,633 $ 48,565
Cost of sales 3 (12,466) (22,221) (34,327) (39,700)
----------------------------------------------------------------------------
Gross profit/(loss) (12,092) (13,809) (30,694) 8,865
Other operating
expenses 4 (14,877) (3,803) (15,260) (6,380)
Administration
expenses 5 (4,024) (7,497) (7,757) (13,380)
Evaluation and
exploration expenses 6 (221) (2,099) (494) (7,132)
----------------------------------------------------------------------------
Loss from operations (31,214) (27,208) (54,205) (18,027)
Finance costs 7 (5,617) (4,006) (10,608) (4,681)
Finance income 7 3,366 26,875 4,136 26,290
Share of earnings of
joint venture 44 204 27 204
----------------------------------------------------------------------------
Income/(loss) before
tax (33,421) (4,135) (60,650) 3,786
Current income tax
recovery/(expense) 8 - 3,747 (1) (1,127)
Deferred income tax
recovery/(expense) 8 (241) 625 2,087 704
----------------------------------------------------------------------------
Net income/(loss)
attributable to
equity holders of
the Company (33,662) 237 (58,564) 3,363
----------------------------------------------------------------------------
OTHER COMPREHENSIVE
LOSS
Items that may be
reclassified to
profit or loss:
Loss on available-
for-sale financial
asset, net of tax (930) (20,087) - (25,509)
Net comprehensive
loss attributable to
equityholders of the
Company $ (34,592) $ (19,850) $ (58,564) $ (22,146)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
BASIC INCOME/(LOSS)
PER SHARE 9 $ (0.18) $ 0.00 $ (0.32) $ 0.02
DILUTED LOSS PER
SHARE 9 $ (0.18) $ (0.12) $ (0.32) $ (0.10)
Condensed Consolidated Interim Statements of Financial Position
(Unaudited)
(Expressed in thousands of U.S. Dollars)
As at
-----------------------------
June 30, December 31,
Notes 2013 2012
------ -------------- --------------
ASSETS
Current assets
Cash $ 19,171 $ 19,674
Trade and other receivables 10 7,947 17,430
Short term investments - 15,000
Inventories 45,872 53,661
Prepaid expenses and deposits 33,467 37,982
----------------------------------------------------------------------------
Total current assets 106,457 143,747
Non-current assets
Prepaid expenses and deposits 16,778 16,778
Property, plant and equipment 508,734 521,473
Long term investments 21,887 24,084
Deferred income tax assets 25,372 23,285
----------------------------------------------------------------------------
Total non-current assets 572,771 585,620
----------------------------------------------------------------------------
Total assets $ 679,228 $ 729,367
----------------------------------------------------------------------------
----------------------------------------------------------------------------
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 11 $ 16,184 $ 10,216
Current portion of convertible debenture 12 12,278 6,301
----------------------------------------------------------------------------
Total current liabilities 28,462 16,517
Non-current liabilities
Convertible debenture 12 95,631 99,667
Decommissioning liability 4,406 4,104
----------------------------------------------------------------------------
Total non-current liabilities 100,037 103,771
----------------------------------------------------------------------------
Total liabilities 128,499 120,288
Equity
Common shares 1,059,791 1,059,710
Share option reserve 51,436 51,303
Accumulated deficit 13 (560,498) (501,934)
----------------------------------------------------------------------------
Total equity 550,729 609,079
----------------------------------------------------------------------------
Total equity and liabilities $ 679,228 $ 729,367
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net current assets $ 77,995 $ 127,230
Total assets less current liabilities $ 650,766 $ 712,850
SELECT INFORMATION FROM THE NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
Additional information required by the Hong Kong Stock Exchange and not
disclosed elsewhere in this announcement is as follows. All amounts are
expressed in thousands of U.S. Dollars and shares in thousands, unless otherwise
indicated.
1. BASIS OF PREPARATION
1.1 Corporate information and liquidity
The Company curtailed its mining activities at the Ovoot Tolgoi Mine during the
three months ended June 30, 2012 to varying degrees to manage coal inventories
and to maintain efficient working capital levels. As at June 30, 2012, mining
activities had been fully curtailed. The Company's mining activities remained
fully curtailed until March 22, 2013, when the Company recommenced mining
activities at the Ovoot Tolgoi Mine.
The Company had cash of $19,171 and working capital of $77,995 at June 30, 2013.
These condensed consolidated interim financial statements have been prepared on
a going concern basis which assumes that the Company will continue operating for
the foreseeable future and will be able to realize its assets and discharge its
liabilities in the normal course of operations as they come due. The Company has
in place a planning, budgeting and forecasting process to help determine the
funds required to support the Company's normal operations on an ongoing basis
and its expansionary plans. The Company expects to have sufficient liquidity and
capital resources to meet its ongoing obligations and future contractual
commitments, including the interest payments due on the CIC convertible
debenture (Note 12), for at least twelve months from the end of the June 30,
2013 reporting period. The Company expects its liquidity to remain sufficient
based on existing capital resources and estimated income from mining operations.
Estimated income from mining operations is subject to a number of external
market factors including supply and demand and pricing in the coal industry. The
Company continues to minimize uncommitted capital expenditures and exploration
expenditures in order to preserve the Company's financial resources.
1.2 Statement of compliance
The Company's condensed consolidated interim financial statements, including
comparatives, have been prepared in accordance with International Accounting
Standard 34 "Interim Financial Reporting" ("IAS 34") using accounting policies
in full compliance with the International Financial Reporting Standards ("IFRS")
issued by the International Accounting Standards Board ("IASB") and
Interpretations of the IFRS Interpretations Committee ("IFRIC").
1.3 Adoption of new and revised standards and interpretations
The Company has adopted the new and revised standards and interpretations issued
by the IASB listed below effective January 1, 2013. These changes were made in
accordance with the transitional provisions outlined in the respective standards
and interpretations.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces IAS 27 "Consolidated and Separate Financial Statements" and SIC
12 "Consolidation - Special Purpose Entities". IFRS 10 establishes principles
for the presentation and preparation of consolidated financial statements when
an entity controls multiple entities. The new consolidation standard changes the
definition of control so that the same criteria apply to all entities, both
operating and special purpose entities, to determine control. The revised
definition focuses on the need to have both power over the investee and exposure
to variable returns before control is present. The adoption of IFRS 10 did not
result in any change in the consolidation status of any of the Company's
subsidiaries and investees.
IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 "Interests in Joint Ventures". IFRS 11 classifies joint
arrangements as either joint operations or joint ventures, depending on the
rights and obligations of the parties involved in the joint arrangement. Joint
arrangements that are classified as joint operations require the venturers to
recognize the individual assets, liabilities, revenues and expenses to which
they have legal rights or are responsible. Joint arrangements that are
classified as a joint venture are accounted for using the equity method of
accounting.
As a result of the adoption of IFRS 11, the Company's 40% interest in RDCC LLC
is now classified as a joint venture (previously classified as a
jointly-controlled entity under IAS 31). Prior to the adoption of IFRS 11, the
Company accounted for its investment in RDCC LLC under the equity method of
accounting. Therefore, the adoption of IFRS 11 did not have an impact on the
consolidated financial statements for the current or prior periods presented.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 outlines the disclosure requirements for interests in subsidiaries and
other entities. The adoption of IFRS 12 will result in incremental disclosures
in the Company's consolidated annual financial statements.
IFRS 13 Fair Value Measurement
IFRS 13 provides a definition of fair value, sets out a single IFRS framework
for measuring fair value and outlines disclosure requirements for fair value
measurements. The adoption of IFRS 13 has resulted in additional fair value
measurement disclosures in these condensed consolidated interim financial
statements and will result in incremental disclosures in the Company's annual
consolidated financial statements.
IAS 1 Presentation of Financial Statements (Amendment)
The amendments to IAS 1 requires companies preparing financial statements under
IFRS to group items within other comprehensive income that may be reclassified
to profit or loss and those that will not be reclassified. The consolidated
statement of comprehensive income in these condensed consolidated interim
financial statements has been amended to reflect the presentation requirements
under the amended IAS 1.
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
IFRIC 20 provides guidance on the accounting for the costs of stripping
activities during the production phase of a surface mine. Under IFRIC 20,
stripping activity assets are recognized when the following three criteria are
met:
-- it is probable that the future economic benefit (improved access to the
ore body) associated with the stripping activity will flow to the
entity;
-- the entity can identify the component of the ore body for which access
has been improved; and
-- the costs relating to the stripping activity associated with that
component can be measured reliably
If not all of the criteria are met, the stripping activity costs are included in
the costs of inventory produced during the period incurred.
The Company assessed its open-pit mining operations at the Ovoot Tolgoi Mine and
concluded that as at January 1, 2012 there are identifiable coal seams with
which the predecessor stripping activity related to. Therefore, no adjustment to
the consolidated financial statements was required upon initial transition to
IFRIC 20.
The adoption of IFRIC 20 has not resulted in a change in the Company's
capitalization of stripping activity costs, and therefore no adjustment was
required to the Company's consolidated financial statements in the current or
prior periods presented. The Company classifies stripping activity assets
capitalized under IFRIC 20 as mineral property costs within property, plant and
equipment and these costs are amortized on a units-of-production basis based on
proven and probable reserves.
Other
The IASB also amended IAS 19 "Post-Employment Benefits" and IAS 28 "Investments
in Associates" (2003) effective January 1, 2013. The amendments to these
standards did not impact the Company's consolidated financial statements.
IFRS 9 "Financial Instruments" is effective for years beginning on or after
January 1, 2015. The IASB issued IFRS 9 as the first step in its project to
replace IAS 39 "Financial Instruments: Recognition and Measurement". The Company
will assess the impact of this new standard closer to its implementation date.
2. SEGMENTED INFORMATION
The Company's one reportable operating segment is its Mongolian Coal Division.
The Company's Corporate Division does not earn revenues and therefore does not
meet the definition of an operating segment.
The carrying amounts of the Company's assets, liabilities, reported income or
loss and revenues analyzed by operating segment are as follows:
Mongolian Coal Consolidated
Division Unallocated (i) Total
---------------- ---------------- ----------------
Segment assets
As at June 30, 2013 $ 644,407 $ 34,821 $ 679,228
As at December 31, 2012 673,896 55,471 729,367
Segment liabilities
As at June 30, 2013 $ 14,693 $ 113,806 $ 128,499
As at December 31, 2012 11,315 108,973 120,288
Segment income/(loss)
For the three months
ended June 30, 2013 $ (25,876) $ (7,786) $ (33,662)
For the three months
ended June 30, 2012 (18,872) 19,109 237
For the six months ended
June 30, 2013 $ (43,721) $ (14,842) $ (58,563)
For the six months ended
June 30, 2012 (7,108) 10,471 3,363
Segment revenues
For the three months
ended June 30, 2013 $ 374 $ - $ 374
For the three months
ended June 30, 2012 8,412 - 8,412
For the six months ended
June 30, 2013 $ 3,633 $ - $ 3,633
For the six months ended
June 30, 2012 48,565 - 48,565
Impairment charge on
assets (ii)
For the three months
ended June 30, 2013 $ 15,202 $ 3,067 $ 18,269
For the three months
ended June 30, 2012 2,583 - 2,583
For the six months ended
June 30, 2013 $ 17,363 $ 3,067 $ 20,431
For the six months ended
June 30, 2012 2,583 - 2,583
(i) The unallocated amount contains all amounts associated with the
Corporate Division.
(ii) The impairment charge on assets for the three and six months ended
June 30, 2013 and 2012 relates to trade and other receivables,
investments, inventories and property, plant and equipment.
3. COST OF SALES
The Company's cost of sales consists of the following amounts:
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Operating expenses $ 2,777 $ 4,975 $ 5,899 $ 17,567
Share-based compensation
expense (153) 189 (153) 1,205
Depreciation and depletion 114 1,470 278 5,341
Impairment of inventories
(Note 12) 3,973 - 6,135 -
----------------------------------------------------------------------------
Cost of sales from mine
operations 6,711 6,634 12,159 24,113
Cost of sales related to
idled mine assets (i) 5,755 15,587 22,168 15,587
----------------------------------------------------------------------------
Cost of sales $ 12,466 $ 22,221 $ 34,327 $ 39,700
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Cost of sales related to idled mine assets for the three months ended
June 30, 2013 includes $5,716 of depreciation expense and other non-
cash costs and $nil share-based compensation expense. Cost of sales
related to idled mine assets for the six months ended June 30, 2013
includes $16,872 of depreciation expense and other non-cash costs and
$nil share-based compensation expense. Cost of sales related to idled
mine assets for the three and six months ended June 30, 2012 includes
$8,785 of depreciation expense and other non-cash costs and $965 of
share-based compensation expense.
The 2012 idled mine asset depreciation expense and other non-cash
costs relates to the Company's idled plant and equipment during the
full curtailment of its mining activities at the Ovoot Tolgoi Mine
during the three months ended June 30, 2012. The 2013 idled mine asset
depreciation expense and other non-cash costs relates to the Company's
idled plant and equipment as the 2013 production plan does not fully
utilize the Company's existing mining fleet.
4. OTHER OPERATING EXPENSES
The Company's other operating expenses consist of the following amounts:
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Public infrastructure $ 3 $ 1,176 $ 6 $ 1,186
Sustainability and community
relations 34 260 80 431
Foreign exchange (gain)/loss (22) (483) 296 1,960
Loss on disposal of property,
plant and equipment 566 - 566 -
Provision for doubtful trade
and other receivables - 2,583 - 2,583
Impairment loss on available-
for-sale financial asset 3,067 - 3,067 -
Impairment of materials and
supplies inventories 6,930 - 6,930 -
Impairment of property, plant
and equipment 4,299 - 4,299 -
Other - 267 16 220
----------------------------------------------------------------------------
Other operating expenses $ 14,877 $ 3,803 $ 15,260 $ 6,380
----------------------------------------------------------------------------
----------------------------------------------------------------------------
5. ADMINISTRATION EXPENSES
The Company's administration expenses consist of the following amounts:
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Corporate administration $ 992 $ 1,544 $ 2,124 $ 3,033
Legal and professional fees 2,229 1,338 3,631 1,682
Salaries and benefits 643 1,508 1,607 2,857
Share-based compensation
expense 126 3,052 274 5,698
Depreciation 34 55 121 110
----------------------------------------------------------------------------
Administration expenses $ 4,024 $ 7,497 $ 7,757 $ 13,380
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6. EVALUATION AND EXPLORATION EXPENSES
The Company's evaluation and exploration expenses consist of the following amounts:
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Drilling and trenching $ - $ 696 $ - $ 3,470
Other direct expenses 9 259 29 587
License fees 166 199 346 405
Share-based compensation
expense 6 177 12 314
Overhead and other 40 768 107 2,356
----------------------------------------------------------------------------
Evaluation and exploration
expenses $ 221 $ 2,099 $ 494 $ 7,132
----------------------------------------------------------------------------
----------------------------------------------------------------------------
7. FINANCE COSTS AND INCOME
The Company's finance costs consist of the following amounts:
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Interest expense on
convertible debenture $ 5,073 $ 1,552 $ 10,031 $ 1,816
Interest expense on line of
credit facility - 99 11 187
Unrealized loss on FVTPL
investments 473 2,282 468 2,620
Realized loss on disposal of
FVTPL investments 43 46 43 -
Accretion of decommissioning
liability 28 27 55 58
----------------------------------------------------------------------------
Finance costs $ 5,617 $ 4,006 $ 10,608 $ 4,681
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Company's finance income consists of the following amounts:
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Unrealized gain on embedded
derivatives in convertible
debenture $ 3,343 $ 26,770 $ 4,091 $ 25,995
Interest income 23 105 45 256
Realized gain on disposal of
investments - - - 39
----------------------------------------------------------------------------
Finance income $ 3,366 $ 26,875 $ 4,136 $ 26,290
----------------------------------------------------------------------------
----------------------------------------------------------------------------
8. TAXES
The Company and its subsidiaries are subject to income or profits tax in the
jurisdictions in which the Company operates, including Canada, Hong Kong,
Singapore and Mongolia. Income or profits tax was not provided for the Company's
operations in Canada, Hong Kong or Singapore as the Company had no assessable
income or profit arising in or derived from these jurisdictions.
For the six months ended June 30, 2013 the Company recorded current income tax
expense of $1 (2012: $1,127) related to assessable profit derived from Mongolia
at prevailing rates. For the six months ended June 30, 2013, the Company
recorded a deferred income tax recovery of $2,087 (2012: $704) related to its
Mongolian operations.
9. EARNINGS/(LOSS) PER SHARE
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Net income/(loss) $ (33,662) $ 237 $ (58,564) $ 3,363
Weighted average number of
shares 181,963 181,860 181,954 181,802
---------------------------------------------------------------------------
Basic income/(loss) per
share $ (0.18) $ 0.00 $ (0.32) $ 0.02
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Income/(loss)
Net income/(loss) $ (33,662) $ 237 $ (58,564) $ 3,363
Interest expense on
convertible debenture - 1,552 - 1,816
Unrealized gain on embedded
derivatives in convertible
debenture - (26,770) - (25,995)
---------------------------------------------------------------------------
Diluted net loss $ (33,662) $ (24,981) $ (58,564) $ (20,816)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Number of shares
Weighted average number of
shares 181,963 181,860 181,954 181,802
Convertible debenture (i) - 28,128 - 28,406
---------------------------------------------------------------------------
Diluted weighted average
number of shares 181,963 209,988 181,954 210,208
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Diluted loss per share $ (0.18) $ (0.12) $ (0.32) $ (0.10)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(i) The convertible debenture was anti-dilutive for the three and six
months ended June 30, 2013.
The diluted earnings/(loss) per share reflects the potential dilution of common
share equivalents, such as the convertible debenture and outstanding stock
options, in the weighted average number of common shares outstanding during the
period, if dilutive.
Potentially dilutive items not included in the calculation of diluted
earnings/(loss) per share for the three and six months ended June 30, 2013 were
3,145 and 3,106 stock options, respectively, that were anti-dilutive.
10. TRADE AND OTHER RECEIVABLES
The Company's trade and other receivables consist of the following amounts:
As at
-------------------------------
June 30, December 31,
2013 2012
--------------- ---------------
Trade receivables $ 7,134 $ 15,577
Other receivables 813 1,853
----------------------------------------------------------------------------
Total trade and other receivables $ 7,947 $ 17,430
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The aging of the Company's trade and other receivables is as follows:
As at
-------------------------------
June 30, December 31,
2013 2012
--------------- ---------------
Less than 1 month $ 71 $ 2,135
1 to 3 months 23 95
3 to 6 months 6 159
Over 6 months 7,847 15,041
----------------------------------------------------------------------------
Total trade and other receivables $ 7,947 $ 17,430
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Company anticipates full recovery of its outstanding trade and other
receivables; therefore, no loss provisions have been recorded in respect of the
Company's trade and other receivables.
11. TRADE AND OTHER PAYABLES
The aging of the Company's trade and other payables is as follows:
As at
-------------------------------
June 30, December 31,
2013 2012
--------------- ---------------
Less than 1 month $ 14,658 $ 8,999
1 to 3 months 341 176
3 to 6 months 153 -
Over 6 months 1,032 1,041
----------------------------------------------------------------------------
Total trade and other payables $ 16,184 $ 10,216
----------------------------------------------------------------------------
----------------------------------------------------------------------------
12. CONVERTIBLE DEBENTURE
On November 19, 2009, the Company issued a convertible debenture to a wholly
owned subsidiary of the China Investment Corporation for $500,000.
The convertible debenture is presented as a liability since it contains no
equity components. The convertible debenture is a hybrid instrument, containing
a debt host component and three embedded derivatives - the investor's conversion
option, the issuer's conversion option and the equity based interest payment
provision (the 1.6% share interest payment) (the "embedded derivatives"). The
debt host component is classified as other-financial-liabilities and is measured
at amortized cost using the effective interest rate method and the embedded
derivatives are classified as FVTPL and all changes in fair value are recorded
in profit or loss. The difference between the debt host component and the
principal amount of the loan outstanding is accreted to profit or loss over the
expected life of the convertible debenture.
12.1 Partial conversion
On March 29, 2010, pursuant to the debenture conversion terms, the Company
exercised its conversion right and completed the conversion of $250,000 of the
convertible debenture into 21,471 shares at a conversion price of $11.64
(Cdn$11.88).
12.2 Presentation
Based on the Company's valuations as at June 30, 2013, the fair values of the
embedded derivatives decreased by $3,343 and $4,091 compared to March 31, 2013
and December 31, 2012, respectively. The decreases were recorded as finance
income for the three and six months ended June 30, 2013.
For the three months ended June 30, 2013, the Company recorded interest expense
of $5,073 (2012: $4,989) related to the convertible debenture of which $nil
(2012: $3,437) was capitalized as borrowing costs. For the six months ended June
30, 2013, the Company recorded interest expense of $10,031 (2012: $9,984)
related to the convertible debenture of which $nil (2012: $8,168) was
capitalized as borrowing costs.
The interest expense consists of the interest at the contract rate and the
accretion of the debt host component of the convertible debenture. To calculate
the accretion expense, the Company uses the contract life of 30 years and an
effective interest rate of 22.2%.
The movements of the amounts due under the convertible debenture are as follows:
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2013 2012 2013 2012
----------- ----------- ----------- -----------
Balance, beginning of period $ 106,179 $ 147,156 $ 105,969 $ 145,386
Interest expense on
convertible debenture 5,073 4,989 10,031 9,984
Decrease in fair value of
embedded derivatives (3,343) (26,770) (4,091) (25,995)
Interest paid - (7,957) (4,000) (11,957)
---------------------------------------------------------------------------
Balance, end of period $ 107,909 $ 117,418 $ 107,909 $ 117,418
---------------------------------------------------------------------------
---------------------------------------------------------------------------
During the three months ended June 30, 2013, the Company and the CIC mutually
agreed upon a three month deferral of the convertible debenture semi-annual
$7,934 cash interest payment due on May 19, 2013. The $7,934 cash interest
payment is now due on August 19, 2013. The mutually agreed upon deferral of the
cash interest payment did not trigger an event of default and all other terms of
the convertible debenture remain unchanged.
The convertible debenture balance consists of the following amounts:
As at
-------------------------------
June 30, December 31,
2013 2012
--------------- ---------------
Debt host $ 90,845 $ 90,791
Fair value of embedded derivatives 4,786 8,876
Interest payable 12,278 6,301
----------------------------------------------------------------------------
Convertible debenture $ 107,909 $ 105,968
----------------------------------------------------------------------------
----------------------------------------------------------------------------
12.3 Convertible debenture share interest payment and application of Mongolian
Foreign Investment Law
On May 17, 2012, the Parliament of Mongolia approved a Law on Regulation of
Foreign Investment in Business Entities Operating in Sectors of Strategic
Importance ("Foreign Investment Law") that regulates foreign direct investment
into a number of key sectors of strategic importance, which includes mineral
resources. Prior to the amendments in the three months ended June 30, 2013, if
foreign shareholding exceeded 49% of an asset and the amount of the investment
at the time exceeds 100 billion Mongolian Tugriks (approximately $69,000), then
parliamentary approval was required. In the case of state owned entities there
was no minimum threshold and all proposed investments from state owned entities
required parliamentary approval. In addition, if a foreign entity wanted to
acquire one third or more of the shares in an investment in a strategic sector,
then the 100 billion Mongolian Tugrik threshold was not applicable and cabinet
approval for the investment was required regardless of the value.
As a result of the Foreign Investment Law, the Company expected it would require
parliamentary approval for the shares to be issued for the November 19, 2012
share interest payment. As a result, during the three months ended March 31,
2013, the Company settled the 1.6% share interest payment of $4,000 in cash.
Following amendments to the Foreign Investment Law, passed in the three months
ended June 30, 2013, the requirement for parliamentary approval has been limited
to circumstances where a state owned entity is to exceed 49% share ownership of
a strategic asset, irrespective of the amount of investment. As a result, the
Company understands that it will now only require cabinet approval, rather than
parliamentary approval, under the Foreign Investment Law for the 1.6% share
interest payment to the CIC. The Company will fully comply with the requirements
of the Foreign Investment Law in connection with share interest payments.
13. ACCUMULATED DEFICIT AND DIVIDENDS
At June 30, 2013, the Company has accumulated a deficit of $560,498 (December
31, 2012: $501,934). No dividends have been paid or declared by the Company
since inception.
REVIEW OF INTERIM RESULTS
The condensed consolidated interim financial statements for the Company for the
six months ended June 30, 2013 were reviewed by the Audit Committee of the
Company.
SouthGobi's results for the quarter ended June 30, 2013 are contained in the
unaudited Condensed Consolidated Interim Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A"), available on the SEDAR website at www.sedar.com and SouthGobi
Resources' website at www.southgobi.com.
ABOUT SOUTHGOBI RESOURCES
SouthGobi Resources is listed on the Toronto and Hong Kong stock exchanges, in
which Turquoise Hill Resources Ltd., also publicly listed in Toronto and New
York, has a 58% 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 Resources is focused on exploration and development of its
metallurgical and thermal coal deposits in Mongolia's South Gobi Region. It has
a 100% 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.
Disclosure of a scientific or technical nature in this release and the Company's
MD&A with respect to the Company's Mongolian Coal Division was prepared by, or
under the supervision of, RungePincockMinarco ("RPM"). The professionals at RPM
meet the definition of a "qualified person" for the purposes of National
Instrument 43-101 of the Canadian Securities Administrators.
Forward-Looking Statements: This document includes forward-looking statements.
Forward-looking statements include, but are not limited to: the statement that
gross profit will vary by year depending on sales volume, sales price and unit
costs; statements relating to the determination of the royalty rate on coal
sales exported out of Mongolia; statements regarding future variances in
exploration expenses; the statement that the Company expects to have sufficient
liquidity and capital resources to meet its ongoing obligations and future
contractual commitments, including the interest payments due on the CIC
convertible debenture, for at least twelve months from the end of the June 30,
2013 reporting period; the statement that the Company expects its liquidity to
remain sufficient based on existing capital resources and estimated income from
mining operations; statements regarding the estimates and assumptions
incorporated into the impairment analysis on the carrying values of certain
assets related to the Ovoot Tolgoi Mine; the statement that completion of the
paved highway is expected late 2013; the statement that the capacity of the
paved highway is in excess of 20 million tonnes of coal per year; statements
regarding the Company's entitlement to conciliation or arbitration proceedings
under ICSID; statements regarding the outlook for 2013; statements regarding the
supply and demand of the coking coal market; statements regarding the Company's
objectives for 2013 (including the production of the Ovoot Tolgoi Mine, plans to
continue to develop regional infrastructure from Ovoot Tolgoi to the Shivee
Khuren Border Crossing, plans regarding the implementation of the wet washing
facility to toll-wash coal from the Ovoot Tolgoi Mine, plans to re-establish the
Company's reputation and plans regarding operations); and other statements that
are not historical facts. When used in this document, the words such as "plan",
"estimate", "expect", "intend", "may", and similar expressions are
forward-looking statements. Although SouthGobi believes that the expectations
reflected in these forward-looking statements are reasonable, such statements
involve risks and uncertainties and no assurance can be given that actual
results will be consistent with these forward-looking statements. Important
factors that could cause actual results to differ from these forward-looking
statements are disclosed under the heading "Risk Factors" in SouthGobi's MD&A
for the year ended December 31, 2012 and which are available at www.sedar.com.
FOR FURTHER INFORMATION PLEASE CONTACT:
Mongolia:
SouthGobi Sands LLC (Mongolia)
Altanbagana Bayarsaikhan
+976 9910 7589
Altanbagana.Bayarsaikhan@southgobi.com
www.southgobi.com
Hong Kong:
Brunswick Group (Hong Kong)
Joseph Lo
+852 9850 5033
Brunswick Group (Hong Kong)
Joanna Donne
+852 9221 3930
southgobi@brunswickgroup.com
Romulus Resources Ltd. (TSXV:ROM)
과거 데이터 주식 차트
부터 5월(5) 2024 으로 6월(6) 2024
Romulus Resources Ltd. (TSXV:ROM)
과거 데이터 주식 차트
부터 6월(6) 2023 으로 6월(6) 2024
