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Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

Eight New Gates Open for Coal Transportation Between Mongolia and China

Jun. 11 – The recent opening of eight new border gates between Mongolia and China exclusively for coal transportation will significantly increase coal export capacity between the two nations, SouthGobi Resources Ltd. said in a statement.

Coal was previously transported out of Mongolia at Shivee Khuren-Ceke through a single gate approximately eight meters wide, which would allow empty trucks into Mongolia in the mornings and loaded trucks into China in the afternoons, the company said in a Hong Kong stock exchange filing.

SouthGobi Resources Ltd. mines metallurgical and thermal coal in Mongolia.

The new gates create a significant increase in capacity as a number of gates will be available for simultaneous export traffic and two gates will be reserved for the inbound arrival of empty trucks such that a constant two-way flow of traffic can be facilitated.

Alexander Molyneux, SouthGobi Resources’ president and chief executive officer, said the new gates at the Shivee Khuren-Ceke border-crossing eliminate a bottleneck, reducing costs for transport companies because of more efficient truck utilization for the transport companies.

SouthGobi Resources is focused on exploration and development of its Permian-age metallurgical and thermal coal deposits in Mongolia’s South Gobi Region. The company’s flagship coal mine, Ovoot Tolgoi, is producing and selling coal to customers in China and the company plans to supply a wide range of coal products to markets throughout Asia.

According to the SouthGobi Resources Ltd. announcement, for the three months ending March 31, 2012, the Company sold 0.84 million tons of coal at an average realized selling price of US$56.79 per ton compared to sales of 0.45 million tons of coal at an average realized selling price of US$50.29 per ton for the three months ending March 31, 2011.

Coal sales in the first quarter of 2012 represent a record for any given first quarter, and the average realized selling price represents the highest quarterly average since the commencement of mining operations. For the first three months of 2012, the company produced 1.07 million tons of raw coal compared to production of 1.11 million for the same period of 2011.

Earlier this year, the company announced the signing of a cooperation agreement with China Aluminum Corporation Ltd. (CHALCO) and received official notification of CHALCO’s intentions to make a proportional takeover bid for up to 60 percent of the issued and outstanding common shares of SouthGobi Resources at 8.48 Canadian dollars per share.

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