MMC banking on coal demand from mainland

PUBLISHED : Thursday, 08 March, 2012, 12:00am
UPDATED : Thursday, 08 March, 2012, 12:00am


Unfazed by a lower economic growth target, Mongolian Mining Corporation expects to continue to benefit from rising demand for coal this year.

'We remain optimistic on the demand from China,' MMC's chief executive Dr Battsengel Gotov said in Hong Kong yesterday.

This is because China is forecast to increase its annual steel production, which is dependent on coal, by 2 to 3 per cent to about 700 million tonnes this year, he said.

'[The predicted growth in the mainland's GDP of] 7.5 per cent is still a significant [level of] growth,' Gotov added.

MMC, the largest coking coal exporter in Mongolia, sold 3.3 million tonnes of raw hard coking coal and 1.5 million tonnes of washed hard coking coal to Chinese customers last year.

The Hong Kong-listed company said nearly all of Mongolia's 21.1 million tonnes of coal exports coal went to China last year, accounting for about 45 per cent of the mainland's total coal imports. With that, it surpassed Australia as the biggest coking coal exporter to China.

Announcing its 2011 annual results, MMC reported that its net profit nearly doubled to US$119.1 million last year from 2010. Revenue grew 95.5 per cent to US$542.6 million, mainly due to an increase in prices and sales volumes.

The group said the average selling price of its coal products was US$113.9 per tonne last year, up 60.9 per cent from the year before, partly because it started offering washed coal, which is more expensive than raw coal. It sold about 4.8 tonnes of raw and washed coal last year, up 23.1 per cent year on year.

It achieved around 7.1 million tonnes of run-of-mine, or unprocessed, coal last year, slightly above its target of 7 million tonnes and up significantly from 3.9 million tonnes in 2010.

Gotov expects annual production to increase to 12 million tonnes this year, and all additional coal production will be turned into value-added washed coal that commands higher prices.

He also said the group would budget up to US$190 million for capital expenditure this year, of which about US$100 million would be spent on coal washing facilities, up to US$50 million on water facilities and around US$30 million on its Baruun Naran mine that the company acquired last year.

MMC shares rose nearly 6.5 per cent to close at HK$7.55 yesterday.