Coal miner SouthGobi to cut staff after posting US$55m net loss
Coal miner reverses previous year's gainsin the third quarter amid 94.5 per cent fall in revenue as soft markets take their toll
SouthGobi Resources swung to a net loss of US$54.56 million in the third quarter from a net profit of US$55.92 million in the period last year, while the mining firm's revenue plunged 94.5 per cent to US$3.34 million in the quarter.
SouthGobi said it has begun sacking a third of its employees due to the uncertain state of the coal market. According to public records, the firm is estimated to have 720 full-time and part-time employees.
During the third quarter, "the company's mining activities remained fully curtailed. The company anticipates its operations will most likely remain fully curtailed in the fourth quarter", said SouthGobi, which is listed in Hong Kong, Singapore and Toronto.
The company sold 310,000 tonnes of coal at US$15.79 per tonne during the third quarter, compared to sales of 1.37 million tonnes at US$54.01 per tonne in the third quarter last year.
"China coking coal markets closest to SouthGobi's operations have continued to soften in the third quarter. The company has observed a substantial deterioration in demand sentiment among its customers, which led to a substantial decline in prices. Prices have fallen to levels below the cost of production and logistics, and need to rise to encourage production," said SouthGobi.
The company's cash and cash equivalent dwindled to US$63.5 million on September 30 from US$168.6 million at the end of last year.
The company continues to suspend uncommitted capital expenditures and exploration expenditures to preserve its financial resources.
After Aluminum Corp of China (Chalco), the largest Chinese state-owned aluminium producer, ended its bid to acquire 60 per cent of SouthGobi on September 3, SouthGobi received official notification from the Mongolian government on September 6 confirming that as of September 4, all of SouthGobi's exploration and mining licences in Mongolia were in good standing, said the company. The miner also received approval from the Mongolian ministry of environment for its dry coal handling facility in the country.
Analysts said the Mongolian government has been worried about Chinese state-owned firms controlling too much of that country's resources.
SouthGobi is co-operating with the Mongolian Independent Authority Against Corruption in its investigations, said SouthGobi.
The company fired its chief operating officer Curtis Church in October and its chief executive Alexander Molyneux in September. In January, 40 laid off SouthGobi workers temporarily took Church hostage, reported InfoMongolia.com
Sovereign wealth fund China Investment Corp owns 14 per cent of SouthGobi.