Mongolian Mining to boost raw coal output 28pc

Company keeps last year's production target of 12 million tonnes after plunging into the red

PUBLISHED : Wednesday, 13 March, 2013, 12:00am
UPDATED : Wednesday, 13 March, 2013, 4:41am


Mongolian Mining, the largest producer of coal used in steel-smelting in Mongolia, aims to raise raw coal output by 28 per cent this year after missing its target last year because of weak demand.

Yesterday, the firm posted a US$2.54 million net loss for last year, a turnaround from a profit of US$119 million in 2011.

Sales fell 12.6 per cent to US$474.48 million as lower selling prices more than offset a 16.7 per cent rise in volumes to 5.6 million tonnes of coal products.

Mongolian Mining's chief executive, Battsengel Gotov, said the company aimed to produce 12 million tonnes of raw coal this year. Last year's output of 9.4 million tonnes was short of its target of 11 million to 12 million tonnes.

It has a target of 6 million to 6.5 million tonnes of processed hard coking coal, its main product, up from 3.7 million tonnes last year.

Last year's average selling price of hard coking coal fell 30 per cent to US$108.40 a tonne, as demand from developed nations fell and that from emerging nations slowed markedly.

China, which buys almost all of Mongolia's coking coal exports, saw crude steel output grow just 3.1 per cent last year, down from 7.3 per cent in 2011, according to China's Ministry of Industry and Information Technology. The ministry predicted growth of 4.6 per cent this year.

Because of its underdeveloped railways, Mongolia saw its share of China's coking coal imports slide to 36 per cent last year from 45 per cent in 2011, as more expensive trucks were used to transport the coal.

Mongolia lost share to Australia, Canada and Russia, which benefited from depressed seaborne freight prices. Oversupply saw high-cost Mongolia producers shut production facilities in last year's third quarter, when prices were at their lowest.

Mongolian Mining, with its own road and trucks, fared better than its rivals. Its cost to transport coal to the border fell 30.8 per cent to US$11.90 a tonne last year after it bought more trucks.

To cut costs, it began building a railway in June, but the newly elected Mongolian government decided in November to unify all railway concessions under a single state-owned firm. The company is in talks on handing over the US$62 million of railway assets already built, in exchange for a stake of up to 10 per cent in the state-owned firm. Gotov expects a deal by June 30.