Canadian coal miner SouthGobi Resources yesterday reported a second-quarter profit of US$53.3 million, but this was primarily because of changes in the value of derivatives. The company made an operating loss of US$10.6 million, compared with a loss of US$4.8 million for the same period last year. SouthGobi's share price fell 4.2 per cent to HK$92, compared with the Hang Seng Index's decline of 0.89 per cent. The company's shares were listed on the Hong Kong stock exchange in January at HK$124.90 each. SouthGobi started mining coal at its flagship coal mine, Ovoot Tolgoi, in Mongolia last year and has two other development projects, the Soumber Deposit and the Ovoot Tolgoi Underground Deposit. In addition, it holds mineral exploration licences in Mongolia. SouthGobi sells its coal at the mine head and all of it goes to China, said Alexander Molyneux, the company's president and chief executive. Revenues rose 65 per cent to US$17.7 million, compared with US$10.7 million in the second quarter of last year, and from US$13.9 million in the first quarter. Cost of sales and of production increased on higher volumes. The mine operations were affected by work on realigning the open pit and also by delays in taking delivery of trucks and mining equipment. In the six months to June, the company shipped 870,000 tonnes of coal at an average price of US$39 per tonne, compared with sales of 510,000 tonnes at an average price of US$30 per tonne last year. For the second quarter, coal prices averaged US$43 per tonne, the highest the company has achieved. Molyneux said the company had sold virtually all of the premium coal it had produced and expected prices to rise about 10 per cent over the next quarter. He said the company would continue to ramp up production at Ovoot Tolgoi and would continue its aggressive exploration programme. SouthGobi has completed 64 kilometres of drilling this year and expects that this would lead to an increase in its resources. Molyneux said production would be affected in future months in that it would produce proportionately less of the better quality of coal. Secondly, the company is experiencing areas of high sulphur which it would be unable to sell to customers without being treated. Molyneux said coal sales would not be significantly different from the second quarter. Digging deep SouthGobi Resources recorded an operating loss of US$10.6 million Because of the changes in the value of derivatives, the firm reported a second-quarter profit of, in US$: $53m
