Politics and poor prices hit SouthGobi

Politics and poor prices hit SouthGobi

Khartoum : Sudan | Jun 30, 2012 at 3:19 AM PDT
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Mining in Mongolia

Mongolian coal producer SouthGobi Resources Ltd said its profitability was being impacted by ongoing uncertainty regarding its licences in the central Asian state, forcing it to suspend mining and exploration plans. The company also said it had been affected by falling coal prices in China.

cement crushing equipment for sale SouthGobi is presently the target of a US$930 million bid from Aluminium Corp of China Ltd (Chalco), which would gain Chalco a 60% stake in the company. SouthGobi’s present major shareholder is Ivanhoe Mines Ltd, majority owned by Rio Tinto.

However, Mongolian officials said in April that some of SouthGobi’s licences could be suspended in light of the takeover proposal, and would be reviewed as a new law limiting foreign ownership of strategic mineral reserves clears parliament.

SouthGobi concrete crushing equipment suppliers said that although it had received no formal clarification from the government regarding suspensions, the uncertainty created meant that other state departments had been unwilling to issue development permits. The company said it may not be able to operate a newly commissioned dry-coal handling facility as it was waiting for approval from the Ministry of Environment.

Orders for coal from SouthGobi’s Ovoot Tolgoi mine had been impacted by the licence uncertainty, and by falling coking-coal prices in China. The company said it had experienced “a substantial deterioration in sentiment” from Chinese buyers.

SouthGobi said it would suspend mining at Ovoot Tolgoi from the end of this quarter, and would cut all uncommitted capital and exploration expenditure.

“With the difficult conditions of the second quarter and the uncertainty regarding how the third quarter may evolve,diamond beneficiation equipment the company cautions that at this time sales volumes, pricing and production volume outcomes for the full year of 2012 cannot be estimated,” said SouthGobi.

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A coal mine is seen in China's north Inner Mongolia region
A coal mine is seen in China's north Inner Mongolia region
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