SouthGobi Resources Announces Second Quarter 2015 Financial and Operating Results
(firmenpresse) - HONG KONG, CHINA -- (Marketwired) -- 08/13/15 -- SouthGobi Resources Ltd. (TSX: SGQ)(HKSE: 1878) (the "Company" or "SouthGobi") today announced its financial and operating results for the three and six months ended June 30, 2015. All figures are in U.S. Dollars unless otherwise stated.
Significant Events and Highlights
The Company's significant events and highlights for the three months ended June 30, 2015 and subsequent period to August 13, 2015 are as follows:
(i) Average realized selling price is presented before deduction of royalties and selling fees.
(ii) A non-IFRS financial measure, see "Non-IFRS Financial Measure" section. Cash costs of product sold exclude idled mine asset cash costs.
(iii) Per 200,000 man hours and calculated based on a rolling 12 month average.
Overview of Operational Data
For the three months ended June 30, 2015
Market conditions and prices for coal remained weak in China through the second quarter of 2015. The Company sold 0.19 million tonnes of its coal products during the quarter. After the resumption of mining operations on March 30, 2015, production increased to 0.62 million tonnes for the quarter, allowing the Company to position itself to meet its commitments under existing and expected new coal offtake contracts.
The cash cost of product sold for the second quarter of 2015 $23.47 has significantly increased compared to the second quarter of 2014 $10.72. The reason for the increase is primarily related to the decrease in sales volumes over which the relatively fixed administration costs are allocated. The Mine administration cash costs per tonne of product sold in the second quarter of 2015 was $7.90 an increase of $5.41 compared to comparative period in 2014 of $2.49.
The Company ended the second quarter of 2015 without a lost time injury. As at June 30, 2015, the Company has a lost injury time frequency rate of nil per 200,000 man hours based on a rolling 12 month average.
For the six months ended June 30, 2015
During the first six months of 2015 market conditions and prices for coal remained weak in China.
The production in the first six months of 2015 was lower than the first six months of 2014 due to the curtailment of the Company's mining operations through to March 30, 2015. During the first quarter of 2015 the Company sold through its existing stockpiles to preserve the Company's liquidity and therefore mining operations were curtailed. On March 30, 2015, the Company resumed mining operations allowing the Company to position itself to meet its commitments under existing and expected new coal offtake contracts.
Total cash costs of product sold were $17.40 per tonne in the first six months of 2015 compared to $12.08 per tonne in the first six months of 2014. The reason for the increase is primarily related to the decrease in sales volumes over which the fixed and variable costs are allocated. At a gross level, the Mine administration cash costs of product sold in the first six months of 2015 is $1.9 million compared to $3.1 million a decrease of $1.2 million.
(i) Revenue is presented after deduction of royalties and selling fees.
(ii) Revenue and cost of sales relate to the Company's Ovoot Tolgoi Mine within the Mongolian Coal Division operating segment. Refer to note 3 of the condensed consolidated interim financial statements for further analysis regarding the Company's reportable operating segments.
Royalty regime in Mongolia
The royalty regime in Mongolia is evolving and has been subject to change since 2012. The Government of Mongolia implemented a trial period from October 1, 2012 to March 31, 2013, during which the royalty imposed on coal sales was determined using the actual contracted sales price per tonne. Subsequently, from April 1, 2013 to March 31, 2014, the royalty on all coal sales exported out of Mongolia was based on a set reference price per tonne published monthly by the Government of Mongolia.
The Government of Mongolia implemented a new royalty regime effective April 1, 2014, referred to as the "flexible tariff" royalty regime. From April 1, 2014, the royalty per tonne for export coal sales has been calculated based on the actual contracted sales price per tonne, whereby the contracted sales price includes the costs of transporting the coal to the Mongolia-China border. If transportation costs are not included in the contracted sales price between a buyer and seller, the following costs are required to be included in the contracted sales price for purposes of calculating the royalty per tonne: transportation costs and costs associated with transportation such as customs documentation fees, insurance, loading and unloading costs. In the event the actual contracted sales price calculated as described above differs by more than 10% from the contracted sales price of coal products with the same classification and quality being exported by other legal entities in Mongolia through the same border crossing, the calculated contracted sales price is deemed non-market under Mongolian tax law and the royalty per tonne is calculated based on a reference price that will be determined by the Government of Mongolia.
The Company currently sells coal from the Ovoot Tolgoi Mine ex mine gate and the coal is exported through the Shivee Khuren Border Crossing. The Company's average realized selling price excludes transportation costs.
On July 4, 2014, the Government of Mongolia made further amendments to the royalty regime. From July 4, 2014 onwards, the royalty is initially calculated and paid monthly based on the Government reference price. On a quarterly basis the royalty amount is adjusted to reflect the contracted sales price and additional documentation needs to be submitted to the Mongolian Tax Authority. Once the quarterly statement has been approved by the Mongolian Tax Authority, any adjustments between the monthly payments for the quarter and the quarterly submission are adjusted in the next months' royalty calculation.
On January 1 2015, this "flexible tariff" royalty regime ended and royalty payments reverted to the previous regime which is based on a set reference price per tonne published monthly by the Government of Mongolia.
On March 16, 2015, the Government of Mongolia issued an amendment resolution to the "flexible tariff" regime changing the coal classification methodology from which to base the royalty calculation. The resolution is effective from May 1, 2015 and the Government of Mongolia has published reference price classifications subdivided into additional classifications since that date. According to the resolution, Company's coal is mainly divided into 2 classifications depending on coal quality under raw coal type.
The Company and other Mongolian coal producers are actively engaging the Mongolian authorities to seek the continuation of the "flexible tariff" regime. See "Risk Factors - Company's Projects in Mongolia" in the MD&A issued on March 30, 2015 and available on SEDAR at .
Overview of Financial Results
For the three months ended June 30, 2015
The Company recorded a $30.3 million loss from operations in the second quarter of 2015 compared to a $17.5 million loss from operations in the second quarter of 2014. The operations for the three months ended June 30, 2015 were impacted by continuing difficult market conditions and weak coal prices in China. Whilst the Company resumed production on March 30, 2015 in anticipation of increased sales volumes, the results for the second quarter of 2015 were primarily impacted as a consequence of the tax investigation case in Mongolia as a provision of $18.0 million was recorded in respect of the Tax Penalty during the three months ended June 30, 2015.
Revenue was $3.0 million in the second quarter of 2015 compared to $6.7 million in the second quarter of 2014. The Company sold 0.19 million tonnes of coal at an average realized selling price of $17.42 per tonne in the second quarter of 2015 compared to sales of 0.63 million tonnes at an average realized selling price of $12.52 per tonne in the second quarter of 2014. Despite the continued difficult market conditions there was an increase in the average realized selling price which is attributed to a change in sales mix. The product mix for the second quarter of 2015 consisted of approximately 69% of Premium and Standard semi-soft coking coal and 31% of Thermal coal compared to approximately 19% of Premium and Standard semi-soft coking coal and 81% of Thermal coal in the second quarter of 2014.
The Company's revenue is presented after deduction of royalties and selling fees. The Company's effective royalty rate for the second quarter of 2015, based on the Company's average realized selling price of $17.42 per tonne, was 10.7% or $1.86 per tonne compared to 8.1% or $1.00 per tonne based on the average realized selling price of $12.52 per tonne in the second quarter of 2014.
Cost of sales was $11.8 million in the second quarter of 2015 compared to $20.1 million in the second quarter of 2014. Cost of sales comprises operating expenses, share-based compensation expense, equipment depreciation, depletion of mineral properties, coal stockpile inventory impairments and idled mine asset costs. Operating expenses in cost of sales reflect the total cash costs of product sold (a non- IFRS financial measure, see "Non-IFRS Financial Measure" section for further analysis) during the period.
Operating expenses in cost of sales were $4.6 million in the second quarter of 2015 compared to $6.8 million in the second quarter of 2014. The overall decrease in operating expenses is primarily the result of the impact of increasing the coal stockpile levels during the second quarter of 2015 to allow the Company to meet its existing and anticipated coal sales commitments compared to a reduction in the coal stockpile in the second quarter of 2014.
Cost of sales in the second quarter of 2015 and 2014 included coal stockpile impairments of $2.6 million and $6.2 million, respectively, to reduce the carrying value of the Company's coal stockpiles to their net realizable value. The coal stockpile impairments recorded in both the second quarter of 2015 and 2014 reflect the challenging coal market conditions and primarily related to the Company's higher-ash products.
Cost of sales related to idled mine asset costs primarily consisted of period costs, which were expensed as incurred and included mainly depreciation expense. Cost of sales related to idled mine assets in the second quarter of 2015 included $3.9 million related to depreciation expenses for idled equipment compared to $4.9 million in the second quarter of 2014.
Other operating expense was $19.5 million in the second quarter of 2015 compared to $1.8 million in the second quarter of 2014 as follows:
The Company recognized an expense for the provision of the Tax Penalty in respect of the tax investigation case in Mongolia. The Tax Penalty amounts to MNT35.3 billion (approximately $18.0 million on June 30, 2015).
The Company recognized an impairment loss of $3.4 million in the second quarter of 2014 related to prepaid toll washing fees under the contract with Ejinaqi Jinda Coal Industry Co. Ltd. ("Ejin Jinda"). The impairment charge was the result of the continued delay in starting the commercial operations at the wet washing facility and the continued soft coal market in China. No corresponding impairment charge was required in the second quarter of 2015.
In the second quarter of 2014, the Company completed the sale of the Tsagaan Tolgoi mining license. The gross proceeds of the sale were $2.0 million, indirect taxes and costs totaled $0.2 million and a withholding tax totaling $0.5 million was incurred. The net proceeds generated for the Company after taxes and costs were $1.3 million.
Administration expenses were $2.0 million in the second quarter of 2015 compared to $2.3 million in the second quarter of 2014 as follows:
Administration expenses were lower for the second quarter of 2015 compared to the second quarter of 2014 primarily as a result of cost reduction measures.
Evaluation and exploration expenses were negligible in the second quarter of 2015 compared to $0.1 million in the second quarter of 2014. The Company continued to minimize evaluation and exploration expenditures in the second quarter of 2015 in order to preserve the Company's financial resources. Evaluation and exploration activities and expenditures in the second quarter of 2015 were limited to ensuring that the Company met the Mongolian Minerals Law requirements in respect of its mining and exploration licenses.
Finance costs were $5.2 million and $5.2 million respectively in the second quarter of 2015 and the second quarter of 2014. Finance costs primarily consisted of interest expense in respect of the $250.0 million CIC Convertible Debenture ($5.1 million for the second quarter of 2015 and $5.0 million for the second quarter of 2014).
Finance income was $0.3 million in the second quarter of 2015 compared to $0.1 million in the second quarter of 2014 which, primarily consists of an unrealized gain in respect of the embedded derivative in the CIC Convertible Debenture.
For the six months ended June 30, 2015
The Company recorded a $46.9 million loss from operations in the first six months of 2015 compared to a $34.2 million loss from operations in the first six months of 2014. The operations for the six months ended June 30, 2015 were impacted by continuing difficult market conditions and weak coal prices in China. Whilst the Company resumed production on March 30, 2015 in anticipation of increased sales volumes, the results for the first six months of 2015 were primarily impacted as a consequence of the Tax investigation case in Mongolia as a provision of $18.0 million was recorded in respect of the Tax Penalty during the three months ended June 30, 2015.
Revenue was $4.5 million in the first six months of 2015 compared to $11.8 million in the first six months of 2014. The Company sold 0.37 million tonnes of coal at an average realized selling price of $15.15 per tonne in the first six months of 2015 compared to sales of 1.02 million tonnes at an average realized selling price of $15.22 per tonne in the first six months of 2014. The benefit of the improved product mix has been more than offset by continued declining prices for the first six months of 2015 when compared to the first six months of 2014.
The Company's revenue is presented net of royalties and selling fees. With the changes affecting the royalty regime in Mongolia, the Company's effective royalty rate for the first six months of 2015, based on the Company's average realized selling price of $15.15 per tonne, was 18.0% or $2.73 per tonne compared to 16.2% or $2.46 per tonne based on the average realized selling price of $15.22 per tonne in the first six months of 2014.
Cost of sales was $29.5 million in the first six months of 2015 compared to $38.5 million in the first six months of 2014. Cost of sales comprises operating expenses, share-based compensation expense, equipment depreciation, depletion of mineral properties, coal stockpile inventory impairments and idled mine asset costs. Operating expenses in cost of sales reflect the total cash costs of product sold (a non- IFRS financial measure, see "Non-IFRS Financial Measure" section for further analysis) during the period.
Operating expenses in cost of sales were $6.5 million in the first six months of 2015 compared to $12.3 million in the first six months of 2014. The overall decrease in operating expenses is the result of both (i) different production profiles, in the first six months of 2015 there was a period of curtailment until March 30, 2015 whilst in the first six months of 2014 production was impacted by a decision by the Company in June 2014 in response to market conditions to reduce production and place approximately half of its workforce on furlough; and (ii) a greater increase in coal stockpiles during the first six months of 2015 when compared to the first six months of 2014.
Cost of sales in the first six months of 2015 and the first six months of 2014 included coal stockpile impairments of $3.1 million and $13.5 million, respectively, to reduce the carrying value of the Company's coal stockpiles to their net realizable value. The coal stockpile impairments recorded in both 2015 and 2014 reflect the challenging coal market conditions and primarily related to the Company's higher-ash products.
Cost of sales related to idled mine asset costs primarily consisted of period costs, which were expensed as incurred and primarily included depreciation expense. Cost of sales related to idled mine assets in the first six months of 2015 included $15.8 million related to depreciation expenses for idled equipment (2014: $7.9 million). Idled mine asset costs increased in the first six months of 2015 compared to the first six months of 2014 as a result of the period of curtailment until March 30, 2014 when mining operations recommenced. However, neither the production plan for the first six months of 2014 nor for the period from March 30, 2015 until June 30, 2015 fully utilized the Company's existing mining fleet, therefore, idled mine asset costs continued to be incurred.
Other operating expenses were $18.5 million in the first six months of 2015 compared to $2.8 million in the first six months of 2014.
The Company recognized an expense for the provision of the Tax Penalty in respect of the tax investigation case in Mongolia. The Tax Penalty amounts to MNT35.3 billion (approximately $18.0 million at June 30, 2015).
The Company recognized an impairment loss of $3.4 million in the first six months of 2014 related to prepaid toll washing fees under the contract with Ejinaqi Jinda Coal Industry Co. Ltd. ("Ejin Jinda"). The impairment charge was the result of the continued delay in starting the commercial operations at the wet washing facility and the continued soft coal market in China. No corresponding impairment charge was required in the second quarter of 2015.
In the first six months of 2014, the Company completed the sale of the Tsagaan Tolgoi mining license. The gross proceeds of the sale were $2.0 million, indirect taxes and costs totaled $0.2 million and a withholding tax totaling $0.5 million was incurred. The net proceeds generated for the Company after taxes and costs were $1.3 million.
The Company's previous investment in Aspire Mining Limited ("Aspire") was accounted for as an available-for-sale financial asset and carried at its fair value. In the first six months of 2014, Aspire's market capitalization fluctuated, in the first quarter of 2014 the market capitalization decreased and an impairment charge of $1.8 million was initially recorded. In the second quarter of 2014 the gain of $0.4 million was recorded in other comprehensive income. The Company disposed all its investment in Aspire during 2014 and did not hold any Aspire shares as at December 31, 2014 or June 30, 2015.
Administration expenses were $3.4 million in the first six months of 2015 compared to $4.5 million in the first six months of 2014.
Administration expenses were lower in the first six months of 2015 compared to the first six months of 2014 reflecting the continued cost-cutting initiatives.
Evaluation and exploration expenses were $0.1 million in the first six months of 2015 compared to $0.3 million in the first six months of 2014. The Company continued to minimize evaluation and exploration expenditures in the first six months of 2015 in order to preserve the Company's financial resources. Evaluation and exploration activities and expenditures in the first six months of 2015 were limited to ensuring that the Company met the Mongolian Minerals Law requirements in respect of its mining and exploration licenses.
Finance costs were $11.6 million and $10.2 million in the first six months of 2015 and 2014 respectively. This primarily consisted of interest expense on the CIC Convertible Debenture ($10.1 million for the first six months of 2015 and $10.0 million for the first six months of 2014).
Finance costs for the first six months of 2015, also includes $1.3 million in respect of the unrealized fair value loss of the embedded derivative in the CIC Convertible Debenture. In comparison, in the first six months of 2014, the Company recorded within Finance income an unrealized fair value gain of the embedded derivative in the CIC Convertible Debenture ($1.1 million). The fair value of the embedded derivatives in the CIC Convertible Debenture is driven by many factors including: the Common Share price, U.S. Dollar and Canadian Dollar exchange rates and share price volatility.
Finance income was negligible in the first six months of 2015 compared to $1.1 million in the first six months of 2014. Finance income primarily consists of unrealized gains on the fair value change of the embedded derivatives in the CIC Convertible Debenture (nil and $1.1 million respectively for the first six months of 2015 and the first six months of 2014).
Income tax expense was negligible in the first six months of 2015 compared to an expense of $0.5 million in the first six months of 2014. The $0.5 million recognized in the first six months of 2014 relates to taxes paid in respect of the sale of the Tsagaan Tolgoi mining license.
Summary of Quarterly Operational Data
(i) Average realized selling price is presented before deduction of royalties and selling fees.
(ii) A non-IFRS financial measure, refer to "Non-IFRS Financial Measures" section. Cash costs of product sold exclude idled mine asset cash costs.
(iii) Per 200,000 man hours and calculated based on a rolling 12 month average.
(i) Revenue is presented after deduction of royalties and selling fees.
(ii) Revenue and cost of sales relate to the Company's Ovoot Tolgoi Mine within the Mongolian Coal Division operating segment. Refer to note 3 of the condensed consolidated interim financial statements for further analysis regarding the Company's reportable operating segments.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Management
The Company has in place a planning, budgeting and forecasting process to help determine the funds required to support the Company's normal operations on an ongoing basis and its expansionary plans.
Novel Sunrise private placement
On February 24, 2015, the Company announced it had entered into a private placement agreement with Novel Sunrise providing for the subscription of up to 21.75 million Common Shares for gross proceeds of up to approximately $7.5 million.
The initial tranche of the private placement consisting of approximately $3.5 million of Mandatory Convertible Units closed on March 3, 2015 having been subject to regulatory approvals and other customary closing conditions. On completion of the Novel SPA each Mandatory Convertible Unit was converted on a one for one basis into Common Shares.
On April 23, 2015, the Company successfully closed the second tranche of the Novel Sunrise private placement for gross proceeds of approximately $4.0 million through the issue of approximately 11.6 million Common Shares.
The issue price for both tranches of the private placement was set at CAD$0.432 ("Placing Price") and represented a discount of approximately 20% to the then 5-day volume-weighted average price per Common Share of approximately CAD$0.54, as of the date the Company received price protection from the TSX for the private placement. The Placing Price was determined with reference to the prevailing market price of the Common Shares and was negotiated on an arm's length basis between the Company's independent directors and Novel Sunrise.
The closing of the Novel Sunrise private placement and related transactions was subject to acceptance of notice of the placement by the TSX pursuant to the financial hardship exemption of the TSX Company Manual and the delisting review (For more information on the delisting review, refer to the heading "TSX Financial Hardship Exemption Application and Status of Listing on TSX").
In accordance with the terms of the Novel Sunrise private placement:
Novel SPA
On April 23, 2015, the Company was advised that the Novel SPA, as initially announced by the Company on February 24, 2015, had received all the necessary approvals and closed. Pursuant to the Novel SPA, Novel Sunrise has purchased 48.7 million Common Shares from Turquoise Hill.
Novel Sunrise change in ownership
The Company notes the announcement by Novel Sunrise, the largest shareholder of the Company, on July 20, 2015 which reported that China Cinda (HK) Investments Management Company Limited ("Cinda"), a wholly-owned subsidiary of China Cinda Asset Management Corporation Limited, acquired ownership and control of all of the outstanding voting (ordinary) shares of Novel Sunrise through Hope Rosy Limited, a wholly-owned subsidiary of Cinda.
CITIC Merchant and Swiss Life GP private placements
On June 22, 2015, the Company announced it had negotiated private placement agreements with sophisticated investors to provide additional capital resources into the Company. The terms of the subscription agreements for the private placements allowed for the issue of approximately 55 million Common Shares, priced at C$0.71 per share (a 20% discount to the five date volume weighted average price of the common shares on the TSX at June 19, 2015).
The closing of the private placements and related transactions were subject to necessary approvals, including by the TSX and the Stock Exchange of Hong Kong Limited, and in the case of CITIC Merchant was subject to the approval of their board.
On July 14, 2015, the Company announced it had obtained all the necessary regulatory approvals for the private placements and subsequently successfully closed a portion of the overall placement by placing 5 million Common Shares for approximately $2.9 million in proceeds.
On July 14, 2015, the Company agreed to an extension of the closing date of the private placement agreement between the Company and CITIC Merchant until July 20, 2015. However, the conditions precedent to the agreement were not fulfilled and CITIC Merchant informed the Company that it would not be subscribing for Common Shares pursuant to the signed private placement agreement.
Interim Funding Loan Commitment
On June 17, 2015, the Company negotiated an interim loan ("Interim Loan") for up to $8 million from Mr. Wilson Chen (a former principal of Novel Sunrise), with immediate availability, intended to address funding obligations pending the closing of the private placements between the Company and CITIC Merchant and Swiss Life GP. In accordance with the terms of the agreement the advances will be in a minimum amount of $2 million, with interest at LIBOR + 12% per annum, payable in cash on a quarterly basis in arrears, and maturing on June 18, 2016. The loan is unsecured and is subject to mandatory repayment upon completion of $30 million of equity or other debt financing.
As at June 30, 2015, the Company had not drawn down any funds under the Interim Loan. The Company has requested a funding drawdown on the Interim Loan multiple times; however, the Company has to date not received such funding.
Turquoise Hill Loan Facility
On May 25, 2014, the Company announced it had obtained a $10 million revolving credit facility from Turquoise Hill to meet its short term working capital requirements. The terms and conditions of this facility were filed on SEDAR () on June 2, 2014. The key commercial terms of the facility were as follows:
On August 30, 2014 and December 4, 2014, subject to certain conditions and limitations, Turquoise Hill agreed to grant deferrals of the payment of $3.8 million plus accrued interest thereon owing by the Company under the Turquoise Hill Loan Facility on the reduced revolving credit facility of $3.8 million. These deferrals of payment and repayment were granted to the Company without prejudice to Turquoise Hill's right and ability to assert and re-assert at any point in time to demand payment and repayment of all amounts owing to Turquoise Hill under the Turquoise Hill Loan Facility.
On May 4, 2015 following the expiry of the NUR SPA on April 30, 2015, Turquoise Hill agreed to a further limited deferral of repayment, subject to certain conditions and limitations, on the $3.8 million principal and accrued interest owing on the Turquoise Hill Loan Facility as follows:
At June 30, 2015 in addition to the principal of $3.8 million the Company owed accrued interest of $0.4 million under this facility (December 31, 2014 the Company had drawn $3.8 million and owed accrued interest of $0.1 million).
Revolving Loan Commitment
On June 22, 2015, the Company announced it had negotiated a revolving loan commitment (the "Revolving Loan") of RMB200 million (approximately $32 million) from a Chinese commercial bank, subject to the finalization of definitive documentation. The revolving loan commitment is intended to provide additional support to the Company in funding its operational objectives. The Company is negotiating with the bank to finalize the terms with a view to obtaining the Revolving Loan.
Going concern considerations
Notwithstanding the provision of the completed private placements, the coal prepayments received from customers and the Turquoise Hill Loan Facility, the Company continues to experience negative impacts on its margins and liquidity and there can be no assurance that the Company will have sufficient funding to be able to continue as a going concern.
The Company anticipates that coal prices in China will remain under pressure in 2015, which will continue to impact the Company's margins and liquidity. Therefore the Company is actively seeking prepaid coal offtake agreements and other additional sources of financing to continue operating and meet its business objectives, while continuing to be focused on minimizing uncommitted capital expenditures and preserving the Company's growth options. The Company, together with its new strategic partner, Novel Sunrise, has developed the Proposed Funding Plan in order to pay the interest due under the CIC Convertible Debenture, meet its obligations as they fall due and achieve its business objectives in 2015 and beyond. These obligations include the Tax Penalty ($18.0 million). However, there is no guarantee that the Company will be able to implement this Proposed Funding Plan or secure other sources of financing. If it fails to do so, or is unable to secure additional capital or otherwise restructure or refinance its business in order to address its cash requirements through June 30, 2016, then the Company is unlikely to have sufficient capital resources or cash flows from mining operations in order to satisfy its ongoing obligations and future contractual commitments, including cash interest payments due on the CIC Convertible Debenture (approximately $16.3 million on November 19, 2015). Refer to section 11 "Risk Factors". Therefore, the Company is actively seeking additional sources of financing to continue operating and meet its objectives.
The Company's consolidated financial statements have been prepared on a going concern basis which assumes that the Company will continue operating until at least June 30, 2016 and will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due; however, in order to continue as a going concern, the Company must generate sufficient operating cash flows, secure additional capital or otherwise pursue a strategic restructuring, refinancing or other transaction to provide it with additional liquidity. If it fails to do so, or is unable to secure additional capital or otherwise restructure or refinance its business in order to address its cash requirements through June 30, 2016, then the Company is unlikely to have sufficient capital resources or cash flows from mining operations in order to satisfy its ongoing obligations and future contractual commitments, including cash interest payments due on the CIC Convertible Debenture, it may not be able to continue as a going concern.
If for any reason, the Company is unable to secure the additional sources of financing and continue as a going concern, then this could result in adjustments to the amounts and classifications of assets and liabilities in the Company's consolidated financial statements and such adjustments could be material.
While the Company intends to secure additional sources of financing as soon as possible, a continued delay in securing additional financing could ultimately result in an event of default of the CIC Convertible Debenture, which if not cured within applicable cure periods in accordance with the terms of such debenture, may result in the principal amount owing and all accrued and unpaid interest becoming immediately due and payable upon notice to the Company by CIC.
The Company is also subject to a remedial delisting review by the TSX in connection with its reliance on the financial hardship exemption from approval by its shareholders of the private placement with Novel Sunrise as announced on February 24, 2015. Refer to the below section "TSX Financial Hardship Exemption Application and Status of Listing on TSX" for details. The failure by the Company to clear the TSX delisting review may result in the delisting of the Common Shares from the TSX which may result in an event of default under the CIC Convertible Debenture. An event of default may result in the principal amount owing and all accrued and unpaid interest becoming immediately due and payable upon notice to the Company by CIC.
Factors that impact the Company's liquidity are being closely monitored and include, but are not limited to, Chinese economic growth, market prices of coal, production levels, operating cash costs, capital costs, exchange rates of currencies of countries where the Company operates and exploration and discretionary expenditures.
Cash Position and Liquidity
At June 30, 2015, the Company had cash of $0.9 million compared to cash of $3.8 million at December 31, 2014. Working capital (excess current assets over current liabilities) was negative $31.3 million at June 30, 2015 compared to positive $3.4 million at December 31, 2014. At August 13, 2015, the Company had cash of $2.0 million.
At June 30, 2015, the Company's gearing ratio was 0.24 (December 31, 2014: 0.23), which was calculated based on the Company's long term liabilities to total assets. At June 30, 2015, the Company is not subject to any externally imposed capital requirements.
Proposed Funding Plan
The Company has commenced the implementation of the Proposed Funding Plan intended to improve cash flow for the Company and support its business strategy and operations in a difficult market, with the goal of positioning the Company with a strong future as a coal producer.
On June 22, 2015, the Company announced a progress update with respect to the Proposed Funding Plan. This included the CITIC Merchant and Swiss Life GP private placements, the Interim Loan, the Revolving Loan all of which are described above and an offtake agreement with a China-based buyer for the sale of 1.8 million tonnes of coal from July 2015 to July 2016.
Subsequent to the change in ownership of Novel Sunrise the Company held discussions with Cinda who confirmed to the Company its continuing support for the Proposed Funding Plan. Therefore the Company will continue with the implementation of the Proposed Funding Plan which includes expanding its customer base further inland in China, securing longer-term coal offtake arrangements, thereby allowing the Company to ramp up production to capacity and obtaining additional loans as required to meet existing obligations and expected further working capital requirements.
At present the Company has decided to pursue the Proposed Funding Plan described above rather than additional equity placements.
While it is the Company's intention to continue to implement the Proposed Funding Plan as soon as possible, the Proposed Funding Plan is indicative only and the Company's ability to implement it successfully is dependent on a number of factors beyond its control. Such factors include but not limited to, China's economic growth and coal demand growth, market prices of coal, the availability of credit and market interest rates, and exchange rates of currencies of countries where the Company operates. There can be no assurance that the Company will be able to implement the Proposed Funding Plan, or that it will be able to do so in sufficient time to satisfy the TSX's delisting review or to continue as a going concern. In such event, the Company is likely to be unable to meet its obligations, which could result in voluntary or involuntary insolvency proceedings involving the Company (including bankruptcy) as discussed under the heading "Risk Factors" in the December 31, 2014 MD&A issued on March 30, 2015 and available on SEDAR at .
TSX Financial Hardship Exemption Application and Status of Listing on TSX
On February 25, 2015, the TSX confirmed that the Company had been placed on remedial delisting review in connection with its reliance on the financial hardship exemption from approval by its shareholders of the private placement with Novel Sunrise. A delisting review is customary practice under TSX policies when a listed company relies on the financial hardship exemption; refer to the Company's MD&A for the year ended December 31, 2014 available on SEDAR at for additional detail.
Following extension requests by the Company to address delays in the implementation of its Proposed Funding Plan, a meeting of the TSX Committee has been deferred until August 25, 2015 to consider whether the Company has met the listing requirements of the exchange or delist the Common Shares. The TSX Committee has determined to defer its delisting decision until no later than August 28, 2015.
The Company believes the extension will provide sufficient time for the implementation of the next stage of the Proposed Funding Plan, which will allow it to meet its short term financing needs, and that it will be compliant with the continued listing requirements of the TSX; however, no assurance can be provided that the Proposed Funding Plan will be successfully implemented or to the outcome of the remedial delisting review when it occurs and the Common Shares may become subject to delisting from the TSX.
Mongolian IAAC Investigation
In the first quarter of 2013, the Company was subject to orders imposed by Mongolia's Independent Authority against Corruption (the "IAAC") which placed restrictions on certain of the Company's Mongolian assets. The orders were imposed on the Company in connection with the IAAC's investigation of the Company and were continued to be enforced by the Mongolian State Investigation Office (the "SIA"). The restrictions on the assets were reaffirmed in the Tax Verdict and form part of the tax penalty payable by the Company.
The orders relate to certain items of operating equipment and infrastructure and the Company's Mongolian bank accounts. The orders related to the operating equipment and infrastructure restricts the sale of these items; however, the orders do not restrict the use of these items in the Company's mining activities. The orders related to the Company's Mongolian bank accounts restrict the use of in-country funds. While the orders restrict the use of in-country funds pending outcome of the investigation, they are not expected to have any material impact on the Company's activities.
Following a review by the Company and its advisers, it is the Company's view that the orders placing restrictions on certain of the Company's Mongolian assets did not result in an event of default as defined under the terms of the CIC Convertible Debenture. However, the enforcement of the orders could ultimately result in an event of default of the Company's CIC Convertible Debenture, which if remains uncured for ten business days, would result in the principal amount owing and all accrued and unpaid interest will become immediately due and payable upon notice to the Company by CIC.
Ovoot Tolgoi Mine Impairment Analysis
Unchanged from the assessment made as at each quarter end in 2014 and the first quarter end of 2015, the Company determined that an indicator of impairment existed for its Ovoot Tolgoi Mine cash generating unit as at June 30, 2015. The impairment indicator was the continued weakness in the Company's share price during the second quarter of 2015 and the fact that the market capitalization of the Company, as at June 30, 2015, was less than the carrying value of its net assets.
Therefore, the Company conducted an impairment test whereby the carrying value of the Company's Ovoot Tolgoi Mine cash generating unit was compared to its "value in use" using a discounted future cash flow valuation model. The Company's cash flow valuation model has been updated to take into consideration the latest available information to the Company, including but not limited to, sales price, sales volumes and washing assumptions, operating cost assumptions and life of mine coal production assumptions as at June 30, 2015. The Company's Ovoot Tolgoi Mine cash generating unit carrying value was $340.6 million as at June 30, 2015.
Key estimates and assumptions incorporated in the valuation model included the following:
Key sensitivities in the valuation model are as follows:
The impairment analysis did not result in the identification of an impairment loss and no charge was required as at June 30, 2015. A decline of more than 2% in the long term price estimates, an increase of more than 2% in the pre-tax discount rate or an increase of more than 3% in the cash mining cost estimates may trigger an impairment charge on the cash generating unit. The Company believes that the estimates and assumptions incorporated in the impairment analysis are reasonable; however, the estimates and assumptions are subject to significant uncertainties and judgments.
The Company is currently reviewing its mine plan for the Ovoot Tolgoi project. Changes to the mine plan may have an impact on the quantities of measured and/or indicated resources and reserves of the Ovoot Tolgoi project.
REGULATORY ISSUES AND CONTINGENCIES
Governmental and Regulatory Investigations
The Company was subject to investigations by the IAAC regarding allegations of breaches of Mongolia's anti-corruption laws (the "Anti-Corruption Case"), tax evasion and money laundering (the "Tax Evasion Case"). On March 18, 2013 the Prosecutor's Office decided to split the Tax Evasion Case from the Anti- Corruption Case and on April 12, 2013, the Public Prosecutor of Capital city Prosecutor's Office issued a resolution that the jurisdiction to conduct the investigation on Tax Evasion Case was with the SIA and not the IAAC, and the Tax Evasion Case was transferred to SIA.
While the IAAC has not made any formal accusations against any current or former employee of the Company or the Company under the Anti-Corruption Case, administrative penalties were imposed on certain of the Company's Mongolian assets in connection with the investigation, including a restriction of the use of $1.2 million (the "Restricted Funds") held in bank accounts in Mongolia to spending in Mongolia. The Company has been informed that the Anti-Corruption Case has been suspended; however, it has not received formal notice that the investigation is completed and the restriction on the Restricted Funds remains in place. The Restricted Funds are included within the prepaid expenses and deposits balance in the Company's financial statements. This restriction may have a material impact on the Company's activities in light of the Tax Penalty (MNT 35.3 billion as declared by the Tax Verdict).
Investigations under the Tax Evasion Case included investigations of three of the Company's former employees (the "Former Employees"). On December 30, 2014, the Capital City Prosecutor's Office (Ulaanbaatar, Mongolia) dismissed the allegations of money laundering as not having been proven during the investigation. The Former Employees were indicted for tax evasion by the Prosecutor General on March 14, 2014. The case was sent to the First Instance Second District Criminal Court of Justice (the "District Court"). The Company was advised on May 12, 2014 that the appointed judge of the District Court concluded that the investigation of the Tax Evasion Case initiated by IAAC and continued by SIA was incomplete and ordered the case to be returned to the Prosecutor General for additional investigation. The additional investigation was subsequently completed and the case was sent to the District Court again on June 4, 2014. The trial took place on August 25 and 26, 2014. A panel of three judges appointed to the case returned the case to the Prosecutor General once again for further investigation due to insufficient evidence presented by the prosecutor.
On October 7, 2014, based on the District Court verdict, the SIA ordered a re-investigation (the "Fourth Investigation") into allegations of violations of Mongolian tax laws by the Former Employees. Following the completion of the Fourth Investigation, the Former Employees were indicted again on December 31, 2014 and were subsequently tried in the District Court. On January 30, 2015, the panel of appointed judges from the District Court found the Former Employees guilty of tax evasion and imposed sentences on the Former Employees ranging from 5 years and 6 months to 5 years and 10 months of imprisonment in the correctional facilities of strict regimen in Mongolia. The Former Employees were immediately imprisoned. The Company was informed that, following the receipt of the Tax Verdict, the Former Employees requested pardons from the President of Mongolia and waived their right of appeal. On February 26, 2015 the President of Mongolia issued a decree to pardon to the Former Employees. The Former Employees were released from imprisonment following the decree and departed Mongolia.
The Tax Verdict declared SGS to be financially liable as a "civil defendant" the Tax Penalty of MNT35.3 billion (approximately $18.0 million on June 30, 2015). The Company firmly rejects this conclusion.
On February 18, 2015, the Company appealed the Tax Verdict (the "Tax Verdict Appeal") on the grounds that it has prepared its financial statements, including those of SGS, in compliance with IFRS, and lodged all its tax returns in the required format under Mongolian tax law. The hearing of the Tax Penalty Appeal took place on March 25, 2015 at the 10th Appeal Court for Criminal Case of Mongolia (the "Court of Appeal") and a panel of three appointed judges decided to uphold the Tax Verdict and dismissed the Tax Verdict Appeal by the Company. It is the view of the Company that there is a lack of evidence to support both the Tax Verdict and the Appeal Verdict. The Company received the written version of the Appeal Court's verdict ("Appeal Verdict") on April 10, 2015. The Company lodged a final appeal with the Supreme Court of Mongolia on April 22, 2015. In accordance with Mongolia's criminal procedure law, SGS filed the appeal with the Supreme Court of Mongolia through the Second District Criminal Court of Justice.
On April 29, 2015 the Second District Criminal Court refused to advance SGS's appeal to the Supreme Court. Following an immediate protest by SGS, the Second District Criminal Court delivered SGS's appeal to the Supreme Court of Mongolia.
On May 20, 2015, SGS was informed that the Supreme Court had refused to hear the appeal and had returned the appeal to the Second Criminal Court of Justice. The Supreme Court based its decision on a restrictive reading of Article 342 of the Criminal Procedure Law of Mongolia which stipulates that "the defendant, person acquitted, the victim, and their respective defense counsel have the right to lodge a complaint to the Supreme Court". The Supreme Court concluded that the omission of a specific reference to a civil defendant in Article 342, in and of itself denies SGS, in such capacity, the right to lodge an appeal to the Supreme Court.
In its decision, the Supreme Court did not address other provisions of the Criminal Procedure Law and the Law on Courts of Mongolia, which provide that civil defendants have standing to appeal to the Supreme Court and that no judicial proceedings or decisions in Mongolia are outside of the scope of supervision by the Supreme Court.
On May 21, 2015, SGS sent an official letter of protest to the Presiding Justice of the Criminal Chamber of the Supreme Court (the "Presiding Justice"), challenging the decision to refuse to hear the tax case on appeal. On June 2, 2015, SGS received a formal response from the Presiding Justice, confirming the Supreme Court's refusal to hear the tax case. In the letter, the Presiding Justice reaffirmed the restrictive interpretation of Article 342 of the Criminal Procedure Law.
With the refusal by the Supreme Court to hear the case on appeal, the Tax Verdict has entered into force. The Tax Verdict is, however, not immediately payable and enforceable against SGS absent further actions prescribed by the laws of Mongolia. In particular, SGS has not received a copy of the bailiff's resolution on execution of the Tax Verdict, as required under the Law of Mongolia on Execution of Court Decisions in order for any judgment execution process to happen. However, the Company made a corresponding provision for the court case penalty of $18.0 million as at June 30, 2015 given the Tax Verdict has entered into force.
The Company continues to believe that there is a lack of evidence to support the Tax Verdict and that the Tax Verdict and the subsequent decisions of the higher courts on appeal were substantively and procedurally in error under the laws of Mongolia.
While the Company had various additional legal avenues available to it to continue defending itself, it has decided to and is currently seeking to resolve amicably the dispute giving rise to the Tax Verdict in a manner that is both appropriate having regard to the Company's limited financial resources and supportive of a positive environment for foreign investment in Mongolia. There can be no assurance, however, that any such resolution can be successfully negotiated by the Company either at all or on favourable terms, or that the terms of any resolution to which the Government would be prepared to agree would not be materially adverse to the Company. In such case, this may result in an event of default under the Debenture held by CIC and CIC would have the right to declare the full principal and accrued interest owing thereunder immediately due and payable. Such an event of default under the Debenture or the Company's inability to pay the penalty could result in voluntary or involuntary proceedings involving the Company (including bankruptcy) as discussed under the heading Risk Factors in the MD&A issued on March 30, 2015 and available on SEDAR at . However, with the Presiding Justice having upheld the decision to refuse to hear the case on appeal, this exhausts the legal appeals available to the Company in Mongolia.
Internal Investigations
Commencing in September 2012, through its Audit Committee (comprised solely of independent directors), the Company has conducted an internal investigation into possible breaches of law, internal corporate policies and codes of conduct arising from the allegations which have been raised through the investigations in Mongolia. The Chair of the Audit Committee has also participated in a tripartite committee, comprised of the Audit Committee Chairs of the Company and Turquoise Hill and a representative of Rio Tinto, which focused on the investigation of a number of those allegations, including possible violations of anti-corruption laws. The tripartite committee substantially completed the investigative phase of its activities during the third quarter of 2013. There have been no significant developments in respect of the internal investigations since the completion of the investigative phase during the third quarter of 2013.
The investigations referred to above could result in one or more Mongolian, Canadian, United States or other governmental or regulatory agencies taking civil or criminal action against the Company, its affiliates or its current or former employees. The likelihood or consequences of such an outcome are unclear at this time but could include financial or other penalties, which could be material, and which could have a material adverse effect on the Company. Refer to the Company's MD&A for the year ended December 31, 2014, which is available on SEDAR at , section 14 risk factors, "the Company is subject to continuing governmental, regulatory and internal investigations, the outcome of which is unclear at this time but could have a material adverse effect on the Company".
Mining Prohibition in Specified Areas Law
In July 2009, Mongolia promulgated the Law on Prohibiting Mineral Exploration and Extraction Near Water Sources, Protected Areas and Forests (the "Mining Prohibition in Specified Areas Law"). Pursuant to the Mining Prohibition in Specified Areas Law, the Government of Mongolia has defined the boundaries of certain areas in which exploration and mining is purportedly prohibited. A list of licenses has been prepared that overlap with the prohibited areas described in the law based on information submitted by water authority agencies, forest authority agencies and local authorities for submission to the Government of Mongolia.
Portions of the Company's Ovoot Tolgoi mining license and exploration licenses pertaining to the Zag Suuj Deposit and the South Biluut and Jargalant Fields within the Soumber Deposit are included on the list of licenses published by the Government of Mongolia, potentially affecting the status of those licenses under the Mining Prohibition in Specified Areas Law.
In regard to the Ovoot Tolgoi mining license, the potential area which may be affected is a relatively small area which represents approximately 3% of the entire area of the mining license and does not contain any of the Company's NI 43-101 reserves or resources or immovable assets. Accordingly, the loss of the potentially affected area would not materially and adversely affect the existing operations.
Activities historically carried out on the other licenses referred to above include drilling, trenching and geological reconnaissance. The Company has no immovable assets located in any of the potentially affected areas of these licenses and the loss of any or all of these potentially affected properties would not materially and adversely affect the existing operations.
The Mining Prohibition in Specified Areas Law has not been adequately enforced mainly due to compensation issues due to the license holders.
In order to address the issues facing its implementation, in February, 2015 the Parliament of Mongolia adopted an amendment to the Law on Implementation of the Mining Prohibition in Specified Areas Law (the "Amended Law on Implementation"). The Amended Law on Implementation provides an opportunity for license holders covered within the scope of application of the Mining Prohibition in Specified Areas Law to continue their mining operations subject to advance placement of funds to cover 100% of the future environmental rehabilitation costs. A model contract and a specific Government regulation on this requirement will be adopted by the Government. The licence holders must also apply within 3 months after the amendment to the Law on Implementation comes into effect for permission to the Mineral Resource Authority of Mongolia (the "MRAM") to resume activities. The Company submitted its application with respect to its mining licenses before the deadline set on June 16, 2015 and hasn't yet received any communication from the MRAM on the status of its application.
The potential impact of the Mining Prohibition in Specified Areas Law on the Company's operations is unclear pending the adoption by the Government of the relevant regulations pursuant to the Amended Law on implementation. The Company will continue to monitor the developments and ensure that it follows the necessary steps in the Amended Law on Implementation to secure its operations and licenses and is fully compliant with Mongolian law.
Special Needs Territory in Umnugobi
On February 13, 2015, the whole of the Soumber mining license and a portion of SGS' exploration license No.9443 X (the "License Areas") were included into a special protected area (to be further referred as Special Needs Territory "SNT") newly set up by the Umnugobi Aimag's Civil Representatives Khural (the "CRKh") to establish a strict regime on the protection of natural environment and prohibit mining activities in the territory of the SNT.
In March 2015, SGS filed a complaint with the 12th Court for Administrative Cases of First Instance (the "Administrative Court") seeking the annulment of CRKh's decision to the extent it impacted the License Areas. In parallel, SGS initiated negotiations with the CRKh in order to reach an acceptable solution.
On July 8, 2015, SGS and the Chairman of the CRKh, in his capacity as the respondent's representative, reached an agreement (the "Amicable Resolution Agreement") to exclude the License Areas from the territory of the SNT in full, subject to confirmation of the Amicable Resolution Agreement by the session of the CRKh. The parties formally submitted the Amicable Resolution Agreement to the appointed judge of the Administrative Court for her approval and requested a dismissal of the case in accordance with the Law of Mongolia on Administrative Court Procedure. On July 10, 2015, the judge issued her order approving the Amicable Resolution Agreement and dismissing the case, while reaffirming the obligation of CRKh to take necessary actions at its next session to exclude the License Areas from the SNT and register the new map of the SNT with the relevant authorities. The Company has not yet received any indication on the timing of the next session of the CRKh.
Commercial arbitration in Hong Kong
On June 24, 2015, First Concept served the Notice on SGS in respect of the Coal Supply Agreement. The arbitral proceedings (the "Arbitration") are deemed to have commenced on June 24, 2015 as the date when the respondent received the Notice.
According to the Notice, First Concept: alleged, inter alia, (i) that SGS had failed and/or wrongfully refused to sell any coal to First Concept; (ii) expressed its wish to have the dispute settled in an arbitration to be administered by the Hong Kong International Arbitration Centre; and (iii) sought the repayment of the prepayment, in the sum of $11.5 million, it made to SGS under the Coal Supply Agreement, as well as any and all damages that may be due to it.
Under the Coal Supply Agreement, SGS agreed to sell coal to First Concept between May 22, 2014 and May 31, 2015 for a total consideration of $11.5 million. It was also agreed that that First Concept would pre-pay the $11.5 million. While First Concept fulfilled its payment obligation under the contract, it totally failed to fulfill its obligation to collect and transport the coal. Pursuant to the Coal Supply Agreement that obligation fell squarely on First Concept, while SGS was only obliged to make the coal available at its stockpile. The sole reason for the lack of coal sales to First Concept was the continued failure of First Concept to complete the necessary legal requirements for collection and transportation of coal and to provide a pickup schedule in accordance with industry practice. Contrary to the allegation by First Concept that SGS "wrongfully refused" to sell the coal, SGS has repeatedly advised First Concept of its willingness, ability and readiness to make available the coal for collection at its stockpile. In fact, SGS, at all times during the term of the Coal Supply Agreement, had more than sufficient coal at its stockpile to meet its obligations.
The Company, therefore, firmly rejects the allegations of First Concept in the Notice as lacking any merit and will vigorously defend itself in the Arbitration, including claiming the relevant fees and damages from First Concept.
There can be no assurance, however, that the Company will prevail in the Arbitration. Should SGS be unsuccessful in the Arbitration, the Company may not be able to re-pay the sum of $11.5 million. In such case, this may result in an event of default under the Debenture held by CIC and CIC would have the right to declare the full principal and accrued interest owing thereunder immediately due and payable. Such an event of default under the Debenture or the Company's inability to re-pay the $11.5 million to First Concept could result in voluntary or involuntary proceedings involving the Company.
Class Action Lawsuit
On or about January 6, 2014, Siskinds LLP, a Canadian law firm, filed a proposed securities class action (the "Ontario Action") against the Company, certain of its former senior officers and current directors, and its former auditors, Deloitte LLP, in the Ontario Superior Court of Justice in relation to the Company's restatement of financial statements as previously disclosed in the Company's public filings.
There have been no significant developments in respect of the class action lawsuit since the first quarter ended March 31, 2014. For more details, refer to the Company's Management Discussion and Analysis for the quarter ended March 31, 2014 available on SEDAR at , and, in particular, the sub- section on "Contingencies - Class Action Lawsuit" of the "Regulatory Issues and Contingencies".
The Company disputes and will vigorously defend itself against these claims through independent Canadian litigation counsel retained by the Company and the other defendants for this purpose. Due to the inherent uncertainties of litigation, it is not possible to predict the final outcome of the Ontario Action or determine the amount of any potential losses, if any. However, the Company has judged a provision for this matter at June 30, 2015 is not required.
Notice of claim by former Chief Executive Officer
On June 30, 2015, the Company was served with a Notice of Civil Claim filed by the Company's former President and Chief Executive Officer, Alexander Molyneux, in the British Columbia Supreme Court. The claim relates to alleged breaches of Mr. Molyneux's employment agreement by the Company. In addition to the Company, Turquoise Hill Resources Ltd., the Company's largest shareholder at the time of Mr. Molyneux's employment, was also named in the claim.
Mr. Molyneux acted as the Company's President (from April 2009) and Chief Executive Officer (from October 2009) until September 2012, when the Company terminated his employment.
Mr. Molyneux is seeking damages in excess of $1 million in his Notice of Claim. The Company considers the action is without merit. SouthGobi intends to vigorously defend the action and reserves its right to pursue all legal rights and remedies available to it in connection with the proceedings.
PROCESSING INFRASTRUCTURE
Dry Coal Processing
The use of mobile screens at stockpile areas closer to the pits has enabled the Company to realize a cost benefit compared to hauling the coal to the central DCHF and operating the rotary breaker. This provides
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Datum: 13.08.2015 - 11:32 Uhr
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