Hong Kong – Russia, the primary supplier of fuel to Mongolia, has substantially cut fuel exports to Mongolia for the month of May. The issue is related to the Russian fuel deficit situation, and the fact that Russia has generally curtailed fuel exports. Media reports have indicated that Mongolian fuel importers have ordered 84,000 tonnes of fuel from Rosneft, the Russian export fuel supplier, for May but will only be allocated 10,000 tonnes.
SouthGobi's fuel supplier has claimed Force Majeure and will be unable to meet contracted fuel supply this month. SouthGobi currently has approximately 722,000 litres of diesel fuel available on site at its Ovoot Tolgoi operation or already in transit to site. The Company has also today entered into an agreement with an alternative supplier to purchase an additional 2.8 million litres of diesel fuel. This combined fuel supply will allow the mine to operate for approximately 45 days under normal operations, or around three months if operations are partially curtailed to preserve fuel.
SouthGobi has coal in inventory and customer trucks can be fuelled in China, a short distance away. SouthGobi should be able to sell and ship coal for some period in the event sufficient future fuel supply cannot be obtained.