SouthGobi hit badly by coal prices slump, seeks funding to avert default
Mongolia-focused coal producer SouthGobi Resources (TSX: SGQ) said Monday is seeking additional financing to avoid defaulting on a $250 million convertible debenture due to the ongoing coal prices slump.
Delivering its 2013 results, the Vancouver-based miner said it expected continued pressure on its margins and liquidity, as coal prices were likely to stay weak in China this year.
The company, controlled by Rio Tinto (LON:RIO) logged a $197 million loss from operations in 2013 compared to a $124 million loss from operations in 2012. Excluding certain items, loss from operations was $25 million, compared to a loss of $15 million a year earlier.
SouthGobi operates the Ovoot Tolgoi metallurgical-coal mine, located about 40 km from Mongolia’s border with China. Prices for metallurgical coal have plummeted to a three-year low amid slowing economic growth in China, the top consumer of the steelmaking ingredient, and an increase in supply from Australia.