Miner aims to clean up with washed coal business

Mongolia Mining Corp (0975) aims to boost annual revenue by 1 times to about US$700 million (HK$5.45 billion) by doubling production and launching a washed coal business. The miner this year is set to produce seven million tonnes of coal – 1.5 million to two million tonnes of raw coal, 3.5 million to four million tonnes of washed coal, and the rest thermal coal for self-use. Last year, the miner produced 3.9 million tonnes of just raw coal only. Raw coal, used by coal-fired power plants, sells for US$90 to US$100 per tonne; while wash coal, used by steel makers costs US$140 to US$150 per tonne.“By selling the washed coal, we believe that the net profit margin can rise to 30 percent this year as compared to 22 percent last year,” chief executive Battsengel Gotov said in Ulan Bator.

The company, which listed in October, had revenue of US$277.50 million last year. Even if coal prices fall under the firm’s estimated range, it would generate a revenue of US$690 million to US$760 million this year.

MMC plans to invest US$1.2 billion between 2011 and 2013 on expanding its coal washing plant and infrastructure construction. The first phase will start from next month. All three phases are expected to have an annual production capacity of 15 million tonnes. It is now building a paved road that can help save transportation costs and plans to build its own railway.

The coal washing plant will have three phases – each with an annual capacity of 5 million tonnes. The coking coal miner is also looking at merger and acquisitions at home.

Since 2009, when MMC started operations, the average selling price of coal has risen from between US$48 and US$49 per tonne to between US$70 and US$71.

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