Record coal sales for SouthGobi Energy Resources

SouthGobi Energy Resources (SGQ-V) more than doubled coal sales at its Ovoot Tolgoi mine last month and has moved it to round-the-clock production, seven days a week, starting from July 1.

Coal sales at the massive mine in southern Mongolia reached a new record of 231,566 tonnes in June, more than double the previous month’s figure. Total sales in the second quarter were roughly three times greater than those in the first quarter.

By midday in Toronto, the news had sent SouthGobi shares surging $2 or 20% to $12 per share. (The company has a 52-week trading window of $4-$20 per share.)

SouthGobi has signed new customer contracts, and existing customers have mobilized larger fleets of trucks to transport their coal, the company explains. Operations have also become more efficient at the nearby boarder crossing between Mongolia and China.

“The June sales success demonstrates the strength of the market in China for SouthGobi’s coal and confirms that the logistical capacity exists to move large tonnages across the border,” Alexander Molyneux, the company’s president, said in a statement.

Greater demand has seen Ovoot Tolgoi’s coal inventory dropping to less than 700,000 tonnes.

The coal producer plans to have its second mining fleet commissioned in October and is targeting production of 1.1-1.3 million tonnes of coal in the second half of this year.

SouthGobi is focused on exploration and the development of its Permian-age metallurgical and thermal coal deposits in Mongolia’s South Gobi region and its Eocene-age metallurgical and thermal coal deposits in East Kalimantan in Indonesia. The company plans to supply a range of coal products and electricity to markets in Asia.

Ivanhoe Mines (IVN-T, IVN-N, IVN-Q) is SouthGobi’s largest shareholder with about 80% of its shares.