SouthGobi gets green light to start Mongolian coal mine

The government of Mongolia has given the final go-ahead to SouthGobi Energy Resources (SGQ-V) to start mining at its Ovoot Tolgoi open pit coal mine.

SouthGobi will start deliveries in the third quarter and is finalizing sales contracts and transportation arrangements.

The news sent SouthGobi’s shares in mid-day trading up 47 apiece to a new 52-week high of $13.97.

Ovoot Tolgoi is brilliantly situated to feed coal directly to Chinese clients. It is just 45 km north of Ceke, the border point between the two countries.

A Chinese steel mill already has built a railway line to Ceke, and an automated railcar loading facility opened there last year.

Pre-production is underway and SouthGobi can now start stripping and developing the first production benches for the pit. The company started clearing the site in January, stockpiling topsoil, building roads and designing drainage control systems.

Most of the mining fleet is available for mining and SouthGobi is finalizing a two-year equipment maintenance contract.

The initial workforce (111 Mongolians and seven expatriates) have been selected and all senior mine management staff are in place.

The first operating crews are experienced Mongolian heavy-equipment operators.

Over the last year, SouthGobi’s stock has traded between $3.82 and $13.97 per share. The company has about 130.2 million shares outstanding.