Company was able to get unrealized fair value gain of HK$62.7mln and realized gain of HK$10.1mln.
Mongolia Energy Corporation (MEC), an energy and resources developer, announced its final results for the year ended March 31, 2010 (FY2010).
Mining at Khushuut commences
As reported by MEC mining at Khushuut has commenced. Assisted by Leighton LLC, products will be delivered to Baosteel Bayi soon. MEC is also working on its other prospects and projects to maximize value to shareholders.
A recap of developments at Khushuut
The Khushuut coking coal mine has around 149 million tonnes of JORC in-place coal resources.
These resources are substantially of premium coking coal quality. The Khushuut coking coal mine is around 600 hectares out of MEC’s 330,000 hectares of concession areas in Western Mongolia.
MEC’s mining contractor is Leighton LLC. In June, 2010, MEC awarded a six-year mining contract to Leighton worth AUD273 million (approximately HK$1,856.4 million).
Our market intelligence is that there is strong demand for our premium coking coal. Already, Baosteel Bayi, a member of the Baosteel Group has signed up to buy between 9.6 million to 10 million tonnes of our coking coal between the years 2010 to 2020, on agreed terms upon delivery, including for any additional production. We have also been approached by other potential customers. Assisted by Leighton, MEC is working to deliver coal to Baosteel Bayi in August 2010. MEC will initially sell screened coal through rotary breaker and then washed coal after a wash plant is built.
Assisted by Shenyang Design Institute, MEC is working on the preliminary design of an initial 12MW power generation facility. This is for RMB 5 million (approximately HK$5.7 million). The power generation may be expanded over time to supply electricity to the local network.
MEC has substantially built the Khushuut Road foundation and is currently paving the road with asphalt and constructing the road service stations. These will reduce overall maintenance costs and transport time. The pavement costs RMB488.2 million (approximately HK$556.5 million).
MEC Chief Executive Officer, Mr. James Schaeffer Jr. said, “Apart from continuing to forge ahead with our Khushuut coking coal project, other exploration programs have also been initiated for creating value for MEC’s shareholders during the year. As mining operation commences and favorable local government policies are being implemented in our core market Xinjiang, we believe our Mongolian assets are going to continue contributing favorably to MEC’s long term development.”
Other coal and mineral concession areas in Western Mongolia
Apart from the development of the Khushuut coking coal mine, MEC’s conducts general reconnaissance and initial explorations at certain other prospective areas. These include exploration of the iron ore deposits at Bayan-Ulgii, further coal resources at north of the Khushuut coking coal mine, copper prospect near Khushuut, and copper & gold prospects at Gants Mod and Govi Altai areas.
Loss for the year ended March 31, 2010 was HK$317.4 million (2009: HK$438.4 million).
The loss from the continuing operation relating to the energy and related resources projects was HK$248.5 million (2009: HK$420 million). Loss from the discontinued operation relating to aircraft charter flight business was HK$68.9 million (2009: HK$18.3 million), due mainly to revaluation and impairment losses. On the other hand, there was an unrealized fair value gain of HK$62.7 million (2009: Loss of HK$24.0 million) and realized gain of HK$10.1 million (2009: Nil) from Hong Kong listed investments resulting from the surge in Hong Kong stock market during the review year.
As at March 31, 2010, the Group’s cash and bank balances were HK$121.3 million (2009: HK$660.9 million). The decline in cash and bank balances was largely caused by the usage of funding in the mine development and related activities such as construction of the Khushuut road and payment of cash consideration for the acquisition of an exploration concession with ferrous resources in Mongolia.
As mining commences at Khushuut, the Group’s initial plan is for an annual 3 million tonnes production rate by the end of 2011 with expansion to an annual production rate of 5 to 6 million tonnes or more over time. Apart from its existing projects, the Group will also consider other potential energy and resources projects as and when opportunities arise.
MEC Chairman, Mr. Simon Lo concluded, “It has been a little over three years since we first acquired our concession areas in Western Mongolia. I am pleased to see the Khushuut coking coal project and MEC’s strategy as an energy and resources developer materializing after years of hard work."
"Moving forward, MEC will continue its commitment to grow and develop as an energy and resources developer, with an aim of maximizing value and return to shareholders through efficient use of our assets and funds.”
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