HONG KONG – SouthGobi Resources Ltd. (TSX:SGQ) has repeated a warning that it’s in dire need of additional financing to relieve a cash shortage and help it keep operating through a period of low coal prices.
The company, part of the Rio Tinto group of companies, says it has US$15.8 million of cash as of April 21, including $8 million from a prepayment for future coal deliveries. It also has a US$7.9-million cash payment due on May 19, to pay for interest on a debt owed to China Investment Corp.
“While the company intends to secure additional sources of financing as soon as possible, a continued delay in securing additional financing could ultimately result in an event of default of the $250.0 million CIC convertible debenture, which if not cured within applicable cure periods in accordance with the terms of such debenture, may result in the principal amount owing and all accrued and unpaid interest becoming immediately due and payable upon notice to the company by CIC.”
SouthGobi is a direct subsidiary of Vancouver-based Turquoise Hill Resources Ltd. (TSX:TRQ) which, in turn, is controlled by Anglo-Australian mining giant Rio Tinto PLC (NYSE:RIO).
The company, which is listed on both the Hong Kong and Toronto stock markets, exports its coal production to China. The company said Monday that it expects coal prices in China will remain under pressure in 2014 and that will affect its margins and liquidity.
SouthGobi previously warned on March 24 that it would be difficult to meet its debt obligations this year and could face a default of a US$250 million convertible debenture issued by CIC.
In the fourth quarter ended Dec. 31, SouthGobi reported a net loss of $138.7 million, or 75 cents per share, and $32.4 million of revenue. For the full year, its loss was $237.4 million or $1.30 per share with $58.6 million of revenue.
The company noted Monday that sales volume is usually lower in the first quarter of each year due to seasonal holidays in Mongolia and China. It didn’t provide guidance on the value of the first-quarter sales nor provide an earnings estimate.