Peter Meredith, Chief Executive Officer of SouthGobi Energy
Resources Ltd. (TSX VENTURE: SGQ), and Gene Wusaty, Chief Operating
Officer, Coal Division, announced today that the Ovoot Tolgoi mine
in southern Mongolia has produced its first 1,000,000 tonnes of
coal ahead of schedule and below budget.
"We are very pleased to announce this coal production milestone
at Ovoot Tolgoi," Mr. Wusaty said. "Our initial success at Ovoot
Tolgoi is a positive reflection on the management, staff and
employees at the mine and this further solidifies our position as a
significant new coal producer in Mongolia."
Ovoot Tolgoi has surpassed its budgeted production for 2008 of
1,000,000 tonnes of coal as of November 29, 2008, and is on track
to produce 1,100,000 tonnes of coal in 2008. The actual site cash
cost of production at the Ovoot Tolgoi mine through October 31,
2008 was approximately US$8.20 per tonne of coal produced, 32%
under budget. The Ulaanbaatar office overhead costs through the
same period were approximately US$3.20 per tonne of coal mined, 27%
under budget. The overhead cost includes the lease renewal costs of
the company's 46 Mineral Exploration Licences (MELs). The Ovoot
Tolgoi development capital cost of approximately US$42 million for
the project also is on target.
Coal shipments commenced September 22, 2008, part of two
one-year 2008 contracts for 700,000 tonnes of a 6,300 kcal thermal
coal product, sold and loaded on customer coal trucks at the Ovoot
Tolgoi mine gate. The forecast for 2009 coal production is
approximately 2,900,000 tonnes. Discussions have started with
customers on 2009 coal sales. All tonnages are expected to be sold
into western Inner Mongolia and Gansu Province in China.
Infrastructure Construction Update
Construction continues on three major infrastructure projects to
support the Ovoot Tolgoi mine - a workshop/warehouse complex, an
administration facility/accommodation camp and concreting the Ovoot
Tolgoi airport runway.
Construction on both the permanent shop facility and camp
accommodation complexes will continue through the winter with
completion scheduled for late in the second quarter 2009. A new
shop facility is being erected and has been designed to accommodate
the larger 240-tonne truck fleet, which has been purchased and is
scheduled to arrive in the third quarter 2009. The shop facility
also includes a drive-through wash bay, welding shop, warehouse and
offices. An on-site coal quality testing laboratory will be
relocated into this building once completed.
The new camp is designed to sleep up to 196 people, which could
be expanded to accommodate up to 286 people. The company has more
than 200 employees in Mongolia, of which more than 95% are
Mongolian Nationals. The company has 179 employees at the mine
site, with more than 30% from the local area.
A new concrete runway at the adjacent airport has been completed
and the concrete is now curing. It is expected that final Mongolian
Civil Aviation Authority approval to begin using the new runway
will be received by year-end. Regular charter flights continue on
the dirt runway until the concrete runway is approved. The Ovoot
Tolgoi workforce residing in Ulaanbaatar are transported to and
from the mine via regular charter flights directly to Ovoot Tolgoi,
approximately 950 km southwest of the capital. Ovoot Tolgoi is a
fly-in/fly-out operation with crew rotations every 14 days. The
remaining employees that reside in the local community are provided
with bus transportation to/from the mine.
Cross border coal traffic inefficiencies and coal transportation
have been key areas targeted by SouthGobi for improvement.
SouthGobi has formally requested the government to convert the day
shift only Shivee Khuren (Ceke) border checkpoint to a permanent
24/7 status to maximize coal exports. The request has been met
favorably by the Mongolian government with the appointment of a
working group made up of representatives from Customs, the
Specialized State Inspection Agency, the Military and the Ministry
of Foreign Affairs. The working group has visited the Ovoot Tolgoi
mine and the Shivee Khuren checkpoint with representatives of the
Company to identify and assess the requirements for conversion of
the checkpoint to a permanent status. SouthGobi is working with a
neighboring mining company on upgrading and maintaining the
existing 45 kilometre road from the mine site to the checkpoint.
SouthGobi also has purchased and installed a dedicated 150-tonne
weigh scale at the checkpoint which is being used for official
weighing of SouthGobi coal exports.
In October, as part of its increased involvement in China,
SouthGobi opened a representative office in Beijing to assist in
all dealings in the country. As well, the company opened a small
office in Ceke, China, to facilitate company matters across the
border.
The 2008 exploration program which is concluding shortly,
concentrated on delineating coal resources on the new Sumber
Project, where near-surface seams of high-quality coking and
thermal coal was discovered. SouthGobi plans to have a National
Instrument 43-101 compliant resource estimate and classification
report in the first half of 2009. Once completed, mine planning
will be initiated and an application for a mining licence will be
submitted for the development of this project.
Significant exploration also was carried out on the Ovoot Tolgoi
underground project (below the surface mine resources) focused on
delineating coal resources to the standards prescribed by National
Instrument 43-101, which is expected to be completed in the first
half of 2009. Exploration also was carried out on the coal fields
to the east and west of Ovoot Tolgoi. In addition, drilling work
continued on greenfields exploration targets and the Tavan Tolgoi
and Tsagaan Tolgoi areas.
Gene Wusaty, SouthGobi Energy's Chief Operating Officer, a
qualified person as defined by National Instrument 43-101,
supervised the preparation of the technical information in this
release.
About SouthGobi Energy Resources
SouthGobi Energy Resources is focused on exploration and
development of its Permian-age metallurgical and thermal coal
deposits in Mongolia's South Gobi Region and its Eocene-age
metallurgical coking and thermal coal deposits in East Kalimantan,
Indonesia. The company's flag-ship coal mine, Ovoot Tolgoi, is in
production and selling coal to customers in China. The company
plans to supply a wide range of coal products and electricity to
markets in Asia. The company also is investigating the
implementation of clean-coal technologies in the development of
coal power-generating capacity to benefit all of its
stakeholders.
The company's metals division is focused on the exploration and
development of its copper and gold projects in Mongolia and
Indonesia.
Forward-Looking Statements: This document includes
forward-looking statements. Forward-looking statements include, but
are not limited to, the forecast production for 2008 of 1,100,000
tonnes, the forecast for 2009 coal production of approximately
2,900,000 tonnes, tonnages to be sold into western Inner Mongolia
and Gansu Province in China, the timing to complete the permanent
shop facility and camp accommodation complexes, the timing for the
arrival of the 240 tonne truck fleet, the timing to receive final
Mongolian Civil Aviation authority approval to use the new runway,
the timing to bring the Sumber and Ovoot Tolgoi underground
resources into National Instrument 43-101 compliance, the
initiation of mine planning and the application for a mining
licence for the Sumber Project, the company's future ability to
supply coal products and electricity to markets in Asia, and other
statements that are not historical facts. When used in this
document, the words such as "could", "plan", "estimate", "expect",
"intend", "may", "potential", "should", and similar expressions are
forward-looking statements. Although SouthGobi Energy Resources
believe that the expectations reflected in these forward-looking
statements are reasonable, such statements involve risks and
uncertainties and no assurance can be given that actual results
will be consistent with these forward-looking statements. Important
factors that could cause actual results to differ from these
forward-looking statements are disclosed under the heading "Risk
Factors" in SouthGobi Energy's Management's Discussion and Analysis
of Financial Condition and Results of Operations for the nine
months ended September 30, 2008, and its Annual Information Form
dated March 28, 2008 which is available at www.sedar.com.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
Contacts: SouthGobi Energy Resources Ltd. Steven Feldman
Investors (604) 681-6799 SouthGobi Energy Resources Ltd. Bob
Williamson Media (604) 681-6799 Website: www.southgobi.com
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