(EnergyAsia, August 13 2012, Monday) — Investors in Mongolia’s coal industry face more uncertainties, with Canada’s Prophecy Coal the latest to deliver a clouded outlook.
The Vancouver, British Columbia company said it has temporarily suspended mining at its Ulaan Ovoo coal mine since July as it has built up a 187,000-tonne stockpile sufficient to meet contractual obligations for the rest of the year.
The company said it has laid off about 80 mining staff and retained 15 employees on site for equipment and site maintenance, shipping and security operations during the shutdown.
The retrenched employees have each been paid about US$100,000 in accordance with local employment laws, but could be promptly rehired when needed.
“The shutdown is expected to run for approximately six months but could end sooner if any significant new coal sale agreements are entered into. Start-up can be effected in a matter of weeks,” said Prophecy.
“Management is using the downtime to work with Mongolian officials to seek road and bridge improvements, and to open Zeltura border to facilitate Russia export sales. The overall effect of the suspended operations will be modestly cash flow positive as Ulaan Ovoo operations had not yet achieved break-even levels.”
The overall effect of the suspended operations would only be “modestly” cash-flow positive as Ulaan Ovoo operations had not yet achieved break-even levels.
The company said its priority is to conclude joint venture discussions for a proposed 600 MW mine-mouth power plant adjacent to its Chandgana coal deposit. Negotiations on financing, power purchase agreement and construction management are underway.
Separately, Prophecy said it has started up Prophecy Power Corp, a wholly owned subsidiary focused on the power sector in Mongolia. Prophecy Power, formerly known as East Energy Corp, was incorporated in 2010 with the specific business objective of supplying power to Mongolia through the construction of the Chandgana thermal power plant.