Erdenes TT turns in 953 billion MNT revenue in H1’18
Majority state-owned coal miner Erdenes Tavan Tolgoi (Erdenes TT) exported 6.9 million tons of coal for 953 billion MNT in revenue in the first half of 2018, reported CEO B.Gankhuyag at a press conference on July 30...
Majority state-owned coal miner Erdenes Tavan Tolgoi (Erdenes TT) exported 6.9 million tons of coal for 953 billion MNT in revenue in the first half of 2018, reported CEO B.Gankhuyag at a press conference on July 30.
“It has been eight years since Erdenes TT was established. In this time, the company has faced economic recession and financial troubles. The company even found itself in difficult situations due to certain political decisions. Today, we have overcome all of these difficulties and what lies ahead of us is a very big opportunity,” underlined B.Gankhuyag.
The company’s planned revenue for 2018 was 1.26 trillion MNT. With 953 billion MNT in revenue in only the first half of 2018, Erdenes TT has already completed 78 percent of its projected revenue. Of the 210.5 billion MNT Erdenes TT was projected to contribute to the state budget, it has already surpassed that amount with 216.5 billion MNT provided. In 2017, the company gave 253.3 billion MNT in taxes and fees to the state budget, which saw the company be named the second biggest taxpayer in 2017.
In terms of gross profit, the company has turned in 373.3 billion MNT, 110 percent of the projected gross profit in 2017.
“Even though we projected to turn in around 337 billion MNT in gross profit in the whole calendar year, the company saw 373 billion MNT in gross profit in just the first half. This allows us to partially finance projects that are directly connected with the company’s operations in addition to economizing the 1,072 shares owned by 2.5 million citizens,” added B.Gankhuyag.
Higher market prices for coal have been the sole reason for the significant surge in revenue. In May, the administration of Erdenes TT reached an agreement with China’s Aluminum Corporation of China Limited (Chalco) to raise the price of coal from East Tsankhi by 70 cents per ton to make it 61 USD per ton.
As per the agreement that Erdenes TT reached with Chalco in 2011, the prices of coal are index-based and are subject to change every quarter depending on market conditions. In addition, the two sides added one additional index to the calculation of price, increasing the number of indices to five. Previously, the price was 60 percent dependent on the Cr China Coking Coal Price Index, with the agreement, that number will be brought down to 30 percent.
The addition of the fifth index has allowed coal prices to remain stable and will prevent prices from dropping below 61 USD per ton. Inversely, it will allow the price to be increased if the global market price of coal surges.
Coal from the West Tsankhi mine is sold through an open bidding process. In 2018, coal from the West Tsankhi is being sold at 70 USD, whereas it was previously sold at 68 USD per ton. This difference ultimately totaled 12 million USD or 30 billion MNT.
The company was projected to mine 4.9 million tons of wool in 2018, but has so far mined 5.1 million tons. In terms of export, the company has exceeded its projected amount by 64 percent, exporting 6.9 million tons compared to the five million projected to be exported.
The strong performance of the company has allowed it to restart exploration efforts that had been suspended since 2014. These exploration activities have allowed the company to add on to its indicated reserves as the Tavan Tolgoi mine. In addition, Erdenes TT has increased its wages by 21 percent on average, addressing some of the financial issues that its workers had been facing.
Meanwhile, the company said that it has been intensifying its efforts on launching an IPO on a foreign stock exchange. It has been cooperating with Mongolian and foreign financial organizations and banks on offering up to 30 percent of its shares on the international market. The company has said that it will begin to partially finance some of the infrastructure projects needed to be completed at the mine in preparation for the foreign listing. The railway project has been named as a priority project for the company while the coal refinery is the second priority in maximizing the productivity of the mine.