Financial Performance - The company reported an operating profit of $33.8 million for the first nine months of 2023, compared to $5.9 million for the same period in 2022, reflecting a significant increase in sales volume and average selling prices [15]. - For the quarter ended September 30, 2023, the company reported revenues of $97,979,000, an increase of 17.7% compared to $83,243,000 for the same period in 2022 [22]. - The company recorded a net profit of $29,349,000 for the quarter, a significant recovery from a net loss of $60,632,000 in the same quarter of the previous year [22]. - Basic and diluted earnings per share were both $0.10, compared to a loss of $0.21 per share in the prior year [22]. - Total revenue for the three months ended September 30, 2023, was $97,979 thousand, compared to $36,807 thousand for the same period in 2022, representing a significant increase [134]. - Gross profit for the nine months ended September 30, 2023, was $121,452 thousand, up from $4,487 thousand in the same period of 2022 [134]. - Operating profit for the three months ended September 30, 2023, was $46,343 thousand, compared to $3,456 thousand for the same period in 2022 [134]. - The company reported a net profit attributable to equity holders of $29,349 thousand for the three months ended September 30, 2023, compared to a loss of $8,017 thousand in the same period of 2022 [134]. Sales and Production - Coal sales volume for the three months ended September 30, 2023, was 1.15 million tons, up from 0.55 million tons in the same period of 2022, representing a 109% increase [8]. - The company’s coal production for the first nine months of 2023 was 2.71 million tons, significantly higher than 0.12 million tons in the same period of 2022, due to the resumption of major mining operations [10]. - The company sold 1.15 million tons of coal in Q3 2023, an increase from 0.88 million tons in Q3 2022 [50]. - The average coal selling price increased from $65.4 per ton in Q3 2022 to $85.6 per ton in Q3 2023, attributed to improved market conditions in China and an expanded sales network [3]. - The average realized price for coal in the first nine months of 2023 was $93.05 per ton, compared to $65.53 per ton in the same period of 2022, marking a 42% increase [8]. - The average realized price per ton of coal in Q3 2023 was $85.57, down from $95.34 in Q3 2022 [50]. - The unit sales cost decreased from $58.3 per ton in Q3 2022 to $42.2 per ton in Q3 2023, driven by economies of scale from increased sales [41]. Costs and Expenses - The total cash cost of sold products per ton decreased from $42.91 in 2022 to $33.08 in 2023 for the three months ended September 30, indicating improved cost management [8]. - Financing costs for the first nine months of 2023 were $36.7 million, up from $31.0 million in 2022, primarily due to interest expenses on convertible bonds totaling $205 million [19]. - The company’s management expenses for the first nine months of 2023 totaled $6.56 million, compared to $4.81 million in 2022, reflecting increased operational activities [18]. - Sales cost for Q3 2023 was $48.6 million, up from $32 million in Q3 2022, primarily due to increased sales [44]. - Total sales cost for the first nine months of 2023 was $121.6 million, compared to $38.1 million in the same period of 2022 [47]. - The company reported a direct cash cost of $32.26 per ton for sold products in Q3 2023, compared to $33.79 in Q3 2022 [50]. - Management expenses for Q3 2023 were $1.754 million, compared to $666,000 in Q3 2022, reflecting increased administrative costs due to expanded operations [45]. Financial Management and Liabilities - The company has made a tax provision of $75,000,000 as of September 30, 2023, due to ongoing tax disputes [26]. - The company has a reimbursement claim of $6,300,000 related to Turquoise Hill, which is currently disputed [25]. - The company has established a cash flow forecast covering the next 12 months, considering cost-saving measures and potential financial support of up to $73,000,000 from major shareholders [29]. - The company is facing potential legal actions and bankruptcy proceedings due to delays in repaying trade payables [28]. - As of September 30, 2023, the company reported a working capital deficit that includes significant liabilities of $67.1 million, which consists of unpaid taxes of $26.2 million and a provision for the $75 million tax penalty [56]. - The company has a tax provision of $74,990 thousand for the nine months ended September 30, 2023 [134]. - Total liabilities increased to $412,291 thousand as of September 30, 2023, compared to $323,883 thousand as of December 31, 2022 [138]. Strategic Outlook and Growth - The company expects to continue expanding mining operations and capacity in 2023 to capitalize on anticipated sales growth [83]. - The company aims to increase coal production and optimize cost structure by hiring large third-party contract mining companies and enhancing procurement management [84]. - The company has several growth potentials, including the Suu Mbeel deposit located approximately 20 km east of the Aobao Te Taalai coal mine and the Zag Suuj deposit located about 150 km east of the same mine [85]. - The company is focused on enhancing infrastructure and technology for cross-border exports at the Ceke port in 2023 [131]. - The company anticipates future coal demand in China will influence its operational strategies [148]. - The company aims to expand its market reach and customer base in China to enhance the profitability of its coal products [119]. Legal and Compliance Issues - The company is involved in a class action lawsuit related to the restatement of financial statements, with no provision required as of September 30, 2023 [75]. - The company has received a tax penalty notice from the Mongolian tax authority amounting to approximately $75 million, with an appeal submitted on August 17, 2023 [160]. - Future outlook includes addressing potential environmental impacts and compliance with regulatory requirements [132]. Operational Efficiency - The company resumed major mining operations, including coal extraction, by the end of 2022, leading to increased coal production and significantly improving cash flow by mid-2023 [82]. - The company is actively working to improve the operational efficiency and output of its washing facilities at the Ovoot Tolgoi coal mine [148]. - The company is focused on enhancing product value through coal washing and selection processes [143]. - The company has been blending higher ash content products into its semi-soft coking coal to meet market demand [156].

Stock Options and Bonus Shares - As of December 31, 2022, the total number of shares available for issuance under the stock option plan was 2,297 shares, representing approximately 0.00078% of the company's issued shares[3] - The total number of shares available for issuance under the bonus share plan was 1,800,000 shares, accounting for about 0.61% of the company's issued shares as of December 31, 2022[10]

Financial Performance - The company recorded an operating loss of $40.5 million in Q2 2023, compared to an operating profit of $2.7 million in Q2 2022[27]. - Revenue for Q2 2023 was $83.2 million, a significant increase from $5.8 million in Q2 2022, due to the normalization of coal exports and improved market conditions[74]. - The company reported a net loss of $60,632 thousand for the quarter, compared to a net profit of $7,855 thousand in the previous quarter, reflecting a substantial decline in profitability[132]. - The company reported a loss attributable to equity holders of $52.8 million for the first six months of 2023, compared to a loss of $17.8 million in 2022[170]. - The company’s net loss attributable to equity holders was $60,632,000 for the second quarter of 2023, compared to a loss of $7,053,000 in the same quarter of 2022[84]. Tax Penalties - The company has received a tax penalty notice of $75 million from the Mongolian tax authority, which has impacted its financial performance[27]. - The company recorded a tax provision of $75 million related to penalties from the Mongolian tax authority as of June 30, 2023[59]. - The company is actively exploring solutions regarding the tax penalty issue, including negotiations with the Mongolian tax authority[59]. - The company is subject to a tax penalty of approximately $75 million from the Mongolian tax authority following an audit of financial data from 2017 to 2020[168]. Sales and Production - The average selling price of the company's products has increased, contributing to higher sales volumes in the first half of 2023[27]. - The company reported coal sales of 0.88 million tons for the three months ended June 30, 2023, compared to 0.09 million tons in the same period of 2022, representing a significant increase[40]. - The average realized price per ton of coal sold increased to $95.34 in Q2 2023 from $66.55 in Q2 2022, reflecting improved market conditions[40]. - The company’s total coal sales for the first six months of 2023 reached 1.5 million tons, up from 0.1 million tons in the same period of 2022[42]. - The average selling price per ton for the first half of 2023 was $98.9, an increase from $66.6 in the first half of 2022, attributed to market improvements and expanded sales networks[42]. Operational Developments - The company resumed coal mining operations at the end of 2022, with coal production gradually increasing, and washing operations resumed in April 2023[13]. - The company is focusing on increasing the value of its products through coal washing and processing[4]. - The company is exploring market trends in the Chinese coal industry for future growth opportunities[4]. - The company aims to develop markets for its premium and standard semi-soft coking coal products, particularly targeting long-term supply agreements with end-users in China[122]. - The company has completed all document production and depositions related to a class action lawsuit, with a hearing scheduled for October 23, 2023[199]. Financial Obligations and Liquidity - The company expects to have sufficient liquidity and capital resources to meet its ongoing obligations, including the ability to pay the $75 million tax penalty or appeal[3]. - The company has entered into a deferral agreement with JDZF, allowing for the postponement of approximately $79 million in cash interest payments due in May 2023[14]. - The company is seeking shareholder approval for a repayment plan related to outstanding obligations totaling approximately $110.4 million[152]. - The company reported a working capital deficit that includes significant liabilities of $59.1 million, which includes $19.2 million in unpaid taxes[149]. - The company believes it can continue as a going concern until at least June 30, 2024, provided it generates sufficient operating cash flow[148]. Cost Management - The total cash cost per ton of sold products decreased from $56.32 in Q2 2022 to $47.76 in Q2 2023, driven by economies of scale from increased sales[41]. - The company's unit sales cost decreased from $67.5 per ton in the first half of 2022 to $49.3 per ton in the first half of 2023, driven by economies of scale from increased sales[68]. - The total cash cost for the three months ended June 30, 2023, was $31.139 million, with no idle mine asset cash costs included[135]. - The cash cost per ton of sold products for Q2 2023 was $35.39, compared to $34.30 in Q2 2022, reflecting a slight increase[136]. - The company has reduced assessment and exploration expenses in Q2 2023 to conserve financial resources[77]. Management and Governance - The company appointed a new non-executive director on May 17, 2023, following the removal of the previous CEO on May 15, 2023[36][37]. - The company has implemented a planning, budgeting, and forecasting process to determine the funding needed for ongoing operations and expansion plans[165]. - The company is closely monitoring factors affecting its liquidity, including coal market prices and economic growth in China[175]. - The company has agreed to pay deferred payment fees at a rate of 1.5% for unpaid balances related to the March 2023 deferred payment[186]. - The company must obtain approval from the Toronto Stock Exchange and disinterested shareholders for the March 2023 deferred payment agreement to take effect[184].

Sales Performance - For the six months ended June 30, 2023, coal sales volume reached 1.5 million tons, a significant increase from 0.1 million tons in the same period of 2022, with an average selling price rising from $66.6 per ton to $98.9 per ton[5]. - The company reported a revenue of $83.243 million for the three months ended June 30, 2023, compared to $5.790 million for the same period in 2022, reflecting a substantial increase due to improved market conditions in China and expanded sales networks[7]. - The total coal sales volume for the second quarter of 2023 was 0.88 million tons, up from 0.09 million tons in the same quarter of 2022, with an average realized price of $95.34 per ton compared to $66.55 per ton in 2022[2]. - The average realized price for premium semi-soft coking coal increased from $92.87 per ton in the second quarter of 2022 to $103.33 per ton in the second quarter of 2023[2]. - The average coal selling price increased from $66.6 per ton in Q2 2022 to $95.3 per ton in Q2 2023, attributed to improved market conditions in China and an expanded sales network[37]. Financial Performance - The company incurred an operating loss of $40.459 million in the second quarter of 2023, compared to an operating profit of $2.661 million in the same quarter of 2022, primarily due to a $74.99 million tax provision[10]. - The company experienced a total operating loss of $12.5 million for the first half of 2023, compared to an operating profit of $2.5 million in the first half of 2022[19]. - The company reported a net loss of $60.6 million, compared to a profit of $7.9 million in the previous quarter[80]. - The company recorded a foreign exchange loss of $2.46 million in the first half of 2023, compared to a foreign exchange gain of $1.9 million in the same period of 2022[49]. - The company reported a basic and diluted loss per share of $0.21 for the period[156]. Cost and Expenses - The cost of sales for the second quarter of 2023 was $42.027 million, significantly higher than $5.069 million in the same quarter of 2022, driven by increased sales volume[11]. - Operating expenses in the first half of 2023 amounted to $49.4 million, up from $3.6 million in the first half of 2022, reflecting the company's expanded operations[46]. - Management expenses for Q2 2023 were $2.656 million, up from $1.772 million in Q2 2022, primarily due to increased operational scale[16]. - The company’s management fees increased to $1.124 million in Q2 2023 from $0.131 million in Q2 2022, reflecting higher compensation and benefits[15]. - The direct cash cost of sold products per ton decreased from $34.30 in the second quarter of 2022 to $35.39 in the second quarter of 2023, reflecting economies of scale from increased sales[4]. Tax and Penalties - The company recorded a provision for a tax penalty of $75 million from the Mongolian tax authority, impacting financial performance significantly[37]. - The company’s subsidiary received a formal notice from the Mongolian tax authority regarding a tax audit covering the years 2017 to 2020, resulting in a proposed penalty of approximately $75 million[23]. - The company has made a provision of $75 million for the tax penalty as of June 30, 2023[93]. - The Mongolian tax authority has imposed a tax penalty of approximately $75 million on the company, following an audit of financial data from 2017 to 2020[88]. - The company is exploring various solutions regarding the tax penalty, including negotiations with the Mongolian tax authority and potential appeals[93]. Financing and Debt - Financing costs for the first half of 2023 were $11.6 million, compared to $10.2 million in the same period of 2022, mainly due to interest expenses on $250 million convertible bonds[17]. - The company has agreed to defer payments totaling approximately $110.4 million related to convertible bonds until August 31, 2024, with an interest rate of 6.4% on the unpaid balance[41]. - The company issued $500 million of secured convertible bonds with an interest rate of 8.0%, of which 6.4% is paid in cash semi-annually and 1.6% in common stock annually[102]. - The company agreed to defer a cash interest payment of $7.9 million due on May 19, 2022, to August 31, 2023[104]. - The company has entered into multiple deferral agreements, with the latest extending payment obligations to August 31, 2024[112]. Operational Developments - The company resumed its coal washing operations in April 2023, contributing to increased production levels compared to the previous year[5]. - The company plans to continue expanding its sales network and diversifying its customer base to capitalize on improving market conditions in China[5]. - The company plans to enhance its logistics capabilities to address distribution bottlenecks[144]. - The company aims to optimize its product mix by improving mining operations and exploring the potential for dry coal processing[150]. - The company is closely monitoring factors affecting its liquidity, including sales limitations in China, economic growth, coal market prices, and currency exchange rates[99]. Market Outlook - The company remains cautiously optimistic about the Chinese coal market, anticipating that coal will continue to be a primary energy source in China for the foreseeable future[143]. - The company plans to expand its mining operations and production capacity in 2023 to capitalize on expected sales growth[148]. - The company is monitoring and responding to dynamic market conditions, particularly regarding coal supply and pricing fluctuations due to environmental regulations[143]. - The company expects to increase coal production to leverage economies of scale and improve operational efficiency[152]. - The company will focus on expanding its market reach and customer base to increase sales volume and improve sales prices[144]. Asset and Liabilities - The company's asset deficit increased to $195.4 million as of June 30, 2023, from $142.5 million as of December 31, 2022[95]. - The company's working capital deficit reached $257.4 million as of June 30, 2023, compared to $184.7 million as of December 31, 2022[95]. - Total assets increased to $219,590 thousand as of June 30, 2023, from $181,359 thousand as of December 31, 2022[159]. - Current liabilities totaled $160,463 thousand as of June 30, 2023, compared to $140,784 thousand as of December 31, 2022[161]. - Non-current liabilities decreased to $85,129 thousand as of June 30, 2023, from $91,723 thousand as of December 31, 2022[161].

Mining Operations and Production - The company resumed major mining operations, including coal extraction, by the end of 2022, leading to a gradual increase in coal production and a significant improvement in cash flow for Q1 2023[2] - The company plans to enhance its product mix by improving mining operations, utilizing wet washing coal processing plants, and exploring dry coal processing operations[4] - The company intends to increase coal production to leverage economies of scale while optimizing its cost structure through improved operational efficiency and procurement management[4] - The company expects to continue expanding mining operations and capacity in 2023 to capitalize on anticipated sales growth[133] - The company has a five-year agreement with Ejin Horo Banner to wet wash approximately 3.5 million tons of coal annually from the Aobao Te Taalugei coal mine[131] - The company aims to improve operational efficiency and output at the Aobote Taole Coal Mine[164] Financial Performance - In Q1 2023, the company recorded sales of 600,000 tons of coal, with an average realized price of $104.1 per ton, reflecting improved market conditions in China and an expanded customer base[19] - The company achieved an operating profit of $27.9 million in Q1 2023, compared to an operating loss of $200,000 in Q1 2022, driven by increased sales volume and higher average selling prices[19] - The company recorded a revenue of $61.8 million for Q1 2023, with an average realized price of $104.1 per ton[37] - The company reported revenue of $61,780,000 for the three months ending March 31, 2023, compared to $0 for the same period in 2022[146] - Gross profit excluding idle mine asset costs was $30.86 million in Q1 2023, compared to a loss of $0.56 million in Q1 2022[63] - Net profit attributable to equity holders was $7.86 million in Q1 2023, compared to a net loss of $10.77 million in Q1 2022[63] - Total assets increased to $225,648,000 as of March 31, 2023, up from $181,359,000 at the end of 2022[148] - Cash and cash equivalents rose to $39,406,000 from $9,255,000 at the end of 2022, indicating improved liquidity[148] Sales and Market Strategy - The company aims to expand its market reach and customer base by increasing sales networks, enhancing coal logistics capabilities, and adjusting sales prices to maximize profits[4] - The company is focusing on expanding its market presence in China with the support of JDZF to enhance the profitability of its coal products[2] - Coal sales volume reached 0.60 million tons, an increase from 0.47 million tons in the previous quarter, representing a 28.7% growth[71] - Average realized price per ton of coal was $104.11, significantly up from $65.90 in the previous quarter, marking a 58% increase[71] Cost Management and Financial Obligations - The total sales cost for Q1 2023 was $30.9 million, significantly up from $1 million in Q1 2022, primarily due to increased sales volume[57] - The increase in sales costs for Q1 2023 was primarily due to higher sales volume, with operating expenses rising to $18.30 million from $0.50 million in Q1 2022[65] - Financing costs for Q1 2023 were $11.91 million, compared to $10.80 million in Q1 2022, largely due to interest expenses on convertible bonds[69] - A significant agreement was made with JD Zhixing Fund L.P. to defer payments totaling approximately $79 million in cash interest due on convertible bonds, extending the payment deadline to August 31, 2024[20][22] - The company has agreed to pay a deferred payment fee at an annual interest rate of 6.4% for the deferred payments due to JDZF[100] Operational Challenges and Risks - The company’s financial performance is impacted by several adverse conditions and significant uncertainties regarding its ability to continue as a going concern[30] - The company may face significant uncertainty regarding its ability to continue as a going concern due to its working capital deficit[93] - The company has not faced any legal proceedings or bankruptcy processes as of May 19, 2023, but cannot guarantee that creditors will not initiate such actions in the future[91] - The company is assessing the potential impacts of collective lawsuits on its operations[164] - The company acknowledges various risks and uncertainties that may affect its forward-looking statements[166] Management and Governance - The company appointed a new CEO, Mr. Xu Ruibin, on May 15, 2023, following the dismissal of the previous CEO[42] - The company expects to hold a special shareholders' meeting in Q3 2023 to seek approval for the March 2023 deferred payment agreement[25] - The company will provide monthly updates on its financial condition and business operations to JDZF during the period from the effective date of the March 2023 deferred payment agreement until the payment date[116] Environmental and Social Responsibility - The company is committed to operating in a safe and socially responsible manner while maximizing revenue through various strategies[3] - The company is committed to addressing environmental impacts and implementing measures to mitigate potential risks[164]

Supplier and Customer Relationships - The largest supplier accounts for 13% of the company's total procurement[5] - The largest customer accounts for 14% of the company's total sales[6] Liquidity and Financial Resources - The company expects sufficient liquidity and capital resources to meet ongoing operational obligations and future contractual commitments[14] - The company has secured access to up to $73 million in financial support from an affiliate of its major shareholder to improve liquidity and financial conditions[125] - The company has implemented cost-saving measures and is in discussions with suppliers and the Mongolian Tax Authority to extend payment schedules for outstanding liabilities[125] - The company's cash flow forecast covers a 12-month period starting from December 31, 2022, and includes expected cash flows from operations and cost-saving measures[125] - The company's board of directors believes there are sufficient financial resources to continue operations and meet financial obligations for the next 12 months, supporting the use of the going concern basis for financial reporting[125] Operational Efficiency and Production Capacity - The company aims to improve operational efficiency and production capacity at the Ovoot Tolgoi coal washing facility[15] - The company plans to enhance mining operations and capacity in 2023, along with strengthening infrastructure and technology for cross-border exports at the Ceke Port[199] Environmental and Safety Performance - The company is focused on mitigating environmental impacts and enhancing health, safety, and environmental performance[15] Corporate Governance and Compliance - The company is transitioning its listing status on the Hong Kong Stock Exchange from secondary to primary[15] - The company regularly reviews and updates its practices to ensure compliance with the latest corporate governance requirements and best practices[28] - The company has established a disclosure committee to oversee its disclosure practices, consisting of management members and the chair of the nomination and corporate governance committee[24] - The company has a disclosure committee responsible for overseeing disclosure practices, including controls, procedures, and policies[55] - The company has adopted a disclosure policy that meets or exceeds the standards set by the Hong Kong Securities and Futures Commission[49] - The company updated the Audit Committee and Compensation and Benefits Committee charters in March 2023 to align with Hong Kong Listing Rules, effective April 2023[65][69] - The company's corporate governance report highlights the role of the nomination and corporate governance committee in monitoring compliance with legal, regulatory, and governance standards[136] - The company has updated its disclosure, confidentiality, and securities trading policies to align fully with the Hong Kong Listing Rules, effective March 2023[145] Board of Directors and Committees - The Board of Directors consists of 3 executive directors, 2 non-executive directors, and 3 independent non-executive directors[52] - A special committee of independent non-executive directors was established in December 2022 to explore potential capital restructuring options[56] - The Board oversees the company's business and sets long-term development goals and strategies[44] - The Nomination and Corporate Governance Committee reviews the effectiveness of risk management and internal control systems[40] - The Board ensures that senior management operates in the best interests of shareholders and aligns with shareholder and management objectives[47] - The Board is responsible for approving the appointment of senior management and reviewing their performance annually[49] - The Audit Committee consists of three independent non-executive directors: Mr. Sun Mao (Chairman), Mr. He Yingbin, and Ms. Quan Jinlan[66] - The Board of Directors held a total of 13 meetings in 2022, with the Audit Committee holding 10 meetings, the Compensation and Benefits Committee holding 5 meetings, and the Operations Committee holding 4 meetings[75] - The company's board diversity policy emphasizes the importance of diverse perspectives, experiences, and expertise for effective governance[107] - The company's nomination and corporate governance committee uses a skills matrix to identify and track the qualifications and skills needed for board members[111] - The company's board diversity policy emphasizes gender diversity and recognizes the importance of women in promoting diverse perspectives on the board[139] - The company's board of directors includes members with expertise in corporate governance, mining, financial management, and related fields, as outlined in the skills matrix[143] Financial Performance and Reporting - Coal sales increased from 900,000 tons in 2021 to 1.1 million tons in 2022 after the reopening of the Ceke Port in May 2022[39] - The company suspended coal exports to China from November 2021 to May 2022 due to COVID-19 restrictions in Inner Mongolia[39] - The company significantly improved its cash flow due to the gradual increase in the number of trucks allowed to cross the China-Mongolia border and coal exports since May 25, 2022, with coal mining operations resuming on July 15, 2022[62] - The company reported a net loss attributable to equity holders of $30.4 million in 2022, compared to a net loss of $14.4 million in 2021[155] - As of December 31, 2022, the company had an asset deficit of $142.5 million, up from $90.5 million in 2021[155] - The company's working capital deficit (current liabilities exceeding current assets) reached $184.7 million as of December 31, 2022, compared to $42.5 million in 2021[155] - The company's internal controls over financial reporting were deemed effective by the CEO and CFO as of December 31, 2022[151] - The company's financial reporting internal controls did not undergo any significant changes in the most recent quarter that could materially affect them[152] - The company's audit fees for 2022 included the audit of annual financial statements, review of quarterly financial statements, and statutory audits of subsidiary financial statements[154] - Audit fees and related fees amounted to $361,000 and $101,000 respectively, totaling $462,000[177] Risk Management and Internal Controls - The company's internal control policies aim to provide reasonable assurance against material misstatements and help the board identify and mitigate risks[118] - The company's financial reporting internal controls include policies and procedures to ensure transactions are recorded accurately and in accordance with IFRS[121] - The company's board is responsible for maintaining an effective risk management and internal control system[118] Whistleblower and Employee Welfare - The company has adopted a whistleblower program to allow employees to confidentially report concerns or perceived misconduct[29] - The company's audit committee and corporate secretary jointly manage the whistleblower program[104] - The company emphasizes employee welfare and is committed to providing a healthy, respectful, and safe working environment, considering employees as its greatest asset[81] Shareholder Communication and Governance - The company's shareholder communication policy ensures that shareholders and the investment community receive complete, fair, and timely information about the company[105] - The company's shareholders can request a meeting if they hold at least 5% of the issued and outstanding common shares[162] Mining Operations and Assets - The company fully owns the Ovoot Tolgoi open-pit coal mine and the Soumber and Zag Suuj deposit development projects, located 150 kilometers apart in Mongolia[34] - The company focuses on the exploration, development, and production of coal deposits in the South Gobi region of Mongolia, with its flagship Ovoot Tolgoi mine supplying coal to Chinese customers[83] - The company's Oyu Tolgoi deposit has over 90 million tons of mineral reserves, with growth potential in nearby deposits[170] Legal and Financial Obligations - The company agreed to pay JDZF a deferral fee at an annual interest rate of 6.4% for the deferred interest payment due in November 2022[91] - The company's operating capital deficit as of December 31, 2022, included significant liabilities, including $59.7 million in trade and other payables, with $22.5 million in unpaid taxes owed to the Mongolian Tax Authority[124] - The company has deferred payments totaling approximately $133.5 million to JDZF, including $7.9 million in semi-annual cash interest payments, $8.7 million in cash interest, management fees, and related deferral fees, $13.5 million in cash and in-kind interest and related deferral fees, and $110.4 million in cash and in-kind interest, management fees, and related deferral fees, all due by August 31, 2024[125] - The company may face delays in repaying trade payables and other liabilities, potentially impacting its ability to resume mining activities and leading to legal actions or bankruptcy proceedings[180] Business Conduct and Ethics - The company has adopted a business conduct and ethics policy, "The Way We Work," applicable to all employees, consultants, senior management, and directors at all times[135] Going Concern and Financial Uncertainty - The company's ability to continue as a going concern is in significant doubt due to adverse conditions and uncertainties, potentially requiring adjustments to asset values and liabilities[157] - The company continues to operate on a going concern basis, with the ability to realize assets and repay debts in the normal course of business[199] Factors Affecting Liquidity - Factors affecting the company's liquidity include the impact of COVID-19, restrictions on coal product sales in China, economic growth, coal market prices, production levels, operational cash costs, capital costs, currency exchange rates, and exploration expenses[181] Director Education and Compensation - The company provides Canadian Directors Association membership to all directors to facilitate ongoing education, covering topics such as corporate governance and mining industry updates[78] - The company's independent non-executive directors received approved annual retainers for the fiscal year 2022, with no stock options granted during the year[116] Property, Plant, and Equipment - The company’s property, plant, and equipment changes for the fiscal year are detailed in Note 16 of the financial statements[87] Strategic Planning and Investments - The Board of Directors is responsible for approving annual and quarterly budgets, strategic plans, and significant acquisitions or investments outside the approved budget[86] Listing and Exchange Transitions - The company's revised articles of association will take effect after its delisting from the Toronto Stock Exchange and relisting on the TSX Venture Exchange[168]

Financial Agreements and Restructuring - The company has entered into an unsecured revolving credit facility with its largest shareholder JDZF, providing a maximum principal amount of RMB 90 million, maturing three months from the agreement date[1]. - The credit facility allows the borrower to request advances, with the total outstanding amount not exceeding the maximum loan amount, and repayments can be made without penalties[3]. - The company has agreed to defer cash interest payments totaling approximately $7.9 million due on May 19, 2023, and other deferred payments totaling approximately $8.7 million and $13.5 million due by August 31, 2023[13]. - The total deferred payments, including those from previous agreements, amount to approximately $110.4 million, with a new payment date set for August 31, 2024[16]. - The company plans to hold a special shareholders' meeting in Q2 2023 to seek approval for the deferred payment agreement from disinterested shareholders[19]. - The company has agreed to defer interest and management fees due in November 2022 until November 19, 2023, reflecting ongoing financial restructuring efforts[33]. - The company has entered into a payment deferral agreement with JDZF, extending payments due until August 31, 2024, for various obligations[93]. - The company anticipates receiving up to $73 million in financial support from affiliates of its major shareholders during the cash flow forecast period[93]. - The company has agreed to pay a deferral fee at an annual interest rate of 6.4% on the postponed cash interest payments starting from November 19, 2022[133]. - The company is subject to shareholder approval for the effectiveness of the March 2023 deferral agreement, which includes significant cash and interest payments due by August 31, 2023[135]. Financial Performance - The company's revenue for the year ended December 31, 2022, was $73,084,000, an increase from $43,398,000 in 2021, representing a growth of 68.5%[32]. - The cost of sales increased to $57,762,000 in 2022 from $31,304,000 in 2021, resulting in a gross profit of $15,322,000 compared to $12,094,000 in the previous year[32]. - The company reported a net loss attributable to equity holders of $30,419,000 in 2022, compared to a loss of $14,373,000 in 2021, reflecting a significant increase in financial costs[32]. - The company reported a net loss of $4.577 million for Q4 2022, an improvement from a net loss of $8.017 million in Q4 2021[66]. - The company reported a financing cost of $42.219 million in 2022, compared to $39.118 million in 2021, indicating an increase in financing expenses[194]. - The company experienced a net loss attributable to equity holders of $30.419 million in 2022, compared to a loss of $14.373 million in 2021[194]. - The total asset deficit rose to $(142,524) in 2022 from $(90,450) in 2021, marking an increase of about 57.5%[199]. Sales and Production - The average selling price of coal increased from $46.0 per ton in 2021 to $65.7 per ton in 2022, driven by improved market conditions in China[41]. - Coal sales volume increased from 0.94 million tons in 2021 to 1.11 million tons in 2022, with a notable increase in processed coal sales[40]. - The company reported a coal sales increase from 900,000 tons in 2021 to 1,100,000 tons in 2022 following the reopening of the Ceke border crossing on May 25, 2022[121]. - The company gradually resumed mining operations starting July 15, 2022, as truck transit and coal export volumes increased[112]. - The company plans to expand mining operations and capacity in 2023 to capitalize on anticipated sales growth[165]. - The reopening of the Tsagaan Khad border in May 2022 significantly improved the company's cash flow situation, with expectations for continued increases in coal export volumes in 2023[168]. Cost Management - The unit sales cost of sold products rose from $33.3 per ton in 2021 to $52.0 per ton in 2022, primarily due to changes in product mix and higher processing costs[31]. - Operating expenses within the sales cost for 2022 were $40.1 million, compared to $18.2 million in 2021, indicating a significant rise in operational costs[46]. - The total sales cost for 2022 was $57.762 million, compared to $31.304 million in 2021, reflecting higher operational activity[56]. - The effective royalty rate for Q4 2022 was 18.9%, down from 49.4% in Q4 2021, indicating improved cost management[52]. - Cash costs for sold products increased significantly, with total cash cost per ton rising from $19.34 in 2021 to $36.14 in 2022, reflecting a 86.8% increase[189]. Market Conditions and Strategy - The company remains cautiously optimistic about the Chinese coal market, anticipating that environmental and safety regulations will limit coal supply and imports, potentially leading to price volatility[170]. - The company aims to optimize its product mix by improving mining operations and considering the resumption of its coal washing plant operations[171]. - The company intends to expand its market reach and customer base by increasing sales networks and enhancing coal logistics capabilities[171]. - The company aims to increase coal production to leverage economies of scale while focusing on cost structure optimization through improved operational efficiency[171]. - The company has identified several growth potentials, including the Suumbeier and Zag Suuj deposits, which are located approximately 20 km and 150 km east of the Aobote Taolege coal mine, respectively[174]. Corporate Governance and Transparency - The company aims to provide monthly updates on its financial status and operations to JDZF, indicating a commitment to transparency and collaboration in managing financial obligations[38]. - The company will provide monthly updates on its financial status and business operations to JDZF until the postponed payments are made[138]. Asset Management - The carrying amount of the cash-generating unit for the Aobote Taole Coal Mine was USD 119.3 million as of December 31, 2022[141]. - The estimated fair value of the cash-generating unit is sensitive to a 1% increase/decrease in the after-tax discount rate, which would decrease/increase the estimated fair value by approximately USD 12.9 million/USD 13.8 million[143]. - No impairment loss or reversal was identified as of December 31, 2022, and no impairment adjustments were necessary[144]. - The company has confirmed that two mining licenses (MV-016869 and MV-020451) no longer overlap with the special demand area, allowing for continued discussions regarding the third license (MV-020436) with Mongolian authorities[155].

Sales Performance - For Q3 2022, SouthGobi Resources reported coal sales increased from 200,000 tons in Q3 2021 to 600,000 tons in Q3 2022 following the reopening of the Ceke border crossing on May 25, 2022[9]. - Coal sales volume for the three months ended September 30, 2022, increased to 0.55 million tons from 0.17 million tons in the same period of 2021, representing a growth of 223.5%[25]. - The company experienced a significant increase in sales volume post the reopening of the Ceke border crossing on May 25, 2022, with sales rising from 0.20 million tons in Q3 2021 to 0.60 million tons in Q3 2022[25]. - The total coal sales volume for the quarter included 0.35 million tons of washed coal, with an average realized price of $64.57 per ton[49]. Revenue and Profitability - The average selling price of coal rose from $53.5 per ton in Q3 2021 to $65.4 per ton in Q3 2022, attributed to improved market conditions in China[9]. - The company's total revenue for the three months ended September 30, 2022, was $36.81 million, compared to $9.30 million in the same period of 2021, marking a significant increase of 296.5%[29]. - Revenue for the quarter ending September 30, 2022, was $36.807 million, a significant increase from $5.790 million in the previous quarter[54]. - The company recorded a net loss attributable to equity holders of $8.02 million for the three months ended September 30, 2022, compared to a loss of $8.73 million in the same period of 2021[29]. Operating Costs and Expenses - The unit sales cost of sold products increased to $58.25 per ton in Q3 2022 from $40.39 per ton in Q3 2021, reflecting a rise of 43.9%[26]. - Sales costs for Q3 2022 amounted to $32.036 million, up from $6.866 million in Q3 2021, primarily due to increased sales[34]. - Operating expenses in Q3 2022 were $23.599 million, compared to $3.251 million in Q3 2021[34]. - The total cash cost of sold products per ton was $42.91 in Q3 2022, compared to $19.12 in Q3 2021, reflecting an increase of 124.3%[29]. Financial Position and Liquidity - The company faces significant uncertainties regarding its ability to continue as a going concern due to insufficient assets and working capital[19]. - Operating cash flow concerns were highlighted, with a working capital deficit of $17.63 million as of September 30, 2022, compared to a deficit of $4.25 million at the end of 2021[61]. - The company has ongoing obligations to repay $25.3 million in unpaid taxes to the Mongolian tax authority[61]. - The company reported a basic and diluted loss per share of $0.03 for the three months ended September 30, 2022, consistent with the loss per share of $0.03 in the same period of 2021[103]. Strategic Initiatives - SouthGobi plans to apply for its common shares to be listed on the TSX-V and aims to transition its listing status on the Hong Kong Stock Exchange from secondary to primary[18]. - The company is exploring sales strategy adjustments to expand sales opportunities amid uncertainties related to coal exports to China[62]. - The company intends to expand its customer base by increasing sales network and logistics capabilities, addressing distribution bottlenecks, and adopting market-driven pricing strategies[98]. - The company is positioned to leverage opportunities arising from the "Belt and Road" initiative between China and Mongolia, seeking strategic support from major shareholders[99]. Operational Developments - The coal mining operations have gradually resumed since July 15, 2022, with expectations for increased coal production, while coal processing remains suspended[9]. - The company anticipates a gradual increase in coal production as mining operations continue to stabilize[9]. - The company has confirmed no provisions are necessary for the class action lawsuit as of September 30, 2022, due to the uncertainty of potential losses[89]. - The company has implemented strategies to explore expanded sales opportunities amid ongoing challenges in the coal export market[70]. Market Conditions and Risks - The company expects its revenue, liquidity, and profitability to continue to be adversely affected until coal exports to China return to normal levels[70]. - The potential negative impact of Chinese authorities' import coal quality standards on the company's operations[115]. - The impact of the COVID-19 pandemic and potential border closures between southern Mongolia and China on the company's business and financial condition, particularly regarding coal production and processing normalization[113]. - The company maintains a cautious optimism regarding the Chinese coal market, anticipating that coal will continue to be a primary energy source in China in the foreseeable future[96].

Operational Challenges and Responses - In 2021, SouthGobi Resources faced significant challenges due to COVID-19, impacting both operational and financial performance, with coal exports to China suspended from November 2021 to May 2022[14]. - The company temporarily halted mining operations in November 2021 to control inventory levels and preserve operational funds, with no significant changes in resources and reserves by the end of the fiscal year[14]. - SouthGobi Resources will continue to implement strict COVID-19 safety measures to maintain efficient operations while adhering to local public health guidelines[15]. - Safety remains a top priority, with the company reporting zero lost time injuries for the year based on a 12-month average of 200,000 work hours[15]. Strategic Initiatives and Market Outlook - SouthGobi Resources plans to enhance operational efficiency through a flat management structure, focusing on logistics, production processes, and financial operations[16]. - The company remains cautiously optimistic about the Chinese coal market, anticipating price fluctuations and closely monitoring market dynamics[16]. - SouthGobi aims to increase the washing capacity of its coal washing plants to improve product value and quality, thereby expanding its customer base and sales network[16]. - The company is strategically positioned to capitalize on opportunities arising from the Belt and Road Initiative between China and Mongolia[19]. Financial Performance and Management - The company reported a significant increase in revenue, achieving a total of $X million for the quarter, representing a Y% growth year-over-year[27]. - The company provided guidance for the next quarter, projecting revenue between $A million and $B million, indicating a growth rate of C%[27]. - The company reported a loss attributable to equity holders of $14.4 million for the year ended December 31, 2021, compared to a loss of $20.1 million for the year ended December 31, 2020[199]. - As of December 31, 2021, the company had total asset deficits of $90.5 million, up from $76.2 million as of December 31, 2020[199]. Governance and Corporate Structure - The company has established a strong governance structure with board members possessing extensive experience in finance and investment[22]. - The board of directors has adopted a dividend policy that considers various factors, including financial performance and future cash requirements, but no specific dividend payments are guaranteed[38]. - The company has implemented a whistleblower program to allow employees to report concerns or suspected misconduct confidentially[103]. - The board consists of 8 current directors, with 3 (37.5%) identified as independent directors[105]. Risk Management and Internal Controls - The company engaged an independent consultant, Ernst & Young (China) Consulting Co., Ltd., to assess its risk management and internal control systems, with reports presented to the audit committee and board at least annually[190]. - The company’s internal controls are designed to provide reasonable assurance regarding the reliability of financial reporting and compliance with applicable laws and regulations[192]. - The audit committee is tasked with ensuring the integrity of financial reporting and internal controls, including the effectiveness of key business processes[128]. - The company’s financial reporting internal controls were assessed as effective as of December 31, 2021, with no significant changes impacting the internal control system[194]. Shareholder Engagement and Communication - The company has established a shareholder communication policy to ensure timely and accurate information dissemination[166]. - Major shareholders include Land Breeze II S.à-r.l. and its affiliates, holding 23.63% of the issued shares, and Novel Sunrise Investments Limited and its affiliates, holding 16.91%[64]. - The company has not declared any dividends since its inception and does not anticipate declaring dividends in the near future[39]. - The company has established appropriate insurance coverage for directors and senior management against liabilities arising from legal actions related to company activities[85]. Future Growth and Innovation - Future growth strategies include expanding into new markets and enhancing product offerings through innovative technologies[21]. - The company is investing in R&D for new technologies, allocating $F million towards innovation initiatives[27]. - Market expansion efforts include potential acquisitions, with a focus on companies that can enhance the company's product offerings and market reach[27]. - A new partnership has been established with a leading tech firm, expected to drive synergies and increase market competitiveness[27].

Financial Performance - For Q1 2022, SouthGobi Resources Ltd. reported an operating loss of $200,000, compared to a profit of $7.5 million in Q1 2021, primarily due to a decrease in sales caused by the temporary closure of the Ceke border crossing[10]. - The company reported zero coal sales for Q1 2022, a significant drop from 600,000 tons in Q1 2021, due to the closure of the border and suspension of coal exports to China[31]. - Revenue for Q1 2022 was $0, compared to $28.064 million in Q1 2021, reflecting the impact of the pandemic on operations[32]. - The company recorded an operating loss of $177,000 in Q1 2022, a decline from an operating profit of $7.536 million in Q1 2021[35]. - The company reported a net foreign exchange loss of $481,000 in Q1 2022, compared to a loss of $18,000 in Q1 2021[41]. - The company reported a revenue of $848 million for the quarter ending March 31, 2022, compared to $9,295 million for the same quarter in the previous year, reflecting a significant decline[49]. - The net loss attributable to equity holders was $10,772 thousand for the quarter, compared to a net profit of $13,054 thousand in the same quarter of the previous year[49]. - The company experienced a working capital deficit of $44.4 million as of March 31, 2022, compared to a deficit of $42.5 million as of December 31, 2021[57]. - The company has significant uncertainties regarding its ability to continue as a going concern, which may affect asset realizability and debt repayment[60]. - The company anticipates continued adverse effects on revenue, cash flow, and profitability until coal exports to China return to normal levels[65]. Operational Changes - The company suspended coal mining operations starting November 2021 to control inventory levels and preserve working capital, impacting overall production[10]. - The company has temporarily suspended mining operations since early November 2021 to control inventory levels and preserve operational funds due to COVID-19 impacts[87]. - The company is actively adjusting its sales strategy to explore opportunities for expanding sales following the reopening of coal exports at the China-Mongolia border on May 25, 2022[58]. - The reopening of the Ceke border crossing on May 25, 2022, allows for limited coal exports to China, but ongoing uncertainties may affect future export capabilities[65]. - The company is focused on improving operational efficiency and production capacity at its coal washing facilities[115]. Financial Agreements and Liabilities - The company entered into a payment deferral agreement with China Investment Corporation, allowing a deferral of $7.9 million in cash interest payments due on May 19, 2022, until August 31, 2023[14]. - The company has negotiated payment deferrals totaling $75.2 million in cash interest and fees due to 中投公司, with additional payments of $16 million and $4 million in stock interest[61]. - The company has a significant liability of $65.7 million in trade and other payables, which includes $22.5 million in unpaid taxes owed to the Mongolian tax authority[57]. - The company has a $500 million convertible bond agreement with 中投公司, with an interest rate of 8.0%, primarily for funding operations and debt repayment[66]. - The company has incurred financing costs of $10,036 thousand for the quarter, compared to $9,702 thousand in the previous quarter[49]. Cost Management - The sales cost for Q1 2022 was $1.005 million, significantly reduced from $18.347 million in Q1 2021, primarily due to decreased sales volume[36]. - Operating expenses for Q1 2022 were $499,000, a significant decrease from $12,280,000 in Q1 2021, primarily due to reduced sales volume[37]. - Management fees in Q1 2022 were $1,206,000, down from $1,781,000 in Q1 2021, reflecting cost control measures[41]. - Financing costs decreased to $10,000,000 in Q1 2022 from $14,600,000 in Q1 2021, mainly due to a reduction in fair value losses related to convertible bonds[42]. - The cost of sales for Q1 2022 was $1,005,000, down from $18,347,000 in Q1 2021, indicating improved cost management[37]. Market and Sales Strategy - The company aims to optimize its product mix and increase high-quality coal production through improved mining operations and collaboration with nearby washing plants[90]. - The company plans to expand its customer base and sales network while addressing distribution bottlenecks to increase sales volume and prices[90]. - The company holds over 100 million tons of coal reserves at the Aobao Te Taalige mine, positioning it favorably in the market[92]. - The company is committed to maintaining high standards of health, safety, and environmental performance while adhering to COVID-19 prevention measures[90]. Legal and Compliance Issues - The company has been involved in a class action lawsuit since January 2014 regarding restated financial statements, with the Ontario Court allowing the lawsuit to proceed against the company[79]. - The company has paused activities related to the Tsak Logistics Park project, which may lead to legal actions from investment partners[119]. Risks and Uncertainties - The company continues to face risks related to the impact of the COVID-19 pandemic on its operations and financial condition[115]. - Customer credit risk is a significant concern for the company[119]. - There are cash flow and liquidity risks impacting the company's operations[119]. - The company may face challenges in raising additional financing and continuing its operations[119]. - Actual events may differ significantly from current expectations due to assumptions, risks, and uncertainties[119].