南戈壁(01878) - 2025 - 中期业绩

Company Announcement Announcement Summary SouthGobi Resources Ltd. announced its unaudited financial and operating results for the three and six months ended June 30, 2025, with detailed reports available on SEDAR+ and HKEXnews websites - SouthGobi Resources Ltd. announced its unaudited financial and operating results for the three and six months ended June 30, 2025, on August 14, 2025[2] Board of Directors As of the announcement date, the company's board of directors comprises executive, independent non-executive, and non-executive directors, with Yingbin He serving as Lead Director - As of the announcement date, the board members include Mr. Ruibin Xu, Ms. Chonglin Zhu, Mr. Chen Shen (Executive Directors), Mr. Yingbin He, Ms. Jinlan Quan, Mr. Fenqiang Cai (Independent Non-Executive Directors), and Mr. Zhu Gao, Mr. Zaixiang Wen (Non-Executive Directors)[3] Significant Events and Highlights Operating Performance Since 2024, the company has expanded its mining operations, employing various coal processing methods to enhance coal quality and output, facilitating exports to China; however, a downturn in the Chinese coal market led to a decrease in average realized prices and a shift in product mix towards lower-priced coal products - The company expanded its mining operations since 2024, employing various methods such as screening, wet washing, and dry coal processing to improve coal quality and output, facilitating exports to China[6] - Sales volume reached 3.0 million tonnes in Q2 2025, a significant increase from 1.2 million tonnes in Q2 2024[6] | Metric | 2025 Q2 | 2024 Q2 | Change | | :--- | :--- | :--- | :--- | | Sales Volume (million tonnes) | 3.0 | 1.2 | +150% | | Average Realized Price (USD/tonne) | 52.6 | 77.6 | -32.2% | Mongolian Government Strategic Mineral Deposit Designation The Mongolian government designated certain company mineral deposits as strategically important under the State Wealth Fund Law and initiated preliminary discussions with the company's subsidiary SGS to determine Mongolia's ownership or royalty interests in SGS - The Mongolian government designated four mining licenses related to the company's Ovoot Tolgoi and Soumber deposits as strategically important under the State Wealth Fund Law[7][8] - SGS received a letter from the Mongolian government's plenipotentiary representative on April 2, 2025, inviting discussions on the Mongolian government's ownership interest in SGS, with preliminary discussions commencing on April 24, 2025[7][9] Financial Performance In Q2 2025, the company reported an operating loss of $14.3 million, compared to an operating profit of $15.0 million in the prior year, primarily due to lower average realized prices, a shift in product mix towards higher-cost processed coal, and an impairment loss of $12.3 million on coal inventory | Metric | 2025 Q2 | 2024 Q2 | Change | | :--- | :--- | :--- | :--- | | Operating Profit/(Loss) (million USD) | (14.3) | 15.0 | Shift from profit to loss | - The decline in financial performance was primarily due to lower average realized prices, a shift in product mix (selling more higher-cost processed coal), and an impairment loss of $12.3 million on coal inventory[9] Mongolian Tax Authority Additional Taxes and Penalties The Mongolian Tax Authority's initial tax penalty of approximately $75 million against SGS was ultimately reduced to about $26.5 million by the Tax Dispute Resolution Council after multiple appeals and reassessments; an appeal by tax officials to overturn this decision was rejected by the Administrative Court, making the ruling final, and the company has paid $17.3 million, with the remainder expected to be paid from operating cash - The Mongolian Tax Authority initially imposed a tax penalty of approximately $75 million on SGS, which was later increased to approximately $80 million after reassessment[10][11] - Following a TDRC ruling, the tax penalty amount was ultimately reduced to approximately $26.5 million[12] - The Mongolian Tax Authority's appeal to overturn the TDRC ruling was rejected by the first-instance Administrative Court and the Appeals Court, making the decision final; the company has paid $17.3 million and expects to pay the remaining amount from operating cash[14][15] March 2025 Deferral Agreement The company entered into a March 2025 deferral agreement with JD Zhixing Fund L.P. (JDZF) to postpone payments totaling approximately $133.7 million until August 31, 2026, subject to deferral fees; the agreement, approved by shareholders, requires monthly financial updates to JDZF and negotiation of repayment amounts - The company reached an agreement with JDZF to defer approximately $133.7 million in cash and in-kind interest, management fees, and related deferral fees until August 31, 2026[16][17] - The deferred payments are subject to deferral fees at an annual interest rate of 6.4% (related to convertible bonds) and 1.5% (related to cooperation agreements)[17] - The agreement requires the company to provide monthly financial updates to JDZF and negotiate repayment amounts, also stipulating that changes in senior management require JDZF's written consent[19][57] Going Concern Considerations The company faces adverse conditions and significant uncertainties, including asset and working capital deficits, which cast substantial doubt on its ability to continue as a going concern - The company faces adverse conditions and significant uncertainties, including asset and working capital deficits, which cast substantial doubt on its ability to continue as a going concern[19] Operating Data and Financial Performance Review Operating Data Summary In Q2 and H1 2025, the company experienced significant growth in coal sales volume, but average realized prices declined sharply due to a downturn in the Chinese coal market, with the product mix shifting towards lower-priced processed coal, leading to an increase in unit cost of sales in H1 | Metric | 2025 Q2 | 2024 Q2 | YoY Change | 2025 H1 | 2024 H1 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Coal Sales Volume (million tonnes) | | | | | | | | Premium Semi-Soft Coking Coal | 0.17 | 0.29 | -41.4% | 0.21 | 0.65 | -67.7% | | Standard Semi-Soft Coking Coal/Premium Thermal Coal | 1.65 | 0.28 | +489.3% | 2.60 | 0.56 | +364.3% | | Standard Thermal Coal | 0.09 | 0.12 | -25.0% | 0.23 | 0.24 | -4.2% | | Processed Coal | 1.05 | 0.51 | +105.9% | 1.98 | 0.80 | +147.5% | | Total Sales Volume (million tonnes) | 2.96 | 1.20 | +146.7% | 5.02 | 2.25 | +123.1% | | Average Realized Price (USD/tonne) | | | | | | | | Premium Semi-Soft Coking Coal | 59.84 | 102.61 | -41.7% | 65.57 | 107.22 | -38.8% | | Standard Semi-Soft Coking Coal/Premium Thermal Coal | 60.07 | 77.04 | -22.1% | 63.88 | 76.56 | -16.6% | | Standard Thermal Coal | 17.89 | 36.10 | -50.4% | 28.54 | 41.93 | -32.0% | | Processed Coal | 42.46 | 73.04 | -41.9% | 46.28 | 67.09 | -31.0% | | Total Average Realized Price (USD/tonne) | 52.55 | 77.55 | -32.2% | 55.41 | 78.47 | -29.4% | | Cost of Sales of Products Sold (USD/tonne) | 53.87 | 61.32 | -12.1% | 58.39 | 52.94 | +10.3% | For the Three Months Ended June 30, 2025 In Q2 2025, the average realized price was $52.6/tonne, a 32.2% year-over-year decrease, primarily due to the downturn in the Chinese coal market and a shift in product mix towards lower-priced coal products, while the unit cost of sales was $53.9/tonne, a 12.1% year-over-year decrease, mainly due to increased raw coal sales - The average realized price in Q2 2025 was $52.6/tonne, a decrease from $77.6/tonne in Q2 2024, primarily due to the downturn in the Chinese coal market and changes in product mix[22] - The unit cost of sales for products sold in Q2 2025 was $53.9/tonne, a decrease from $61.3/tonne in Q2 2024, mainly due to changes in product mix and increased raw coal sales[22] For the Six Months Ended June 30, 2025 In H1 2025, sales volume reached 5.0 million tonnes, a significant year-over-year increase, but the average realized price was $55.4/tonne, a 29.4% year-over-year decrease, also affected by market downturns and product mix adjustments, while the unit cost of sales was $58.4/tonne, a 10.3% year-over-year increase, primarily due to business expansion into higher-cost processed coal categories - Sales volume in H1 2025 was 5.0 million tonnes, a significant increase from 2.3 million tonnes in H1 2024[24] - The average realized price in H1 2025 was $55.4/tonne, a decrease from $78.5/tonne in H1 2024, primarily due to the downturn in the Chinese coal market and changes in product mix[24] - The unit cost of sales for products sold in H1 2025 was $58.4/tonne, an increase from $52.9/tonne in H1 2024, mainly due to business expansion into higher-cost processed coal categories[24] Quarterly Operating Data Summary The report provides detailed quarterly operating data from 2023 to 2025, including sales volume, average realized price, raw coal production, cost of sales, and strip ratio for various coal types, illustrating trends in sales fluctuations and market-influenced pricing | Metric | 2025 Q2 | 2025 Q1 | 2024 Q4 | 2024 Q3 | 2024 Q2 | 2024 Q1 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Sales Volume (million tonnes) | 2.96 | 2.06 | 2.66 | 2.11 | 1.20 | 1.05 | | Total Average Realized Price (USD/tonne) | 52.55 | 59.51 | 65.72 | 67.77 | 77.55 | 79.52 | | Raw Coal Production (million tonnes) | 3.91 | 3.92 | 4.19 | 2.75 | 2.01 | 1.25 | | Cost of Sales of Products Sold (USD/tonne) | 53.87 | 64.90 | 48.92 | 52.77 | 61.32 | 43.36 | Financial Performance Summary In Q2 and H1 2025, the company's operating performance shifted from profit to loss, primarily due to declining average realized prices, changes in product mix, impairment losses on coal inventory, and a significant increase in cost of sales; while revenue grew, it could not offset rising costs and adverse market factors | Metric (thousand USD) | 2025 Q2 | 2024 Q2 | YoY Change | 2025 H1 | 2024 H1 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 155,289 | 92,821 | +67.3% | 278,156 | 174,990 | +58.9% | | Cost of Sales | (159,452) | (73,582) | +116.7% | (293,141) | (119,115) | +146.1% | | Gross Profit/(Loss) | (4,163) | 19,239 | Shift from profit to loss | (14,985) | 55,875 | Shift from profit to loss | | Operating Profit/(Loss) | (14,326) | 15,045 | Shift from profit to loss | (30,000) | 47,193 | Shift from profit to loss | | Net Profit/(Loss) Attributable to Owners of the Company | (22,806) | (2,085) | Loss widened | (49,011) | 10,167 | Shift from profit to loss | | Basic and Diluted Earnings/(Loss) Per Share (USD) | (0.077) | (0.007) | Loss widened | (0.165) | 0.034 | Shift from profit to loss | For the Three Months Ended June 30, 2025 In Q2 2025, the company reported an operating loss of $14.3 million, with revenue increasing to $155.3 million, but cost of sales significantly rising to $159.5 million due to higher sales volume, sales of high-cost processed coal, and increased transportation costs; other operating expenses also increased significantly due to a $12.3 million impairment loss on coal inventory - In Q2 2025, operating activities resulted in a $14.3 million loss, compared to a $15.0 million profit in Q2 2024, primarily due to lower average realized prices, changes in product mix, and a $12.3 million impairment loss on coal inventory[28] - Revenue increased to $155.3 million (Q2 2024: $92.8 million), while cost of sales increased to $159.5 million (Q2 2024: $73.6 million), mainly due to higher sales volume, sales of high-cost processed coal, and increased transportation costs[28] - Other operating expenses increased to $7.0 million (Q2 2024: $1.2 million), primarily due to higher administrative fees and a $12.3 million impairment loss on coal inventory[30] For the Six Months Ended June 30, 2025 In H1 2025, the company incurred an operating loss of $30.0 million, with revenue increasing to $278.2 million, and cost of sales rising to $293.1 million, mainly due to increased sales volume and expansion into higher-cost processed coal categories; other operating expenses also increased due to the impairment loss on coal inventory - In H1 2025, operating activities resulted in a $30.0 million loss, compared to a $47.2 million profit in H1 2024, primarily due to lower average realized prices, changes in product mix, and a $12.3 million impairment loss on coal inventory[33] - Revenue increased to $278.2 million (H1 2024: $175.0 million), while cost of sales increased to $293.1 million (H1 2024: $119.1 million), mainly due to higher sales volume and business expansion into higher-cost processed coal categories[33] - Other operating expenses increased to $8.6 million (H1 2024: $2.2 million), primarily due to higher administrative fees and a $12.3 million impairment loss on coal inventory[35] Quarterly Financial Performance Summary The report provides detailed quarterly financial performance from 2023 to 2025, including revenue, cost of sales, gross profit, operating profit/loss, and net profit/loss, reflecting quarterly fluctuations in performance and the impact of market environment changes | Metric (thousand USD) | 2025 Q2 | 2025 Q1 | 2024 Q4 | 2024 Q3 | 2024 Q2 | 2024 Q1 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 155,289 | 122,867 | 174,640 | 143,748 | 92,821 | 82,169 | | Cost of Sales | (159,452) | (133,689) | (130,119) | (111,354) | (73,582) | (45,533) | | Gross Profit/(Loss) | (4,163) | (10,822) | 44,521 | 32,394 | 19,239 | 36,636 | | Operating Profit/(Loss) | (14,326) | (15,674) | 79,052 | 27,697 | 15,045 | 32,148 | | Net Profit/(Loss) | (22,806) | (26,205) | 72,291 | 10,039 | (2,085) | 12,252 | | Basic Earnings/(Loss) Per Share (USD) | (0.077) | (0.088) | 0.244 | 0.034 | (0.007) | 0.041 | Liquidity and Capital Resources Liquidity and Capital Management The company has established planning, budgeting, and forecasting procedures to determine the funding required for ongoing operations and expansion plans, while closely monitoring factors affecting liquidity - The company has established planning, budgeting, and forecasting procedures to determine the funding required for ongoing operations and expansion plans[42] Mongolian Tax Authority Additional Taxes and Penalties_Liquidity The Mongolian Tax Authority's tax penalty against SGS was ultimately determined to be $26.5 million after multiple appeals and court rulings; the company has paid $17.3 million, with the remaining amount expected to be paid through operating cash flow, and management will continue to assess the impact of subsequent events on the tax amount - The Mongolian Tax Authority's tax penalty against SGS was finally determined to be $26.5 million, of which the company has paid $17.3 million[45][47] - The Mongolian Tax Authority's appeal to overturn the TDRC ruling was rejected by the first-instance Administrative Court and the Appeals Court, making the decision final[46] - The company expects to pay the outstanding taxes and tax penalties from cash generated by operating activities, and management will continue to assess the impact of any subsequent events on the tax amount[47] Going Concern Considerations The company faces an asset deficit of $108.4 million and a working capital deficit of $148.0 million, raising significant doubt about its ability to continue as a going concern; to address liquidity issues, the company has implemented measures including deferral agreements, repayment negotiations with suppliers, and access to up to $127 million in financial support from a major shareholder's affiliate, with the Board believing sufficient financial resources exist for continued operations | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Asset Deficit | (108,406) | (49,843) | | Working Capital Deficit | (147,962) | (228,134) | - Significant uncertainty exists regarding the company's ability to continue as a going concern, but management has developed cash flow forecasts and implemented measures including deferral agreements, repayment negotiations with suppliers, and access to up to $127 million in financial support from a major shareholder's affiliate[48][50] - The Board believes the company has sufficient financial resources to continue operations, but its going concern status depends on the timely utilization of financial support from the major shareholder's affiliate[50] Convertible Bonds In November 2009, the company entered into a financing agreement with CIC, issuing $500 million in secured convertible bonds with an 8.0% interest rate and a 30-year term; in March 2010, the company exercised its conversion right, converting $250 million of bonds into approximately 21.5 million shares - In November 2009, the company issued $500 million in secured convertible bonds to CIC, with an 8.0% interest rate and a 30-year term[53] - In March 2010, the company converted $250 million of convertible bonds into approximately 21.5 million shares[53] Deferral Agreement The company signed a March 2025 deferral agreement with JDZF, postponing approximately $133.7 million in payments until August 31, 2026, subject to deferral fees; the agreement, approved by shareholders, requires monthly financial updates to JDZF, negotiation of repayment amounts, and JDZF's written consent for senior management changes - The company signed a March 2025 deferral agreement with JDZF, deferring approximately $133.7 million in payments until August 31, 2026[54][55] - The deferred payments are subject to deferral fees at an annual interest rate of 6.4% (related to convertible bonds) and 1.5% (related to cooperation agreements)[55][57] - The agreement requires the company to provide monthly financial updates to JDZF and negotiate repayment amounts, and changes in senior management require JDZF's written consent[57] Ovoot Tolgoi Coal Mine Impairment Analysis As of June 30, 2025, the Ovoot Tolgoi coal mine showed impairment indicators, primarily due to uncertainties in future Chinese coal prices; however, no impairment of non-financial assets was recognized for the period as the recoverable amount exceeded the carrying value - The Ovoot Tolgoi coal mine showed impairment indicators, primarily due to uncertainties in future Chinese coal prices[56] - No impairment of non-financial assets was recognized for the six months ended June 30, 2025, as the recoverable amount exceeded the carrying value[56] Regulatory Matters and Contingencies Litigation The company faces a class action lawsuit stemming from restated financial statements and has reached a conditional settlement of CAD 6.8 million with the plaintiffs, with costs covered by the company's insurer, pending approval by the Ontario Superior Court - The company faces a class action lawsuit due to restated financial statements and has reached a conditional settlement of CAD 6.8 million with the plaintiffs[59] - The settlement costs are covered by the company's insurer and are pending approval by the Ontario Superior Court[59][60] Special Needs Areas in South Gobi Province The company's Soumber mining licenses were previously included in a special needs area prohibiting mining; following negotiations and court rulings, two license areas no longer overlap with special needs areas, and the local government's appeal to re-designate the license areas as protected zones was rejected, making the ruling final - Mining licenses for the Soumber deposit were previously included in a special needs area, prohibiting mining[62] - Following negotiations and court rulings, two mining license areas no longer overlap with special needs areas[63] - The local government's appeal to re-designate the license areas as protected zones was rejected, making the ruling final[64] Tax Law Mongolian tax laws are subject to frequent interpretation and changes, potentially exposing the company to additional taxes, penalties, and interest risks; despite management's belief in its appropriate interpretations, tax authorities may still raise objections, and the company has paid $17.3 million in tax penalties and continues to assess the impact of subsequent events - Mongolian tax, currency, and customs laws are frequently subject to differing interpretations and changes, potentially leading to significant additional taxes, penalties, and interest being levied against the company[65] - The Mongolian Tax Authority's appeal to overturn the TDRC's reduction of SGS's tax penalty was rejected by the Administrative Court, making the ruling final[67] - The company has paid a total of $17.3 million to the Mongolian Tax Authority for the aforementioned tax penalties, and management will continue to assess the impact of any subsequent events on the tax amount[68] Transportation Infrastructure The company, through its Mongolian subsidiary SGS, holds a 40% indirect equity interest in RDCC LLC, which owns a 30-year patent for the road from the Ovoot Tolgoi coal mine to the Shivee Khuren border crossing; in H1 2025, RDCC LLC recognized $6.5 million in toll revenue, and most of the company's mobile equipment is pledged as collateral for convertible bonds - The company, through SGS, holds a 40% indirect equity interest in RDCC LLC, which owns a 30-year patent for the road from the Ovoot Tolgoi coal mine to the Shivee Khuren border crossing[69] - In H1 2025, RDCC LLC recognized $6.5 million in toll revenue (2024: $6.3 million)[70] - As of June 30, 2025, most of the company's mobile equipment and other operating equipment with a carrying value of $12.6 million is pledged as collateral for convertible bonds[71] Corporate Governance and Other Disclosures Purchase, Sale or Redemption of Listed Securities For the six months ended June 30, 2025, neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities, and the company held no treasury shares - For the six months ended June 30, 2025, neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities[72] - As of June 30, 2025, the company held no treasury shares[72] Compliance with Corporate Governance Requirements For the six months ended June 30, 2025, the company generally complied with the Corporate Governance Code, with three exceptions: the Board having no chairman (duties performed by the independent Lead Director), insufficient frequency of meetings between the chairman and non-executive directors, and the independent Lead Director chairing the annual general meeting - The company generally complied with the Corporate Governance Code, with three exceptions, including the Board having no chairman (duties performed by the independent Lead Director), insufficient frequency of meetings between the chairman and non-executive directors, and the independent Lead Director chairing the annual general meeting[73] Directors' Securities Transactions The company has adopted a directors' securities dealing policy with terms no less exacting than the Model Code, and all directors confirmed compliance; directors engaging in transactions involving company securities or related financial instruments must submit insider reports and disclose to the HKEX - The company has adopted a directors' securities dealing policy, and all directors confirmed compliance with the policy and the Model Code[74] - Directors engaging in transactions involving company securities or related financial instruments must submit insider reports and disclose to the HKEX[74] Material Investments As of June 30, 2025, the company had no material investments other than investments in joint ventures and associates - As of June 30, 2025, the company had no material investments other than investments in joint ventures and associates[76] Material Acquisitions and Disposals of Subsidiaries, Joint Ventures and Associates For the six months ended June 30, 2025, the company had no material acquisitions or disposals of subsidiaries, joint ventures, or associates - For the six months ended June 30, 2025, the company had no material acquisitions or disposals of subsidiaries, joint ventures, or associates[77] Future Plans for Material Investments or Capital Assets As of June 30, 2025, the company had no specific plans for material investments or capital assets - As of June 30, 2025, the company had no specific plans for material investments or capital assets[78] Outlook Market Outlook Despite global geopolitical challenges and a downturn in the Chinese real estate market impacting coking coal demand, the company remains cautiously optimistic about the Chinese coal market, anticipating continued reliance on coal and supply constraints from environmental and safety regulations, which may lead to price volatility; the company will focus on expanding market reach and customer base to improve profit margins - Global geopolitical dynamics and US-China trade tensions may lead to a shift in China's coal import sources, potentially benefiting Mongolia through strengthened Sino-Mongolian government cooperation and improved infrastructure[79][80] - Challenges in China's real estate market and infrastructure investment are leading to a decline in steel demand and coking coal demand[80] - The company remains cautiously optimistic about the Chinese coal market, expecting coal to remain China's primary energy source, with environmental and safety production requirements limiting supply, potentially leading to price volatility[80] Medium-Term Objectives In the medium term, the company will continue to expand mining operations and coal processing capacity, optimize its product portfolio through improved mining, processing plants, and blended coal trading, broaden its market reach and customer base via sales networks, logistics capabilities, and market pricing, and optimize its operating cost structure, all while prioritizing safety and social responsibility - The company will continue to expand mining operations and coal processing capacity to capture market share[81] - Medium-term objectives include optimizing the product portfolio (improving mining, utilizing processing plants, trading blended coal), expanding market reach and customer base (sales network, logistics capabilities, market pricing), and optimizing the operating cost structure, while prioritizing safety and social responsibility[81][82] Long-Term Competitive Advantages The company's long-term competitive advantages include increased production and optimized cost structure, safe and socially responsible operations, a strategic geographical location (Ovoot Tolgoi coal mine near the Chinese market), a substantial reserve base, growth potential (Soumber and Zag Suuj deposits), and its role as a bridge between China and Mongolia - Long-term competitive advantages include increased production and optimized cost structure, safe and socially responsible operations, strategic location (Ovoot Tolgoi coal mine close to the Chinese market), a substantial reserve base (at least 82.3 million tonnes), several growth potentials (Soumber and Zag Suuj deposits), and its position as a bridge between China and Mongolia[84] Non-IFRS Financial Measures Cash Cost The company uses cash cost as a non-IFRS financial measure to reflect cash production and related cash costs incurred to bring inventory to its present location and condition, excluding idle mine asset costs and non-cash expenses, for internal monitoring and providing investors with operating cash cost information - Cash cost is a non-IFRS financial measure used by the company to monitor internal operating cash costs[83] - Cash cost includes all production costs (direct and indirect) but excludes idle mine asset costs and non-cash expenses (such as share-based compensation, coal inventory impairment, depreciation, and depletion)[83] Financial Data Summary Comprehensive Income Data Summary In Q2 and H1 2025, the company reported net losses and comprehensive losses, primarily due to a significant increase in cost of sales, a shift from operating profit to loss, and negative impacts from exchange differences | Metric (thousand USD) | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 155,289 | 92,821 | 278,156 | 174,990 | | Cost of Sales | (159,452) | (73,582) | (293,141) | (119,115) | | Gross Profit/(Loss) | (4,163) | 19,239 | (14,985) | 55,875 | | Operating Profit/(Loss) | (14,326) | 15,045 | (30,000) | 47,193 | | Net Profit/(Loss) | (22,806) | (2,085) | (49,011) | 10,167 | | Other Comprehensive Income/(Loss) (Exchange Differences) | (5,324) | (196) | (9,552) | 2,006 | | Net Comprehensive Income/(Loss) | (28,130) | (2,281) | (58,563) | 12,173 | | Basic and Diluted Earnings/(Loss) Per Share (USD) | (0.077) | (0.007) | (0.165) | 0.034 | Financial Position Data Summary As of June 30, 2025, the company's total assets were $410.7 million, and total liabilities were $519.1 million, resulting in an asset deficit of $108.4 million; total current liabilities were $279.9 million, leading to a working capital deficit of $148.0 million, primarily influenced by trade and other payables and additional tax penalties | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total Current Assets | 131,994 | 153,679 | | Total Non-Current Assets | 278,689 | 276,174 | | Total Assets | 410,683 | 429,853 | | Liabilities | | | | Total Current Liabilities | 279,956 | 381,813 | | Total Non-Current Liabilities | 239,133 | 97,883 | | Total Liabilities | 519,089 | 479,696 | | Equity | | | | Total Asset Deficit | (108,406) | (49,843) | | Net Current Liabilities (Working Capital Deficit) | (147,962) | (228,134) | Cash Flow Data Summary In H1 2025, net cash flow from operating activities was $34.57 million, net cash outflow from investing activities was $39.349 million, and net cash outflow from financing activities was $0.374 million, resulting in a decrease in cash and cash equivalents to $2.614 million at period-end | Metric (thousand USD) | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 34,570 | 32,355 | | Net Cash Flow Used in Investing Activities | (39,349) | (64,294) | | Net Cash Flow Used in Financing Activities | (374) | (3,291) | | Net Effect of Exchange Rate Changes | (823) | (105) | | Decrease in Cash and Cash Equivalents | (5,976) | (35,335) | | Cash and Cash Equivalents at End of Period | 2,614 | 12,658 | Selected Information from Notes to Condensed Consolidated Financial Statements Basis of Preparation The condensed consolidated interim financial statements are prepared on a going concern basis, despite the company facing an asset deficit of $108.4 million and a working capital deficit of $148.0 million, which raises significant doubt about its ability to continue as a going concern; management has developed plans, including deferral agreements and financial support from a major shareholder, to ensure liquidity for the next 12 months - The condensed consolidated interim financial statements are prepared on a going concern basis, but the company faces an asset deficit of $108.4 million and a working capital deficit of $148.0 million, raising significant doubt about its ability to continue as a going concern[92] - The company has implemented measures, including deferral agreements, repayment negotiations with suppliers, and access to up to $127 million in financial support from a major shareholder's affiliate, to ensure liquidity for the next 12 months[94] Company Overview and Going Concern The company faces severe asset and working capital deficits, creating significant uncertainty about its ability to continue as a going concern; management has developed cash flow forecasts and implemented various measures, including deferral agreements and financial support from a major shareholder, to address liquidity challenges and considers the going concern assumption appropriate | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Asset Deficit | (108,406) | (49,843) | | Working Capital Deficit | (147,962) | (228,134) | - Significant uncertainty exists regarding the company's ability to continue as a going concern, but management has developed cash flow forecasts and implemented measures, including deferral agreements, repayment negotiations with suppliers, and access to up to $127 million in financial support from a major shareholder's affiliate[94] - The Board believes the company has sufficient financial resources to continue operations, but its going concern status depends on the timely utilization of financial support from the major shareholder's affiliate[94] Compliance Statement The condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard 34, comply with IFRS accounting policies and interpretations, and were approved for issue by the Board of Directors on August 14, 2025 - The condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard 34 and comply with IFRS accounting policies and interpretations[97] - The financial statements were approved and authorized for issue by the Board of Directors on August 14, 2025[97] Basis of Presentation The condensed consolidated interim financial statements adopt accounting policies and measurement methods consistent with the annual consolidated financial statements for the year ended December 31, 2024, and should be read in conjunction with those annual statements - The condensed consolidated interim financial statements adopt accounting policies and measurement methods consistent with the annual consolidated financial statements for the year ended December 31, 2024[98] - The financial statements should be read in conjunction with the company's annual consolidated financial statements for the year ended December 31, 2024[98] Adoption of New and Revised Standards and Interpretations No other new or revised IFRS or interpretations, apart from those already disclosed as not yet effective, are expected to have a significant impact on the company - No other new or revised IFRS or interpretations, apart from those already disclosed as not yet effective, are expected to have a significant impact on the company[99] Segment Information The company has only one reportable operating segment, the coal segment, primarily engaged in coal mining, development, and exploration in Mongolia, and coal logistics and trading in Mongolia and China; revenue is mainly derived from Chinese customers, with two largest customers contributing over 10% of total revenue - The company has only one reportable operating segment, the coal segment, primarily engaged in coal mining, development, and exploration in Mongolia, and coal logistics and trading in Mongolia and China[100] - For the six months ended June 30, 2025 and 2024, two customers each contributed over 10% of total revenue, with the largest customer accounting for 20% (2024: 15%) and the second largest for 12% (2024: 12%)[101] - For the six months ended June 30, 2025, the company's revenue primarily originated from China ($278.2 million), and non-current assets were mainly located in Mongolia ($277.2 million)[103] Information on Major Customers For the six months ended June 30, 2025 and 2024, the company had 70 and 50 active customers, respectively; two customers each contributed over 10% of total revenue, with the largest customer accounting for 20% (2024: 15%) and the second largest for 12% (2024: 12%) - For the six months ended June 30, 2025 and 2024, the company had 70 and 50 active customers, respectively[101] - Two customers each contributed over 10% of total revenue, with the largest customer accounting for 20% (2024: 15%) and the second largest for 12% (2024: 12%)[101] Geographical Information The company's operations are primarily located in Mongolia, Hong Kong, and China; for the six months ended June 30, 2025, the vast majority of revenue ($278.2 million) was generated from China, while non-current assets were mainly concentrated in Mongolia ($277.2 million) - The company's operations are primarily located in Mongolia, Hong Kong, and China[102] | Metric (thousand USD) | Mongolia | Hong Kong | China | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | | Revenue (2025 H1) | 4 | – | 278,152 | 278,156 | | Non-Current Assets (June 30, 2025) | 277,183 | 357 | 1,149 | 278,689 | Revenue Revenue is derived from coal trading and recognized when customers obtain control of the goods and services - Revenue is derived from coal trading and recognized when customers obtain control of the goods and services[104] Expenses by Nature In Q2 and H1 2025, the company's total operating expenses significantly increased, primarily due to higher depreciation, employee benefit expenses, impairment loss on coal inventory, and mine operating costs | Metric (thousand USD) | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Depreciation | 12,254 | 3,555 | 21,378 | 5,944 | | Employee Benefit Expenses | 4,460 | 3,535 | 9,878 | 7,919 | | Impairment Loss on Coal Inventory | 12,348 | – | 12,348 | – | | Mine Operating Costs and Others | 135,301 | 58,649 | 247,573 | 90,795 | | Total Operating Expenses | 169,615 | 77,776 | 308,156 | 127,797 | Cost of Sales In Q2 and H1 2025, cost of sales significantly increased, primarily comprising operating expenses, depreciation and depletion, royalties, and cost of sales of idle mine assets; inventory costs also increased substantially | Metric (thousand USD) | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Operating Expenses | 136,759 | 59,483 | 251,441 | 92,854 | | Depreciation and Depletion | 11,842 | 3,355 | 20,617 | 5,565 | | Royalties | 10,540 | 10,662 | 20,521 | 20,568 | | Cost of Sales of Idle Mine Assets | 311 | 64 | 562 | 110 | | Cost of Sales | 159,452 | 73,582 | 293,141 | 119,115 | - For the three and six months ended June 30, 2025, inventory costs recognized as cost of sales totaled $119,692 and $221,516, respectively, a significant increase from the prior year[107] Net Other Operating Expenses In Q2 and H1 2025, net other operating expenses significantly increased, primarily due to a $12.3 million impairment loss on coal inventory, partially offset by the write-off of other payables | Metric (thousand USD) | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Administrative Expenses | 2,229 | 1,268 | 3,917 | 2,384 | | Net Foreign Exchange Loss/(Gain) | (914) | 382 | (945) | 582 | | Impairment Loss on Coal Inventory | 12,348 | – | 12,348 | – | | Write-off of Other Payables | (6,272) | – | (6,272) | – | | Net Other Operating Expenses | 7,013 | 1,157 | 8,584 | 2,210 | Finance Costs and Income In Q2 and H1 2025, finance costs, primarily consisting of interest expense on convertible bonds, decreased compared to the prior year; finance income mainly arose from fair value gains on embedded derivatives of convertible bonds and interest income | Metric (thousand USD) | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Interest Expense on Convertible Bonds | 8,915 | 9,686 | 17,536 | 18,929 | | Finance Costs | 9,140 | 10,322 | 17,952 | 20,655 | | Fair Value Gain on Embedded Derivatives of Convertible Bonds | 40 | 688 | 55 | – | | Interest Income | 13 | 34 | 19 | 107 | | Finance Income | 53 | 722 | 74 | 107 | Taxation In Q2 and H1 2025, the company's current income tax expense, primarily from jurisdictions outside Canada, significantly decreased compared to the prior year | Metric (thousand USD) | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Current Tax - Other Jurisdictions | 284 | 8,585 | 2,450 | 18,376 | | Total Tax Expense for the Period | 284 | 8,585 | 2,450 | 18,376 | Earnings/(Loss) Per Share In Q2 and H1 2025, the company's basic and diluted loss per share were $0.077 and $0.165, respectively, representing an expanded loss or a shift from profit to loss compared to the prior year | Metric | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Net Profit/(Loss) (thousand USD) | (22,806) | (2,085) | (49,011) | 10,167 | | Weighted Average Number of Shares (thousands) | 296,705 | 295,844 | 296,705 | 295,987 | | Basic and Diluted Earnings/(Loss) Per Share (USD) | (0.077) | (0.007) | (0.165) | 0.034 | - In calculating diluted loss, the related shares embedded in anti-dilutive convertible bonds and share options were not included[111] Cash and Cash Equivalents As of June 30, 2025, the company's cash and cash equivalents were $2.614 million, a significant decrease from $8.59 million as of December 31, 2024; cash is primarily denominated in RMB and Mongolian Tugrik, and exchange rate fluctuations have a sensitive impact on profit/loss before tax | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and Bank Balances | 3,452 | 8,864 | | Less: Restricted Cash | (838) | (274) | | Cash and Cash Equivalents | 2,614 | 8,590 | - Cash is primarily denominated in RMB ($1,826 thousand) and Mongolian Tugrik ($439 thousand)[112] | Exchange Rate Change | June 30, 2025 (thousand USD) | December 31, 2024 (thousand USD) | | :--- | :--- | :--- | | Foreign currency exchange rate increase/+5% | 422 | 273 | | Foreign currency exchange rate decrease/-5% | (422) | (273) | Trade and Other Receivables As of June 30, 2025, total trade and other receivables amounted to $17.233 million, a significant decrease from $31.486 million as of December 31, 2024, with most balances less than one month old; the company provides for expected credit losses based on days past due, with an ending provision of $21.876 million | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade Receivables | 15,710 | 25,418 | | Other Receivables | 1,523 | 6,068 | | Total Trade and Other Receivables | 17,233 | 31,486 | - As of June 30, 2025, the loss allowance for trade and other receivables was $21.876 million[116][117] Trade and Other Payables As of June 30, 2025, total trade and other payables amounted to $212.3 million, an increase from $169.3 million as of December 31, 2024, with $84.41 million of payables outstanding for over six months | Aging | June 30, 2025 (thousand USD) | December 31, 2024 (thousand USD) | | :--- | :--- | :--- | | Less than 1 month | 49,885 | 53,646 | | 1 to 3 months | 52,930 | 50,936 | | 3 to 6 months | 25,064 | 18,205 | | More than 6 months | 84,410 | 46,494 | | Total Trade and Other Payables | 212,289 | 169,281 | Accumulated Losses and Dividends As of June 30, 2025, the company's accumulated losses increased to $1,198.2 million from $1,149.2 million as of December 31, 2024; the company has not paid or declared any dividends since its inception | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accumulated Losses | (1,198,236) | (1,149,222) | - The company has not paid or declared any dividends since its inception[120] Other Information Interim Results Review The company's condensed consolidated interim financial statements for the three and six months ended June 30, 2025, are unaudited but have been reviewed by the company's audit committee and are available on SEDAR+ and the company's website - The company's condensed consolidated interim financial statements for the three and six months ended June 30, 2025, are unaudited but have been reviewed by the company's audit committee[121] About SouthGobi SouthGobi Resources Ltd. is listed on the HKEX and TSX-V, owns and operates the Ovoot Tolgoi coal mine in Mongolia, holds mining licenses for other coking and thermal coal deposits, and primarily sells coal to Chinese customers - SouthGobi Resources Ltd. is listed on the HKEX and TSX-V and owns and operates the Ovoot Tolgoi coal mine in Mongolia[122] - The company holds mining licenses for other coking and thermal coal deposits in Mongolia and primarily sells coal to Chinese customers[122] Contact Information Contact information for investors is provided, including email and office phone, along with details for CEO Mr. Ruibin Xu and the company website - Investors can contact the company via email at info@southgobi.com or by office phone[123][124] - The CEO is Mr. Ruibin Xu, and the company website is www.southgobi.com[124](index=124&type=chunk) Forward-Looking Statements The report contains numerous forward-looking statements regarding the company's going concern ability, future liquidity, discussions with the Mongolian government, operational plans, litigation outcomes, and market outlook; these statements are based on management's current opinions and estimates but are subject to various risks and uncertainties, and actual results may differ materially, with no obligation for the company to update them - The report contains numerous forward-looking statements regarding the company's going concern ability, future liquidity, discussions with the Mongolian government, operational plans, litigation outcomes, and market outlook[125][126] - Forward-looking statements are based on management's current opinions and estimates but are subject to various risks, uncertainties, and other factors, and actual events or results may differ materially from expectations[127] - The company has no obligation to update forward-looking statements, and readers should not place undue reliance on them[128] Disclaimer Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited assume no responsibility for the contents of this announcement and make no representation as to its accuracy or completeness; TSX-V and its Regulation Services Provider also bear no responsibility for the adequacy or accuracy of this announcement - The Stock Exchange of Hong Kong Limited assumes no responsibility for the contents of this announcement and makes no representation as to its accuracy or completeness[1] - TSX-V and its Regulation Services Provider assume no responsibility for the adequacy or accuracy of the contents of this announcement[129]