TORONTO (miningweekly.com) – Toronto- and Hong Kong-listed SouthGobi Resources has narrowed its net loss for the second quarter, ended June 30, propped up by higher coal sales, which was offset by significantly lower coal prices.

The Hong Kong-based miner reported a net loss of $23.17-million, or $0.12 a share, compared with a loss of $33.14-million in the same quarter a year earlier.

Two Bay Street analysts expected a loss of $0.073 a share on revenue of $17.6-million.

SouthGobi reported revenue of $6.7-million, marginally higher than the $6.13-million reported in the second quarter of last year, despite total coal sales nearly doubling to 630 000 t. This was offset by the average realised coal price falling 52% to $12.52/t in the period, compared with $26.26/t a year earlier.

During the second quarter, the company shipped 910 000 t of coal from its Mongolia-based flagship Ovoot Tolgoi coal mine that sells coal to Chinese customers, but only recognised revenue for 630 000 t, with the remaining 280 000 t expected to meet revenue recognition requirements in the second half of the year.

“The company continues to operate under difficult market conditions. Coal prices in China declined further in the second quarter compared to the first quarter of 2014 in response to excess seaborne and Chinese domestic supply,” SouthGobi said in a statement.

Output in the quarter decreased to 550 000 t of raw coal, compared with 640 000 t of raw coal in the first quarter of this year. This decrease was owing to the company’s decision in June, in response to current market conditions, to reduce its production and place about half of its workforce on furlough. This furlough was expected to remain in place until the end of August, subject to market conditions.

During the quarter, the company obtained a C$10-million revolving credit facility from Turquoise Hill to meet its short-term working capital requirements with a maturity date of August 30. At June 30, the company had drawn down C$3.8-million under this facility.

SouthGobi had also, during the quarter, completed the sale of its Tsagaan Tolgoi mining licence for net proceeds of C$1.3-million.

SouthGobi is 56%-owned by Turquoise Hill Resources, which took management control of the company in September 2012. Diversified miner Rio Tinto has a majority shareholding in Turquoise Hill.

Turquoise Hill last week announced that it had entered into an agreement to sell a 29.95% stake in SouthGobi to Hong Kong-based National United Resources Holdings. National United would buy 56.1-million shares at a price of C$0.455 a share, leaving Turquoise Hill with a 26% interest in SouthGobi after the deal had closed.