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Mongolian Mining Reports 2012 Loss on Coal Prices; Bonds Tumble

Mongolian Mining Corp., the nation’s biggest coking coal exporter, swung to a full-year loss after prices declined because of slowing demand in China, its main market. Dollar bonds posted a record drop.

The net loss was $2.5 million in the 12 months ended Dec. 31, compared with a profit of $119.1 million a year earlier, the Ulan Bator-based company, known as MMC, said today in a statement. Revenue dropped 13 percent to $474.5 million.

MMC’s dollar bonds due in 2017 fell 2.83 cents on the dollar, the most since the securities were issued in March 2012, to 102.13 cents at 9:18 a.m. New York time, according to data compiled by Bloomberg. Yields rose 81 basis points, or 0.81 percentage point, to 8.24 percent.

MMC’s average selling price for its washed hard coking coal, used by steelmakers, fell 30 percent to $108 a metric ton, even as it sold 17 percent more coal. Seven of China’s top 10 steelmakers, which accounted for more more than half of the nation’s total production, cut output last year, according to research company, citing the China Iron and Steel Association.

“The apparent consumption of coking coal in China has fallen in line with the slower growth of steel production and the de-stocking and reduction of inventory levels by coke and steel producers,” the company said in the statement.

The stock lost 3.4 percent to HK$3.10 in Hong Kong trading, compared with the 0.9 percent drop in the benchmark Hang Seng index. It has slumped 18 percent this year.

Gradual Recovery

MMC, which accounted for about 27 percent of the nation’s coal exports, said inventories in China had returned to normal levels from the fourth quarter of 2012 and that will have a positive effect on coking coal prices.

“We started seeing a gradual recovery in coking coal prices,” Chief Executive Officer Battsengel Gotov told reporters in Hong Kong today. “This trend will continue, subject to government measures, which will be taken by the Chinese government in terms of stimulating the economy.”

The contract selling price for hard coking coal in the first two months this year was $108 per metric ton, Gotov said, compared with $91.4 a ton in the fourth quarter.

The company is in talks with Erdenes Tavan Tolgoi LLC, Mongolia’s biggest state-owned coal company, to lower the cost of using MMC’s paved road for transport, Gotov said.

Charging a toll for use of its road “is not only a kind of profit for us but covering costs, which is associated with all maintenance,” he said.

Erdenes TT, as the state-owned coal company is known, halted deliveries in January to Aluminum Corp. of China Ltd. amid a cash crunch. The coal company wants to increase prices and cut shipments, revising terms of a supply contract signed in July 2011, Erdenes TT’s CEO Yaichil Batsuuri said in a Jan. 14 interview.

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