SouthGobi Resources announces third quarter 2015 financial and operating results
November 12, 2015
SouthGobi Resources announces third quarter 2015 financial and operating results
HONG KONG – SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) (the “Company” or “SouthGobi) today announced its financial and operating results for the three and nine months ended September 30, 2015. All figures are in U.S. Dollars unless otherwise stated.
Significant Events and Highlights
The Company’s significant events and highlights for the three months ended September 30, 2015 and subsequent period to November 12, 2015 are as follows:
- Operating results – The Company continues to operate under difficult market conditions as prices for coal remained weak in the People’s Republic of China (“China”) through the third quarter of 2015. The impact of these conditions on the Company’s operations continues to be exacerbated given the Company’s liquidity constraints. The Company sold 0.49 million tonnes of its coal products during the quarter compared to 0.19 million tonnes in the second quarter of 2015. The production for the third quarter of 2015 was 0.71 million tonnes, allowing the Company to position itself to meet its commitments under existing and expected new coal offtake contracts.
- Tax investigation case in Mongolia – On October 6, 2015, the Company was informed by the banks (where $1.2 million deposits with restricted use were placed (“Restricted Funds”)) that they have received an official request from Court Decision Implementing Agency (“CDIA”) to transfer the Restricted Funds to CDIA according to the court decision. $1.2 million was transferred to CDIA from the frozen bank accounts subsequently in October and November 2015.
- CITIC Merchant and Swiss Life GP private placements – On June 22, 2015, the Company announced it had negotiated private placement agreements with sophisticated investors to provide additional capital resources into the Company. The terms of the subscription agreements for the private placements allowed for the issue of approximately 55 million common Shares of the Company (“Common Shares”).
On July 14, 2015, the Company announced it had obtained all the necessary regulatory approvals for the private placement and subsequently successfully closed the Swiss Life GP Private Placement, raising $2.9 million for the issuance of 5 million Common Shares.
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On July 14, 2015, the Company agreed to an extension of the closing date of the private placement agreement between the Company and CITIC Merchant until July 20, 2015. However, the conditions precedent to the agreement were not fulfilled and CITIC Merchant informed the Company that it would not be subscribing for Common Shares pursuant to the signed private placement agreement.
- Toronto Stock Exchange (“TSX”) remedial delisting review – On October 30, 2015, the Company received confirmation from the Continued Listing Committee of the TSX (the “TSX Committee”) that it will further defer its scheduled meeting to consider whether the Company has met the listing requirements of the TSX until November 23, 2015.
- China Investment Corporation (“CIC”) convertible debenture (“CIC Convertible Debenture”) – On May 20, 2015 under the terms of the CIC Convertible Debenture, CIC confirmed to the Company that subject to certain conditions and limitations, it would grant a deferral of payment of approximately $7.9 million in cash interest due by the Company to CIC on May 19, 2015 (“May 2015 cash interest installment”) until July 22, 2015, subject to a three day cure period which expired on July 27, 2015.
On July 27, 2015, CIC confirmed to the Company that, subject to certain conditions and limitations, it agreed to grant a further deferral of payment of the May 2015 cash interest installment until November 19, 2015 to allow the Company to execute its Proposed Funding Plan (as defined below in the section entitled “Going Concern”). The Company is currently engaged in discussion with CIC with respect to its interest payment obligations.
- Novel Sunrise Investments Limited (“Novel Sunrise”) change in ownership – The Company notes the announcement by Novel Sunrise, the largest shareholder of the Company, on July 20, 2015 which reported that China Cinda (HK) Investments Management Company Limited (“Cinda”), a wholly-owned subsidiary of China Cinda Asset Management Corporation Limited, acquired ownership and control of all of the outstanding voting (ordinary) shares of Novel Sunrise through Hope Rosy Limited, a wholly-owned subsidiary of Cinda.
- Shareholder loan extension – On October 27, 2015, Turquoise Hill Resources Ltd. (“Turquoise Hill”) agreed and signed a Deferral Letter Agreement with the Company, in which Turquoise Hill agreed to a limited and circumscribed deferral of repayment of all remaining amounts and obligations now and hereafter owing under the Turquoise Hill Loan Facility to April 22, 2016 (the “Second Limited Deferral Date”). In the event that Turquoise Hill signs a definitive and binding agreement with a third party for the sales by Turquoise Hill to such party of no less than 49.1 million Common Shares and completes all of the transactions thereunder by no later than November 30, 2015, then Turquoise Hill agrees that the Second Limited Deferral Date shall be deferred for a further six months to October 24, 2016, subject to certain conditions and limitations.
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- Notice of claim – On July 2, 2015, the Company announced it had been served with a notice of claim by former President and Chief Executive Officer Alexander Molyneux. The claim relates to alleged breaches of Mr. Molyneux’s employment agreement by the Company and is seeking damages of $1 million. The Company considers the claim has no merit and will vigorously defend the action.
- Short-term Bridge loan – On October 27, 2015, the Company executed a $10 million bridge loan agreement with an independent Asian based private equity fund. The Company drew down $6.3 million on October 30, 2015 and expects to draw down the remaining $3.7 million by mid November 2015.
- Class Action Lawsuit - On November 5, 2015, the Ontario Superior Court of Justice (the “Court”) rendered its decision on the preliminary motions to seek leave to commence the Ontario class action (the “Action”) under the Securities Act (the “Leave Motion”). The Court dismissed the plaintiff’s Leave Motion as against each of the former senior officers and former and current directors of the Company named in the Action and granted the preliminary Leave Motion against the Company. The Court refused an award of costs for the Leave Motion and the certification of the Action as a class proceeding (“Certification Motion”) to the plaintiff.
- Changes in Management and Directors
Mr. Ted Chan: Mr. Chan was initially appointed as Executive Director of the Company on March 3, 2015. On July 26, 2015, following the appointment of Mr. Yulan Guo as Interim Chief Executive Officer, Mr. Chan ceased to be Executive Director but remained as Non-Executive Director of the Company until August 6, 2015, the date of the Company’s Annual Meeting of Shareholders (the “AGM”), where Mr. Chan did not stand for re-election.
Mr. Yulan Guo: Mr. Guo was initially appointed to the board of directors as Non- Executive Director on May 15, 2015. On July 26, 2015, Mr. Guo was appointed as Interim Chief Executive Officer and Executive Director of the Company and was reelected as a director of the Company at the AGM. On September 1, 2015, Mr. Guo was appointed as Chief Financial Officer and ceased to be Interim Chief Executive Officer.
Mr. Ningqiao Li: Mr. Li was appointed to the board of directors as Non-Executive Director on May 15, 2015 and was re-elected as a director of the Company at the AGM. On September 17, 2015, Mr. Li was appointed as Executive Director and Chairman of the board of directors.
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Mr. Aminbuhe: On August 6, 2015, Mr. Aminbuhe was elected to the board of directors as Non-Executive Director following the conclusion of the AGM. On September 1, 2015, Mr. Aminbuhe was appointed as Executive Director and Chief Executive Officer.
Mr. Zhu Liu and Ms. Jin Lan Quan: On August 6, 2015, Mr. Liu and Ms. Quan were elected to the board of directors as Independent Non-Executive Directors following the conclusion of the AGM.
Mr. Kelly Sanders: On August 6, 2015, Mr. Sanders did not stand for the re-election at the AGM and ceased to be Non-Executive Director.
Mr. Bertrand Troiano: Mr. Troiano stepped down as Chief Financial Officer of the Company following a two-year secondment from Rio Tinto plc (“Rio Tinto”) which ended on July 31, 2015.
Mr. André Deepwell: Mr. Deepwell resigned as Independent Non-Executive Director and Chairman of the Audit Committee on August 31, 2015.
Mr. Mao Sun: Mr. Sun was appointed as Independent Non-Executive Director and Chairman of the Audit Committee on November 5, 2015.
- Going Concern – As at the date hereof, the Company, together with its new strategic partner and significant shareholder, Novel Sunrise, has developed and continues to execute on a funding plan (the “Funding Plan”) in order to pay the interest due under the CIC Convertible Debenture, meet the Company’s obligations as they fall due and achieve its business objectives in 2015 and beyond. However, there is no guarantee that the Company will be able to continue to implement and execute on the Funding Plan or secure other sources of financing. As at November 12, 2015, the Company had cash of $2.0 million.
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OVERVIEW OF OPERATIONAL DATA AND FINANCIAL RESULTS
Summary of Operational Data
Three months ended Nine months ended September 30, September 30, 2015 2015
2014 2014
Sales Volumes, Prices and Costs
Premium semi-soft coking coal Coal sales (millions of tonnes) 0.16 – 0.18 – $ 22.32 $ – $ 22.46 $ Average realized selling price (per tonne) (i) – Standard semi-soft coking coal
0.31 0.48
Coal sales (millions of tonnes) 0.31 0.72 Average realized selling price (per tonne) (i) $ 19.10 $ 17.41 $ 19.17 $ 19.76 Thermal coal
0.02 0.21
Coal sales (millions of tonnes) 0.34 0.95 Average realized selling price (per tonne) (i) $ 10.48 $ 10.66 $ 10.47 $ 10.84 Total
| Coal sales(millions of tonnes) | 0.49 | 0.65 | 0.87 | 1.67 | |
| Average realized selling price(per tonne)(i) | $ | 19.76 $ | 13.87 $ | 17.77 $ | 14.70 |
| Raw coal production(millions of tonnes) | 0.71 | 0.17 | 1.33 | 1.36 | |
| Direct cash costs of product sold(per tonne)(ii) | $ | 17.46 $ | 7.38 $ | 15.22 $ | 8.39 |
Mine administration cash costs of product sold $ 2.81 $ 2.30 $ 3.81 $ (per tonne) (ii) 2.73 Total cash costs of product sold (per tonne) (ii) $ 20.27 $ 9.68 $ 19.03 $ 11.12
Other Operational Data
Production waste material moved (millions of
2.33 5.94
bank cubic meters) 0.20 4.92 Strip ratio (bank cubic meters of waste material
3.25 4.46
per tonne of coal produced) 1.20 3.65 Lost time injury frequency rate (iii) 0.00 0.17 0.00 0.17
(i) Average realized selling price is presented before deduction of royalties and selling fees.
(ii) A non-IFRS financial measure, see “Non-IFRS Financial Measure” section. Cash costs of product sold exclude idled mine asset cash costs.
(iii) Per 200,000 man hours and calculated based on a rolling 12 month average.
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Overview of Operational Data
For the three months ended September 30, 2015
Market conditions and prices for coal remained weak in China through the third quarter of 2015. The Company sold 0.49 million tonnes of its coal products during the quarter. The Company is pacing production with current and expected demand, production was 0.71 million tonnes for the quarter as compared to 0.17 million tonnes for the third quarter of 2014.
The cash cost of product sold per tonne was $20.27 for the third quarter of 2015, which has significantly increased compared to $9.68 per tonne for the third quarter of 2014. The reason for the increase is primarily related to less idled mine costs being allocated during the quarter. (Nil for the third quarter of 2015 as compared to $3.2 million for the third quarter of 2014 in which the Company placed approximately half of its workforces on furlough throughout the third quarter of 2014.)
The Company ended the third quarter of 2015 without a lost time injury. As at September 30, 2015, the Company has a lost time injury frequency rate of nil per 200,000 man hours based on a rolling 12 month average.
For the nine months ended September 30, 2015
During the first nine months of 2015, market conditions and prices for coal remained weak in China.
The production in the first nine months of 2015 was comparable to the first nine months of 2014. The Company paced the production with current demand for its coal product after the curtailment of the Company’s mining operations through to March 30, 2015. During the first quarter of 2015 the Company sold through its existing stockpiles to preserve the Company’s liquidity and therefore mining operations were curtailed. On March 30, 2015, the Company resumed mining operations allowing the Company to position itself to meet its commitments under existing and expected new coal offtake contracts.
Total cash costs of product sold were $19.03 per tonne in the first nine months of 2015 compared to $11.12 per tonne in the first nine months of 2014. The reason for the increase is primarily related to the decrease in sales volumes over which the fixed and variable costs are allocated. At a gross level, the mine administration cash costs of product sold in the first nine months of 2015 was $3.3 million compared to $4.6 million in the first nine months of 2014.
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Summary of Financial Results
Three months ended Nine months ended September 30, September 30, $ in thousands, except per share information 2015 2014 2015 2014
| $ 8,620 $ | 7,611 $ | 13,157 $ | ||
|---|---|---|---|---|
| Cost of sales(ii) | (22,108) | (23,922) | (51,619) | (62,375) |
| Gross loss excluding idled mine asset costs | (2,178) | (20,877) |
Revenue (i),(ii) 19,440
(10,642) (16,889)
| Gross loss including idled mine asset costs | (13,488) (16,311) | (38,462) | (42,935) |
| Other operating income/(expenses) | 621 (2) | (17,858) | (2,851) |
| Administration expenses | (2,530) | (7,020) |
(1,967) (5,355)
| Evaluation and exploration expenses | (40) | (122) | (99) | (401) | |
| Loss from operations | (14,874) | (18,965) | (61,774) | (53,207) | |
| Finance costs | (5,351) | (5,257) | (15,677) | (15,500) | |
| Finance income | 1,984 | 135 | 722 | 1,268 | |
| Share of earnings/(losses) of a joint venture | (32) | (60) |
99 232
| Current income tax expense | (1) | – | (2) | (546) | |
| Net loss | (18,143) | (24,119) | (76,499) | (68,045) | |
| Basic loss per share | $ | (0.07)$ | (0.13)$ | (0.32)$ | (0.36) |
| Diluted loss per share | $ | (0.07)$ | (0.13)$ | (0.32)$ | (0.36) |
(i) Revenue is presented after deduction of royalties and selling fees.
(ii) Revenue and cost of sales relate to the Company’s Ovoot Tolgoi Mine within the Mongolian Coal Division operating segment. Refer to note 3 of the condensed consolidated interim financial statements for further analysis regarding the Company’s reportable operating segments.
Royalty regime in Mongolia
The royalty regime in Mongolia is evolving and has been subject to change since 2012. The Government of Mongolia implemented a trial period from October 1, 2012 to March 31, 2013, during which the royalty imposed on coal sales was determined using the actual contracted sales price per tonne. Subsequently, from April 1, 2013 to March 31, 2014, the royalty on all coal sales exported out of Mongolia was based on a set reference price per tonne published monthly by the Government of Mongolia.
The Government of Mongolia implemented a new royalty regime effective April 1, 2014, referred to as the “flexible tariff” royalty regime. From April 1, 2014, the royalty per tonne for export coal sales has been calculated based on the actual contracted sales price per tonne, whereby the contracted sales price includes the costs of transporting the coal to the Mongolia-China border. If transportation costs are not included in the contracted sales price between a buyer and seller, the following costs are required to be included in the contracted sales price for purposes of calculating the royalty per tonne: transportation costs
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and costs associated with transportation such as customs documentation fees, insurance, loading and unloading costs. In the event the actual contracted sales price calculated as described above differs by more than 10% from the contracted sales price of coal products with the same classification and quality being exported by other legal entities in Mongolia through the same border crossing, the calculated contracted sales price is deemed nonmarket under Mongolian tax law and the royalty per tonne is calculated based on a reference price that will be determined by the Government of Mongolia.
The Company currently sells coal from the Ovoot Tolgoi Mine ex mine gate and the coal is exported through the Shivee Khuren Border Crossing. The Company’s average realized selling price excludes transportation costs.
On July 4, 2014, the Government of Mongolia made further amendments to the royalty regime. From July 4, 2014 onwards, the royalty is initially calculated and paid monthly based on the Government reference price. On a quarterly basis the royalty amount was adjusted to reflect the contracted sales price and additional documentation needs to be submitted to the Mongolian Tax Authority. Once the quarterly statement has been approved by the Mongolian Tax Authority, any adjustments between the monthly payments for the quarter and the quarterly submission were adjusted in the next months’ royalty calculation.
On January 1 2015, this “flexible tariff” royalty regime ended and royalty payments reverted to the previous regime which is based on a set reference price per tonne published monthly by the Government of Mongolia.
On March 16, 2015, the Government of Mongolia issued an amendment resolution to the “flexible tariff” regime changing the coal classification methodology from which to base the royalty calculation. The resolution is effective from May 1, 2015 and the Government of Mongolia has published reference price classifications subdivided into additional classifications since that date. According to the resolution, Company’s coal is mainly divided into 2 classifications depending on coal quality under raw coal type.
The Company and other Mongolian coal producers are actively engaging the Mongolian authorities to seek the continuation of the “flexible tariff” regime. See “Risk Factors – Company’s Projects in Mongolia” in the MD&A issued on March 30, 2015 and available on SEDAR at www.sedar.com.
Overview of Financial Results
For the three months ended September 30, 2015
The Company recorded a $14.9 million loss from operations in the third quarter of 2015 compared to a $19.0 million loss from operations in the third quarter of 2014. The operations for the three months ended September 30, 2015 were impacted by continuing difficult market conditions and weak coal prices in China.
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Revenue was $8.6 million in the third quarter of 2015 compared to $7.6 million in the third quarter of 2014. The Company sold 0.49 million tonnes of coal at an average realized selling price of $19.76 per tonne in the third quarter of 2015 compared to sales of 0.65 million tonnes at an average realized selling price of $13.87 per tonne in the third quarter of 2014. Despite the continued difficult market conditions, there was an increase in the average realized selling price which is attributed to a change in sales mix. The product mix for the third quarter of 2015 consisted of approximately 96% of Premium and Standard semi-soft coking coal and 4% of Thermal coal compared to approximately 48% of Premium and Standard semi-soft coking coal and 52% of Thermal coal in the third quarter of 2014.
The Company’s revenue is presented after deduction of royalties and selling fees. The Company’s effective royalty rate for the third quarter of 2015, based on the Company’s average realized selling price of $19.76 per tonne, was 9.3% or $1.83 per tonne compared to 8.9% or $1.23 per tonne based on the average realized selling price of $13.87 per tonne in the third quarter of 2014.
Cost of sales was $22.1 million in the third quarter of 2015 compared to $23.9 million in the third quarter of 2014. Cost of sales comprises operating expenses, share-based compensation expense, equipment depreciation, depletion of mineral properties, coal stockpile inventory impairments and idled mine asset costs. Operating expenses in cost of sales reflect the total cash costs of product sold (a non-IFRS financial measure, see “Non- IFRS Financial Measure” section for further analysis) during the period.
Three months ended September 30,
| $ in thousands | 2015 | 2014 |
| Operating expenses | $ 9,988 $ | 6,259 |
| Share-based compensation expense | 1 | 90 |
| Depreciation and depletion | 3,273 | 1,742 |
| Impairment of coal stockpile inventories | 6,000 | 1,698 |
| Cost of sales from mine operations | 19,262 | 9,789 |
2,846
Cost of sales related to idled mine assets 14,133
$ 22,108
Cost of sales $ 23,922
Operating expenses in cost of sales were $10.0 million in the third quarter of 2015 compared to $6.3 million in the third quarter of 2014. The overall increase in operating expenses is primarily the result of higher variable costs which are linked to the production level which are up to 0.71 million tonnes in the third quarter of 2015 compared to 0.17 million tonnes in the third quarter of 2014.
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Cost of sales in the third quarter of 2015 and 2014 included coal stockpile impairments of $6.0 million and $1.7 million, respectively, to reduce the carrying value of the Company’s coal stockpiles to their net realizable value. The coal stockpile impairments recorded in both the third quarter of 2015 and 2014 reflected the challenging coal market conditions and primarily related to the Company’s higher-ash products.
Cost of sales related to idled mine asset costs primarily consisted of period costs, which were expensed as incurred and included mainly depreciation expense. Cost of sales related to idled mine assets in the third quarter of 2015 included $2.8 million of depreciation expenses for idled equipment compared to $14.1 million in the third quarter of 2014.
Other operating income was $0.1 million in the third quarter of 2015 compared to nil in the third quarter of 2014 as follows:
Three months ended September 30, 2015
$ in thousands 2014
| Foreign exchange gain | $ | (679) $ | (80) |
| Other | 58 | 82 | |
| Other operating expenses/(income) | $ | (621) $ | 2 |
Administration expenses were $2.0 million in the third quarter of 2015 compared to $2.5 million in the third quarter of 2014 as follows:
Three months ended September 30,
| $ in thousands | 2015 | 2014 |
| Corporate administration | $ 508 $ | 544 |
| Professional fees | 771 | 971 |
| Salaries and benefits | 620 | 627 |
| Share-based compensation expense | 39 | 355 |
Depreciation 33
$ 1,967
Administration expenses $ 2,530
Administration expenses were lower for the third quarter of 2015 compared to the third quarter of 2014 primarily as a result of cost reduction measures.
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Evaluation and exploration expenses were negligible in the third quarter of 2015 compared to $0.1 million in the third quarter of 2014. The Company continued to minimize evaluation and exploration expenditures in the third quarter of 2015 in order to preserve the Company’s financial resources. Evaluation and exploration activities and expenditures in the third quarter of 2015 were limited to ensuring that the Company met the Mongolian Minerals Law requirements in respect of its mining and exploration licenses.
Finance costs were $5.4 million and $5.3 million respectively in the third quarter of 2015 and the third quarter of 2014. Finance costs primarily consisted of interest expense in respect of the $250.0 million CIC Convertible Debenture ($5.2 million for the third quarter of 2015 and $5.1 million for the third quarter of 2014).
Finance income was $2.0 million in the third quarter of 2015 compared to $0.1 million in the third quarter of 2014 which, primarily consists of an unrealized gain in respect of the embedded derivative in the CIC Convertible Debenture.
For the nine months ended September 30, 2015
The Company recorded a $61.8 million loss from operations in the first nine months of 2015 compared to a $53.2 million loss from operations in the first nine months of 2014. The operations for the nine months ended September 30, 2015 were impacted by continuing difficult market conditions and weak coal prices in China. The results for the first nine months of 2015 were primarily impacted as a consequence of the tax investigation case in Mongolia which a provision of $18.0 million was recorded in respect of the tax penalty during the three months ended June 30, 2015.
Revenue was $13.2 million in the first nine months of 2015 compared to $19.4 million in the first nine months of 2014. The Company sold 0.87 million tonnes of coal at an average realized selling price of $17.77 per tonne in the first nine months of 2015 compared to sales of 1.67 million tonnes at an average realized selling price of $14.70 per tonne in the first nine months of 2014. The impact on revenue from the drop in tonnage was partially offset by the improved product mix for the first nine months of 2015 when compared to the first nine months of 2014. The product mix for the first nine months of 2015 consisted of approximately 76% of Premium and Standard semi-soft coking coal and 24% of Thermal coal compared to approximately 43% of Premium and Standard semi-soft coking coal and 57% of Thermal coal in the first nine months of 2014.
The Company’s revenue is presented net of royalties and selling fees. With the changes affecting the royalty regime in Mongolia, the Company’s effective royalty rate for the first nine months of 2015, based on the Company’s average realized selling price of $17.77 per tonne, was 12.5% or $2.22 per tonne compared to 13.5% or $1.99 per tonne based on the average realized selling price of $14.70 per tonne in the first nine months of 2014.
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Cost of sales was $51.6 million in the first nine months of 2015 compared to $62.4 million in the first nine months of 2014. Cost of sales comprises operating expenses, share-based compensation expense, equipment depreciation, depletion of mineral properties, coal stockpile inventory impairments and idled mine asset costs. Operating expenses in cost of sales reflect the total cash costs of product sold (a non-IFRS financial measure, see “Non- IFRS Financial Measure” section for further analysis) during the period.
Nine months ended September 30,
$ in thousands 2015 2014
$ 16,486
Operating expenses $ 18,576
| Share-based compensation expense | 34 | 232 |
| Depreciation and depletion | 4,415 | 6,283 |
| Impairment of coal stockpile inventories | 9,111 | 15,226 |
| Cost of sales from mine operations | 30,046 | 40,317 |
| Cost of sales related to idled mine assets | 21,573 | 22,058 |
| Cost of sales | $ 51,619 $ | 62,375 |
Operating expenses in cost of sales were $16.5 million in the first nine months of 2015 compared to $18.6 million in the first nine months of 2014. The overall decrease in operating expenses is the result of both (i) different production profiles, in the first nine months of 2015 there was a period of curtailment until March 30, 2015 whilst in the first nine months of 2014 production was impacted by a decision by the Company in June 2014 in response to market conditions to reduce production and place approximately half of its workforce on furlough; and (ii) a greater increase in coal stockpiles during the first nine months of 2015 when compared to the first nine months of 2014.
Cost of sales in the first nine months of 2015 and the first nine months of 2014 included coal stockpile impairments of $9.1 million and $15.2 million, respectively, to reduce the carrying value of the Company’s coal stockpiles to their net realizable value. The coal stockpile impairments recorded in both 2015 and 2014 reflect the challenging coal market conditions and primarily related to the Company’s higher-ash products.
Cost of sales related to idled mine asset costs primarily consisted of period costs, which were expensed as incurred and primarily included depreciation expense. Cost of sales related to idled mine assets in the first nine months of 2015 included $18.6 million related to depreciation expenses for idled equipment (2014: $18.7 million).
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