Southgobi Announces First Quarter 2026 Financial and Operating Results
R E S O U R C E S
May 14, 2026
SOUTHGOBI ANNOUNCES FIRST QUARTER 2026 FINANCIAL AND OPERATING RESULTS
HONG KONG – SouthGobi Resources Ltd. (Hong Kong Stock Exchange (“HKEX”): 1878, TSX Venture Exchange (“TSX-V”): SGQ) (the “Company” or “SouthGobi”) today announces its financial and operating results for the three months ended March 31, 2026. All figures are in U.S. dollars (“USD”) unless otherwise stated.
SIGNIFICANT EVENTS AND HIGHLIGHTS
The Company’s significant events and highlights for the three months ended March 31, 2026 and the subsequent period to May 14, 2026 are as follows:
- Operating Results – The Company continues to expand the scale of mining operations in 2026, as well as implementing various coal processing methods, including screening, wet washing and dry coal processing, which have resulted in improved coal quality and enhanced production volume and growth of coal export volume into China. In addition, the Company also continues to expand the categories of coal products in its portfolio, including mixed coal, wet washed coal and dry processed coal, which further increases the Company’s coal export volume.
The Company recorded sales volume of 3.1 million tonnes for the first quarter of 2026 compared to 2.1 million tonnes for the first quarter of 2025, while the Company recorded an average realised selling price of $54.4 per tonne for the first quarter of 2026 compared to $59.5 per tonne for the first quarter of 2025. The decrease in the average realised selling price was primarily attributable to prevailing market uncertainty and cautious buyer sentiment in the Chinese coal market. As a result, the Company adjusted its sales strategy and selling price to maintain its sales volume.
- Financial Results – The Company recorded a $4.6 million profit from operations for the first quarter of 2026 compared to a $15.7 million loss from operations for the first quarter of 2025. The financial results were impacted by the increased sales volume, as well as improved cost control on the coal production process during this period.
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- Notice from Mongolian Government Plenipotentiary and designation of Company’s mining deposits as mineral deposits of strategic importance – On April 2, 2025, Southgobi Sands LLC (“SGS”) received a letter from a plenipotentiary representative of the Mongolian government (the “Letter”) which invited SGS to participate in negotiations in relation to determining the Mongolian state’s ownership interest in SGS, being the legal entity which holds the Company’s coal mining and exploration licenses in Mongolia.
The Letter states that, in furtherance of Mongolia’s National Wealth Fund Law which was passed in April 2024, the Mongolian government resolved on February 5, 2025 to appoint a plenipotentiary representative (the “Plenipotentiary Representative of the Mongolian Government”) to negotiate with legal persons holding a mining license for a deposit designated by the Mongolian government as a strategically important deposit (“Mineral Deposits of Strategic Importance”) in relation to determining the proportionate interest the Mongolian state has in such legal entity or whether to replace the Mongolian state’s interest with a royalty interest.
The Company has been advised by its Mongolian legal counsel that, the Government of Mongolia is empowered to participate on an equity ownership basis with the license holder in the exploitation and/or mining of each Mineral Deposit of Strategic Importance on terms to be negotiated between the Government of Mongolia and such license holder. Based solely on the knowledge of the Company’s Mongolian legal counsel, the Company is aware that various other license holders of Mineral Deposits of Strategic Importance have entered into similar negotiations with the Plenipotentiary Representative of the Mongolian Government. The Company also understands that any legal person holding a special licence for a Mineral Deposit of Strategic Importance shall not, individually or jointly with other entities having a common interest, hold more than 34% of the total issued and outstanding shares of such legal person. However, there is uncertainty as to how these regulations will be interpreted and applied to a publicly-listed company which is the beneficial owner of a Mineral Deposit of Strategic Importance. The Company’s Mongolian legal counsel has advised that, while there is no clarity as to how the aforementioned ownership restriction will be interpreted and applied in practice to a publicly-listed company, they are of the view that the ownership restriction is likely to be determined with reference to the beneficial shareholders of the publicly-listed company. In the event that the aforementioned ownership restriction is not complied with, the Government of Mongolia shall have the right to appoint a Plenipotentiary Representative to take charge of managing such legal person to ensure legal compliance.
On April 24, 2025, SGS initiated preliminary discussions with the Plenipotentiary Representative of the Mongolian Government. The Company anticipates that the discussion between SGS and the Plenipotentiary Representative of the Mongolian Government will continue and both parties will endeavour to engage in good faith for the purpose of arriving at a mutual and constructive understanding and agreement. The Company intends to fully cooperate with the Mongolian government and provide all necessary information to the extent permitted by applicable law.
As at the date of this press release, the deposits covered by four of the Company’s Mongolian mining licenses have been designated as Mineral Deposits of Strategic Importance by Mongolian government authorities. The relevant mining licenses relate to the Company’s Ovoot Tolgoi open pit coal mine (“Ovoot Tolgoi Mine”) and the Soumber Deposit.
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- Additional Tax and Tax Penalty Imposed by the Mongolian Tax Authority (“MTA”) – On July 18, 2023, SGS received an official notice (the “Notice”) issued by the MTA stating that the MTA had completed a periodic tax audit (the “Audit”) on the financial information of SGS for the tax assessment years between 2017 and 2020, including transfer pricing, royalty, airpollution fee and unpaid tax payables. As a result of the Audit, the MTA notified SGS that it was imposing a tax penalty against SGS in the amount of approximately $75.0 million. Subsequently, the Company filed an appeal letter in relation to the Audit with the MTA on August 17, 2023.
On February 8, 2024, SGS received notice from the Tax Dispute Resolution Council (“TDRC”) which stated that, following the TDRC’s review, the TDRC ordered that the audit assessments set forth in the Notice be returned to the MTA for review and re-assessment.
On February 22, 2024, SGS received another notice from the MTA stating that the MTA anticipated commencing the re-assessment process on or about March 7, 2024.
On May 15, 2024, SGS received a notice (the “Revised Notice”) from the MTA regarding the re-assessment result on the Audit (the “Re-assessment Result”), which amounted to a tax penalty of approximately $80.0 million.
On June 12, 2024, following consultation with its independent tax consultant in Mongolia, SGS submitted an appeal letter to the TDRC regarding the Re-assessment Result.
On January 10, 2025, SGS received a resolution dated December 19, 2024 (the “Resolution”) from the TDRC in response to the appeal letter sent by SGS to the TDRC on June 12, 2024. As set forth in the Resolution, the TDRC reduced the re-assessment result from approximately $80.0 million to approximately $26.5 million (the “Revised Re-assessment Result”). The Company decided not to pursue a further appeal of the Revised Re-assessment Result.
On March 19, 2025, SGS received correspondence from the Administrative Court of First Instance requesting supplemental information regarding a court proceeding initiated by certain officers of the MTA (the “MTA Officials”) against the TDRC. SGS obtained a copy of an order dated March 7, 2025 issued by the Administrative Court of First Instance in Ulaanbaatar, Mongolia (the “Administrative Court of First Instance”) regarding commencement of court proceedings brought by the MTA Officials. The MTA Officials petitioned the court to overturn the Revised Re-assessment Result (the “Proposed Case”).
On April 25, 2025, SGS obtained a copy of an order dated April 15, 2025 (the “Latest Court Order”) issued by the Administrative Court of First Instance dismissing the Proposed Case. The Company understood that the MTA Officials subsequently filed an appeal.
On June 9, 2025, SGS obtained a copy of a judgement dated May 27, 2025 (the “Appellate Court Judgement”) issued by the Appellate Court for Administrative in Ulaanbaatar, Mongolia (the “Appellate Court”), pursuant to which the Appellate Court upheld the Latest Court Order. As a result, the Proposed Case was dismissed and rejected. According to applicable Mongolian law, the Appellate Court Judgement is not subject to further appeal.
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In the prior year, the Company recorded an additional tax and tax penalty in the amount of $45.5 million, which consist of a tax penalty payable of $26.5 million and a provision for additional late tax penalty of $19.0 million. As a result of the Revised Re-assessment Result, the Company recorded a reversal of additional tax and tax penalty of $48.5 million in 2024. As of the date hereof, the Company has fully settled the aforementioned tax penalty in February 2026. The provision for additional late tax penalty of $18.5 million refers to potential penalty chargeable by the MTA for future tax audit periods. It is an estimated amount which will be adjusted when the tax audit is finalised.
- 2026 March Deferral Agreement – On March 23, 2026, the Company and JDZF entered into an agreement (the “2026 March Deferral Agreement”) pursuant to which JDZF agreed to grant the Company a deferral of (i) the cash and payment-in-kind interest (“PIK Interest”), management fees, and related deferral fees in the aggregate amount of approximately $140.5 million which will be due and payable to JDZF on or before August 31, 2026 pursuant to the deferral agreement dated March 20, 2025; (ii) semi-annual cash interest payment of approximately $7.9 million payable to JDZF on May 19, 2026 under the Convertible Debenture; (iii) semi-annual cash interest payments of approximately $8.1 million payable to JDZF on November 19, 2026 and the $4.0 million in PIK Interest payable to JDZF on November 19, 2026 under the Convertible Debenture; and (iv) management fees in the aggregate amount of approximately $7.6 million payable to JDZF on May 16, 2026, August 15, 2026, November 15, 2026 and February 15, 2027, respectively, under the Amended and Restated Cooperation Agreement (collectively, the “2026 March Deferred Amounts”).
The effectiveness of the 2026 March Deferral Agreement and the respective covenants, agreements and obligations of each party under the 2026 March Deferral Agreement are subject to the Company obtaining the requisite approval of the 2026 March Deferral Agreement from shareholders in accordance with the requirements of applicable Canadian securities laws and Rule 14.33 and Rule 14A.36 of the rules governing the listing of securities on the Stock Exchange of Hong Kong (the “Listing Rules”). The Company will be seeking approval of the 2026 March Deferral Agreement from disinterested shareholders at the Company’s upcoming special meeting of shareholders, which will be held at a future date to be set by the board of directors of the Company (the “Board”).
The principal terms of the 2026 March Deferral Agreement are as follows:
- Payment of the 2026 March Deferred Amounts will be deferred until August 31, 2027 (the “2026 March Deferral Agreement Deferral Date”).
- As consideration for the deferral of the 2026 March Deferred Amounts which relate to the payment obligations arising from the Convertible Debenture, the Company agreed to pay JDZF a deferral fee equal to 6.4% per annum on the outstanding balance of such 2026 March Deferred Amounts, commencing on the date on which each such 2026 March Deferred Amounts would otherwise have been due and payable under the Convertible Debenture.
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- As consideration for the deferral of the 2026 March Deferred Amounts which relate to payment obligations arising from the Amended and Restated Cooperation Agreement, the Company agreed to pay JDZF a deferral fee equal to 1.5% per annum on the outstanding balance of such 2026 March Deferred Amounts commencing on the date on which each such 2026 March Deferred Amounts would otherwise have been due and payable under the Amended and Restated Cooperation Agreement.
- The 2026 March Deferral Agreement does not contemplate a fixed repayment schedule for the 2026 March Deferred Amounts or related deferral fees. Instead, the 2026 March Deferral Agreement requires the Company to use its best efforts to pay the 2026 March Deferred Amounts and related deferral fees due and payable under the 2026 March Deferral Agreement to JDZF. During the period beginning as of the effective date of the 2026 March Deferral Agreement and ending as of the 2026 March Deferral Agreement Deferral Date, the Company will provide JDZF with monthly updates of its financial status and business operations, and the Company and JDZF will on a monthly basis discuss and assess in good faith the amount (if any) of the 2026 March Deferred Amounts and related deferral fees that the Company may be able to repay to JDZF, having regard to the working capital requirements of the Company’s operations and business at such time and with the view of ensuring that the Company’s operations and business would not be materially prejudiced as a result of any repayment.
- If at any time before the 2026 March Deferred Amounts and related deferral fees are fully repaid, the Company proposes to appoint, replace or terminate one or more of its chief executive officer, its chief financial officer or any other senior executive(s) in charge of its principal business function or its principal subsidiary, the Company will first consult with, and obtain written consent (such consent shall not be unreasonably withheld) from JDZF prior to effecting such appointment, replacement or termination.
- Build-Transfer Agreement – On April 22, 2026, the Company’s wholly-owned Mongolian subsidiary, SGS, entered into a Build-Transfer agreement (the “BT Agreement”) with Tangshan Shenzhou Manufacturing Group Co., Ltd (“Tangshan”), pursuant to which Tangshan will be responsible for the construction of a new dry coal separation system (the “Dry Coal Separation System”) at the Company’s Ovoot Tolgoi Mine in Mongolia, which will be a standalone plant separate from the Company’s existing dry processing plants. Tangshan will also be responsible for the construction of all related facilities for the Dry Coal Separation System. Tangshan shall transfer the ownership and relevant intellectual property rights of the Dry Coal Separation System and the related facilities to SGS upon the satisfaction of the conditions for transfer under the BT Agreement. Under the BT Agreement, SGS has the right to supervise and inspect Tangshan’s construction progress and safety management.
The total consideration payable by the Company over the term of the BT Agreement is approximately $7.8 million. Subject to the terms as set out therein, the BT Agreement is effective from April 22, 2026 until the consideration has been fully paid by SGS, which is expected to take place on or around April 22, 2031.
- Going Concern – Several adverse conditions and material uncertainties relating to the Company cast significant doubt upon the going concern assumption which includes the deficiencies in assets and working capital.
See section “Liquidity and Capital Resources” of this press release for details.
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OVERVIEW OF OPERATIONAL DATA AND FINANCIAL RESULTS
Summary of Operational Data
Three months ended March 31,
2025
Sales Volumes, Prices and Costs
Premium semi-soft coking coal Coal sales (millions of tonnes)
- Run-of-mine 0.26 0.04
- Processed 0.95 0.08
Average realised selling price (per tonne)
- Run-of-mine $ 75.38 $ 90.75 $ 68.11 $
- Processed 87.91
Standard semi-soft coking coal Coal sales (millions of tonnes)
- Run-of-mine 1.06 0.95
- Processed 0.01 0.22
Average realised selling price (per tonne)
- Run-of-mine $ 52.90 $ 70.46
- Processed $ 58.03 $ 78.34
Premium thermal coal Coal sales (millions of tonnes)
0.63
- Processed 0.63
Average realised selling price (per tonne)
- Processed $ 43.14 $ 35.79
Standard thermal coal Coal sales (millions of tonnes)
–
- Run-of-mine 0.12
Average realised selling price (per tonne)
- Run-of-mine $ – $ 37.81
Coal by-products Coal sales (millions of tonnes) 0.20 0.02 $ 5.85 $ Average realised selling price (per tonne) 13.91 Total Coal sales (millions of tonnes) 3.11 2.06 Average realised selling price (per tonne) $ 54.40 $ 59.51
4.98
Run-of-mine production (millions of tonnes) 3.92
| Cost of sales of product sold (per tonne) | $ | 51.48 $ | 64.90 |
| Direct cash costs of product sold (per tonne)(i) | $ | 40.51 $ | 53.97 |
| Mine administration cash costs of product sold (per tonne)(i) | $ | 1.44 $ | 1.70 |
$ 41.95 $ Total cash costs of product sold (per tonne) (i) 55.67
Other Operational Data
Overburden stripped (millions of bank cubic meters) 22.47 19.36 Strip ratio (bank cubic meters of overburden per tonne of coal produced) 4.51 4.93 Lost time injury frequency rate (ii) 0.00 0.00
(i) A Non-International Financial Reporting Standards (“non-IFRS”) financial measure. Refer to “Non-IFRS Financial Measures” section. Cash costs of product sold exclude idled mine asset cash costs.
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Overview of Operational Data
The Company recorded an average realised selling price of $54.4 per tonne for the first quarter of 2026 compared to $59.5 per tonne for the first quarter of 2025. The decrease was primarily attributable to prevailing market uncertainty and cautious buyer sentiment in the Chinese coal market. As a result, the Company adjusted its sales strategy and selling price to maintain its sales volume. The product mix for the first quarter of 2026 consisted of approximately 39% of premium semi-soft coking coal, 35% of standard semi-soft coking coal, 20% of premium thermal coal, and 6% of coal by-products compared to approximately 6% of premium semi-soft coking coal, 56% of standard semi-soft coking coal, 31% of premium thermal coal, 6% of standard thermal coal and 1% of coal by-products for the first quarter of 2025.
The Company’s unit cost of sales of product sold was $51.5 per tonne for the first quarter of 2026 compared to $64.9 per tonne for the first quarter of 2025. The decrease was due to economies of scale and improved cost control on the coal production process during this period.
The Company ended the first quarter of both 2026 and 2025 without any lost time injury.
Summary of Financial Results
Three months ended March 31,
$ in thousands, except per share information 2026 2025
$ 169,365 $ Revenue (i) 122,867
| Cost of sales(i) | (160,109) | (133,689) |
| Gross profit/(loss) excluding idled mine asset costs(ii) | 9,828 | (10,571) |
| Gross profit/(loss) | 9,256 | (10,822) |
| Other operating expenses, net | (1,476) | (1,571) |
(3,171)
Administration expenses (3,249)
| Evaluation and exploration expenses | (21) | (32) |
| Profit/(loss) from operations | 4,588 | (15,674) |
| Finance costs | (10,502) | (8,812) |
Finance income 21
| Share of earning of a joint venture | 1,337 | 613 |
| Share of earnings/(losses) of associates | 8 | (187) |
| Current income tax expenses | (3,489) | (2,166) |
(8,036)
Net loss attributable to equity holders of the Company (26,205) Basic and diluted loss per share $ (0.027) $ (0.088)
(i) Revenue and cost of sales related to the Company’s Ovoot Tolgoi Mine within the 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.
(ii) A non-IFRS financial measure, idled mine asset costs represents the depreciation expense relates to the Company’s idled plant and equipment.
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Overview of Financial Results
The Company recorded a $4.6 million profit from operations for the first quarter of 2026 compared to a $15.7 million loss from operations for the first quarter of 2025. The increase was mainly due to the increased sales volume, as well as improved cost control on coal production process during this period.
Revenue was $169.4 million for the first quarter of 2026 compared to $122.9 million for the first quarter of 2025. The financial results were impacted by increased sales volume year-over-year, as a result of an expansion of the Company’s sales network, diversification of its customer base and expansion of the categories of coal products in its portfolio.
Cost of sales was $160.1 million for the first quarter of 2026 compared to $133.7 million for the first quarter of 2025. The increase in cost of sales was mainly due to increased sales volume year-overyear, the Company expanding into certain categories of processed coal with higher production costs and the increase of sales to further destinations with higher transportation costs.
Cost of sales consists of operating expenses, share-based compensation expense, equipment depreciation, depletion of mineral properties, royalties and idled mine asset costs. Operating expenses in cost of sales reflect the total cash costs of product sold (a Non-IFRS financial measure, refer to “Non-IFRS Financial Measures” section of this press release for further analysis) during this quarter.
Three months ended March 31, 2026
$ in thousands 2025
$ 130,480 $ Operating expenses 114,682
16,165
Depreciation and depletion 8,775
12,892
Royalties 9,981
| Cost of sales from mine operations | $ | 159,537 $ | 133,438 |
| Cost of sales related to idled mine assets | 572 | 251 | |
| Cost of sales | $ | 160,109 $ | 133,689 |
Operating expenses in cost of sales were $130.5 million for the first quarter of 2026 compared to $114.7 million for the first quarter of 2025. The overall increase in operating expenses was due to increased sales volume year-over-year, the Company expanding into certain categories of processed coal with higher production costs and the increase of sales to further destinations with higher transportation costs.
Cost of sales related to idled mine assets for the first quarter of 2026 included $0.6 million related to depreciation expenses for idled equipment (first quarter of 2025: $0.3 million).
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Other operating expenses was $1.5 million for the first quarter of 2026 compared to $1.6 million for the first quarter of 2025.
Three months ended March 31,
$ in thousands 2025
$ 2,430 $ Management fee 1,688
(11)
Reversal of provision for doubtful trade and other receivables (56)
(832)
Foreign exchange gain, net (31) Loss on disposal of items of property, plant and equipment, net –
(112)
Reversal of impairment loss on materials and supplies inventories (30)
Other operating expenses, net $ 1,476 $ 1,571
Administration expenses were both $3.2 million for the first quarter of 2026 and the first quarter of 2025.
Three months ended March 31,
| $ in thousands | 2026 | 2025 | |
| Corporate administration | $ | 1,055 $ | 938 |
| Legal and professional fees | 391 | 539 | |
| Salaries and benefits | 1,510 | 1,567 | |
| Depreciation | 215 | 205 | |
| Administration expenses | $ | 3,171 $ | 3,249 |
The Company continued to minimise evaluation and exploration expenditures in the first quarter of 2026 in order to preserve the Company’s financial resources. Evaluation and exploration activities and expenditures in the first quarter of 2026 were limited to ensuring that the Company met the Mongolian Minerals Law requirements in respect of its mining licenses.
Finance costs were $10.5 million and $8.8 million for the first quarter of 2026 and 2025 respectively, which primarily consisted of interest expense on the $250.0 million Convertible Debenture.
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Summary of Quarterly Operational Data
2026 2025 2024 Quarter Ended 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun
Sales Volumes, Prices and Costs
Premium semi-soft coking coal Coal sales (millions of tonnes)
- Run-of-mine 0.26 0.38 0.30 0.17 0.04 0.16 0.10 0.29
0.95
- Processed 0.97 0.82 0.26 0.08 0.12 0.02 0.05
Average realised selling price (per tonne)
- Run-of-mine $ 75.38 $ 68.76 $ 63.37 $ 59.84 $ 90.75 $ 89.56 $ 116.48 $ 102.61
- Processed $ 68.11 $ 66.22 $ 62.48 $ 59.06 $ 87.91 $ 98.02 $ 90.64 $ 92.85
Standard semi-soft coking coal Coal sales (millions of tonnes)
- Run-of-mine 1.06 1.13 1.25 1.65 0.95 1.31 1.09 0.28
- Processed 0.01 0.01 0.12 0.13 0.22 0.25 0.14 0.07
Average realised selling price (per tonne)
- Run-of-mine $ 52.90 $ 55.58 $ 48.03 $ 60.07 $ 70.46 $ 69.30 $ 72.54 $ 77.04
$ 58.03
- Processed $ 64.54 $ 42.11 $ 56.83 $ 78.34 $ 100.36 $ 93.38 $ 79.42
Premium thermal coal Coal sales (millions of tonnes)
- Processed 0.63 $ 0.37 $ 0.12 $ 0.67 $ 0.63 $ 0.44 $ 0.52 $ 0.38
Average realised selling price (per tonne)
$ 43.14
- Processed $ 39.92 $ 33.44 $ 33.36 $ 35.79 $ 42.54 $ 43.74 $ 49.74
Standard thermal coal Coal sales (millions of tonnes)
- Run-of-mine – 0.10 0.28 0.04 0.12 0.37 0.23 0.11
Average realised selling price (per tonne)
$ –
- Run-of-mine $ 34.15 $ 32.76 $ 32.55 $ 37.81 $ 37.45 $ 38.60 $ 41.76
Coal by-products Coal sales (millions of tonnes) 0.20 0.18 0.15 0.04 0.02 0.01 0.01 0.02 Average realised selling price (per tonne) $ 5.85 $ 2.28 $ 14.94 $ 13.31 $ 13.91 $ 18.43 $ 2.47 $ 2.13 Total
3.11
Coal sales (millions of tonnes) 3.14 3.04 2.96 2.06 2.66 2.11 1.20
| Average realised selling price (per tonne) | $ 54.40 | $ | 54.46 | $ | 48.99 | $ | 52.55 | $ | 59.51 | $ | 65.72 | $ | 67.77 | $ | 77.55 |
| Run-of-mine production (millions of tonnes) | 4.98 | 4.37 | 4.43 | 3.91 | 3.92 | 4.19 | 2.75 | 2.01 | |||||||
| Cost of sales of product sold (per tonne) | $ | 51.60 | $ | 47.22 | $ | 53.87 | $ | 64.90 | $ | 48.92 | $ | 52.77 | $ | 61.32 |
$ 51.48
Direct cash costs of product sold (per tonne) (i) $ 40.51 $ 41.27 $ 39.39 $ 44.92 $ 53.97 $ 37.92 $ 41.74 $ 47.15 Mine administration cash costs of product sold (per tonne) (i) $ 1.44 $ 1.34 $ 0.97 $ 1.28 $ 1.70 $ 1.88 $ 0.94 $ 2.42 Total cash costs of product sold (per tonne) (i) $ 41.95 $ 42.61 $ 40.36 $ 46.20 $ 55.67 $ 39.80 $ 42.68 $ 49.57
Other Operational Data
Overburden stripped (millions of bank cubic meters) 22.47 21.91 19.48 19.86 19.36 17.48 15.04 14.59 Strip ratio (bank cubic meters of overburden per tonne of coal produced) 4.51 5.02 4.39 5.08 4.93 4.17 5.48 7.27 Lost time injury frequency rate (ii) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(i) A non-IFRS financial measure. Refer to section “Non-IFRS Financial Measures”. Cash costs of product sold exclude idled mine asset cash costs.
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Summary of Quarterly Financial Results
The Company’s condensed consolidated interim financial statements are reported under the IFRS Accounting Standards issued by the International Accounting Standards Board (“IASB”) (“IFRS Accounting Standards”). The following table provides highlights, extracted from the Company’s annual and interim consolidated financial statements, of quarterly financial results for the past eight quarters.
2026
$ in thousands, except per share information 2025 2024 Quarter Ended 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun
Financial Results
$ 169,365
Revenue (i) $ 171,861 $ 148,802 $ 155,289 $ 122,867 $ 174,640 $ 143,748 $ 92,821 Cost of sales (i) (160,109) (162,036) (143,542) (159,452) (133,689) (130,119) (111,354) (73,582) Gross profit/(loss) excluding idled mine asset costs (ii) 9,828 10,135 5,627 (3,852) (10,571) 44,757 32,544 19,303 Gross profit/(loss) including idled mine
9,256
asset costs 9,825 5,260 (4,163) (10,822) 44,521 32,394 19,239
| Other operating income/(expenses), net | (1,476) | (2,027) | (699) | 5,335 | (1,571) | (1,194) | (294) | (1,157) |
| Administration expenses | (3,171) | (5,074) | (3,273) | (3,128) | (3,249) | (3,627) | (3,400) | (3,014) |
| Evaluation and exploration expenses | (21) | (49) | (234) | (22) | (32) | (314) | (1,003) | (23) |
| Impairment loss on coal stockpiles | (64,986) | – | (12,348) | – | – | – | – |
–
Impairment loss on items of property,
| plant and equipment | – | (41,960) | – | – | – | – | – | – |
| Reversal of additional tax and tax penalty | – | – | – | – | – | 39,666 | – | – |
| Profit/(loss) from operations | 4,588 | (104,271) | 1,054 | (14,326) | (15,674) | 79,052 | 27,697 | 15,045 |
| Finance costs | (10,502) | (10,471) | (9,422) | (9,140) | (8,812) | (6,893) | (10,679) | (10,322) |
| Finance income | 22 | 19 | 1,908 | 53 | 21 | 3,247 | 733 | 722 |
| Share of earning of a joint venture | 1,337 | 1,258 | 1,100 | 1,011 | 613 | 1,206 | 133 | 1,055 |
| Share of earnings/(losses) of associates | 8 | 606 | 257 | (120) | (187) | 578 | (1) | – |
| Current income tax credit/(expenses) | 147 | (1,940) | (284) | (2,166) | (4,899) | (7,844) | (8,585) |
(3,489)
| Net profit/(loss) | (8,036) | (112,712) | (7,043) | (22,806) | (26,205) | 72,291 | 10,039 | (2,085) |
| Basic earnings/(loss) per share | $ (0.027) | $ (0.380) | $ (0.024) | $ (0.077) | $ (0.088) | $ 0.244 | $ 0.034 | $ (0.007) |
| Diluted earnings/(loss) per share | $ (0.027) | $ (0.380) | $ (0.024) | $ (0.077) | $ (0.088) | $ 0.228 | $ 0.034 | $ (0.007) |
(i) Revenue and cost of sales relate to the Company’s Ovoot Tolgoi Mine within the 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.
(ii) A non-IFRS financial measure, idled mine asset costs represents the depreciation expense relates to the Company’s idled plant and equipment.
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LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Management
The Company has in place a planning, budgeting and forecasting process to help determine the funds required to support the Company’s normal operations on an ongoing basis and the Company’s expansionary plans.
Bank Loan
On October 7, 2025, SGS obtained a bank loan (the “2025 Bank Loan”) in a principal amount of up to RMB235 million (equivalent to approximately $33.1 million) from Khan Bank JSC (the “Bank”) with the key commercial terms as follows:
- Maturity date set at 18 months from drawdown;
- Interest rate of 10% per annum on the outstanding principal and interest is calculated on a 365-day year basis;
- Loan repayments will consist of interest-only payments during the initial 12 months of the term, followed by principal amortisation payments during months 13 to 18 of the term;
- Certain items of property, plant and equipment with a carrying amount of $1.9 million, land-use rights and intangible assets were pledged as security for the 2025 Bank Loan; and
- The Company intends to use the proceeds of the 2025 Bank Loan to support working capital, operating expenses, taxes and the settlement of accounts payable of SGS.
Additional tax and tax penalty imposed by the MTA
On July 18, 2023, SGS received the Notice stating that the MTA had completed the Audit on the financial information of SGS for the tax assessment years between 2017 and 2020, including transfer pricing, royalty, air-pollution fee and unpaid tax payables. As a result of the Audit, the MTA notified SGS that it was imposing a tax penalty against SGS in the amount of approximately $75.0 million. Subsequently, the Company filed an appeal letter in relation to the Audit with the MTA on August 17, 2023.
On February 8, 2024, SGS received notice from the TDRC which stated that, following the TDRC’s review, the TDRC ordered that the audit assessments set forth in the Notice be returned to the MTA for review and re-assessment.
On February 22, 2024, SGS received another notice from the MTA stating that the MTA anticipated commencing the re-assessment process on or about March 7, 2024.
On May 15, 2024, SGS received the Revised Notice from the MTA regarding the Re-assessment Result, which amounted to a tax penalty of approximately $80.0 million.
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