Mongolian Mining Corp. (MOGLF)

[mhsg]

I think the buyers of coking and thermal coal are separate and different. Some will be consistent but they need to market, take credit risks (payment terms) on a new customer base.

Due to the border issues and number of trucks on the road, transport trips increased significantly in time. As a result, MMC used all their capacity. Third party trucking contractors increased levies. So whilst MMC showed a cost of $16.9/t, most of this will have been in house and cost of securing third party trucking contractors likely over $20/t. They also mentioned that total border fees, taxes, loading/unloading cost add $10.

So MMC would rather prioritise trucks for HCC where margins approx $50 (and look like they will increase in H2). If a buyer comes in and offers to buy middling at mine gate, they avoid all the trucking headaches. So $13 is profit. If they sell into China they have say $25 trucking costs, $10 border fees, transportation charges on the PRC side (depending on delivery point), plus VAT. By my calcs thats getting towards a RMB400 all in price i.e. they need to generate more than this to improve on the $13 margin. It could also be at the expense of delivering HCC at $50 margin.

The good news in their announcements is that they have secured additional double trailer trucks and should have 500kt+ per month capacity available - and at costs they control.

2 washing plants can produce around 500kt HCC per month. If they can truck all this, and thermal coal prices rally sharply, then trucking capacity permitting, I am sure they would look to move the middling themselves.