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EFG Continent - Daily Update, Aug 14, 2012.


SouthGobi Resources posts 2Q2012 results (page 2)

Uranium One: 2Q2012 results (page 2)

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SouthGobi Resources posts 2Q2012 results

EVENT: SouthGobi Resources (SGQ) announced its financial and operating results for 2Q2012. SGQ reported that Sales volume and revenue declined to 0.16 million tonnes and USD$8.4 million, respectively, production declined to 0.27 million tonnes of raw coal due to the curtailment of mining operations to varying degrees throughout the quarter. As at June 30, 2012, mining activities had been fully curtailed.

COMMENT: The news is negative for SGQ, as the second-quarter profit slumped more than 99%. Net income was USD$237K in 2Q12 compared with USD$67.3 million a year earlier, while revenue fell 82% to USD$8.4 million due to the curtailment of mining operations. SGQ announced in June it was cutting output at its Mongolian mine as prices and customers cut orders because of economic uncertainty. Aluminum Corporation of China Limited (Chalco), has extended its deadline to make a takeover bid for SouthGobi to September 4, 2012 amid concern that a new Mongolian foreign investment law will block the deal. We note that stocks catalyst for SGQ remains Mongolian government action as to granting a permission to authorize a takeover by Chalco.

Uranium One: 2Q2012 results

EVENT: Uranium One Inc. (UUU) reported revenue of USD$96.8 million for Q2 2012 based on sales of 1.9 million pounds at an average realized sales price of USD$52 per pound. Attributable production for the quarter was 3.0 million pounds (28% up comparing to 2Q11) at an average total cash cost per pound sold of USD$16. South Inkai, Zarechnoye, Kharasan, Willow Creek and Honeymoon achieved record quarterly production during 2Q2012. The Willow Creek Mine was successfully commissioned and reached commercially viable production levels. Earnings from mine operations were USD$40.1 million, a 35% decrease compared to USD$61.7 million in 1Q2011.

COMMENT: Although UUU announced that it second-quarter earnings were down slightly from USD$29.7 million to USD$29.2 million as a result of uranium price decline, adjusted profit, excluding one-time items such as USD$11.2 million currency hedging adjustment and a USD$10.4-million one-time tax, totaled to USD$8.8 million compared to USD$27.5 million a year ago. Hence, we view 1Q12 results as having a moderately negative impact on UUU.


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Publication:Russian Banks and Brokers Reports
Date:Aug 14, 2012
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