SouthGobi spokesman Steven Feldman:
The Vancouver-based coal miner’s stock sat at $11.93 in early day trades this morning, which is compared with a 52-week high of $20.39 on January 8.
SouthGobi announced a share repurchase program this week in which up to five million, or 2.7%, of its outstanding common shares would be bought back.
Company spokesman Steven Feldman told BIV the buy-back decision went beyond management.
“The board of directors believes the share repurchase program is in the best interest of the company’s shareholders, because they feel the underlying value of the common shares may not be reflected in the price.”
When asked if the repurchase was an attempt to counteract the stock’s precipitous fall, he said the strategy was not based on day-to-day trades.
The company’s flagship Ovoot Tolgoi coalmine is in Mongolia and produced 220,000 tonnes of coal in 2010’s first quarter.
The last time BIV caught up with SouthGobi it had just become the first Canadian mining company to be jointly listed on the Toronto and Hong Kong stock exchanges (see “Coal venture draws $459m equity financing” – issue 1060, February 16-22) and had recently raised nearly $1 billion in financing.
Feldman said the company has maintained its production and development plan for the last several months, yet is realigning its coal pit.
The pit realignment is meant to improve the operation’s efficiency, but has affected production and costs in 2010’s first quarter.
SouthGobi’s stock dropped $0.06 to $11.50 on the day that news broke and within a week closed as low as $9.84.
The company expects the alignment to be finished by the end of 2010’s second quarter.
Feldman said it was the right time to do the realignment because the company no longer faces the funding issues that forced it to mine coal from a less efficient pit position.
“When you’re capital constrained, you don’t have a lot of options in that regard, so since we’ve raised the capital we have that’s not an issue anymore,” he said. “With that being said, you’d go in there and optimize and mine this the most efficient and optimal way you can. So that’s what we’re doing.”
The share repurchase program is scheduled to start June 15 and remain open until June 14, 2011.
All repurchased shares will be cancelled, and SouthGobi said it has not repurchased any of its shares in the last year.