Longer term, SouthGobi remains well positioned, with a number of key competitive strengths, including:
-- Strategic location - SouthGobi is the closest major coking coal producer in the world to China. The Ovoot Tolgoi Mine is approximately 40km from China, which is approximately 190km closer than Tavan Tolgoi coal producers in Mongolia and 7,000 to 10,000km closer than Australian and North American coking coal producers. The Company has an infrastructure advantage, being approximately 50km from existing railway infrastructure, which is approximately one tenth the distance to rail of Tavan Tolgoi coal producers in Mongolia.-- Premium quality coals - Most of the Company's coal resources have coking properties, including a mixture of semi-soft coking coals and hard coking coals. SouthGobi is also completing its investment in infrastructure to capture more of the value from the products it sells.-- Favorable cost structure - The long-term cost structure of SouthGobi provides a strong base for sustainable growth when access to end-user markets is obtained even though competition from other Chinese and Mongolian semi-soft coals indicate that capturing margins relative to other international coals is difficult.-- Substantial resource base - The Company's aggregate coal resources (including reserves) include measured and indicated resources of 533 million tonnes and inferred resources of 302 million tonnes.
The Company's objectives for 2013 are as follows:
-- Resume production at the Ovoot Tolgoi Mine - The Company has reviewed the overall structure of its workforce and market conditions and has recommenced mining activities at the Ovoot Tolgoi Mine in March 2013 with plans to produce 3.2 million tonnes in 2013. The focus is to do this in a safe manner that provides a sustainable long-term operating base.-- Continue to develop regional infrastructure - The Company's priority is to complete the construction of the paved highway from the Ovoot Tolgoi Mine to the Shivee Khuren Border Crossing as part of the existing consortium that was awarded the tender by the end of 2013.-- Advance the Soumber Deposit - The Company intends to substantially advance the feasibility, planning and physical preparation for a mine at Soumber by 2014.-- Value-adding/upgrading coal - Implement an effective and profitable utilization of the wet washing facility contracted with Ejin Jinda to toll-wash coal from the Ovoot Tolgoi Mine and further develop the Company's marketing plans on product mix and seek to expand the Company's customer base.-- Re-establish the Company's reputation - The Company's vision is to be a respected and profitable Mongolian coal company. This will require re- establishing good working relationships with all our external stakeholders.-- Operations - Continuing to focus on production safety, environmental protection, operational excellence and community relations.
NON-IFRS FINANCIAL MEASURES
The Company uses cash costs to describe its cash production costs. Cash costs incorporate all production costs, which include direct and indirect costs of production, with the exception of idled mine costs which are excluded. Non-cash adjustments include share-based compensation expense, inventory impairments, depreciation and depletion of mineral properties.
The Company uses this performance measure to monitor its operating cash costs internally and believes this measure provides investors and analysts with useful information about the Company's underlying cash costs of operations. The Company believes that conventional measures of performance prepared in accordance with IFRS do not fully illustrate the ability of its mining operations to generate cash flows. The Company reports cash costs on a sales basis. This performance measure is commonly utilized in the mining industry.