SouthGobi Resources Limited
SEHK : 1878

SouthGobi Resources Limited

June 16, 2008 08:30 ET

SouthGobi Energy Resources Establishes High-Quality, Semi-Soft Coking Coal at its Mamahak Coal Project in Indonesia

- Director of Indonesian Coal Operations Appointed - Major Coal Drilling Program Underway

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 16, 2008) - Peter Meredith, Chief Executive Officer of SouthGobi Energy Resources Ltd. (TSX VENTURE:SGQ), and Gene Wusaty, Chief Operating Officer, Coal Division, announced today that the company has received encouraging geological and analytical results from its 2008 drilling program at the Mamahak Coal Project in East Kalimantan, Indonesia.

SouthGobi Energy has commenced the development of a "green fields" surface coal deposit in four concessions covering 26,065 hectares in East Kalimantan, Indonesia, through its participation in the Mamahak Joint Venture. The company currently owns 56% of the Mamahak Coal Project and has provisions to acquire full ownership of the project.

Mr. Wusaty also announced that Gordon Gormley has been appointed SouthGobi Energy's Director of Indonesian Coal Operations. Mr. Gormley, based in Jakarta, will head up the on-going exploration and development of the Mamahak Project and other Indonesian coal opportunities. Mr. Gormley has more than 30 years of coal related experience in senior production, development and exploration capacities. SouthGobi Energy is establishing an Indonesian subsidiary - PT Multi Mamahak Batubara (MMB) - which, under Mr. Gormley's direction, will be responsible for all coal initiatives in the country.

SouthGobi Energy commenced an integrated exploration and development program at Mamahak in March of this year. The 2008 drilling program has identified direct-shipping, semi-soft coking coal amenable to surface mining. While further drilling is ongoing, work to date just on the 4,996-hectare portion within the MCM concession supports the company's objective of developing an open-pit mining operation. The intent of the drilling program is to determine down-dip continuity, thickness variations, coal quality and structure. The close proximity of the Mahakam River, within 26 kilometres of the MCM concession, and the primary coal-barging route in the region, has established this area as the priority location for initial project development. Future exploration still is required on the remaining three concession areas to fully assess the ultimate potential for the entire project.

Eleven drill core samples from the MCM concession seams have been received and approximately 75 seam samples are pending. The results received to date support the quality data from the initial field outcrop quality results (see SouthGobi's news release of April 30, 2008). This new data supports the plan to market the joint venture's coal as a semi-soft coking coal, which commands a premium market price.

The following table summarizes the quality data gathered from the drill program and the quality data from the outcrop field sampling.

MCM Concession: results from 11 drill-core samples

TM IM Ash VM Fixed Sulphur CM CV
(ARB) (ADB) (ADB) (ADB) Carbon (ADB) (ADB) (DAF) FSI
% % % % (ADB) % % kCal/kg kCal/kg (CSN)
(low) 2.97 1.73 2.1 37.3 47.0 0.66 7188 8204 3.5
(high) 9.70 2.53 12.7 44.10 51.9 2.00 8261 8605 5.0
Average 5.28 2.08 6.70 40.97 50.03 1.08 7683 8445 4.5

Initial Field Outcrop Coal Quality Sample Results

IM Ash VM Fixed Sulphur CV
(ADB) (ADB) (ADB) Carbon (ADB) (ADB) FSI
% % % (ADB) % % kCal/kg (CSN)
No. of
Samples 11 9 11 11 10 11 6
(low) 1.4 1.9 35.9 42.1 0.54 6642 1.5
(high) 4.4 10.0 42.4 54.2 1.32 8098 6.5
Average 2.5 5.4 39.5 45.9 0.88 7414 4.5

TM - Total Moisture; CV - Calorific Value; CSN - Crucible Swelling Index;
IM - Inherent Moisture; VM - Volatile Matter

ADB - Air Dry Basis; DAF - Dry Ash Free; FSI - Free Swelling Index;
ARB - As Received Basis

As previously announced, the company has contracted the Jakarta office of Australia-based SMG Consultants to assist with the field programs. All drill holes are being geophysically logged with detailed intersection data provided to the SMG Consultants' office in Jakarta for the preparation of a geological model to be used for mine planning. SMG Consultants also will review the practicality, design and cost of providing wet season and dry season barge-loading terminals on the Mahakam River and coal-haul roads to these sites.

Project highlights include:

- A site office, accommodation camp and a satellite communication system are being mobilized for the project. An administrative project office has been established at the port village of Melak on the Mahakam River, approximately 90 kilometres from the site. More than 200 workers are at the project site.

- The drilling program on the MCM concession is being supported by five manually transportable drill rigs. Three additional portable drill rigs and a skid-mount, conventional core rig are being added.

- A total of 60 of the planned 112 exploration holes on the MCM concession development area now have been completed in the E1 and E2 resource blocks. Drilling and geophysical logging has identified four to 13 separate seam intersections in which coal thickness is in excess of 0.4 metres. These seams aggregate to between 2.25 metres and 8.33 metres of total mineable coal. Work to date indicates that the coal seams are thickening in the direction of the E3 resource block, where work now is progressing.

- A coal bulk-sampling program is being organized to provide samples for further testing to determine if the coal has potential for yielding a higher quality coking coal product. This testing requires larger volumes of coal than is available from core samples.

- Initial site infrastructure studies have identified an existing 26-kilometre logging road and log- pond barging area on the Mahakam River that, with upgrading, will facilitate coal haulage and barge-loading activities during wet-season periods.

- Required permit applications for mining, coal transportation and a barging facility for the MCM concession have been filed and are in various stages of progress.

The Mamahak Project is ideally located to supply the Japanese, Korean, Indian and Chinese coastal markets and complements SouthGobi's established strategic advantage in Mongolia. The company's flagship coal project, Ovoot Tolgoi, in southern Mongolia, now is in production to supply coal to interior customers in China later this year.

Demand for coal from the growing economies of Asia, most notably China, and constraints in supply, have put upward pressure on coal prices. China became a net coal importer for the first time in 2007, prompting many coal consumers to seek sources of coal in other regions, such as Mongolia and Indonesia, to meet their growing energy needs.

Gene Wusaty, SouthGobi Energy's Chief Operating Officer, a qualified person as defined by National Instrument 43-101, supervised the preparation of the technical information in this release.

About SouthGobi Energy Resources

SouthGobi Energy Resources is focused on exploration and development of its Permian-age metallurgical and thermal coal deposits in Mongolia's South Gobi Region and East Kalimantan, Indonesia. The company intends to supply a wide range of coal products and electricity to markets in Asia. The company is investigating the implementation of clean-coal technologies in the development of coal power-generating capacity to benefit all of its stakeholders.

The company's metals division is focused on the exploration and development of its copper and gold projects in Mongolia and Indonesia.

Forward-Looking Statements: This document includes forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning the ongoing exploration and development of the Mamahak Coal Project in Indonesia, the company's establishment of an Indonesian subsidiary, the company's objective to develop an open-pit mining operation, the company's plan to market the coal as a semi-soft metallurgical coal, the company's future ability to supply coal markets in Asia, and other statements that are not historical facts. When used in this document, the words such as "could", "plan", "estimate", "expect", "intend", "may", "potential", "should", and similar expressions are forward-looking statements. Although SouthGobi Energy Resources believe that the expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are disclosed under the heading "Risk Factors" in SouthGobi Energy's Management's Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2008, and its Annual Information Form dated March 28, 2008 which is available at

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • SouthGobi Energy Resources Ltd. - Investors
    Steven Feldman
    (604) 681-6799
    SouthGobi Energy Resources Ltd. - Media
    Bob Williamson
    (604) 681-6799