SouthGobi Resources Limited
TSX : SGQ
PINK SHEETS : SGQRF
SEHK : 1878

SouthGobi Resources Limited

April 30, 2008 08:30 ET

SouthGobi Energy Resources Signs Agreement to Explore and Develop Indonesian Coal Project

High-quality premium thermal and semi-soft coals ideally located for coastal markets in Japan, Korea, India and China

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 30, 2008) - Peter Meredith, Chief Executive Officer of SouthGobi Energy Resources Ltd. (TSX VENTURE:SGQ), announced today that SouthGobi Energy Resources has signed a Joint Venture Agreement (JVA) with Score Resources Ltd. to explore and develop the Mamahak coal project in Indonesia. The JVA allows for SouthGobi to earn into a 56% ownership position by spending US$14.5 million on the development of the project. Provisions are included in the agreement for SouthGobi to increase its ownership position to 100%.

The Mamahak project is ideally located to target the Japanese, Korean, Indian and Chinese coastal markets and compliments SouthGobi's strategic advantage in Mongolia. The company's flagship coal project, Ovoot Tolgoi, located in southern Mongolia has commenced production to supply coal to interior customers in China.

The Mamahak project site is in East Kalimantan, Indonesia (see website for map location), which is the primary coal-producing region in Indonesia. The Joint Venture has obtained the rights for two concessions totalling approximately 12,000 hectares and is applying for two additional nearby concessions totalling approximately 14,000 hectares. The concessions are approximately 30 kilometres from the Mahakam River, which is the primary coal-barging route in the region.

The company has contracted the Jakarta office of Australian based SMG Consultants to assist in the field programs. Preliminary site investigation indicates the potential for continuous coal structures over a large area. Geological mapping delineated encouraging coal outcrops and has identified over thirty coal seams to date. Indicated coal quality which has been taken from outcrops on the concessions is premium thermal, semi-soft and potentially coking coal. The coal found in this formation is generally of a quality rank ranging from sub-bituminous to bituminous with low moisture content and calorific values between 6500 kCal/kg - 8000 kCal/kg.

Two new geological field programs to better define the potential size of the project and the coal quality are now underway. The main field program will consist of a detailed drilling program on the most advanced Mamahak concession to determine down-dip continuity, thickness variations, coal quality and geology. The second field program will concentrate on the other three concessions and will focus on geological mapping and sampling of outcrops.

"Indonesia is Asia's third-largest coal producer and offers tremendous opportunities for greenfields coal exploration and development," said Mr. Meredith. "This project is ideally suited to the expertise and skill set successfully developed by the company through its extensive exploration and rapidly increasing activities in Mongolia."

Coal mining operations in East Kalimantan typically are located near the sea or along major river systems. The Mamahak project is located in close proximity to the Mahakam River which is a main transportation system for barging coal to markets. Coal barges used on the Mahakam River range in size from 6,000-12,000 tonnes. The barges are used to deliver coal to larger vessels unable to load in shallow coastal waters.

Demand for coal from the growing economies of Asia, most notably China, and constraints in supply, has put upward pressure on coal prices. China became a net coal importer for the first time in 2007, prompting many coal consumers to source coal from other coal producing 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.

About Score Resources Ltd.

Score Resources Ltd. is a private investment company focused on energy and resource interests in East Asia and the Middle East. Based on its assessment of market fundamentals Score Resources has in recent years increased its exposure to the coal industry.

Forward-Looking Statements: This document includes forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning the presence of continuous coal structures over a large area, the company's future ability to supply coal markets in Mongolia, China, India and Indonesia, 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 December 31, 2007, and its Annual Information Form dated March 28, 2008 which is available at www.sedar.com.

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
    or
    SouthGobi Energy Resources Ltd. - Media
    Bob Williamson
    (604) 681-6799
    Website: www.southgobi.com