SouthGobi Resources Limited
TSX : SGQ
HKSE : 1878

SouthGobi Resources Limited

April 24, 2015 00:28 ET

SouthGobi Resources Announces the Successful Closing of Novel Sunrise Transactions and Issues Select First Quarter 2015 Operating Results

Resumption of Trading

HONG KONG, CHINA--(Marketwired - April 24, 2015) - SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878) (the "Company" or "SouthGobi") today announces the closing of the Novel Sunrise Investments Limited ("Novel Sunrise") private placement and the closing of the sale and purchase agreement between Novel Sunrise and Turquoise Hill Resources Ltd. ("Turquoise Hill") ("Novel SPA") (together the "Novel Sunrise transactions"). In addition, the Company issues select first quarter 2015 operating results. All figures are in U.S. Dollars unless otherwise stated.

Closing of Novel Sunrise transactions

The Company has been advised that the Novel SPA, as initially announced on February 24, 2015, closed on April 23, 2015 after receiving all necessary regulatory approvals. Pursuant to the Novel SPA, Novel Sunrise has purchased approximately 48.7 million common shares of the Company (each, a "Common Share") from Turquoise Hill.

As also announced on February 24, 2015, the Company entered into a private placement with Novel Sunrise for the issuance of approximately 21.7 million Common Shares for gross proceeds of approximately $7.5 million (the "Private Placement"). On March 3, 2015 the Company successfully closed the initial tranche of the Private Placement raising $3.5 million for the issuance of approximately 10.1 million mandatory convertible units of the Company, each unit convertible on a one for one basis for Common Shares of the Company (the "Mandatory Convertible Units"). Upon closing of the Novel SPA, the Mandatory Convertible Units automatically converted into Common Shares in accordance with their terms.

On April 23, 2015 the Company successfully closed the second tranche of the Private Placement for gross proceeds of approximately $4.0 million through the issuance of approximately 11.6 million Common Shares. The Common Shares are subject to a four month hold period from the date of issuance.

As a result of the closing of the Novel SPA and the Private Placement, Novel Sunrise now has a shareholding of approximately 70.5 million Common Shares, representing approximately 29.3 percent of the Company's share capital. Turquoise Hill's shareholding has been reduced to approximately 56.1 million Common Shares or 23.3 percent of the Company's share capital.

In accordance with the terms of the second and final tranche of the Private Placement, Novel Sunrise holds the right to nominate two directors, in addition to the director previously nominated pursuant to the first tranche, to the Company's board of directors. Novel Sunrise has advised the Company that it plans to exercise this right at a later date.

Select Operating Results

The Company's select operating results for the three months ended March 31, 2015, including comparative periods, are summarized in the table below:

Three months ended
31-Mar 31-Dec 31-Mar
2015 2014 2014
Raw coal production (millions of tonnes) - 0.21 0.64
Sales volumes (millions of tonnes)
Premium semi-soft coking coal - 0.02 -
Standard semi-soft coking coal 0.05 0.14 0.29
Thermal coal 0.13 0.21 0.10
Total 0.18 0.37 0.39

In the first quarter of 2015, market conditions remained difficult and coal prices weakened further in China. The Company sold coal from its existing stockpile in order to preserve its liquidity.

Other Information

Cash Position and Liquidity

The Company's cash position (excluding restricted cash) as at March 31, 2015, including comparative periods, is summarized in the table below. Amounts are presented in millions of U.S. Dollars.

As at
31-Mar 31-Dec 30-Sep 31-Mar
2015 2014 2014 2014
Cash $ 3.6 $ 3.8 $ 4.8 $ 9.9

In accordance with the China Investment Corporation ("CIC") convertible debenture, there was no cash interest payment due or paid by the Company in the first quarter of 2015. The next cash interest payment on the CIC convertible of approximately $7.9 million is due on May 19, 2015.

At April 23, 2015 the Company had a cash balance of $5.9 million. This includes the $4.0 million received in respect of the second tranche of the Novel Sunrise private placement, and excludes $1.2 million of restricted cash held in Mongolia.

The Company is implementing a funding plan, as previously announced on February 24, 2015, with the assistance of Novel Sunrise which includes actively seeking additional sources of financing to continue funding its operations and meeting its objectives.

The Company remains subject to a remedial delisting review following its application to the Toronto Stock Exchange ("TSX") pursuant to the "financial hardship" provisions of section 604(e) of the TSX Company Manual for an exemption from the requirement to obtain shareholder approval for the Private Placement.

For further detail in respect of the Company's ability to be able to continue as a going concern, please refer to the Management's Discussion and Analysis for the year ended December 31, 2014, available on SEDAR at www.sedar.com, and, in particular, section 6 "Liquidity and Capital Resources" and section 14 "Risk Factors" thereof.

Resumption of Trading

Pending the issuance of this announcement, trading of the shares of the Company on the Stock Exchange of Hong Kong Limited was halted with effect from 9:00 am Hong Kong Time on Friday, April 24, 2015.

An application has been made by the Company to the Stock Exchange of Hong Kong Limited for the resumption of trading in the shares of the Company with effect from 1:00 pm Hong Kong Time on Friday, April 24, 2015.

About SouthGobi

SouthGobi, listed on the Toronto and Hong Kong stock exchanges, is focused on exploration and development of its metallurgical and thermal coal deposits in Mongolia's South Gobi Region. It has a 100% shareholding in SouthGobi Sands LLC, a Mongolian registered company that holds the mining and exploration licences in Mongolia and operates the flagship Ovoot Tolgoi coal mine. Ovoot Tolgoi produces and sells coal to customers in China.

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