SouthGobi Energy Resources Arranges C$6.4 Million Financing to Develop Coal Properties in Mongolia
Peter Meredith, Chief Executive Officer of SouthGobi Energy Resources Ltd. (TSX VENTURE: SGQ), announced today that SouthGobi Energy Resources has entered into an agreement with CEF (Capital Markets) Limited for a placement of 711,111 common shares at C$9.00 per share, representing an aggregate offering amount of C$6,400,000.
CEF (Capital Markets) Limited is 50% indirectly owned by Cheung Kong (Holdings) Limited and 50% indirectly owned by Canadian Imperial Bank of Commerce (CIBC). Cheung Kong (Holdings) Limited is the flagship of the Cheung Kong Group which has business operations in 56 countries and employs about 260,000 staff worldwide. In Hong Kong alone, members of the Cheung Kong Group include eight listed companies with a combined market capitalization of approximately US$120 billion (as at 31 December, 2007). Mr. Li Ka-shing is the Chairman of Cheung Kong (Holdings) Limited.
The proceeds from this offering – and the previous C$111,500,000 raised in January, 2008 – will be used to finance initial development of an open-pit coal mine at SouthGobi’s Ovoot Tolgoi coal project in southern Mongolia, 45 kilometres north of the border with China and to finance additional drilling and engineering focused on developing an underground coal mine at Ovoot Tolgoi. Proceeds also will be used for exploration and development of the company’s other coal and mineral projects, identifying and investigating new projects and for general corporate and administrative purposes. The financing is subject to all necessary regulatory approvals, including approval of the TSX Venture Exchange. All securities issued by way of this placement will be subject to a four-month hold period.
Capital costs to start production at Ovoot Tolgoi are estimated at approximately C$45 million. Pre-development of the open-pit coal mine is scheduled to commence this quarter. The first shipments of Ovoot Tolgoi coal to markets are scheduled for the third quarter of 2008.
SouthGobi recently announced that it has purchased a fleet of coal-mining equipment. Auxiliary equipment and a temporary maintenance facility were delivered to the Ovoot Tolgoi mine site in December 2007 and the remainder of the equipment is scheduled to start arriving in the coming weeks.
SouthGobi has agreed to pay a fee equal to 3.5% of the gross proceeds to an arm’s-length third party in connection with the financing.
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 to supply a wide range of coal products and electricity to markets in Mongolia and China. 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 completion of the private placement, the company’s plans to develop the Ovoot Tolgoi Project in Mongolia, including timing of completion of development and commencement of coal shipments to market and the estimated capital cost of development of an open pit coal mine at Ovoot Tolgoi, and other statements that are not historical facts. When used in this document, the words such as “could”, “plan”, “scheduled”, “estimate”, “expect”, “intend”, “may”, “potential”, “should”, and similar expressions are forward-looking statements. Although SouthGobi Energy Resources believes 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 September 30, 2007 and its Annual Information Form dated August 27, 2007, which are 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.
Contacts: SouthGobi Energy Resources – Investors Steven Feldman (604) 681-6799 SouthGobi Energy Resources – Media Bob Williamson (604) 681-6799 Website: www.southgobi.com
SOURCE: SouthGobi Energy Resources Ltd.