September 5, 2008
SouthGobi Energy Resources Increases Ownership Position in the Mamahak Coal Project, Indonesia, to 85%
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 5, 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 increased its ownership in the Mamahak Coal Project in East Kalimantan, Indonesia, from 56% to 85%. The original Joint Venture Agreement with Score Resources Ltd. included a provision allowing for SouthGobi to increase its ownership position based on a predetermined pricing mechanism. SouthGobi has elected to increase its ownership to 85% by paying Score Resources US$13.2 million, comprised of US$8,013,800 cash and 320,000 common shares of SouthGobi Energy Resources at a deemed value of US$16.15 per share.
"Management's decision to increase our ownership in Mamahak is based on positive exploration results that show continuous coal structures with excellent coal quality," Mr. Wusaty said. "We continue to identify new surrounding areas with coal-bearing strata, indicating the potential for significant coal resources of direct- shipping, semi-soft metallurgical coal for this project."PT Multi Mamahak Batubara (PT MMB), a new SouthGobi Energy subsidiary based in Jakarta, Indonesia, will be the operating company responsible for the development of the Mamahak Coal Project and other coal opportunities within the country.
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, is in production to supply coal to interior customers in China.
The issuance of 320,000 common shares to Score Resources Ltd. is subject to the prior approval of the TSX Venture Exchange.
Other project developments include:
- Local Indonesian government approvals have been received that will allow for the expedited development of coal surface mining in the APL block within the southern portion of the MCM concession. Two potential mining areas have been outlined within the MCM concession - the APL and E series resource blocks. The company forecasts commencement of mining in the first quarter of 2009.
- 59 holes have been drilled and geophysically logged in the south-west area within the MCM concession's APL block. At least four separate coal seams, ranging in thickness between 0.4 metres to 1.25 metres, have been confirmed. These seams are expected to aggregate to a total mineable thickness ranging between 2.45 metres and 3.15 metres.
- 94% (105 drill holes) of the 112 drill holes proposed for the E1, E2 and E3 series resource blocks, located in the south- southeast area of the MCM concession, now have been completed.
- Work is underway to excavate a bulk coal sample from the APL block for testing purposes. The company plans to deliver coal to Australia for metallurgical testing and to Canada for petrographic analysis. Screening and sizing tests also will be carried out. Coal samples also will be delivered to select potential customers in China, Japan, India and Korea.
- Data have been transferred to the company's geological consultant, SMG Consultants in Jakarta, for mine modeling, National Instrument 43-101 resource qualification and classification, and mine planning. Work now will focus on in-fill drilling, full-core drilling, sampling and analysis of the seams.
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 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 June 30, 2008, and its Annual Information Form dated March 28, 2008 which is available at www.sedar.com.
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