(EnergyAsia, May 9 2012, Wednesday) — Coal mining firm SouthGobi Resources Ltd has attributed the sharp fall in its share price in the stock exchanges of Canada and Hong Kong to a near three-year low to events in Mongolia.
SouthGobi, which is fully exposed in the resource-rich Asian country, said yesterday its share price tumbled to less than C$6 after Mongolia’s Anti-Corruption Agency formally requested information from subsidiary SouthGobi Sands LLC as part of its investigations into an unidentified third party, and the government’s move to legislate that local entities own at least 51% of strategic assets. (US$1=C$0.99).
SouthGobi owns four significant coal projects in Mongolia including the producing Ovoot Tolgoi mine and three development projects in Soumber, Zag Suuj and the Ovoot Tolgoi underground deposit.
Canada’s Ivanhoe Mines was forced to call off the proposed sale of its majority 57.6% stake in SouthGobi for C$925 million to China’s Chalco after he Mongolian government voiced its objections.
In explaining the sharp drop in its stock price on the Hong Kong Stock Exchange, SouthGobi said it “understands a bill regarding foreign investment in Mongolia proceeded through first reading in the State Great Khural (Parliament).
“In its current version, the bill contains a clause requiring 51% Mongolian ownership of strategic assets.
“Second, the Anti-Corruption Agency of Mongolia today formally requested information from the offices of SouthGobi Sands LLC, a wholly owned subsidiary of SouthGobi.
“SouthGobi has previously been advised this is in connection with an investigation into a third-party and has no reason to believe SouthGobi Sands LLC is itself the subject of any investigation. SouthGobi has cooperated fully and provided the required information.”