SouthGobi Resources Announces Private Placement for Proceeds of Up to US$7.5 Million With Novel Sunrise Investments Limited as a Proposed New Significant Investor and Strategic Partner

HONG KONG, CHINA--(Marketwired - Feb 24, 2015) - SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878) ("SouthGobi" or the "Company") announces it has entered into a private placement agreement with Novel Sunrise Investments Limited ("Novel Sunrise") as a proposed new significant investor and strategic partner for proceeds of up to approximately US$7.5 million, with an initial tranche of approximately US$3.5 million.

Pursuant to the private placement agreement Novel Sunrise will subscribe for an initial tranche of 10,131,113 Mandatory Convertible Units for subscription proceeds of approximately US$3.5 million. The Mandatory Convertible Units are convertible on a one for one basis for common shares in the Company (each, a "Common Share"). Upon closing of the Novel SPA, as described below, the private placement agreement provides for a further subscription of up to 11,618,887 Common Shares for additional gross proceeds of approximately US$4.0 million.

The completion of the private placement and related transactions is subject to acceptance of notice of the placement by the Toronto Stock Exchange ("TSX") pursuant to the financial hardship provisions of the TSX Company Manual. As a result of relying on the financial hardship provisions, the Company will be placed on remedial delisting review. See the section entitled TSX Financial Hardship Exemption Application and Status of Listing on TSX below for more information.

The Company has been advised that Novel Sunrise has entered into a Sale and Purchase Agreement ("Novel SPA") with Turquoise Hill Resources Ltd. ("Turquoise Hill"), the Company's largest shareholder, to purchase 48,705,155 Common Shares currently held by Turquoise Hill, subject to applicable regulatory approvals and other customary conditions. The Company has been advised that the closing of the Novel SPA is expected to occur no later than March 31, 2015.

Private Placement

The Company has entered into a private placement agreement with Novel Sunrise providing for the initial subscription of 10,131,113 Mandatory Convertible Units for approximately US$3.5 million, and, upon the closing of the Novel SPA, for the subscription of up to 11,618,887 Common Shares for additional gross proceeds of approximately US$4.0 million.

The initial tranche of the private placement consisting of approximately US$3.5 million of Mandatory Convertible Units is expected to close March 3, 2015, subject to regulatory approvals and other customary closing conditions. Each Mandatory Convertible Unit is convertible on a one for one basis into a Common Share, resulting in a deemed issue price of CAD$0.432 per Common Share ("Placing Price"). The Mandatory Convertible Units mandatorily convert into Common Shares upon either the closing of the Novel SPA or the termination thereof. The 10,131,113 Common Shares underlying the Mandatory Convertible Units represent 4.63% (on a pre-issuance basis) of the total number of the Company's 218,753,970 Common Shares issued and outstanding at the date of this announcement. The Mandatory Convertible Units do not have any voting rights until converted into Common Shares in accordance with their terms.

After the initial subscription and upon completion of the Novel SPA, Novel Sunrise has agreed to subscribe for an additional approximate US$4.0 million of Common Shares at the Placing Price over a maximum period of 45 days from the date hereof, subject to regulatory approvals and other customary closing conditions. Assuming issuance of the additional Common Share tranches, the total gross proceeds of the placement will be approximately US$7.5 million. Assuming final closing of the private placement and conversion of the Mandatory Convertible Units, an additional 21,750,000 new Common Shares, representing 9.04% of the total number of 240,503,970 Common Shares after issuance (9.94% on a pre-issuance basis) will be issued and outstanding after completion of the placement.

The proceeds from the private placement will be applied towards general working capital.

The Placing Price of CAD$0.432 represents a discount of approximately 20% to the 5-day volume-weighted average price per Common Share of approximately CAD$0.54, as of the date the Company received price protection from the TSX for the private placement.

The Placing Price was determined with reference to the prevailing market price of the Common Shares and was negotiated on an arm's length basis between the Company's independent directors and Novel Sunrise.

The closing of the private placement and related transactions is subject to acceptance of notice of the placement by the TSX pursuant to the financial hardship provisions of the TSX Company Manual.

Under the private placement agreement, the Company has also agreed to grant Novel Sunrise the following additional rights:

• Mr. Ted Chan to join the Company's Board of Directors contemporaneous with the closing of the initial tranche of the private placement as an Executive Director, subject to TSX approval;
• Two more nominees of Novel Sunrise to join the Board of Directors, plus additions to the Company's management team, upon closing of the Novel SPA;
• Novel Sunrise to have pro rata participation rights in future financings; and
• Novel Sunrise to have registration rights under Canadian provincial securities laws in connection with its shareholdings.

Mr. Chan has over 20 years of enterprise management experience. He has played a key role in the management of the Novel Group, especially through establishing and managing client relationships. Mr. Chan holds a bachelor degree from Communication University of China.

Proposed Funding Plan

The Company is entering into the transaction with Novel Sunrise as a new significant shareholder and strategic partner intending to bring its operational and marketing expertise to the Company. Novel Sunrise, together with its affiliated companies in China, is a leading private enterprise in the real estate, logistics and supply chain management industries. In this connection, Novel Sunrise has agreed to assist the Company in the implementation of a funding plan intended to improve cash flow for the Company and support its business strategy and operations in a difficult market, with the goal of positioning the Company with a strong future as a coal producer. The proposed plan includes introducing potential customers in China to the Company to allow the Company to expand its customer base further inland in China, and helping the Company to secure longer-term coal offtake arrangements, thereby allowing the Company to ramp up production to capacity. Novel Sunrise has also advised the Company as part of the financing plan that it intends to help the Company to establish relationships with commercial banks in China and Hong Kong to help the Company to secure short term bridge loans, trading credit facilities and other types of financing.

While it is the Company's intention to proceed to implement the new funding plan with Novel Sunrise's assistance as soon as possible, the proposed plan is indicative only and the Company's ability to implement it successfully is dependent on a number of factors beyond its control, including but not limited to, China's economic growth and coal demand growth, market prices of coal, the availability of credit and market interest rates, and exchange rates of currencies of countries where the Company operates, and there can be no assurance that the Company will be able to do so, or that it will be able to do so in sufficient time to continue as a going concern. In such event, the Company is likely to be unable to meet its obligations, which could result in voluntary or involuntary insolvency proceedings involving the Company as discussed under the heading "Risk Factors" in the Management Discussion and Analysis issued on November 10, 2014 and available on SEDAR at www.sedar.com.

Sale and Purchase Agreement

The Company has been advised by Novel Sunrise and Turquoise Hill that they have today entered into the Novel SPA for the purchase by Novel Sunrise of 48,705,155 Common Shares currently held by Turquoise Hill. The closing of the Novel SPA is subject to certain terms and closing conditions including the approval of the TSX, obtaining clearance from the Hong Kong Securities and Futures Commission that the transactions contemplated by the proposed private placement and the Novel SPA will not trigger a mandatory general offer to the shareholders of the Company, and other customary conditions.

Assuming the Novel SPA and the private placement are completed, Novel Sunrise will hold 70,455,155 Common Shares, representing 29.3% of the expanded share capital of the Company immediately after the private placement of 21,750,000 new Common Shares.

After the completion of the Novel SPA, Turquoise Hill's shareholding would be reduced to 56,102,000 Common Shares. This shareholding, assuming full completion of the private placement and the issuance of 21,750,000 new Common Shares, represents 23.3% of the issued Common Shares in the Company.

As previously detailed by the Company in its Management Discussion and Analysis ("MD&A") for the three months ended September 30, 2014, which is available at www.sedar.com, Turquoise Hill has entered into a Sale and Purchase Agreement ("NUR SPA") with National United Resources Holdings Limited ("NUR") to sell 56,102,000 Common shares in the Company. The closing of this transaction is subject to certain terms and conditions, including the approval of both The Stock Exchange of Hong Kong (the "HKSE") as well as NUR's shareholders following clearance of the relevant shareholder circular by the HKSE. In the event that both the Novel SPA and the NUR SPA are completed this would reduce Turquoise Hill's shareholding in the Company to nil.

The Company has been advised by Novel Sunrise that Novel Sunrise and NUR are not related parties.

TSX Financial Hardship Exemption Application and Status of Listing on TSX

Because Novel Sunrise would hold greater than 20% of the Common Shares after the completion of the Novel SPA and the private placement - and, assuming China Investment Corporation does not elect to employ its pre-emptive or conversion rights under the $250 million debenture issued to it by the Company, Novel Sunrise would become the largest shareholder of the Company - the TSX has advised the Company that it takes the view that the private placement and the Novel SPA must be considered as one transaction, having a material effect on control of the Company, which normally would require the approval of a majority of disinterested shareholders under the provisions of the TSX Company Manual.

On the basis that the Company is in serious financial difficulty and does not have sufficient time to obtain shareholder approval in a timely manner prior to the completion of the private placement and the Novel SPA, the Company has applied to the 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, the Novel SPA and the associated potential material effect on control. The completion of the private placement and related transactions is subject to acceptance of notice of the placement by the TSX with an exemption from the requirement to obtain shareholder approval pursuant to the aforementioned section 604(e).

In connection with this application to the TSX, a special committee of the Company comprised of the Independent Directors of the Company has reviewed and considered the Company's financial position, commitments, alternative financing means, and the terms of the proposed transaction with Novel Sunrise, and in the circumstances, unanimously recommended to the full board of directors that they must pursue the financial hardship exemption. The board of directors has unanimously accepted their recommendation. The board of directors has unanimously agreed that the Company is in serious financial difficulty in light of its immediate capital requirements, and that the private placement with Novel Sunrise is designed to improve the Company's financial situation, is reasonable for the Company in the circumstances, and represents the only solution practicably available to the Company that will enable it to meet the immediate capital needs arising out of its current working capital deficiency on a timely basis.

The TSX has confirmed to the Company that, as a result of reliance on the financial hardship exemption from the requirement to obtain shareholder approval, the Company will be placed under remedial delisting review. Delisting review is customary practice under TSX policies when a listed company requests relief in reliance on this exemption. Although the Company believes that it will be in compliance with all continued listing requirements of the TSX following completion of the private placement and upon conclusion of a delisting review, no assurance can be provided as to the outcome of that review and therefore the Company may become subject to delisting from the TSX.

Current cash position

At February 23, 2015, the Company has cash of US$2.7 million. The funds raised from the initial tranche of the private placement are expected to enable the Company to continue to operate as a going concern through March 31, 2015, and upon closing of the balance of the private placement, through April 30, 2015. The Company intends to continue to seek additional financing to fund its operations and meet its objectives following the closing through the implementation of the financial plan described above.

About SouthGobi

SouthGobi is listed on the Toronto and Hong Kong stock exchanges, in which Turquoise Hill, also publicly listed in Toronto and New York, has a 47.9% shareholding.

SouthGobi 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, 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.

About Novel Sunrise

Novel Sunrise is an investment holding company registered in the British Virgin Islands. Novel Sunrise, together with its affiliated companies in China (collectively, the "Novel Group"), is a leading private enterprise in the real estate, logistics and supply chain management industries. The Novel Group began its real estate business in the 1990s through an entity named Beijing Wanhai Real Estate Development Co. Ltd., which developed several high quality residential and commercial properties in gateway cities of China. With the growth of its real estate business, the Novel Group significantly increased its involvement in the procurement of construction materials and established strong relationships, as a customer, with a number of the leading steel and cement manufacturers in China. In the 2000s, the Novel Group further expanded its business into the logistics and trading of construction materials including iron ore, coking coal, steel and cement products. The Novel Group has since grown these relationships and developed further relationships with well-established state owned trading corporations. As it has expanded its business, the Novel Group has also established strong relationships with key commercial banks in China and Hong Kong. Guogang (Wilson) Chen is the sole owner and founder of Novel Sunrise and the Novel Group. After working for the Australian branch of a state owned company, Mr. Chen started the real estate business in the 1990s which became the foundation of the Novel Group. Mr. Chen is the brother of Mr. Ted Chan who is to join the Company's Board of Directors contemporaneous with the closing of the initial tranche of the private placement as an Executive Director, subject to TSX approval.

FORWARD-LOOKING STATEMENTS

Except for statements of fact relating to the Company, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the dates the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the Company's expectations of sufficient liquidity and capital resources to meets its ongoing obligations and future contractual commitments; the completion of the NUR SPA; the completion of the Novel SPA; the outcome of TSX delisting review; the ability to carry out the Proposed Funding Plan and other financing plans; and other statements that are not historical facts. Except as required by law, the Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.