SouthGobi Resources Announces Select Second Quarter 2015 Operating Results and Progress on Private Placements

HONG KONG, CHINA--(Marketwired - Jul 14, 2015) - SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878) (the "Company" or "SouthGobi") today announces select second quarter 2015 operating results and progress on private placements announced on June 29, 2015. All figures are in U.S. Dollars unless otherwise stated.

Select Operating Results

The Company's select operating results for the three months ended June 30, 2015, including comparative periods, are summarized in the table below:

Market conditions and prices for coal remained weak in China through the second quarter of 2015. The Company sold 0.19 million tonnes of its coal products during the quarter. After the resumption of mining operations on March 30, 2015, production increased to 0.62 million tonnes for the quarter, allowing the Company to position itself to meet its commitments under existing and expected new coal offtake contracts.

Progress update of private placements and Toronto Stock Exchange ("TSX") delisting review

The Company announced on June 29, 2015 that it entered into private placement agreements with Swiss Life Gestion Privée ("Swiss Life GP") and CITIC Merchant Co., Limited ("CITIC Merchant") for the issuance of respectively 5 million and 50 million new common shares in the Company (each, a "Common Share") and total gross proceeds of approximately $31.6 million.

The Company stated in the announcement that the closing of the placements was subject to regulatory approvals for the private placements by the TSX and the Stock Exchange of Hong Kong Limited and, in the case of CITIC Merchant, the completion of their due diligence and approval of their board.

The Company is pleased to announce that it has obtained all necessary regulatory approvals for the private placements and subsequently successfully closed the Swiss Life GP Private Placement raising $2.9 million for the issuance of 5 million Common Shares. The Company has been informed that as at July 13, 2015, certain steps of CITIC Merchant's due diligence exercise remain to be finalized and therefore the approval from the board of directors of CITIC Merchant has not yet been obtained. As such, an extension of the closing date to July 20, 2015 has been agreed to allow more time for CITIC Merchant to complete their due diligence.

The TSX advised the Company on June 22, 2015 that it had granted an extension of the delisting review (refer to Management's Discussion and Analysis for the quarter ended March 31, 2015, available on SEDAR at www.sedar.com) until July 22, 2015 to permit completion of the proposed private placements of the Company's common shares. The TSX has advised the Company that upon completion of the private placements, it believes that the Company will be in compliance with the requirements of the TSX Company Manual for continued listing of the Company on the TSX and will terminate its delisting review, on condition that no other delisting criteria become applicable between now and the closing of the private placements.

Cash Position and Liquidity

The Company's cash position (excluding restricted cash) as at June 30, 2015, including comparative periods, is summarized in the table below. Amounts are presented in millions of U.S. Dollars.

China Investment Corporation ("CIC") has confirmed to the Company that subject to certain conditions and limitations, it has agreed to grant deferral of payment of the May 2015 cash interest installment (approximately $7.9 million) until July 22, 2015 to allow the Company to execute its proposed funding plan. As consideration for the extension, the Company has agreed to pay CIC a deferral fee of 6.4% per annum on the amount of the May 2015 cash interest installment.

At July 14, 2015 the Company had a cash balance of $2.6 million. This includes the $2.9 million received in respect of the Swiss Life GP Private Placement, and excludes $1.2 million of restricted cash held in Mongolia.

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 quarter ended March 31, 2015, available on SEDAR at www.sedar.com, and, in particular, section 5 "Liquidity and Capital Resources" and section 11 "Risk Factors" thereof.

Other information

Tax Investigation Case

On April 22, 2015, the Company's wholly owned subsidiary SouthGobi Sands LLC ("SGS"), filed an appeal with the Supreme Court against the decision of the 10th Appeal Court for Criminal Case of Mongolia upholding the tax verdict against SGS (the "Tax Verdict"). SGS has been informed that the Supreme Court has refused to hear the tax case on appeal and as such the Tax Verdict has entered into force.

The Tax Verdict is however not immediately payable and enforceable against SGS absent further positive actions prescribed by the laws of Mongolia. In particular, SGS has not received a copy of the bailiff's resolution on execution of the Tax Verdict, as required under the Law of Mongolia on Execution of Court Decisions in order for any judgment execution process to happen.

The Company continues to believe that there is a lack of evidence to support the Tax Verdict and that the Tax Verdict and the subsequent decisions of the higher courts on appeal were substantively and procedurally in error under the laws of Mongolia.

The Company has assessed other available judicial avenues to continue defending itself. However, it believes it can and is currently seeking to resolve amicably with the Mongolian authorities the dispute giving rise to the Tax Verdict in a manner that is both appropriate having regard to the Company's limited financial resources and supportive of a positive environment for foreign investment in Mongolia. There can be no assurance, however, that any such resolution can be successfully negotiated by the Company either at all or on favourable terms, or that the terms of any resolution to which the Government of Mongolia would be prepared to agree would not be materially adverse to the Company. In such case, this may result in an event of default under the debenture held by CIC and CIC would have the right to declare the full principal and accrued interest owing thereunder immediately due and payable. Such an event of default under the Debenture or the Company's inability to pay the penalty could result in voluntary or involuntary proceedings involving the Company as discussed under the heading Risk Factors in the MD&A issued on March 30, 2015 and available on SEDAR at www.sedar.com.

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, 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.

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 Proposed Private Placements; the implementation of the coal Offtake Agreement; the possibility of resolving the Tax Investigation Case amicably with the Mongolian authorities; the outcome of TSX delisting review; the ability to carry out the 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.

Contact

SouthGobi Resources Ltd.
Investor Relations
Galina Rogova
Office: +86-21-6103-3550
galina.rogova@southgobi.com
SouthGobi Resources Ltd.
Media Relations
Altanbagana Bayarsaikhan
Office: +976 70070710
altanbagana.bayarsaikhan@southgobi.com
www.southgobi.com