SouthGobi’s Mongolia Woes Worsen
SouthGobi Resources Ltd. shares were taking a beating Tuesday morning after the company said uncertainty over Mongolia’s mining laws is stalling work at its flagship Ovoot Tolgoi Mine.
The miner said in a statement Tuesday that work at the mine would be “entirely curtailed” at the end of the second quarter, partially because it can’t get government permission to revise an environmental impact assessment for a dry coal handling facility, without which the company said it can’t process coal for transport to market. SouthGobi shares slid 5% in Hong Kong.
It also said it scaled back extraction at the mine in the second quarter to avoid accumulating too much unsold coal and to save cash, and has put on hold unspent capital and exploration expenditures.
SouthGobi’s announcement comes as plans by Aluminum Corp. of China Ltd., or Chalco’s, bid to buy a controlling stake in the company has run into regulatory difficulties as Mongolia seeks to pass legislation that would cap future foreign investment in the mining industry, partly to ward off over-reliance on Chinese investment.
The Mongolian government in April suspended certain mining licenses by SouthGobi at Ovoot Tolgoi. SouthGobi said the government announced at the end of May it had lifted the temporary suspension but has failed to clarify what the new laws would be.
SouthGobi said uncertainty over the new mining laws has deterred some customers from entering into purchase contracts with the company.
The miner said in a statement Tuesday that work at the mine would be “entirely curtailed” at the end of the second quarter, partially because it can’t get government permission to revise an environmental impact assessment for a dry coal handling facility, without which the company said it can’t process coal for transport to market. SouthGobi shares slid 5% in Hong Kong.
It also said it scaled back extraction at the mine in the second quarter to avoid accumulating too much unsold coal and to save cash, and has put on hold unspent capital and exploration expenditures.
SouthGobi’s announcement comes as plans by Aluminum Corp. of China Ltd., or Chalco’s, bid to buy a controlling stake in the company has run into regulatory difficulties as Mongolia seeks to pass legislation that would cap future foreign investment in the mining industry, partly to ward off over-reliance on Chinese investment.
The Mongolian government in April suspended certain mining licenses by SouthGobi at Ovoot Tolgoi. SouthGobi said the government announced at the end of May it had lifted the temporary suspension but has failed to clarify what the new laws would be.
SouthGobi said uncertainty over the new mining laws has deterred some customers from entering into purchase contracts with the company.
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