Announcing an agreement to sell its thermal coal property, the TsagaanTolgoi Deposit, to Modun Resources, SouthGobi Resources has said it intends to facilitate the sale through the transfer of a wholly-owned subsidiary holding one mining licence and one exploration licence pertaining to that deposit. Under the transaction, subject to certain terms and conditions and expected to be completed by June 1 this year, SouthGobi expects to receive US$30 million of total consideration.
SouthGobi believes this transaction is positive for three key reasons:
(i) TsagaanTolgoi Deposit has become non-core due to the location being approximately 400 km to the east of the company’s core coking coal resources;
(ii) Modun has agreed to accelerate the development of TsagaanTolgoi into a mining operation, which will create employment and further the development of Mongolia; and
(iii) SouthGobi will, through its significant shareholding in Modun, continue to have exposure to TsagaanTolgoi and will also gain exposure to Modun’s other attractive projects in Mongolia.
“This sale will allow SouthGobi to focus on further developing our OvootKhural basin holdings, including our flagship OvootTolgoi Complex and the nearby Soumber Deposit, while retaining an indirect exposure to TsagaanTolgoi through our shareholding in Modun,” said Alexander Molyneux, President and CEO. “We also believe that Modun is well placed to be able to bring TsagaanTolgoi into production in a timely manner.” Macquarie Capital (Hong Kong) Limited acted as SouthGobi’s financial adviser on the transaction.