SouthGobi Energy Resources
Thursday, August 9th, 2007
Peter Meredith, CEO of SouthGobi Energy Resources Ltd. announce that the company’s wholly owned Mongolian subsidiary has filed a formal application for a Mining Licence for the development of an open-pit coal mine at Ovoot Tolgoi, in southern Mongolia. Ovoot Tolgoi, the company’s most advanced coal mine development project, is located next to the existing MAK/Xinhua coal mine approximately 40 kilometres north of the Mongolia/China border.
The Minerals Law of Mongolia 2006 specifies that upon receiving and registering the licence application the government shall make a decision within 20 business days to grant a mining licence. If all the criteria has been met the government will notify the applicant who is required to pay the licence fee for the first year. Within 3 business days following the payment of the licence fee the government shall issue the applicant a mining licence for 30 years. A mining licence holder has the right to extend the term of the mining licence two times for a period of twenty (20) years each.
The Geological Resource Report for Ovoot Tolgoi was approved by the Mongolian Government’s Resource Committee on August 6, 2007. In May 2007, the project’s Detailed Environmental Impact Assessment (DEIA) was approved by the Mongolian Government’s Ministry of Environment. The company has also received formal support for its Ovoot Tolgoi project from the Omnigovi aimag and local soum governments to proceed with mine development.
SouthGobi has commissioned Norwest Corporation to complete a Prefeasibility Study on Ovoot Tolgoi. The study is expected to be completed by the 3rd quarter 2007 and will be an enhancement of two earlier Scoping Studies. This report will be used to fulfill the legal requirement to file a technical and economical study with applicable Mongolian authorities within 60 days of receiving a mining licence. Mining equipment has been evaluated and is ready for order pending formal mining licence approval. Site facilities have been designed and are also awaiting formal licence approval.
A new Ovoot Tolgoi Technical Report, dated June 21, 2007 entitled “Technical Report – Coal Geology and Resources – Ovoot Tolgoi Property – Omnogovi Aimag, Mongolia, containing the latest resource estimate is now available on SEDAR (www.sedar.com) and the company’s website (www.southgobi.com).
Ovoot Tolgoi Resources
Resource Area, ASTM Coal Rank, Measure(million tonnes), Indicated(million tonnes), Inferred(million tonnes)
South-East Field hvB to hvA 49,752,000 15,987,000 6,502,000
West Field hvB to hvA 55,144,000 28,698,000 22,601,000
Total 149,581,000 29,103,000
Major coal exploration program in the South Gobi underway
SouthGobi has commenced a major exploration program on six separate coal projects in the Gobi area of southern Mongolia. The capital approved for the exploration is approximately $9.5 million, which will be funded by way of an extension of the existing US$15 million line of credit from Ivanhoe Mines. The exploration program was mobilized in June and will continue to the end of the year.
The 2007 exploration program is focused on the following:
– new greenfields exploration at Tavan Tolgoi Extension;
– determination of structure and quality on identified coal occurrences;
– infill drilling at Ovoot Tolgoi;
– additional resource definition at Ovoot Tolgoi Extension and Ovoot Tolgoi underground projects; and
– greenfields drilling on exploration licences as required per Mongolian Mining Law for mineral licence exploration.
SouthGobi has contracted the services of a reputable western research firm operating out of China to perform a complete market analysis of the coal markets in western Inner Mongolia and Gansu provinces of China. This information, together with the possession of a mining licence, is expected to lead to the conclusion of coal sales agreements with potential customers in China with whom the company has been discussing coal sales for the past year.