Thursday, 15 March 2012

SouthGobi to sell thermal coal property for $30 million to Modun Resources

Mongolia-focused SouthGobi Resources (TSE:SGQ) said Monday it will sell its Tsagaan Tolgoi deposit, a thermal coal property, to Modun Resources (ASX:MOU) in a deal valued at $30 million.
Under the terms of the agreement, SouthGobi will transfer the wholly-owned mining license and exploration license that covers the deposit. In exchange, SouthGobi will receive $7.5 million in up-front cash, $12.5 million shares of Modun common stock, and deferred consideration of $10.0 million in Modun stock.
Should SouthGobi acquire over 14.9 percent of Modun shares, it will also have the right to nominate one director to Modun's board.
"This sale will allow SouthGobi to focus on further developing our Ovoot Khural basin holdings, including our flagship Ovoot Tolgoi Complex and the nearby Soumber Deposit, while retaining an indirect exposure to Tsagaan Tolgoi through our shareholding in Modun," said SouthGobi president and CEO, Alexander Molyneux.
"We also believe that Modun is well placed to be able to bring Tsagaan Tolgoi into production in a timely manner."
Additionally, Modun has agreed to accelerate the development of the deposit into a mining operation, creating employment and further development in Mongolia.
In early 2008, SouthGobi announced an initial NI 43-101 compliant resource report for the deposit, which estimated measured plus indicated resources of 36.4 million tonnes of coal, plus another nine million tonnes of coal in the inferred category.
Tsagaan Tolgoi is in the Omnigovi Aimag, approximately 570 kilometres south of the nation's capital of Ulaanbaatar and 113 kilometres southeast of the provincial capital of Dalanzagad.
The project is also located 415 metres to the northeast of the company's flagship Ovoot Tolgoi project, which sells coal to customers in China.
SouthGobi also said the Tsagaan Tolgoi deposit has the potential to supply any future coal-fired power plant that may be developed to produce electricity for Ivanhoe Mines' planned Oyu Tolgoi copper-gold mining complex, which sits about 115 kilometres northeast of Tsagaan Tolgoi.
The sale is expected to close by June 2012.

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