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
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.