SouthGobi Resources has unveiled its financial and operating results for the three and six months ended June 30, 2015.

Significant Events and Highlights

The Company’s significant events and highlights for the three months ended June 30, 2015 and subsequent period to August 13, 2015 are as follows:

• Operating results – The Company continues to operate under difficult market conditions as prices for coal remained weak in China through the second quarter of 2015. The impact of these conditions on the Company’s operations continues to be exacerbated given the Company’s liquidity constraints. The Company sold 0.19 million tonnes of its coal products during the quarter. After the resumption of mining operations on March 30, 2015, production for the second quarter of 2015 was 0.62 million tonnes, allowing the Company to position itself to meet its commitments under existing and expected new coal offtake contracts.

• Tax investigation case in Mongolia – On January 30, 2015, the panel of appointed judges from the Second District Criminal Court of Justice found three of the Company’s former employees guilty of tax evasion and gave sentences ranging from 5 years and 6 months to 5 years and 10 months of imprisonment in the correctional facilities of strict regimen in Mongolia. Although SouthGobi Sands LLC ("SGS"), the Company’s wholly-owned subsidiary, was not a party to the criminal proceedings, the court declared it to be financially liable as a "civil defendant" for a penalty (the "Tax Penalty") of MNT 35.3 billion (approximately $18.0 million at June 30, 2015), the corresponding balance has been provided for in the second quarter of 2015.

Subsequent to an unsuccessful appeal to the Second District Criminal Court of Justice, on April 22, 2015, SGS filed an appeal with the Supreme Court against the decision of the 10th Appeal Court for Criminal Case of Mongolia upholding the tax verdict against SGS (the "Tax Verdict"). SGS has been informed that the Supreme Court has refused to hear the tax case on appeal and as such the Tax Verdict has entered into force.

The Tax Verdict is however not immediately payable and enforceable against SGS absent further actions prescribed by the laws of Mongolia. In particular, SGS has not received a copy of the bailiff’s resolution on execution of the Tax Verdict, as required under the Law of Mongolia on Execution of Court Decisions in order for any judgment execution process to happen.

The Company continues to believe that there is a lack of evidence to support the Tax Verdict and that the Tax Verdict and the subsequent decisions of the higher courts on appeal were substantively and procedurally in error under the laws of Mongolia. The Company has assessed other available judicial avenues to continue defending itself. However, it believes it can and is currently seeking to resolve amicably with the Mongolian authorities the dispute giving rise to the Tax Verdict in a manner that is both appropriate having regard to the Company’s limited financial resources and supportive of a positive environment for foreign investment in Mongolia.

There can be no assurance, however, that any such resolution can be successfully negotiated by the Company either at all or on favourable terms, or that the terms of any resolution to which the Government of Mongolia would be prepared to agree would not be materially adverse to the Company. In such case, this may result in an event of default under the China Investment Corporation ("CIC") convertible debenture Convertible Debenture and CIC would have the right to declare the full principal and accrued interest owing thereunder immediately due and payable.

• Novel Sunrise Private Placement – On February 24, 2015, the Company announced it had entered into a private placement for proceeds of up to $7.5 million with Novel Sunrise Investments Limited ("Novel Sunrise") as a proposed new significant investor and strategic partner.

On March 3, 2015, following the successful closing of the first tranche of the Novel Sunrise private placement, including the receipt of $3.5 million, the Company issued 10,131,113 Mandatory Convertible Units to Novel Sunrise and in accordance with the terms of the agreement Mr. Ted Chan was appointed as the Executive Director of the Company. On July 26, 2015, Mr. Ted Chan ceased to be the Executive Director of the Company. Refer to "Changes in Management and Directors" section below for more details.

On April 23, 2015, the Company successfully closed the second and final tranche of the Novel Sunrise private placement generating approximately $4.0 million in gross proceeds through the issue of approximately 11.6 million Common Shares. In addition, Novel Sunrise converted their previously acquired Mandatory Convertible Units on a one for one basis into Common Shares.

• CITIC Merchant and Swiss Life GP private placements – On June 22, 2015, the Company announced it had negotiated private placement agreements with sophisticated investors to provide additional capital resources into the Company. The terms of the subscription agreements for the private placements allowed for the issue of approximately 55 million Common Shares.

On July 14, 2015, the Company announced it had obtained all the necessary regulatory approvals for the private placements and subsequently successfully closed the Swiss Life GP Private Placement, raising $2.9 million for the issuance of 5 million Common Shares.

On July 14, 2015, the Company agreed to an extension of the closing date of the private placement agreement between the Company and CITIC Merchant until July 20, 2015. However, the conditions precedent to the agreement were not fulfilled and CITIC Merchant informed the Company that it would not be subscribing for Common Shares pursuant to the signed private placement agreement.

• TSX remedial delisting review – As a result of relying on the financial hardship exemption to complete the Novel Sunrise private placement, the Company was placed on remedial delisting review as of February 25, 2015.

The Company has received confirmation from the Continued Listing Committee of the TSX that it will further defer its scheduled meeting to consider whether the Company has met the listing requirements of the TSX until August 25, 2015. The TSX Committee has determined to defer its delisting decision until no later than August 28, 2015.

• CIC Convertible Debenture – On May 20, 2015 under the terms of the CIC Convertible Debenture, CIC confirmed to the Company that subject to certain conditions and limitations, it would grant a deferral of payment of approximately $7.9 million in cash interest due by the Company to CIC on May 19, 2015 until July 22, 2015, subject to a three day cure period which expires on July 27, 2015.

On July 27, 2015, CIC confirmed to the Company that, subject to certain conditions and limitations, it agreed to grant a further deferral of payment of the May 2015 cash interest installment until November 19, 2015 to allow the Company to execute its Proposed Funding Plan.

• Novel SPA – On February 24, 2015, the Company was advised by Turquoise Hill Resources Ltd.that they had entered into a Sale and Purchase Agreement ("Novel SPA") with Novel Sunrise for the purchase of 48,705,155 Common Shares currently held by Turquoise Hill.

On April 23, 2015, the Company was advised that the Novel SPA, as initially announced by the Company on February 24, 2015, had received all the necessary approvals and closed. Pursuant to the Novel SPA, Novel Sunrise has purchased approximately 48.7 million Common Shares from Turquoise Hill.

• NUR SPA – On May 4, 2015, the Company announced it had been notified of the expiry of the Sale and Purchase agreement ("NUR SPA"), between Turquoise Hill and National United Resources Holdings Limited ("NUR") which provided for the sale of 56.1 million Common Shares held by Turquoise Hill.

• Shareholder loan extension – On May 4, 2015, the Company received confirmation from Turquoise Hill of an extension to the limited deferral of amounts owing under the Turquoise Hill shareholder loan facility, subject to certain conditions and limitations.

• Notice of arbitration – On June 29, 2015, the Company announced First Concept Logistics Limited ("First Concept"), a subsidiary of NUR, served a notice of arbitration (the "Notice") on SGS in respect of a coal supply agreement dated May 19, 2014 as amended on June 27, 2014 (the "Coal Supply Agreement").

According to the Notice, First Concept alleges that SGS has breached the Coal Supply Agreement and seeks, among other items, the repayment of $11.5 million, representing the prepayment amount advanced by First Concept under such agreement. The Company firmly rejects the allegations of the First Concept in the Notice as lacking any merit and categorically denies First Concept’s claim for repayment of the sum of $11.5 million as wholly misconceived and will vigorously defend itself throughout the arbitration proceedings. In addition, SouthGobi reserves the right to pursue legal action against NUR and its subsidiary for compensation for any damages that result from their actions.