SouthGobi Energy Resources has revealed that the company will accelerate the development of its Mongolian coal projects through its wholly-owned Mongolian operating subsidiary, Southgobi sands.
SouthGobi’s Mongolian investment programme during the next three to five years is planned to include expansion of the Ovoot Tolgoi Mine to a targeted eight million tonnes of high-quality coal per year from the current sales target of 1.5 million tonnes for 2009. The mine is in Mongolia’s South Gobi Region.
SouthGobi intends to develop a separate coal mining operation at Soumber, approximately 20 kilometres east of the Ovoot Tolgoi Mine. Work is subject to completion of feasibility studies and securing appropriate licenses and permits. The company will continue investing in improvements to the regional road network at and around the Ovoot Tolgoi Mine. It will also evaluate opportunities to participate in the development of a cross-border rail link between the Ovoot Tolgoi Mine and the Mongolia-China border crossing at Shivee Khuren-Ceke.
The company is conducting preliminary testing of the washability of its coals. As reported, testing so far indicates that value and jobs can be added by processing some of its coal products in Mongolia to reduce sulphur and ash content and upgrade other specifications.
SouthGobi said that financing for the investment program has been secured from a wholly-owned subsidiary of China Investment Corporation (CIC), which will provide $500m in the form of a convertible debenture bearing interest at 8%.
Alexander Molyneux, president and CEO of SouthGobi Energy, said: “Our continued exploration successes have significantly expanded our coal resources in Mongolia’s South Gobi – and now we are in a position to develop our company into a prominent regional producer and exporter.
“We recently announced our Measured and Indicated coal resource base, compliant with the Canadian NI 43-101 reporting standard, has increased from 221.2 million tonnes to 307.6 million tonnes, a jump of 39%. We also announced the initial resource at Soumber, an entirely new coal deposit in the South Gobi, and there is significant potential for other discoveries.”