Southgobi Announces Third Quarter 2025 Unaudited Financial and Operating Results
R E S O U R C E S
November 14, 2025
SOUTHGOBI ANNOUNCES THIRD QUARTER 2025 UNAUDITED FINANCIAL AND OPERATING RESULTS
HONG KONG – SouthGobi Resources Ltd. (Hong Kong Stock Exchange (“HKEX”): 1878, TSX Venture Exchange (“TSX-V”): SGQ) (the “Company” or “SouthGobi”) today announces its financial and operating results for the three and nine months ended September 30, 2025. All figures are in U.S. dollars (“USD”) unless otherwise stated.
SIGNIFICANT EVENTS AND HIGHLIGHTS
The Company’s significant events and highlights for the three months ended September 30, 2025 and the subsequent period to November 14, 2025 are as follows:
- Operating Results – The Company increased the scale of its mining operations since 2024, as well as implementing various coal processing methods, including screening, wet washing and dry coal processing, which have resulted in improved coal quality and enhanced production volume and growth of coal export volume into China during the period.
In response to the market demand for different coal products, the Company focused on expanding the categories of coal products in its portfolio, including mixed coal, wet washed coal and dry processed coal. In addition, the Company has experienced success with processing its inventory of F-grade coal products through cost-effective screening procedures. As a result of the improvement in the quality of the processed F-grade coal, the Company was able to meet the import coal quality standards established by Chinese authorities and has been exporting this product to China for sale since the first quarter of 2024, further enhancing the Company’s coal export volume.
The Company recorded sales volume of 3.0 million tonnes for the third quarter of 2025 compared to 2.1 million tonnes for the third quarter of 2024, while the Company recorded an average realised selling price of $49.0 per tonne for the third quarter of 2025 compared to $67.8 per tonne for the third quarter of 2024. The decrease in the average realised selling price was mainly due to the Company facing headwinds in the China coal market since 2024, leading to the Company changing its product mix to sell a greater percentage of lower-priced coal products.
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- Financial Results – The Company recorded a $1.1 million profit from operations for the third quarter of 2025 compared to a $27.7 million profit from operations for the third quarter of 2024. The financial results were impacted by the decreased average realised selling price and the change in product mix as the Company sold more processed coal with higher production costs.
- Notice from Mongolian Government Plenipotentiary and designation of Company’s mining deposits as mineral deposits of strategic importance – On April 2, 2025, Southgobi Sands LLC (“SGS”) received a letter from a plenipotentiary representative of the Mongolian government (the “Letter”) which invited SGS to participate in negotiations in relation to determining the Mongolian state’s ownership interest in SGS, being the legal entity which holds the Company’s coal mining and exploration licenses in Mongolia.
The Letter states that, in furtherance of Mongolia’s National Wealth Fund Law which was passed in April 2024, the Mongolian government resolved on February 5, 2025 to appoint a plenipotentiary representative (the “Plenipotentiary Representative of the Mongolian Government”) to negotiate with legal persons holding a mining license for a deposit designated by the Mongolian government as a strategically important deposit (“Mineral Deposits of Strategic Importance”) in relation to determining the proportionate interest the Mongolian state has in such legal entity or whether to replace the Mongolian state’s interest with a royalty interest.
The Company has been advised by its Mongolian legal counsel that, the Government of Mongolia is empowered to participate on an equity ownership basis with the license holder in the exploitation and/or mining of each Mineral Deposit of Strategic Importance on terms to be negotiated between the Government of Mongolia and such license holder. Based solely on the knowledge of the Company’s Mongolian legal counsel, the Company is aware that various other license holders of Mineral Deposits of Strategic Importance have entered into similar negotiations with the Plenipotentiary Representative of the Mongolian Government.
On April 24, 2025, SGS initiated preliminary discussions with the Plenipotentiary Representative of the Mongolian Government. The Company anticipates that the discussion between SGS and the Plenipotentiary Representative of the Mongolian Government will continue and both parties will endeavour to engage in good faith for the purpose of arriving at a mutual and constructive understanding and agreement. The Company intends to fully cooperate with the Mongolian government and provide all necessary information to the extent permitted by applicable law.
As at the date of this press release, the deposits covered by four of the Company’s Mongolian mining licenses have been designated as Mineral Deposits of Strategic Importance by Mongolian government authorities. The relevant mining licenses relate to the Company’s Ovoot Tolgoi Mine and the Soumber Deposit.
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- Additional Tax and Tax Penalty Imposed by the Mongolian Tax Authority (“MTA”) – On July 18, 2023, SGS received an official notice (the “Notice”) issued by the MTA stating that the MTA had completed a periodic tax audit (the “Audit”) on the financial information of SGS for the tax assessment years between 2017 and 2020, including transfer pricing, royalty, airpollution fee and unpaid tax payables. As a result of the Audit, the MTA notified SGS that it is imposing a tax penalty against SGS in the amount of approximately $75.0 million. The penalty mainly relates to the different view on the interpretation of tax law between the Company and the MTA. Under Mongolian law, the Company had a period of 30 days from the date of receipt of the Notice to file an appeal in relation to the Audit. Subsequently the Company engaged an independent tax consultant in Mongolia to provide tax advice and support to the Company and filed an appeal letter in relation to the Audit with the MTA in accordance with Mongolian laws on August 17, 2023.
On February 8, 2024, SGS received notice from the Tax Dispute Resolution Council (“TDRC”) which stated that, after the TDRC’s review, the TDRC issued a decision in relation to SGS’ appeal of the Audit, and ordered that the audit assessments set forth in the Notice of July 18, 2023 be sent back to the MTA for review and re-assessment.
On February 22, 2024, SGS received another notice from the MTA stating that the MTA anticipated commencing the re-assessment process on or about March 7, 2024 and the duration of such process will be approximately 45 working days.
On May 15, 2024, SGS received a notice (the “Revised Notice”) from the MTA regarding the re-assessment result on the Audit (the “Re-assessment Result”). The re-assessed amount of the tax penalty is approximately $80.0 million. In accordance with applicable Mongolian laws, SGS is entitled to file an appeal to the TDRC regarding the Re-assessment Result within a 30-day period from the date of receiving the Revised Notice.
On June 12, 2024, following consultation with its independent tax consultant in Mongolia, SGS submitted an appeal letter to the TDRC regarding the Re-assessment Result, in accordance with applicable Mongolian laws.
On January 10, 2025, SGS received a resolution dated December 19, 2024 (the “Resolution”) from the TDRC in response to the appeal letter sent by SGS to the TDRC on June 12, 2024, relating to the Re-assessment Result. As set forth in the Resolution, the TDRC has determined to reduce the re-assessed amount of tax penalty against SGS from approximately $80.0 million to approximately $26.5 million (the “Revised Re-assessment Result”). In accordance with applicable Mongolian laws, SGS is entitled to file an appeal to the Administrative Court of First Instance in Ulaanbaatar, Mongolia (the “Administrative Court of First Instance”) regarding the Revised Re-assessment Result within a 30-day period from the date of receiving the Resolution. After careful consideration and consultation with the Company’s independent tax consultant in Mongolia, the Company has determined not to pursue a further appeal of the Revised Re-assessment Result with the Administrative Court of First Instance.
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On March 19, 2025, SGS received correspondence from the Administrative Court of First Instance requesting supplemental information regarding a court proceeding initiated by certain officers of the MTA (“MTA Officials”) against the TDRC. Upon further enquiry, SGS obtained a copy of an order dated March 7, 2025 issued by the Administrative Court of First Instance regarding commencement of court proceedings brought by the MTA Officials. The MTA Officials petitioned the court to overturn the TDRC’s ruling that reduced SGS’s tax penalty from approximately $80.0 million to approximately $26.5 million (“Proposed Case”).
Based on preliminary advice from the Company’s independent Mongolian legal counsel and tax consultants: (i) SGS was not named as a third party defendant to these proceedings;
(ii) the TDRC’s Revised Re-assessment Result remains legally enforceable unless formally overturned by the court; and (iii) SGS’s acceptance of the TDRC’s decision makes the ruling final under Mongolian tax law.
On April 25, 2025, SGS obtained a copy of an order dated April 15, 2025 (the “Latest Court Order”) issued by the Administrative Court of First Instance refusing to accept the Proposed Case. According to the Latest Court Order, the Proposed Case was dismissed by the Administrative Court of First Instance. According to applicable Mongolian laws, the plaintiff is entitled to file an appeal to the appellate court, and the Company understood that the MTA Officials, as plaintiff in the Proposed Case, filed an appeal.
On June 9, 2025, SGS obtained a copy of a judgement dated May 27, 2025 (“Appellate Court Judgement”) issued by the Appellate Court for Administrative in Ulaanbaatar, Mongolia (the “Appellate Court”). As per the Appellate Court Judgement, the Appellate Court upheld the court order issued by the Judge of the Administrative Court of First Instance on April 15, 2025. As a result, the claim brought by the MTA Officials against the TDRC in an attempt to dispute or overturn the previous decision made by the TDRC regarding the Re-assessment Result has been dismissed and rejected. According to applicable Mongolian law, the Appellate Court Judgement shall be final and is not subject to further appeal.
In the prior year, the Company recorded an additional tax and tax penalty in the amount of $45.5 million, which consists of a tax penalty payable of $26.5 million and a provision for additional late tax penalty of $19.0 million. As a result of the Revised Re-assessment Result, the Company recorded a reversal of additional tax and tax penalty of $48.5 million in 2024. To date, the Company has paid the MTA an aggregate of $21.0 million in relation to the aforementioned tax penalty. The Company anticipates paying down the outstanding amount of the tax and tax penalty from cash generated from operations in the normal course. According to Mongolian tax law, the MTA has a legal authority to demand payment of the outstanding amount of the Revised Re-assessment Result from the Company at its discretion.
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- 2025 March Deferral Agreement – On March 20, 2025, the Company and JD Zhixing Fund L.P. (“JDZF”) entered into an agreement (the “2025 March Deferral Agreement”) pursuant to which JDZF agreed to grant the Company a deferral of (i) the cash and payment-inkind interest (“PIK Interest”), management fees, and related deferral fees in the aggregate amount of approximately $111.6 million which will be due and payable to JDZF on or before August 31, 2025 pursuant to the deferral agreement dated March 19, 2024 and the deferral agreement dated April 30, 2024; (ii) semi-annual cash interest payment of approximately $7.9 million payable to JDZF on May 19, 2025 under the Convertible Debenture; (iii) semiannual cash interest payments of approximately $8.1 million payable to JDZF on November 19, 2025 and the $4.0 million in PIK Interest payable to JDZF on November 19, 2025 under the JDZF convertible debenture (the “Convertible Debenture”); and (iv) management fees in the aggregate amount of approximately $6.1 million payable to JDZF on May 16, 2025, August 15, 2025, November 15, 2025 and February 15, 2026, respectively, under the amended and restated mutual cooperation agreement (the “Amended and Restated Cooperation Agreement”) (collectively, the “2025 March Deferred Amounts”).
The effectiveness of the 2025 March Deferral Agreement and the respective covenants, agreements and obligations of each party under the 2025 March Deferral Agreement are subject to the Company obtaining the requisite approval of the 2025 March Deferral Agreement from shareholders in accordance with the requirements of applicable Canadian securities laws and Rule 14.33 and Rule 14A.36 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”). The 2025 March Deferral Agreement was approved by the Company’s disinterested shareholders at the annual general meeting (“AGM”) of shareholders convened on June 27, 2025.
The principal terms of the 2025 March Deferral Agreement are as follows:
- Payment of the 2025 March Deferred Amounts will be deferred until August 31, 2026 (the “2025 March Deferral Agreement Deferral Date”).
- As consideration for the deferral of the 2025 March Deferred Amounts which relate to the payment obligations arising from the Convertible Debenture, the Company agreed to pay JDZF a deferral fee equal to 6.4% per annum on the outstanding balance of such 2025 March Deferred Amounts, commencing on the date on which each such 2025 March Deferred Amounts would otherwise have been due and payable under the Convertible Debenture.
- As consideration for the deferral of the 2025 March Deferred Amounts which relate to payment obligations arising from the Amended and Restated Cooperation Agreement, the Company agreed to pay JDZF a deferral fee equal to 1.5% per annum on the outstanding balance of such 2025 March Deferred Amounts commencing on the date on which each such 2025 March Deferred Amounts would otherwise have been due and payable under the Amended and Restated Cooperation Agreement.
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- The 2025 March Deferral Agreement does not contemplate a fixed repayment schedule for the 2025 March Deferred Amounts or related deferral fees. Instead, the 2025 March Deferral Agreement requires the Company to use its best efforts to pay the 2025 March Deferred Amounts and related deferral fees due and payable under the 2025 March Deferral Agreement to JDZF. During the period beginning as of the effective date of the 2025 March Deferral Agreement and ending as of the 2025 March Deferral Agreement Deferral Date, the Company will provide JDZF with monthly updates of its financial status and business operations, and the Company and JDZF will on a monthly basis discuss and assess in good faith the amount (if any) of the 2025 March Deferred Amounts and related deferral fees that the Company may be able to repay to JDZF, having regard to the working capital requirements of the Company’s operations and business at such time and with the view of ensuring that the Company’s operations and business would not be materially prejudiced as a result of any repayment.
- If at any time before the 2025 March Deferred Amounts and related deferral fees are fully repaid, the Company proposes to appoint, replace or terminate one or more of its chief executive officer, its chief financial officer or any other senior executive(s) in charge of its principal business function or its principal subsidiary, the Company will first consult with, and obtain written consent (such consent shall not be unreasonably withheld) from JDZF prior to effecting such appointment, replacement or termination.
- Going Concern – Several adverse conditions and material uncertainties relating to the Company cast significant doubt upon the going concern assumption which includes the deficiencies in assets and working capital.
See section “Liquidity and Capital Resources” of this press release for details.
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OVERVIEW OF OPERATIONAL DATA AND FINANCIAL RESULTS
Summary of Operational Data
Three months ended Nine months ended September 30, September 30, 2025 2025
2024 2024
Sales Volumes, Prices and Costs
Premium semi-soft coking coal
0.30 0.51
Coal sales (millions of tonnes) 0.10 0.75
$ 63.37 $ 64.29
Average realised selling price (per tonne) $ 116.48 $ 108.49 Standard semi-soft coking coal/premium thermal coal
1.25 3.85
Coal sales (millions of tonnes) 1.09 1.65
$ 48.03 $ 58.74
Average realised selling price (per tonne) $ 72.54 $ 73.89 Standard thermal coal
0.43 0.66
Coal sales (millions of tonnes) 0.24 0.48
$ 22.59 $ 24.63
Average realised selling price (per tonne) $ 37.20 $ 39.52 Processed coal
1.06 3.04
Coal sales (millions of tonnes) 0.68 1.48
$ 56.96 $ 50.00
Average realised selling price (per tonne) $ 63.65 $ 65.50 Total
3.04 8.06
Coal sales (millions of tonnes) 2.11 4.36
| Average realised selling price (per tonne) | $ 67.77 | $ 73.25 |
| $ 48.99 $ 52.99 | ||
| Raw coal production (millions of tonnes) | 2.75 | 6.01 |
4.43 12.26
| Cost of sales of product sold (per tonne) | $ | 52.77 | $ | 52.86 | ||||
| $ | 47.22 | $ | 54.18 | |||||
| Direct cash costs of product sold (per tonne)(i) | $ | 41.74 | $ | 40.57 | ||||
| $ | 39.39 | $ | 45.15 |
Mine administration cash costs of product sold
| (per tonne)(i) | $ | 0.94 | $ | 1.38 | ||||
| $ | 0.97 | $ | 1.27 | |||||
| Total cash costs of product sold (per tonne)(i) | $ | 42.68 | $ | 41.95 | ||||
| $ | 40.36 | $ | 46.42 |
Other Operational Data
Production waste material moved
19.48 58.70
(millions of bank cubic meters) 15.04 41.99 Strip ratio (bank cubic meters of waste
4.39 4.79
material per tonne of coal produced) 5.48 6.99
0.00 0.00
Lost time injury frequency rate (ii) 0.00 0.07
(i) A Non-International Financial Reporting Standards (“non-IFRS”) financial measure, refer to “Non-IFRS Financial Measures” section. Cash costs of product sold exclude idled mine asset cash costs.
(ii) Per 200,000 man hours and calculated based on a rolling 12 month average.
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Overview of Operational Data
The Company recorded an average realised selling price of $49.0 per tonne in the third quarter of 2025 compared to $67.8 per tonne in the third quarter of 2024. The decrease was mainly due to the Company facing headwinds in the China coal market since 2024, leading to the Company changing its product mix to sell a greater percentage of lower-priced coal products. The product mix for the third quarter of 2025 consisted of approximately 10% of premium semi-soft coking coal, 41% of standard semi-soft coking coal/premium thermal coal, 14% of standard thermal coal and 35% of processed coal compared to approximately 5% of premium semi-soft coking coal, 51% of standard semi-soft coking coal/premium thermal coal, 12% of standard thermal coal and 32% of processed coal for the third quarter of 2024.
The Company’s unit cost of sales of product sold was $47.2 per tonne in the third quarter of 2025 compared to $52.8 per tonne in the third quarter of 2024. The decrease was due to change in product mix as more raw coal were sold in the third quarter of 2025 compared to the third quarter of 2024.
The Company ended the third quarter of both 2025 and 2024 without a lost time injury.
For the nine months ended September 30, 2025
The Company sold 8.1 million tonnes for the first nine months of 2025 as compared to 4.4 million tonnes for the first nine months of 2024. The Company recorded an average realised selling price of $53.0 per tonne for the first nine months of 2025 compared to $73.3 per tonne for the first nine months of 2024, the decrease was mainly due to the Company facing headwinds in the China coal market since 2024, leading to the Company changing its product mix to sell a greater percentage of lower-priced coal products.
The Company’s unit cost of sales of product sold was $54.2 per tonne for the first nine months of 2025 compared to $52.9 per tonne for the first nine months of 2024. The increase was due to the Company expanding into certain categories of processed coal with higher production costs.
There was no lost time injury recorded for the first nine months of 2025, while there was a lost time injury frequency rate of 0.07 for the first nine months of 2024.
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Summary of Financial Results
Three months ended Nine months ended September 30, September 30, 2025 2025
$ in thousands, except per share information 2024 2024
$ 148,802 $ 426,958
Revenue (i) $ 143,748 $ 318,738
(143,542) (436,683)
Cost of sales (i) (111,354) (230,469) Gross profit/(loss) excluding idled mine
5,627 (8,796)
asset costs (ii) 32,544 88,529
5,260 (9,725)
Gross profit/(loss) 32,394 88,269
(699) (9,283)
Other operating expenses, net (294) (2,504)
(3,273) (9,650)
Administration expenses (3,400) (9,827)
(234) (288)
Evaluation and exploration expenses (1,003) (1,048)
1,054 (28,946)
Profit/(loss) from operations 27,697 74,890
(9,422) (27,374)
Finance costs (10,679) (30,873)
1,908 1,982
Finance income 733 379
1,100 2,724
Share of earnings of joint ventures 133 2,021
257 (50)
Share of earnings/(loss) of associates (1) 9
(1,940) (4,390)
Current income tax expenses (7,844) (26,220)
Net profit/(loss) attributable to equity holders
(7,043) (56,054)
of the Company 10,039 20,206 $ (0.024) $ $ (0.189) $ Basic and diluted earnings/(loss) per share 0.034 0.068
(i) Revenue and cost of sales related to the Company’s Ovoot Tolgoi Mine within the Coal Division operating segment. Refer to note 3 of the condensed consolidated interim financial statements for further analysis regarding the Company’s reportable operating segments.
(ii) A non-IFRS financial measure, idled mine asset costs represents the depreciation expense relates to the Company’s idled plant and equipment.
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Overview of Financial Results
The Company recorded a $1.1 million profit from operations for the third quarter of 2025 compared to $27.7 million profit from operations for the third quarter of 2024. The decrease was mainly due to the decreased average realised selling price and the change in product mix as the Company sold more processed coal with higher production costs.
Revenue was $148.8 million for the third quarter of 2025 compared to $143.7 million for the third quarter of 2024. The financial results were impacted by increased sales volume, as a result of expansion of its sales network, diversification of its customer base and expansion of the categories of coal products in its portfolio.
Cost of sales was $143.5 million for the third quarter of 2025 compared to $111.4 million for the third quarter of 2024. The increase in cost of sales was mainly due to increased sales volume, the Company expanding into certain categories of processed coal with higher production costs and more sales were made to a farther destination with higher transportation cost.
Cost of sales consists of operating expenses, share-based compensation expense, equipment depreciation, depletion of mineral properties, royalties and idled mine asset costs. Operating expenses in cost of sales reflect the total cash costs of product sold (a Non-IFRS financial measure, refer to “Non-IFRS Financial Measures” section of this press release for further analysis) during the quarter.
Three months ended September 30, 2025
$ in thousands 2024
$ 122,688
Operating expenses $ 90,046
11,149
Depreciation and depletion 5,451
9,338
Royalties 15,707
| Cost of sales from mine operations | $ | 143,175 $ | 111,204 |
| Cost of sales related to idled mine assets | 367 | 150 | |
| Cost of sales | $ | 143,542 $ | 111,354 |
Operating expenses in cost of sales were $122.7 million for the third quarter of 2025 compared to $90.0 million for the third quarter of 2024. The overall increase in operating expenses was due to the Company expanding into certain categories of processed coal with higher production costs and more sales were made to a farther destination with higher transportation cost.
Cost of sales related to idled mine assets for the third quarter of 2025 included $0.4 million related to depreciation expenses for idled equipment (third quarter of 2024: $0.2 million).
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Other operating expenses were $0.7 million for the third quarter of 2025 (third quarter of 2024: $0.3 million).
Three months ended September 30, 2025
$ in thousands 2024
$ 1,950
Management fee $ 1,942 Provision/(reversal of provision) for doubtful trade and other receivables (9)
(290)
Foreign exchange gain, net (1,562) Loss on disposal of items of property, plant and equipment, net –
(963)
Reversal of impairment loss on materials and supplies inventories (12)
(1)
Gain on contract offsetting arrangement (65)
Other operating expenses, net $ 699 $ 294
Administration expenses were $3.3 million for the third quarter of 2025 as compared to $3.4 million for the third quarter of 2024.
Three months ended September 30,
| $ in thousands | 2025 | 2024 | |
| Corporate administration | $ | 629 $ | 1,135 |
| Legal and professional fees | 805 | 527 | |
| Salaries and benefits | 1,774 | 1,634 | |
| Depreciation | 65 | 104 | |
| Administration expenses | $ | 3,273 $ | 3,400 |
The Company continued to minimise evaluation and exploration expenditures in the third quarter of 2025 in order to preserve the Company’s financial resources. Evaluation and exploration activities and expenditures in the third quarter of 2025 were limited to ensuring that the Company met the Mongolian Minerals Law requirements in respect of its mining licenses.
Finance costs were $9.4 million and $10.7 million for the third quarter of 2025 and 2024 respectively, which primarily consisted of interest expense on the $250.0 million Convertible Debenture.
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For the nine months ended September 30, 2025
The Company recorded a $28.9 million loss from operations in the first nine months of 2025 compared to a $74.9 million profit from operations in the first nine months of 2024. The financial results were negatively impacted by the decreased average realised selling price, the change in product mix as the Company sold more processed coal with higher production costs, and an impairment loss on coal stockpiles of $12.3 million was recorded during the second quarter of 2025.
Revenue was $427.0 million in the first nine months of 2025 compared to $318.7 million in the first nine months of 2024. The financial results were impacted by increased sales volume, as a result of expansion of its sales network, diversification of its customer base and expansion of the categories of coal products in its portfolio.
Cost of sales were $436.7 million in the first nine months of 2025 compared to $230.5 million in the first nine months of 2024, as follows:
Nine months ended September 30, 2025
$ in thousands 2024
$ 374,129
Operating expenses $ 182,900
–
Share-based compensation expense 18
31,766
Depreciation and depletion 11,016
29,859
Royalties 36,275
| Cost of sales from mine operations | $ | 435,754 $ | 230,209 |
| Cost of sales related to idled mine assets | 929 | 260 | |
| Cost of sales | $ | 436,683 $ | 230,469 |
Operating expenses in cost of sales were $374.1 million in the first nine months of 2025 compared to $182.9 million in the first nine months of 2024. The overall increase in operating expenses was due to the increased sales and the Company expanding into certain categories of processed coal with higher production costs.
Cost of sales related to idled mine assets in the first nine months of 2025 included $0.9 million related to depreciation expenses for idled equipment (first nine months of 2024: $0.3 million).
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