Receipt of Lawsuit Notice from a Fuel Supplier

January 20, 2017

Receipt of Lawsuit Notice from a Fuel Supplier

HONG KONG – SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) (“SouthGobi” or the

“Company”) announces that SouthGobi Sands LLC ("SGS"), a subsidiary of the Company, has

received a lawsuit notice from the Khan-Uul District Civil Court of First Instance in Mongolia (the

"Court") in relation to a claim from Magnai Trade LLC (" MT"), a fuel supplier of SGS, of

MNT 22.2 billion (approximately US$ 8.9 million) consisting of MNT 14.6 billion of outstanding

fuel supply payments and MNT 7.6 billion of late payment penalty and associated interest costs.

SGS strongly disputes the amount claime d by MT in the proceedings and has filed an

application with the Court to dismiss the litigation, on the basis that if the dispute cannot be

amicably resolved, it must be settled by arbitration in Mon golia, rather than litigation, in

accordance with the ex press provisions of the fuel supply agreement between SGS and MT

(the “Agreement”).

SGS and MT have been in discussions to resolve the outstanding balance of the fuel supply

payment and SGS made a partial payment to MT in December 2016. While there can be no

assurance that the dispute can be resolved on terms favourable to the Company, SG S values

its business relationship with MT and proposes to resolve this dispute with MT through

continuing business discussions, or, if a resolution cannot be reached, through arbitration

pursuant to the provisions of the Agreement.

About SouthGobi

SouthGobi, listed on the Toronto and Hong Kong stock exchanges, owns and operates its

flagship Ovoot Tolgoi coal mine in Mongolia. It also holds the mining and exploration licences

of its other metallurgical and thermal coal deposits in South Gob i Region of Mongolia.

SouthGobi produces and sells coal to customers in China.

Contact:

Investor Relations

Kino Fu

Office: +852 2156 7030

Email: [email protected]

Website: www.southgobi.com