SouthGobi Announces Remedial Actions and Preventative Measures in Furtherance of its Trading Resumption Plan
April 30, 2019
SouthGobi Announces Remedial Actions and Preventative
Measures in Furtherance of its Trading Resumption Plan
VANCOUVER – SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) (“SouthGobi” or the
“Company”) announces that, further to its press release dated March 30, 2019 in which the
Company announced the key findings of the independent investigation (the “ Independent
Investigation”) conducted by the special committee of indep endent non-executive directors of
the Company (the “ Special Committee ”) and its trading resumption plan (the “ Trading
Resumption Plan ”), the Special Committee , with the assistance of Ernst & Young (China)
Advisory Limited who served as forensic investigators in connection with the Independent
Investigation, has completed its assessment of the potential remedial actions and preventative
measures to improve and strengthen the Company’s commitment to a culture of honesty, integrity
and accountability and compliance with the highest standards of professional and ethical conduct.
The Special Committee delivered its report setting out a set of recommended remedial actions
and preventative measures (the “Remedial Actions and Preventative Measures”) to the board
of directors of the Company (the “ Board”), which was approved at a meeting held on April 28,
2019.
The Remedial Actions and Preventative Measures set out below are intended to remediate the
incidents identified in the Independent Investigation and address deficiencies in the
implementation of the Company’s existing practices and procedures. Issues identified of note for
the purposes of such remediation in clude a lack of preventative measures to avoid conflicts of
interests, the need for additional employee oversight and the need to enhance compliance with
accounting protocols and documentation retention.
The Company has already taken proactive steps to add ress some of the issues raised by the
Independent Investigation, including but not limited to: ceasing business activities with companies
allegedly controlled by the Company’s former management, taking steps to defend claims by third
parties attempting to link the Company to the aforementioned companies, and considering
whether legal recourse, such as collection actions, can be taken in respect of certain matters.
The following is a summary of the Remedial Actions and Preventative Measures which were
adopted and approved by the Board:
Recommendation Key Remedial and Preventative
Objective(s)
Enhance the Company’s anti -fraud
program, including establishing an
internal audit function, conducting
routine internal audits and developing
a communication and training
program for employees to effectively
establish a culture of compliance
within the Company, ensure existing
policies (such as the whistleblower
policy) work effectively and support
the implementation of the Remedial
Actions and Preventative Measures
Enhance employee oversight
Limit likelihood of conflicts of interest
Proper document retention and
accounting protocols
Enhance “know your customer”
procedures relating to the intake of
new customers and/or granting of
credit to customers
Limit likelihood of conflicts of interest
Proper document retention and
accounting protocols
Enhance vendor due diligence and
monitoring processes to screen third
parties
Limit likelihood of conflicts of interest
Proper document retention and
accounting protocols
Formalize a process to perform
routine reconciliation of balances with
customers and/or suppliers on a
regular basis
Limit likelihood of conflicts of interest
Proper document retention and
accounting protocols
Enhance the Company’s Financial
Delegation of Authority document
relating to payment authorization and
contract approval processes
Limit likelihood of conflicts of interest
Proper document retention and
accounting protocols
Enhance controls around the use of
commercial bills
Limit likelihood of conflicts of interest
Proper document retention and
accounting protocols
Introduce segregation of employment
duties
Limit likelihood of conflicts of interest
Enhance the standardization of
human resources process and
controls across different locations
Limit likelihood of conflicts of interest
Proper document retention and
accounting protocols
Ensure IT back up and document
retention protocols, including
employee return of Company -issued
devices and subsequent archiving
Enhance employee oversight
Proper document retention
Monitor the implementation of the
Remedial Actions and Preventative
Measures by establishing a special
task force, comprised of managers of
the Company’s various business units
and members of the internal audit
function, which will be tasked with this
responsibility, and will consider the
engagement of third party experts to
conduct a review of the results of the
implementation and advise on further
enhancements if necessary
Enhance employee oversight
Limit the like lihood of conflicts of
interest
Proper document retention and
accounting protocols
Management is committed to remediating the issues which caused the Trading Suspension in a
timely manner and will begin implementing the Remedial Actions and Preventative Measures as
soon as practicable. Once the Remedial Actions and Preventative Measures have been
implemented, the Company will make a further announcement as to the results of the
implementation of the Remedial Actions and Preventative Measures and the steps that the
Company intends to take to apply for trading resumption on the HKEX and the TSX.
Continued Suspension of Trading in the Common Shares
Trading in the common shares of the Company on the HKEX and the TSX has been suspended
since Dece mber 17, 2018, and will remain suspended until further notice. Pursuant to Rule
6.01A(1) of the Listing Rules, the Hong Kong Stock Exchange may cancel the listing of any
securities that have been suspended from trading for a continuous period of 18 months. In the
case of the Company, this 18 -month period expires on June 16, 2020. The HKEX has advised
that unless the Company: (i) remedies the issues causing the trading suspension; (ii) fully
complies with the Listing Rules to the HKEX’s satisfaction; and (iii) resumes trading of its common
shares on the HKEX by June 16, 2020, the Listing Department of the Hong Kong Stock Exchange
will recommend that the Company’s listing on the HKEX be cancelled. Pursuant to Listing Rules
6.01 and 6.10, the HKEX also has the right to impose a shorter specific remedial period, where
appropriate.
The Company will make additional announcements if and when there are further material
developments in relation to the Trading Resumption Plan, and, in any event, every three months
until the HKEX either permits resumption of trading in the Company’s common shares or cancels
the Company’s listing on the HKEX (whichever is earlier).
Forward-Looking Statements
Certain information included in this news release that is not current or historical factual information
constitutes forward-looking statements or information within the meaning of applicable securities
laws (collectively, “forward -looking statements)”, including the implementation of the Remedial
Actions and Preventative Measur es and the formation of a special task force to monitor the
implementation progress . Forward -looking statements are frequently characterized by words
such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, "could", "should", "seek",
"likely", "estimate" and other similar words or statements that certain events or conditions “may”
or “will” occur. Forward -looking statements are based on certain factors and assumptions
including, among other things, the Company’s ability to implement t he Remedial Actions and
Preventative Measures in a timely manner, the effectiveness of the Remedial Actions and
Preventative Measures in addressing the issues which caused the Trading Suspension and other
similar factors that may cause actual results to differ materially from what the Company currently
expects. Actual results may vary from the forward-looking statements. Readers are cautioned not
to place undue importance on forward -looking statements, which speaks only as of the date of
this disclosure, and should not rely upon this information as of any other date. While the Company
may elect to, it is under no obligation and does not undertake to, update or revise any forward -
looking statements, whether as a result of new information, further events or otherwise at any
particular time, except as required by law. Additional information concerning factors that may
cause actual results to materially differ from those in such forward-looking statements is contained
in the Company's filings with Canadian securities reg ulatory authorities and can be found under
the Company’s profile on SEDAR at www.sedar.com.
If there is any inconsistency or discrepancy between the English version and the Chinese version,
the English version shall prevail.
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 licences of its other metallurgical
and thermal coal deposits in South Gobi Region of Mongolia. SouthGobi produces and sells coal
to customers in China.
Contact:
Investor Relations
Kino Fu
Office: +852 2156 7030 (Hong Kong)
+1 604 762 6783 (Canada)
Email: [email protected]
Website: www.southgobi.com