SouthGobi provides bi-weekly status report
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May 29, 2020
SouthGobi provides bi-weekly status report
VANCOUVER – SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) (“SouthGobi” or the
“Company”) provides this bi-weekly default status report in relation to the management cease
trade order dated May 15, 2020 (“ MCTO”) granted by the British Columbia Securities
Commission (“ BCSC”) pursuant to National Policy 12 -203 - Cease Trade Orders for
Continuous Disclosure Defaults ("NP 12-203").
As disclosed in its announcements dated May 12, 2020 and May 17, 2020, the Company was
advised by its external auditors (the “Auditors”) that they were unable to render an unmodified
opinion on the Company’s annual consolidated financial statements for the y ear ended
December 31, 2019 (the “2019 Financial Statements”) prior to the filing deadline of May 14,
2020, as they have not obtained sufficient evidence to support management’s going concern
assumptions due in part to the impact of the COVID-19 pandemic. As a result, the Company
was not able to file: (i) the 2019 Financial Statements, the accompanying Management
Discussion & Analysis and its 2019 Annual Information Form (collectively, the “ 2019 Annual
Filings”) by the filing deadline of May 14, 2020; and ( ii) its interim consolidated financial
statements for the three month period ended March 31, 2020 and accompanying Management
Discussion & Analysis (collectively, the “ 2020 Interim Filings”) by the filing deadline of May
15, 2020.
The Company continues to have discussions with the Auditors and to attempt to obtain and
provide them sufficient evidence to support management’s going concern assumptions for the
2019 Financial Statements. The Company is also working to explore different alternatives in
relation to the 2019 Financial Statements. However, the Company expects that it is unlikely
that it will be able to file the 2019 Annual Filings and 2020 Interim Filings prior to the expiry of
the MCTO (i.e. June 15, 2020).
If the 2019 Annual Filings and 2020 Interim Filings are not filed on or before June 15, 2020, it
is anticipated that the BCSC will issue a general “failure to file” cease trade order (“ CTO”)
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shortly after the expiry of the MCTO to prohibit the trading by any person of any securities of
the Company, including trades in the Company’s common shares made through the TSX. The
CTO will remain in place until such time as the 2019 Annual Filings and 2020 Interim Filings
are filed by the Company. While the CTO is in effect, the TSX may elect to place the Company
under remedial delisting review. If the Company is placed on remedial delisting review, there
can be no assurances that the Company will be able to successfully demonstrate compliance
with TSX listing requirements and maintain its listing on the TSX. The CTO or a delisting
from the TSX will have a significant adverse impact on the liquidity of the Company’s
common shares and shareholders of the Company may suffer a significant decline or
total loss in value of its investment in the Company’s common shares as a result.
As previously disclosed in its announcement dated April 28, 2020, the Ceke Port of the
Mongolian-Chinese border was reopened on March 28, 2020 for coal export on a trial basis,
with a limit imposed on the total volume of coal that is permitted to be exported during the trial
period. The Company’s coal export from May 1 to May 28, 2020 amounted to approximately
0.17 million tonnes, an increase of approximately 70% from the same period in April 2020.
In order to preserve its working capital, the Company has suspended the coal mining
operations from February 11, 2020, but in the meantime, the Company is continuing its coal
blending operations. The Company anticipates that its existing coal inventories are sufficient
to satisfy expected sales demand for a period of at least two months as of the date hereof.
The Company has finalized a repayment agreement with one of its biggest suppliers in
Mongolia and is discussing repayment agreements with other suppliers. The Company is also
in the process of finalizing a one-year extension of an existing bank loan in Mongolia to May
2021.
The Company confirms that (i) there have been no material changes to the information set out
in the announcement dated May 12, 2020 that has not been generally dis closed; (ii) there
have been no failures by the Company in fulfilling its stated intentions with respect to satisfying
the provisions of the alternative information guidelines under NP 12 -203; (iii) there has been
no other, or anticipated, specified default under NP 12-203 concerning the Company; and (iv)
there is no other material information concerning the affairs of the Company that has not been
generally disclosed. The Company will continue to comply with the provisions of the alternative
information guidelines under NP 12-203 by filing bi-weekly default status reports in the form
of news releases for so long as the MCTO remains in effect.
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The Company will continue to take active steps to address the going concern issues raised by
the Auditors and explore available options to attempt to obtain an unmodified opinion on the
2019 Financial Statements. The Company will make further announcements with respect to
the status of the 2019 Annual Filings as and when appropriate.
SHAREHOLDERS OF THE COMPANY AND POTENTIAL INVESTORS ARE ADVISED TO
EXERCISE CAUTION WHEN DEALING IN THE SECURITIES OF THE COMPANY.
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. 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