Update on interest payment obligations to CIC

May 21, 2018

Update on interest payment obligations to CIC

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

the “Company”) announces today that pursuant to the convertible debenture between

China Investment Corporation ( “CIC”) and the Company signed in November 2009

(the “ Convertible Debenture ”) and the deferral agreement between CIC and the

Company executed on June 12, 2017 (the “ June 2017 Deferral Agreement”), total

interest payments and associated fees which were due and payable t o CIC on May

19, 2018 amounted to US$30.3 million (“ Outstanding Interest Payable ”). The

Outstanding Interest Payable consists of:

(i) cash interest payments and associated fees in the agg regate amount of

US$26.3 million (“Outstanding Cash Interest Payable”); and

(ii) US$4.0 million worth of PIK interest shares (“ PIK Interest Shares”) which the

Company is obliged to issue to CIC pursuant to the Convertible Debenture.

As of the date of this announcement, the Company has neither paid the Outstanding

Cash Interest Payable nor issued the PIK Interest Shares to CIC as provided for under

the Convertible Debenture, and has not agreed upon a repayment plan for such

amounts with CIC. Consequently, the Company is in default under the Convertible

Debenture and the June 2017 Deferral Agreement.

Pursuant to the terms of the Convertible Debenture and the June 2017 Deferral

Agreement, CIC may, at its discretion, provide notice to the Company and declare all

principal, interest and other amounts owing under the Convertible Debenture and the

June 2017 Deferral Agreement immediately due and payable, and take steps to

enforce payment thereof, which would have a material adverse effect on the business

and operations of the Company and may negatively affect the price and volatility of

the Common Shares and any investment in such shares could suffer a significant

decline or total loss in value.

As of the date of this press release, the Company has received no indication from CIC

of any intention to deliver a notice of default under the Convertible Debenture and the

June 2017 Deferral Agreement or to accelerate the amounts outstanding under the

Convertible Debenture and the June 2017 Deferral Agreement.

The Company is in discussions with CIC in relation to a repayment plan for the

Outstanding Interest Payable. While the Company believes that an agreement will be

reached, there is no assurance that an agreement will be concluded on terms

favourable to the Company or at all . In such event, the value of the Company’s

Common Shares could be materially and negatively affected. As a result, shareholders

of the Company and potent ial investors are advised to exercise extra caution when

dealing in securities of the Company.

The Comp any will provide further updates of the status of the interest payment

obligations and discussions with CIC as appropriate.

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

Email: [email protected]

Website: www.southgobi.com