After agreeing to an extension of the closing date of a private placement agreement between SouthGobi Resources and CITIC Merchant Co until July 20, CITIC has now advised that it will not be subscribing for shares. Expected gross proceeds from the placement were to have been US$28.7 million.
Conditions precedent to the signed private placement agreement have not been fulfilled.
SouthGobi says it is in ongoing discussions with CITIC Merchant with regard to a private placement, and also continues to actively seek additional sources of financing to continue operating and meet its objectives. These possible sources include, but are not limited to, coal offtake agreements, an interim loan and a revolving loan.
Meanwhile, the Toronto Stock Exchange has advised SouthGobi that it has granted an extension of the delisting review. A meeting of the Listings Committee of TSX is scheduled to be held on July 27 and their decision is expected no later than July 29.
In regards to the China Investment Corporation (CIC) Convertible Debenture, in May SouthGobi obtained a deferral to July 22 of the cash interest payment of approximately $7.9 million due on the debenture. In accordance with the terms of the deferral, the payment date is subject to a three-day cure period which expires on July 27.
In the event that SouthGobi fails to pay the May 2015 cash interest instalment within the cure period which expires on July 27, this would result in an event of default under the CIC Convertible Debenture and CIC would have the right to declare the full principal and accrued interest owing thereunder immediately due and payable, which could result in voluntary or involuntary proceedings involving SouthGobi. The company is in active discussions with CIC for its continued support.
SouthGobi is focused on exploration and development of its metallurgical and thermal coal deposits in Mongolia’s South Gobi region. It has a 100% shareholding in SouthGobi Sands LLC, a Mongolian registered company that holds the mining and exploration licences in Mongolia and operates the Ovoot Tolgoi coal mine.