SOUTHGOBI Resources has filed a technical report in respect of an updated resource estimate for its Ovoot Tolgoi coal mine in Mongolia. The report, prepared by RungePincockMinarco, supports the scientific and technical disclosures in which SouthGobi revealed updated resources of 170 million tonnes of indicated resources and 78 million tonnes of inferred resources.

The new estimate compares to the 2012 estimate of 133 million tonnes of measured resources, 60 million tonnes of indicated resources and 24 million tonnes of inferred resources estimated.

The criteria used to limit the resources are:

  • Minimum coal thickness of 0.3 metres, the same as in previous estimates;
  • Minimum coal parting of 0.2 metres, previous estimates used 0.3 metres;
  • Base of weathering is 4 metres, the same as previously;
  • Resources are limited to a depth of 350 metres;
  • Volumes are converted to tonnages using laboratory relative density analytical results converted to an estimated in-situ basis;
  • Resources are limited to the mining licence boundary;
  • The resource estimations are on an in-situ basis - as an in-situ tonnage and not adjusted for mining losses or recovery; and
  • Resources depleted by mined out tonnage as of January 1, 2015. Mined out surfaces are based on survey data from January 27, 2015 for the Sunrise Field and November 19, 2014 for the Sunset Field. No mining has taken place since the survey information was collected that would affect the resources estimate.

SouthGobi, which is listed on the Toronto and Hong Kong stock exchanges, owns and operates the Ovoot Tolgoi coal mine. It also holds the mining and exploration licences of other metallurgical and thermal coal deposits in the South Gobi Region.

Like other coal companies, SouthGobi has been hit hard by the current coal downturn and on May 30 announced an agreement with China Investment Corporation (CIC) for deferral of approximately US$18.7 million, representing current and deferred cash interest obligations and associated costs payable to CIC, to June 17, 2016.

As consideration for the deferral, the company agreed to pay CIC a deferral fee at a rate of 6.4% per annum on the deferred payments. While SouthGobi believes it will be able to reach a new repayment plan with CIC by June 17, there is no assurance that the plan will be favourable to the company.

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