Construction of a new paved highway linking the Ovoot Tolgoi mining complex to the Mongolia-China border has commenced, with the 15 year project tender awarded to SouthGobi Resources’ subsidiary RDCC.  1

The highway will secure an efficient coal transport route from SouthGobi’s flagship mining complex in southern Mongolia to the Shivee Khuren border crossing. It will have an intended annual carrying capacity in excess of 20 million tonnes of coal upon completion.

SouthGobi’s president Alexander Molyneux says, “The new paved coal highway will significantly increase the safety of coal transportation to the border, reduce dust, and improve efficiency and capacity of coal transportation.”

RDCC’s tender is with the State Property Committee of Mongolia, to not only build the highway, but operate the new road as well.

SouthGobi has recently announced massive resources and reserves increases at its flagship Ovoot Tolgoi coal complex in southern Mongolia, with an updated NI 43-101 measured and indicated resource of 302.3 million tonnes.

The Ovoot Tolgoi complex is spread across two separate resource areas known as the Sunrise and Sunset fields, 320km southwest of the provincial capital and about 40km north of the China-Mongolia border, making it the closest Mongolian coal resource to China.

Meantime, the company is working to overcome the impact of external factors on its Mongolian operations including regulatory issues and deteriorating market conditions.

Uncertainty regarding the April suspension of exploration and mining activity in Mongolia by the Mineral Resources Authority has impacted SouthGobi’s subsidiary which has been unable to gain approval for the development of a proposed dry coal handling facility. The government is also yet to clarify a renewed Ovoot Tolgoi license.

SouthGobi says given the obstacles for its mining operations, production volume outcomes cannot be estimated for 2012, and it has since suspended uncommitted capital and exploration expenditure to preserve the company’s financial reserves.

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