SouthGobi Resources’ Mongolian subsidiary SouthGobi Sands (SGS) has launched an investment dispute against the Mongolian government, citing the Mineral Resources Authority failed to execute its pre-mining agreements covering the Zag Suuj and Soumber coal deposits.  1

SGS says it has exhausted all other possible means to resolve the dispute. The official filing of the investment dispute is under the Bilateral Investment Treaty (BIT) between Singapore and Mongolia, and will trigger a requirement for the Mongolian Government to resolve the dispute through negotiations within six months.

The company’s vice president of investor relations Dave Bartel says, “If the negotiations are not successful, SGS will be entitled to commence conciliation/arbitration proceedings under the auspices of the International Centre for Settlement of Investment Disputes (ICSID) pursuant to the BIT. In the event that the Mongolian Government fails to negotiate, ICSID arbitration proceedings may be accelerated before the six months have expired.”

SGS holds valid permit mining applications across the areas under dispute. The Soumber coal deposit is about 45km north of the Mongolia-China border.

An extensive drill program at the site last year focused on increasing both the confidence in the resource and the extent of the deposit eastward. The company intends to further define the deposit with continued exploration work while also substantially advancing the feasibility and planning for a mine at Soumber. It is estimated to contain 137 million tonnes of measured and indicated bituminous coal. A further 83 million tonnes of inferred coal was announced in January.

An inaugural 17 million tonne indicated coal reserve was announced at the new Zag Suuj deposit earlier this year, coupled with a 66 million tonne inferred resource. Zag Suuj is about 150km east of the company’s flagship Ovoot Tolgoi complex, within the Ovoot Khural basin.

SouthGobi is focused on exploration and development of its Permian-age metallurgical and thermal coal deposits in Mongolia’s South Gobi region. Ovoot Tolgoi produces and sells coal to customers in China which is the world’s largest coal consumer. The company also plans to supply a wide range of coal products to markets in Asia.

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