SouthGobi Resources
| Company type | Public |
|---|---|
| Industry | Coal mining |
| Founded | 2002 |
| Headquarters | Canada |
Area served | Mongolia |
| Products | Coal |
SouthGobi Resources is a Canadian coal mining enterprise publicly traded on both the Hong Kong Stock Exchange and the Toronto Stock Exchange. Its key holdings consist of a coal mine and exploration projects situated in Mongolia.
An attempted acquisition in 2012 by a Chinese state-owned mining corporation was blocked due to resource nationalism policies within Mongolia. This governmental intervention set off a series of developments that contributed to a prolonged downturn in Mongolia’s economy during the decade. The Mongolian government swiftly introduced an investment review law which was soon repealed; this temporary legislation caused hesitation among foreign investors in a market that had previously drawn significant interest from emerging economies.
After the failed takeover, SouthGobi’s fortunes declined sharply in tandem with the Mongolian economy, losing 98% of its peak market value of C$3 billion by 2015.
Corporate affairs
SouthGobi is listed on the Hong Kong Stock Exchange (HKEX: 1878) and the Toronto Stock Exchange (TSX: SGQ). According to the 2018 annual report, its main shareholders include the China Investment Corporation holding 23.8%, Novel Sunrise owning 17.0%, and Voyage Wisdom with 9.5%. Novel Sunrise is wholly controlled by China Cinda Asset Management. Both China Investment Corporation and China Cinda Asset Management are state-owned enterprises under the Chinese central government.
Early history
Established in 2002, SouthGobi became publicly listed on the Toronto Stock Exchange in 2007 and later on the Hong Kong Stock Exchange in 2010.
In 2009, SouthGobi issued a $500 million convertible debenture financed by the China Investment Corporation. By March 2010, $250 million of this debenture was converted into common shares, reducing Ivanhoe Mines’ (which later became Turquoise Hill Resources) ownership to 57.6%.
Blocked Chalco sale
By 2012, under the influence of its largest shareholder Rio Tinto, Ivanhoe Mines aimed to divest non-core assets, including SouthGobi. Ivanhoe sought to sell its 57.6% stake to Aluminum Corporation of China Limited (Chalco) for $889 million. However, Chalco retracted its bid in September 2012 due to anticipated difficulties securing approval from the Mongolian government.
This resistance stemmed from strong resource nationalism within Mongolia, which opposed majority ownership by foreign state-owned enterprises in mining operations. During this period, the Mongolian authorities also targeted SouthGobi with license suspensions and legal proceedings against company staff. In October 2012, chief legal counsel Sarah Armstrong was detained amid bribery accusations directed at company management. The Mongolian anti-corruption agency conducted raids at SouthGobi’s headquarters. In May 2013, executive Justin Capla was convicted and sentenced to five years imprisonment; he was later pardoned by President Tsakhiagiin Elbegdorj in February 2015.
Fallout from Chalco sale failure
The Mongolian government’s stringent measures against SouthGobi prevented the Chalco transaction but also deterred foreign investment, leading to a sustained decline in capital inflows to Mongolia after 2012.
Following the blocked acquisition, SouthGobi’s market value dramatically dropped from its peak of CAD 3 billion in 2012.
In March 2015, Novel Sunrise Investments—a private Chinese company affiliated with the Novel Group—became SouthGobi’s largest shareholder and appointed three representatives to its board. Novel Sunrise also purchased shares in Turquoise Hill Resources, another investor in SouthGobi.
In January 2020, SouthGobi LLC contributed 80 million MNT to Manidbadar General Education School located in Noyon soum, Umnugovi province.
In June 2021, SouthGobi’s CEO was awarded Mongolia’s Medal of Friendship, while the firm’s Vice President of Public Relations received recognition as an "Honored Lawyer of Mongolia."
Operations
The firm manages the Ovoot Tolgoi Mine and is advancing development initiatives at both the Soumber and Zag Suuj Deposits.