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Update on Hong Kong Arbitration Proceeding

 VANCOUVER – SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) (“SouthGobi” or the “Company“) announces the receipt on January 10, 2018 of a confidential partial award (final except as to costs) (“Arbitration Award“) with respect to an arbitration proceeding in Hong Kong related to a dispute concerning a coal supply agreement between SouthGobi Sands LLC (“SGS“), a subsidiary of the Company, and First Concept Industrial Group Limited (formerly known as First Concept Logistics Limited) (“First Concept“). For details of the background of this arbitration proceeding, please refer to the Company’s Management’s Discussion and Analysis for the quarter ended September 30, 2017 and, in particular, the section under the heading “Commercial Arbitration in Hong Kong”, which is available on the SEDAR website at www.sedar.com and on the website of the Hong Kong Stock Exchange at www.hkexnews.hk. 

Pursuant to the Arbitration Award, SGS has been ordered to repay the sum of US$11.5 million (which SGS had received as a prepayment for the purchase of coal) to First Concept, together with accrued interest at a simple interest rate of 6% per annum from the date which the prepayment was made until the date of the Arbitration Award, and then at a simple interest rate of 8% per annum until full payment. The Arbitration Award is final, except as to costs which have been reserved for a future award.

The Company is currently considering and reviewing its options with respect to the Arbitration Award, including exploring ways to work together with First Concept on payment arrangements that are practical to and are in best interests of both parties. In any event, if SGS fails to satisfy the Arbitration Award, First Concept may apply to enforce the Arbitration Award against SGS through judicial measures in courts of Mongolia or in other applicable jurisdiction(s). The Company will provide further updates on the status of this matter as appropriate.


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