SouthGobi says license worries cloud price, sales forecast

Tue Jun 26, 2012 9:32am EDT
 
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(Reuters) - Coal miner SouthGobi Resources Ltd SGQ.TO 1878.HK said uncertainty over its licenses in Mongolia is making it difficult to estimate sales volumes and pricing for the year.

The Canadian miner has been facing uncertainties over its licenses and its proposed takeover by Chinese aluminum giant Chalco (601600.SS: Quote) (2600.HK: Quote).

The Mineral Resources Authority of Mongolia in April requested suspension of exploration and mining activity on certain licenses but the company has not received any official notification so far, SouthGobi said.

"Many government bodies and regulatory authorities in Mongolia are reluctant to provide approvals and permits due to the uncertain position," the company said in a statement.

Lack of clarity has also dampened customer sentiment in the current quarter and many are reluctant to enter into new purchase commitments, the company said.

The Mongolian parliament had also rushed through a new law aimed at controlling foreign ownership of "strategic" sectors, a law believed to have been drawn up to prevent Chalco from acquiring a majority stake in SouthGobi.

Chalco in April agreed to pay $926 million for a controlling stake in SouthGobi in a deal with mining billionaire Robert Friedland's Ivanhoe Resources.

Shares of SouthGobi, which has a market value of C$980 million, closed at C$5.40 on Monday on the Toronto Stock Exchange.

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila)