UPDATE 1-Coal miner SouthGobi warns of debt default; shares tank

Mon Mar 24, 2014 2:32pm EDT
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(Adds details from statement, background, share movement)

March 24 (Reuters) - SouthGobi Resources Ltd , a Canadian coal miner with operations in Mongolia, said it could default on a debt repayment and was looking to raise money, sending its shares down as much as 29 percent in afternoon trading.

The company, controlled by Rio Tinto Plc through its unit Turquoise Hill Resources Ltd, also reported a bigger quarterly loss, mainly due to impairment charges.

A delay in securing additional financing could result in a default of $250 million debentures held by China Investment Corp, SouthGobi said in a statement on Monday.

SouthGobi shares plunged to 52 Canadian cents in afternoon trading, making it one of the biggest percentage losers on the Toronto Stock Exchange.

The company had working capital - the difference between current assets and liabilities - of $41.7 million as of Dec. 31, compared with $120.4 million a year earlier. As of March 24, the company had $10 million cash on hand.

SouthGobi said it expects liquidity problems to continue and margins to remain weak as coal prices are likely to stay anemic in China this year, echoing U.S. rivals such as Alpha Natural Resources and Arch Coal Inc.

Producers of metallurgical, or steelmaking, coal have been hit by weak demand amid slowing growth in China.

SouthGobi is being investigated by Mongolia's Independent Authority Against Corruption (IAAC) and State Investigation Office (SIA) for possible breaches of anti-corruption, money laundering and taxation laws.   Continued...