SouthGobi provides bi-weekly status report
May 29 2020 - 7:48AM
SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878)
(“
SouthGobi” or the “
Company”)
provides this bi-weekly default status report in relation to the
management cease trade order dated May 15, 2020
(“
MCTO”) granted by the British Columbia
Securities Commission (“
BCSC”) pursuant to
National Policy 12-203 - Cease Trade Orders for Continuous
Disclosure Defaults ("
NP 12-203").
As disclosed in its announcements dated May 12,
2020 and May 17, 2020, the Company was advised by its external
auditors (the “Auditors”) that they were unable to
render an unmodified opinion on the Company’s annual consolidated
financial statements for the year ended December 31, 2019 (the
“2019 Financial Statements”) prior to the filing
deadline of May 14, 2020, as they have not obtained sufficient
evidence to support management’s going concern assumptions due in
part to the impact of the COVID-19 pandemic. As a result, the
Company was not able to file: (i) the 2019 Financial Statements,
the accompanying Management Discussion & Analysis and its 2019
Annual Information Form (collectively, the “2019 Annual
Filings”) by the filing deadline of May 14, 2020; and (ii)
its interim consolidated financial statements for the three month
period ended March 31, 2020 and accompanying Management Discussion
& Analysis (collectively, the “2020 Interim
Filings”) by the filing deadline of May 15, 2020.
The Company continues to have discussions with
the Auditors and to attempt to obtain and provide them sufficient
evidence to support management’s going concern assumptions for the
2019 Financial Statements. The Company is also working to explore
different alternatives in relation to the 2019 Financial
Statements. However, the Company expects that it is unlikely that
it will be able to file the 2019 Annual Filings and 2020 Interim
Filings prior to the expiry of the MCTO (i.e. June 15, 2020).
If the 2019 Annual Filings and 2020 Interim
Filings are not filed on or before June 15, 2020, it is anticipated
that the BCSC will issue a general “failure to file” cease trade
order (“CTO”) shortly after the expiry of the MCTO
to prohibit the trading by any person of any securities of the
Company, including trades in the Company’s common shares made
through the TSX. The CTO will remain in place until such time as
the 2019 Annual Filings and 2020 Interim Filings are filed by the
Company. While the CTO is in effect, the TSX may elect to place the
Company under remedial delisting review. If the Company is placed
on remedial delisting review, there can be no assurances that the
Company will be able to successfully demonstrate compliance with
TSX listing requirements and maintain its listing on the TSX.
The CTO or a delisting from the TSX will have a significant
adverse impact on the liquidity of the Company’s common shares and
shareholders of the Company may suffer a significant decline or
total loss in value of its investment in the Company’s common
shares as a result.
As previously disclosed in its announcement
dated April 28, 2020, the Ceke Port of the Mongolian-Chinese border
was reopened on March 28, 2020 for coal export on a trial basis,
with a limit imposed on the total volume of coal that is permitted
to be exported during the trial period. The Company’s coal export
from May 1 to May 28, 2020 amounted to approximately 0.17 million
tonnes, an increase of approximately 70% from the same period in
April 2020.
In order to preserve its working capital, the
Company has suspended the coal mining operations from February 11,
2020, but in the meantime, the Company is continuing its coal
blending operations. The Company anticipates that its existing coal
inventories are sufficient to satisfy expected sales demand for a
period of at least two months as of the date hereof. The Company
has finalized a repayment agreement with one of its biggest
suppliers in Mongolia and is discussing repayment agreements with
other suppliers. The Company is also in the process of finalizing a
one-year extension of an existing bank loan in Mongolia to May
2021.
The Company confirms that (i) there have been no
material changes to the information set out in the announcement
dated May 12, 2020 that has not been generally disclosed; (ii)
there have been no failures by the Company in fulfilling its stated
intentions with respect to satisfying the provisions of the
alternative information guidelines under NP 12-203; (iii) there has
been no other, or anticipated, specified default under NP 12-203
concerning the Company; and (iv) there is no other material
information concerning the affairs of the Company that has not been
generally disclosed. The Company will continue to comply with the
provisions of the alternative information guidelines under NP
12-203 by filing bi-weekly default status reports in the form of
news releases for so long as the MCTO remains in effect.
The Company will continue to take active steps
to address the going concern issues raised by the Auditors and
explore available options to attempt to obtain an unmodified
opinion on the 2019 Financial Statements. The Company will make
further announcements with respect to the status of the 2019 Annual
Filings as and when appropriate.
SHAREHOLDERS OF THE COMPANY AND
POTENTIAL INVESTORS ARE ADVISED TO EXERCISE CAUTION WHEN DEALING IN
THE SECURITIES OF THE COMPANY.
If there is any inconsistency or discrepancy
between the English version and the Chinese version, the English
version shall prevail.
About SouthGobi
SouthGobi, listed on the Toronto and Hong Kong
stock exchanges, owns and operates its flagship Ovoot Tolgoi coal
mine in Mongolia. SouthGobi produces and sells coal to
customers in China.
Contact:
Investor Relations
Kino Fu
Office: +852 2156 7030 (Hong Kong)
+1 604 762 6783 (Canada)
Email: kino.fu@southgobi.com
Website: www.southgobi.com
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