CIC CI Canadian Banks Coverd Call Income Class ETF

SouthGobi Resources Ltd. (TSX:SGQ) (HKSE:1878) ("SouthGobi" or the "Company")
announced today that it anticipates a delay in the filing of its interim
statements (the "Interim Statements") for the three and nine month periods ended
September 30, 2013 and the related Management's Discussion and Analysis ("MD&A")
and certifications by the Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO") (collectively, the "Required Filings").


The anticipated delay is a result of the decision by the Company's board of
directors today to restate the Company's financial statements for 2011 and 2012,
and consequently its comparative interim financial statements for 2013 and the
related MD&A (collectively, the "Restated Financials").


The restatement and anticipated delay in filing the Required Filings follows a
review by the Company of its prior revenue recognition practices for its coal
sales in the fourth quarter of 2010, full year 2011 and in the first half of
2012. This review has been conducted in consultation with PricewaterhouseCoopers
LLP ("PwC"), the Company's current auditors, and Deloitte LLP ("Deloitte"), the
Company's auditors during the 2010 and 2011 fiscal years.


As a result of this review, the Company has determined that certain revenue
transactions were previously recognized in the Company's consolidated financial
statements prior to meeting relevant revenue recognition criteria. These
transactions relate to coal that had been delivered to the customer's stockpile
in a stockyard located within the SouthGobi's Ovoot Tolgoi mining license area
(the "Stockyard"), the location at which title transferred, but from which the
coal had not been collected by the customers. The restatement of the Company's
consolidated financial statements will reflect a change in the point of revenue
recognition from: (A) the delivery of coal to the customer stockpiles within the
Stockyard to (B) the loading of coal onto the customer's trucks at the time of
collection.


The Company adopted new terms in its sales contracts starting in the second half
of 2012 such that title transfers when coal is loaded onto the customer's trucks
which results in the latter point of revenue recognition for all its sales
starting from the second half of 2012. Until the recent review, it was
determined that a restatement of financial statements for periods prior to the
second half of 2012 was not required. The restatement of the Company's 2011 and
2012 financials in order to reflect this change in the point of revenue
recognition will, in turn, require restatements to the comparative information
in the Company's previously filed interim financial statements for 2013.


As a result of the potentially material effects on the Company's financial
statements, the previous financial information provided by the Company in
respect of the periods to be covered by the Restated Financials are no longer
accurate and should not be relied upon.


Under National Instrument 51-102 ("NI 51-102") of the Canadian Securities
Administrators, the Required Filings should be made no later than November 14,
2013. The Company is working expeditiously with PwC and Deloitte to complete the
Required Filings and the Restated Financials as soon as possible. The Restated
Financials are expected to be available on or before January 16, 2014.


The Company will be applying to the British Columbia Securities Commission (the
"Principal Regulator") pursuant to Part 4 of National Policy 12-203 ("NP
12-203") for a Management Cease Trade Order ("MCTO") in connection with the
anticipated late filing of the Required Filings and the Restated Financials. If
issued, the MCTO will prohibit trading in securities of the Company, whether
direct or indirect, by the Company's CEO, CFO and board of directors or other
persons or companies who had, or may have had, access directly or indirectly to
any material fact or material change with respect to the Company that has not
been generally disclosed. There can be no assurance that an MCTO will be issued.



If an MCTO is not issued, or should an MCTO be issued and should the Company
thereafter fail to make the Required Filings on or before January 16, 2014, the
Principal Regulator can impose a general cease trade order ceasing all trading
in securities of the Company for such period of time as the Principal Regulator
may deem appropriate.


As part of the process described above, the Company is re-examining the
Company's internal controls over financial reporting and disclosure controls and
procedures in order to identify material weaknesses with such processes which
gave rise to the decision to prepare the Restated Financials. 


Any delay in filing the Required Filings, or the related financial statement
restatements, could ultimately result in an event of default of the Company's
convertible debenture held by China Investment Corporation ("CIC"), which if not
cured within applicable cure periods in accordance with the terms of such
debenture, may result in the principal amount owing and all accrued and unpaid
interest becoming immediately due and payable upon notice to the Company by CIC.


The Company intends to satisfy the provisions of the Alternate Information
Guidelines as set out in NP 12-203, including the requirement to file bi-weekly
status reports in the form of news releases containing prescribed updating
information, for as long as it remains in default in respect of the Required
Filings.


Other information for the third quarter of 2013

The Company achieved strong production results in the third quarter of 2013 with
production up at 1.13 million tonnes of raw coal produced and a strip ratio of
1.39 compared to 0.17 million tonnes of raw coal produced with a strip ratio of
15.55 in the second quarter of 2013.


Processing Infrastructure

On February 13, 2012, the Company announced the successful commissioning of the
dry coal handling facility ("DCHF") at the Ovoot Tolgoi Mine. The Company has
received all permits to operate the DCHF. The 2013 mine plan considered limited
utilization of the DCHF at the latter end of 2013. However there is now no plan
to use the DCHF in 2013 due to higher quality coals being mined that likely will
not require processing through the DCHF and the Company has delayed construction
to upgrade the DCHF. A review of the DCHF, and its future contribution to the
Company's product strategy, is currently ongoing. The total construction capital
investment to date is $85 million.


CIC Convertible Debenture

During the second quarter of 2013, the Company and the CIC mutually agreed upon
a three month deferral of the convertible debenture semi-annual $7.9 million
cash interest payment due on May 19, 2013. The Company and the CIC subsequently
agreed to an additional deferral of one month, and the cash interest payment
became due on September 19, 2013. 


On September 19, 2013, the Company settled the $7.9 million amount, plus
additional accrued interest of $0.2 million, as follows:




--  The Company issued 1.8 million shares to the CIC for the November 19,
    2012 1.6% share interest payment, where the number of common shares was
    based on the 50-day volume-weighted average share price on November 19,
    2012 of Cdn.$2.16; 
--  In consideration of the common share issuance, CIC applied the $4.0
    million in cash already paid by the Company in the first quarter of 2013
    for the November 19, 2012 share interest payment against the amount due
    on September 19, 2013; and 
--  The Company paid the remaining $4.1 million balance in cash. 



Liquidity and capital management

As of September 30, 2013, the Company had cash of $16.1 million compared to cash
of $19.2 million as of June 30, 2013. The Company expects to have sufficient
liquidity and capital resources to meet its ongoing obligations and future
contractual commitments for at least twelve months from the end of the September
30, 2013 reporting period. The Company expects its liquidity to remain
sufficient based on existing capital resources and estimated income from mining
operations. Estimated income from mining operations is subject to a number of
external market factors including supply and demand and pricing in the coal
industry. The Company continues to minimize uncommitted capital expenditures and
exploration expenditures in order to preserve the Company's financial resources.



Impairment analysis

Unchanged from the assessment made as of June 30, 2013, the Company determined
that an indicator of impairment existed for its Ovoot Tolgoi Mine cash
generating unit as of September 30, 2013. The impairment indicator was the
continued weakness in the Company's share price during the third quarter of 2013
and the fact that the market capitalization of the Company, as of September 30,
2013, was less than the carrying value of its net assets.


Therefore, the Company conducted an impairment test whereby the carrying value
of the Company's Ovoot Tolgoi Mine cash generating unit was compared to its
"value-in-use" using a discounted future cash flow valuation model. The
Company's Ovoot Tolgoi Mine cash generating unit carrying value was $517.5
million as of September 30, 2013.


Key estimates and assumptions incorporated in the valuation model included the
following:




--  Inland Chinese coking coal market coal prices; 
--  Life-of-mine coal production and operating costs; and 
--  A discount rate based on an analysis of market, country and company
    specific factors. 



The impairment analysis did not result in the identification of an impairment
loss and no charge was required as of September 30, 2013. The Company believes
that the estimates and assumptions incorporated in the impairment analysis are
reasonable; however, the estimates and assumptions are subject to significant
uncertainties and judgments.


Governmental, Regulatory and Internal Investigations 

The Company is subject to investigations by Mongolia's Independent Authority
against Corruption ("the IAAC") and the Mongolian State Investigation Office
(the "SIA") regarding allegations against SouthGobi and some of its former
employees. The IAAC investigation concerns possible breaches of Mongolia's
anti-corruption laws, while the SIA investigation concerns possible breaches of
Mongolia's money laundering and taxation laws. 


While the IAAC investigation into allegations of possible breaches of Mongolian
anti-corruption laws has been suspended, the Company has not received notice
that the IAAC investigation is complete. To date, four former SouthGobi
employees have been named as suspects in the IAAC investigation and are subject
to a continuing travel ban imposed by the IAAC. The IAAC has not formally
accused any current or former SouthGobi employees of breach of Mongolia's
anti-corruption laws.


The SIA has not accused any current or former SouthGobi employees of money
laundering. However, three former SouthGobi employees have been informed that
they have each been designated as "accused" in connection with the allegations
of tax evasion, and are subject to a travel ban. The Company has been designated
as a "civil defendant" in connection with the tax evasion allegations, and it
may potentially be held financially liable for the criminal misconduct of its
former employees under Mongolian Law. The Company has shown full cooperation
with the investigation by providing relevant information. The relevant
authorities are yet to conclude on this information. Accordingly, the likelihood
or consequences for the Company of a judgment against its former employees is
unclear at this time.


The SIA also continues to enforce administrative restrictions, which were
initially imposed by the IAAC investigation, on certain of the Company's
Mongolian assets, including local bank accounts, in connection with its
continuing investigation of these allegations. While the orders restrict the use
of in-country funds pending the outcome of the investigation, they are not
expected to have a material impact on the Company's activities in the short
term, although they could create potential difficulties for the Company in the
medium to long term. SouthGobi will continue to take all appropriate steps to
protect its ability to conduct its business activities in the ordinary course. 


Certain of the allegations raised by the SIA and IAAC against SouthGobi
(concerning allegations of bribery, money laundering and tax evasion) have been
the subject of public statements and Mongolian media reports, both prior to and
in connection with the recent trial, conviction, and unsuccessful appeal of the
former Chairman and the former director of the Geology, Mining and Cadastral
Department of the MRAM, and others. SouthGobi was not a party to this case. The
Company understands that the court process is now concluded following the
decision of the Supreme Court of Mongolia to uphold the convictions. As far as
the Company is aware from publicly available information, the court concluded
that the transfer of one of SouthGobi Sands LLC's licenses (5261X) involved
government officials and violated applicable Mongolian anti-corruption laws.
License 5261X was transferred to an entity nominated by MRAM, after the license
had been reinstated by MRAM for this purpose, in exchange for MRAM renewing
certain SouthGobi Sands LLC licenses (5259X, 5277X, 12388X and 9442X) that were
due to expire. As a result the court invalidated the transfer of 5261X and
cancelled the other licenses. At that time only one of the licenses at issue
(9442X) was held by SouthGobi Sands LLC, with the other licenses having earlier
been allowed to lapse when they were determined not to be prospective. The
Company considers that it was entitled under applicable law to the renewal of
the relevant licenses and that it received reasonable payment for the transfer
of license 5261X.


Through its Audit Committee (comprised solely of independent directors),
SouthGobi is conducting an internal investigation into possible breaches of law,
internal corporate policies and codes of conduct arising from the allegations
which have been raised. The Audit Committee has the assistance of independent
legal counsel in connection with its investigation. 


The Chair of the Audit Committee is also participating in a tripartite
committee, comprised of the Audit Committee Chairs of the Company and Turquoise
Hill and a representative of Rio Tinto, which is focused on the investigation of
a number of those allegations, including possible violations of anti-corruption
laws. Independent legal counsel and forensic accountants have been engaged by
this committee to assist it with its investigation. The tripartite committee
substantially completed the investigative phase of its activities during the
third quarter of 2013. The Company continues to cooperate with the IAAC, SIA and
with Canadian and United States government and regulatory authorities that are
monitoring the Mongolian investigations. It is possible that these authorities
may subsequently conduct their own review or investigation or seek further
information from the Company and until all such reviews or investigations are
complete the Audit Committee's and the tripartite committee's work may be
considered ongoing.


The investigations referred to above could result in one or more Mongolian,
Canadian, United States or other governmental or regulatory agencies taking
civil or criminal action against the Company, its affiliates or its current or
former employees. The likelihood or consequences of such an outcome are unclear
at this time but could include financial or other penalties, which could be
material, and which could have a material adverse effect on the Company.
Reference is made to the Company's MD&A for the year ended December 31, 2012,
which is available at www.sedar.com, Section 13, Risk Factors, "the Company is
subject to continuing governmental, regulatory and internal investigations, the
outcome of which is unclear at this time but could have a material adverse
effect on the Company". 


The Company, through its Board of Directors and new management, has taken a
number of steps to address issues noted during the investigations and to focus
ongoing compliance by employees with all applicable laws, internal corporate
policies and codes of conduct, and with the Company's disclosure controls and
procedures and internal controls over financial reporting. 


Withdrawal of Notice of Investment Dispute

On August 22, 2013, SouthGobi announced that it had withdrawn the Notice of
Investment Dispute on the Government of Mongolia in recognition of the fact that
the dispute was resolved following the grant of three pre-mining agreements
("PMAs") on August 14, 2013 relating to the Zag Suuj Deposit and certain areas
associated with the Soumber Deposit, and the earlier grant of a PMA on January
18, 2013 pertaining to the Soumber Deposit.


About SouthGobi Resources

SouthGobi is listed on the Toronto and Hong Kong stock exchanges, in which
Turquoise Hill Resources Ltd. ("Turquoise Hill"), also publicly listed in
Toronto and New York, has a 57% shareholding. Turquoise Hill took management
control of SouthGobi in September 2012 and made changes to the board and senior
management. Rio Tinto has a majority shareholding in Turquoise Hill.


SouthGobi is focused on exploration and development of its metallurgical and
thermal coal deposits in Mongolia's South Gobi Region. It has a 100%
shareholding in SouthGobi Sands LLC, Mongolian registered company that holds the
mining and exploration licences in Mongolia and operates the flagship Ovoot
Tolgoi coal mine. Ovoot Tolgoi produces and sells coal to customers in China.


Forward-Looking Statements: This document includes forward-looking statements.
Forward-looking statements include, but are not limited to, the respective
timing of the filing of the Required Filings and the Restated Financials; the
impact of the revised revenue recognition approach on the financial statements
subject to restatement; whether an MCTO will be granted by the Principal
Regulator; the conclusions of the Company in respect of any material weaknesses
in the Company's controls and procedures; the intention to satisfy the
Alternative Information Guidelines, if applicable; the outcome of a review of
the DCHF to the Company's corporate strategy; the Company's expectations of
sufficient liquidity and capital resources to meets its ongoing obligations and
future contractual commitments; the estimates and assumptions included in the
Company's impairment analysis; the outcome of the Mongolian Government
regulatory and internal investigations; implications of financial statement
restatements or delay in Required Filings with respect to the Company's existing
contractual covenants; and other statements that are not historical facts. When
used in this document, the words such as "plan," "estimate," "expect," "intend,"
"may," "likely" and similar expressions are forward-looking statements. Although
SouthGobi believes that the expectations reflected in these forward-looking
statements are reasonable, such statements involve risks and uncertainties and
no assurance can be given that actual results will be consistent with these
forward-looking statements. Important factors that could cause actual results to
differ from these forward-looking statements are disclosed under the heading
"Risk Factors" in SouthGobi's Management Discussion and Analysis of Financial
Condition and Results of Operations for the year ended December 31, 2012 which
is available at www.sedar.com. 


FOR FURTHER INFORMATION PLEASE CONTACT: 
SouthGobi Resources Limited
Galina Rogova
Investors Relations
+852-2839-9208
galina.rogova@southgobi.com


SouthGobi Resources Limited
Altanbagana Bayarsaikhan
Media Relations
+976 70070710
altanbagana.bayarsaikhen@southgobi.com
www.southgobi.com

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