Chalco drops bid for SouthGobi

THE Aluminum Corporation of China’s $US926 million takeover bid for up to 60% of Mongolian coal player SouthGobi Resources has reportedly been dropped.
Chalco drops bid for SouthGobi Chalco drops bid for SouthGobi Chalco drops bid for SouthGobi Chalco drops bid for SouthGobi Chalco drops bid for SouthGobi

Courtesy SouthGobi Resources.

Justin Niessner

A Reuters report said the Chinese company, also known as Chalco, blamed the failure of the bid on its difficulty in obtaining regulatory approvals.

Stiff political opposition has plagued the deal, with the Mongolian government wary of China’s growing presence in the country’s minerals-based economy.

According to the report, Chalco’s bid for control of SouthGobi in April was the trigger for a law passed in May that limits foreign ownership to 49% for companies in strategic sectors, including mining.

Loss of the Chalco deal may have mixed outcomes for SouthGobi.

During the second quarter of 2012, it produced only 270,000 tonnes of coal, compared to 870,000t in the previous corresponding quarter.

This coincided with an announcement in June that the company’s mining activities had been curtailed to “maintain efficient working capital levels”

The miner said that decline in its sales volumes towards June was due to uncertainty surrounding the Chalco bid.

SouthGobi finished the six months to June 30 with a gross profit, excluding idled mine costs, of $1.8 million.

When those costs were factored in, however, it posted a $13.8 million gross loss for the six months.

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