The Wall Street Journal quotes SouthGobi chief executive Alexander Molyneux as saying such political sensitivities would likely scotch the $US920 million deal.
That report comes just after SouthGobi announced its second quarter financial and operating results.
Those results flagged the signing of a cooperation agreement with CHALCO as one of the quarter highlights.
Loss of the CHALCO deal may have mixed outcomes for the coal miner.
During the quarter it produced 270,000 tonnes of raw coal with a strip ratio of 4.31 compared to the production of 870,000t with a 4.74 strip ratio in the previous corresponding quarter.
However, as at June 30 the company’s mining activities had been curtailed to “maintain efficient working capital levels”
For the three months to June 30 the company sold 160,000t of coal at an average price of $62.56 per tonne. In the previous corresponding quarter it had sold 1.05 million tonnes at an average $54.06/t.
However, the decline in sales volumes towards June 30 was blamed on uncertainty surrounding SouthGobi’s business due to 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.