SouthGobi sells metals division for $3-million (U.S.)

2008-12-31 11:09 ET - News Release

Mr. Peter Meredith reports

SOUTHGOBI ENERGY RESOURCES SELLS ITS METALS DIVISION TO IVANHOE MINES

SouthGobi Energy Resources Ltd. has sold, subject to regulatory approval, its metals division to Ivanhoe Mines Ltd. for $3-million (U.S.). The metals division consists of certain base and precious metals properties in Mongolia and Indonesia. The transaction will enable SouthGobi Energy Resources to focus solely on its principal business of coal production, development and exploration.

In connection with the sale agreement, the company has established a credit facility with Ivanhoe Mines, which allows SouthGobi to obtain advances from Ivanhoe to a total maximum of $30-million (U.S.). The credit facility is for a one-year term with a one-year discretionary extension. The credit facility is unsecured and carries an interest rate equal to LIBOR plus 7.5 basis points.

SouthGobi commissioned an independent valuation report from Stephen Semeniuk, CFA, and engaged Pierre Lebel, lead independent director, to negotiate the sale of the metals division to Ivanhoe Mines.

"We believe the sale of the metals division represents excellent value to SouthGobi shareholders and positions SouthGobi to continue its evolution as a stand-alone coal mining company," said Peter Meredith, chief executive officer.

The transaction is subject to all necessary regulatory approvals, including approval of the TSX Venture Exchange.

We seek Safe Harbor.