• SouthGobi Resources (TSX:SGQ) has continued to reduce production at the Ovoot Tolgoi coal mine
  • The company began reducing production when the Mongolian-Chinese border closed in February, but will not ramp up after the border re-opens later this month
  • The company stated that existing stockpiles should meet current demand over the next two months
  • Alongside this news, the company announced its Mongolian bank account remains frozen due to ongoing arbitration with a third party
  • SouthGobi Resources (SGQ) remained steady, with shares currently trading at $0.10

SouthGobi Resources (TSX:SGQ) is continuing to reduce production at the Ovoot Tolgoi coal mine, despite developments at the China-Mongolia border.

Last month, The Mongolia State Emergency Commission closed the border between Mongolia and China to reduce the spread of COVID-19. As a result, SouthGobi’s coal exports to China were frozen.

Consequently, SouthGobi began reducing production at the mine, hoping to mitigate losses.

However, the company has learned that the border will re-open, allowing exports to resume on March 15.

Despite this news, SouthGobi has chosen not to ramp up production at the Ovoot Tolgoi. The company believes that previously stockpiled coal will meet current demand from China over the next two months.

SouthGobi has not revealed its plans for the mine after this two-month period elapses.

Alongside the border closure, the company was informed that its bank accounts had been frozen by the Court Decision Implementing Agency of Mongolia.

The government agency froze the accounts due to an ongoing dispute between SouthGobi and First Concept Industrial Group Limited.

Previously, First Concept had pre-purchased coal from SouthGobi though a supply agreement in 2017 and is now disputing the sale.

As a result, SouthGobi was ordered to pay C$15 million to First Concept last month.

It is likely that the bank accounts were frozen because of this repayment order. Just over C$1 million dollars is being held. SouthGobi has stated this will affect its normal operations moving forward.

Discussions between SouthGobi and First Concept are ongoing. However, the company stated it is unsure that they can come to any resolution.

SouthGobi Resources (SGQ) remained steady, with shares trading for $0.10 at 11:14am EST.

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