Work at SouthGobi Resources Ltd.”s
(1878.HK) flagship Ovoot Tolgoi Mine will be “entirely curtailed” at
the end of the second quarter, the coal miner said Tuesday, raising uncertainty
for Aluminium Corp. of China Ltd.”s bid to buy a controlling stake in the
Mongolia-focused miner.

State backed Aluminium Corp. of
China, or Chalco, has said it will pay more than $920 million to buy up to 60%
in SouthGobi Resources from Canada”s Ivanhoe Mines Ltd. (IVN). But the deal has
been in stalemate following the Mongolian government”s suspension of SouthGobi
Resources”s mining licenses because of national-security concerns.

SouthGobi Resources has been hit by
regulatory complications in Mongolia as well as deteriorating market
conditions, it said in a statement. Its Mongolian unit can”t get that country”s
environment ministry to revise an environmental impact assessment for a
dry-coal-handling facility. Without approval, SouthGobi won”t be able to run
the plant that washes coal and prepares it for transport to market, it added.

The company said it scaled back
extraction at Ovoot Tolgoi Mine during the second quarter so as not to
accumulate too much unsold coal and to save cash.

It also put on hold unspent capital
and exploration expenditure to save more money.

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