Aluminum Corp. of China Ltd.
(2600.HK) will get an extra month to make a more than $920 million offer to buy
a controlling stake in SouthGobi Resources Ltd. (1878.HK) from Ivanhoe Mines
Ltd., indicating the state-owned Chinese aluminum giant is still keen on
investing in the Mongolia-focused coal company despite the challenges posed by
new foreign ownership restrictions adopted recently by the Mongolian
government.

The proposed deal, under which
Aluminum Corp. of China, or Chalco, would buy up to 60% of the coal miner,
faces political opposition in Mongolia amid growing sensitivity about
foreigners cashing in on the country”s hoard of coal, copper, gold, and other
natural resources. Given its size and influence, China, in particular, raises
concerns in the landlocked country, which broke from Soviet influence just over
two decades ago and formed a democracy.

In a reflection of the changing
situation in Mongolia, the country adopted a new law on foreign investment in
May that limits foreign ownership in strategic industries such as mining to
49%, unless the buyer obtains parliamentary approval. That came shortly after
Chalco first announced its plan to make an offer for SouthGobi in April.

In a joint statement Tuesday, Chalco
and Ivanhoe said they will cooperate with the Mongolian government to ensure
the deal complies with country”s new foreign investment law.

The two sides, whose shareholders
have both approved the deal, have also agreed that the Chinese aluminum giant
now has until Aug. 3 to make its offer, after pushing back the original
deadline from July 5, the statement said.

Word of the extension sent
SouthGobi”s Hong Kong-listed shares surging as much as 13% to HK$34.35 in the
morning session Wednesday, helping them recover somewhat after they had fallen
more than 40% since the offer was announced in April because of the ensuing
uncertainty. At 0537 GMT, shares of the company, which produces coking and
thermal coals at its flagship Ovoot Tolgoi mine 40 kilometers from the China
border, were up 12.3% at HK$34.15 but still 48% below Chalco”s planned offer
price of HK$65.97.

Chalco”s Hong Kong-listed shares
were up 1.2% at HK$3.35, outperforming the benchmark Hang Seng Index”s 0.02%
gain.

Ben Kwong, chief operating officer
at brokerage KGI Asia, said SouthGobi”s shares rebounded because the market
sees the extension as a sign of how committed the Chinese aluminum producer
remains to the deal.

“We saw some bottom fishing in
SouthGobi”s shares following its recent share-price correction as investors bet
that Chalco will get the green light from the Mongolian government,” said
Mr. Kwong.

However, it isn”t clear yet whether
the Mongolian government will approve the acquisition. SouthGobi Chief
Executive Alexander Molyneux told Dow Jones Newswires earlier the deal will
have to be endorsed by parliament, and that no other legal exceptions will have
to be made.

In June, SouthGobi said its
Mongolian business had to stop operating a dry-coal-handling facility because
the country”s environment ministry declined to revise an environmental impact
assessment for the plant, which washes coal and prepares it for transport to
market.

The miner has also had to suspend
mining activities and put capital spending plans on hold because of weak demand
due to the global economic downturn and a “lack of clarity” on
whether its license to mine would be suspended by the Mongolian government
after Chalco announced its acquisition plan.

Dow Jones Newswires