Southgobi up 6% at open as Chalco bid is extended
SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878) climbed 6.25% on Thursday as markets opened after announcing it was notified by majority shareholder Ivanhoe Mines that it has agreed to extend by an additional thirty days until September 4, 2012 an offer by Chalco.
The bid by China's state-owned Aluminum Corp. is a proportional takeover bid for up to 60%, but not less than 56% of the common shares of SouthGobi.
Southgobi has now recovered 10% over the last month since SGS, its Mongolian subsidiary, filed a notice of investment dispute with the government of the Asian country which recently emerged from elections.
The decision came because management of the $773 million company believed "they have exhausted all other possible means to resolve an ongoing investment dispute between SGS and the Mongolian authorities". Mongolia now has six months to negotiate before the dispute is referred to an international arbitration body.
SouthGobi's problems began when Mongolian politicians decided to block a takeover bid by Chalco and changed legislation so that foreign companies are not allowed to own majority stakes in local operations in strategic sectors.
SouthGobi is majority-owned by Vancouver-based Ivanhoe Mines (TSX:IVN). In June SouthGobi was forced to stop production at its Ovoot Tolgoi coal mine.