SouthGobi Energy Resources

http://finance.yahoo.com/news/southgobi-signs-cooperation-agreement-aluminum-002300292.html

SouthGobi learns of Aluminum Corp. of China bid

2012-04-02 02:46 ET - News Release

Mr. Dave Bartel reports

SOUTHGOBI SIGNS COOPERATION AGREEMENT WITH ALUMINUM CORPORATION OF CHINA LIMITED (CHALCO) AND RECEIVES NOTIFICATION OF CHALCO'S INTENTION TO MAKE A PROPORTIONAL TAKE-OVER BID AT C$8.48 PER SHARE

SouthGobi Resources Ltd. has entered into a co-operation agreement with Aluminum Corporation of China Ltd., and has received notice that CHALCO intends to make a proportional takeover bid for up to 60 per cent of the issued and outstanding common shares of SouthGobi.

CHALCO intends to make a takeover bid for up to 60 per cent of the issued and outstanding common shares of SouthGobi at $8.48 per share. SouthGobi has also been informed by its 57.6-per-cent major shareholder, Ivanhoe Mines Ltd., that Ivanhoe has signed a lock-up agreement with CHALCO, committing to tender all of its shares held or thereafter acquired by it during the offer period of CHALCO into the proportional offer. The proportional offer will be made by way of a takeover bid circular under British Columbia law and will be made to all SouthGobi shareholders. If shareholders tender more than 60 per cent of the outstanding common shares of SouthGobi to the takeover bid, a proportional amount of shares will be taken up from each shareholder. SouthGobi has not received any formal documentation relating to the proportional offer.

SouthGobi's board of directors has established a special committee comprising independent directors including, Pierre Lebel, Gordon Lancaster, Andre Deepwell and Robert Hanson, to consider the proportional offer, when received. The special committee has engaged Blake, Cassels & Graydon LLP as its independent legal counsel and will engage an independent financial adviser to assist with its review of the proportional offer. SouthGobi is advising that shareholders take no action in connection with the proportional offer until they receive further information and advice from the special committee.

In conjunction with the proportional offer, CHALCO and SouthGobi have entered into a co-operation agreement. CHALCO's obligations under the co-operation agreement will become effective upon CHALCO acquiring a shareholding in SouthGobi.

Key benefits under the co-operation agreement between SouthGobi and CHALCO include:

• Coal offtake by CHALCO -- SouthGobi will have the right to offer up to 100 per cent of its salable coal to CHALCO and CHALCO will have the obligation to purchase the coal at market prices for a period of 24 months.
• Infrastructure support -- CHALCO will assist SouthGobi to procure electricity for its Mongolian business operations, either through a direct connection to grid power or through development of a conveniently located power plant. CHALCO will also provide support to SouthGobi's coal-haul highway project.

SouthGobi has been notified that CHALCO has entered into consultancy agreements with nine key senior executives, officers and staff to assist CHALCO with the integration and transition following CHALCO's acquisition of a shareholding in SouthGobi. Services would be retained for 12 months from the termination of their employment or for a period of 12 months less the notice period actually served by them on their resignation, after CHALCO becomes a shareholder of SouthGobi. Following arm's-length negotiation between CHALCO and the relevant individuals, it has been agreed that fees totalling $9-million would be paid by CHALCO for the consulting services. Consultancy agreements have been entered into with the president and chief executive officer, chief operating officer, chief financial officer, and key vice-presidents, officers and staff.

CHALCO has advised SouthGobi that it expects to mail the takeover bid circular in connection with the proportional offer on July 5, 2012.

We seek Safe Harbor.