SouthGobi Resources : Announcements and Notices - Southgobi Resources Announces Third Quarter 2016 Financial and Operating Results

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南戈壁資源有限公司*

(A company continued under the laws of British Columbia, Canada with limited liability)

(Hong Kong Stock Code: 1878) (Toronto Stock Code: SGQ)

Please see the attached announcement for more details. The information per the attached announcement is available on the SEDAR website at www.sedar.com and www.hkexnews.hk.

By order of the Board

Chairman

Hong Kong, November 14, 2016

As at the date of this announcement, the executive directors of the Company are Messrs. Ningqiao Li, Aminbuhe and Yulan Guo; the independent non-executive directors are Messrs. Zhu Liu, Mao Sun, Joseph Belan and Ms. Jin Lan Quan; the non-executive director is Mr. Huiyi Wang.

* For identification purposes only

November 14, 2016

The Company's significant events and highlights for the three months ended September 30, 2016 and subsequent period to November 14, 2016 are as follows:

• Operating results - Although the market conditions and prices for coal has improved in China through the third quarter of 2016, the impact of these conditions was partially offset by the depreciation of Renminbi against USD. The Company sold 1.13 million tonnes of its coal products during the quarter compared to 0.49 million tonnes in the third quarter of 2015. The production for the third quarter of 2016 was 1.13 million tonnes compared to 0.71 million tonnes for the third quarter of 2015. The Company maintained a strong safety record and completed the third quarter of 2016 without a lost time injury.
• Financial results - The Company recorded a $3.2 million loss from operations during the quarter compared to a $14.9 million loss from operations in the third quarter of 2015. Revenue was $16.4 million in the third quarter of 2016 compared to $8.6 million in the third quarter of 2015. The operations for the three months ended September 30, 2016 has improved given the improved market conditions in China.
• China Investment Corporation ("CIC") convertible debenture (the "CIC Convertible Debenture") - On July 13, 2016, the Company executed deferral agreement with CIC which covers outstanding deferred cash interest obligations and associated costs of

  $18.8 million as of July 13, 2016 and the next Issue Date Anniversary Cash Interest payment of $8.1 million due on November 19, 2016. Pursuant to the deferral agreement, the Company has agreed to repay $1.3 to $1.4 million monthly from July to November 2016 and repay $20.7 million on December 19, 2016. In consideration for the deferred payments of $18.8 million, the Company will pay a deferral fee at a rate of 6.4% per annum to CIC. The interest payments due from July to October 2016 has been paid as at November 14, 2016.

• Short-term bridge loan - The Company has repaid the first tranche of the short-term bridge loan with interest of $5.0 million up to August 11, 2016. During June and July 2016, the Company drew the second tranche of $5.0 million. $1.5 million and $3.5 million will mature in March and April 2017, respectively.
• Appointment of a Director - Mr. Joseph Belan was appointed as Independent Non- Executive Director of the Company on August 16, 2016.
• Strategic Advisory Board - On September 16, 2016, the Company established a Strategic Advisory Board and appointed Mr. Abraham (Braam) Jonker as its initial member. The purpose of the Strategic Advisory Board is to provide non-binding strategic guidance and advice to the Board of Directors of the Company in connection with the Company's ongoing business activities and initiatives.
• Going Concern - As at the date hereof, the Company is focused on securing additional financing (which includes working capital financing from vendors) and longer term coal offtake agreements by building direct sales relationships with end customers so as to improve sales volumes. The Company has been negotiating with key vendors to lengthen the credit terms and extend the payable turnover cycle. Further, the Company has been exploring the utilization of trade financing in order to speed up the receivable collection cycle. The measures mentioned above are intended to allow the Company to ramp up production to capacity, meet existing as well as upcoming trade and other payables obligations and the interest due under the CIC Convertible Debenture, the short-term bridge loan, the Turquoise Hill ("TRQ") shareholder loan ("TRQ Loan") and the bank loan, to meet its obligations as they fall due and achieve its business objectives in 2016.

  However, there is no guarantee that the Company will be able to successfully secure additional sources of financing. Unless the Company acquires additional sources of financing and/or funding in the short term, the ability of the Company to continue as a going concern is threatened. If the Company is unable to continue as a going concern it may be forced to seek relief under applicable bankruptcy and insolvency legislation. See section "Liquidity and Capital Resources" for details. As at November 14, 2016, the Company had $7.0 million of cash and $1.9 million of bank's acceptance notes, which are financial instruments in Chinese banking industry and are readily convertible into cash.

  OVERVIEW OF OPERATIONAL DATA AND FINANCIAL RESULTS Summary of Operational Data Three months ended Nine months ended September 30, September 30, 2016 2015 2016 2015 Sales Volumes, Prices and Costs

  Premium semi-soft coking coal

  Coal sales (millions of tonnes)	0.07	0.16	0.13	0.18
  Average realized selling price (per tonne) (i)	$ 21.04	$ 22.32	$ 21.19	$ 22.46

  Standard semi-soft coking coal

  Coal sales (millions of tonnes)	0.77	0.31	1.87	0.48
  Average realized selling price (per tonne) (i)	$ 15.66	$ 19.10	$ 16.69	$ 19.17

  Thermal coal

  Coal sales (millions of tonnes)	0.29	0.02	0.83	0.21
  Average realized selling price (per tonne) (i) Total	$ 14.79	$ 10.48	$ 11.11	$ 10.47
  Coal sales (millions of tonnes)	1.13	0.49	2.83	0.87
  Average realized selling price (per tonne) (i)	$ 15.79	$ 19.76	$ 15.27	$ 17.77
  Raw coal production (millions of tonnes)	1.13	0.71	2.17	1.33
  Direct cash costs of product sold (per tonne) (ii)	$ 7.13	$ 17.46	$ 8.92	$ 15.22
  Mine administration cash costs of product sold
  (per tonne) (ii)	$ 2.26	$ 2.81	$ 1.96	$ 3.81
  Total cash costs of product sold (per tonne) (ii)	$ 9.39	$ 20.27	$ 10.88	$ 19.03
  Other Operational Data
  Production waste material moved (millions of bank
  cubic meters) Strip ratio (bank cubic meters of waste material	2.22	2.33	4.76	5.94
  per tonne of coal produced)	1.96	3.25	2.19	4.46
  Lost time injury frequency rate (iii)	0.00	0.00	0.00	0.00

• Average realized selling price is presented before deduction of royalties and selling fees.

• A non-IFRS financial measure, see "Non-IFRS Financial Measure" section. Cash costs of product sold exclude idled mine asset cash costs.

• Per 200,000 man hours and calculated based on a rolling 12 month average.