SouthGobi Resources : Announcements and Notices - Update on Hong Kong Arbitration Proceeding

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SOUTHGOBI RESOURCES LTD.

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)

Update on Hong Kong Arbitration Proceeding

This announcement is made by SouthGobi Resources Ltd. (the "Company") pursuant to Rule 13.09(2)(a) of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the "Listing Rules") and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

The Company announces the receipt on January 10, 2018 of a confidential partial award (final except as to costs) ("Arbitration Award") with respect to an arbitration proceeding in Hong Kong related to a dispute concerning a coal supply agreement between SouthGobi Sands LLC ("SGS"), a subsidiary of the Company, and First Concept Industrial Group Limited (formerly known as First Concept Logistics Limited) ("First Concept"). For details of the background of this arbitration proceeding, please refer to the Company's Management's Discussion and Analysis for the quarter ended September 30, 2017 and, in particular, the section under the heading "Commercial Arbitration in Hong Kong", which is available on the SEDAR website atwww.sedar.comand on the website of the Hong Kong Stock Exchange atwww.hkexnews.hk.

Pursuant to the Arbitration Award, SGS has been ordered to repay the sum of US$11.5 million (which SGS had received as a prepayment for the purchase of coal) to First Concept, together with accrued interest at a simple interest rate of 6% per annum from the date which the prepayment was made until the date of the Arbitration Award, and then at a simple interest

* For identification purposes only

rate of 8% per annum until full payment. The Arbitration Award is final, except as to costs which have been reserved for a future award.

The Company is currently considering and reviewing its options with respect to the Arbitration Award, including exploring ways to work together with First Concept on payment arrangements that are practical to and are in best interests of both parties. In any event, if SGS fails to satisfy the Arbitration Award, First Concept may apply to enforce the Arbitration Award against SGS through judicial measures in courts of Mongolia or in other applicable jurisdiction(s). The Company will provide further updates on the status of this matter as appropriate.

By order of the Board SouthGobi Resources Ltd.

Mao Sun

Interim Independent Lead Director

Vancouver, January 11, 2018

Hong Kong, January 11, 2018

As at the date of this announcement, the Executive Director of the Company is Mr. Yulan Guo; the Independent Non-executive Directors are Messrs. Yingbin Ian He, Zhu Liu and Mao Sun and Ms. Jin Lan Quan; and the Non-executive Directors are Messrs. Wen Yao and Aminbuhe.

January 11, 2018

Update on Hong Kong Arbitration Proceeding

VANCOUVER - SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878) ("SouthGobi" or the "Company") announces the receipt on January 10, 2018 of a confidential partial award (final

except as to costs) ("Arbitration Award") with respect to an arbitration proceeding in Hong Kong related to a dispute concerning a coal supply agreement between SouthGobi Sands LLC ("SGS"),

a subsidiary of the Company, and First Concept Industrial Group Limited (formerly known as

First Concept Logistics Limited) ("First Concept"). For details of the background of this arbitration proceeding, please refer to the Company's Management's Discussion and Analysis

for the quarter ended September 30, 2017 and, in particular, the section under the heading

"Commercial Arbitration in Hong Kong", which is available on the SEDAR website atwww.sedar.comand on the website of the Hong Kong Stock Exchange at www.hkexnews.hk.

Pursuant to the Arbitration Award, SGS has been ordered to repay the sum of US$11.5 million (which SGS had received as a prepayment for the purchase of coal) to First Concept, together with accrued interest at a simple interest rate of 6% per annum from the date which the prepayment was made until the date of the Arbitration Award, and then at a simple interest rate of 8% per annum until full payment. The Arbitration Award is final, except as to costs which have been reserved for a future award.

The Company is currently considering and reviewing its options with respect to the Arbitration Award, including exploring ways to work together with First Concept on payment arrangements that are practical to and are in best interests of both parties. In any event, if SGS fails to satisfy the Arbitration Award, First Concept may apply to enforce the Arbitration Award against SGSthrough judicial measures in courts of Mongolia or in other applicable jurisdiction(s). The Company will provide further updates on the status of this matter as appropriate.

About SouthGobi

SouthGobi, listed on the Toronto and Hong Kong stock exchanges, owns and operates its flagship Ovoot Tolgoi coal mine in Mongolia. It also holds the mining licences of its other metallurgical and thermal coal deposits in South Gobi Region of Mongolia. SouthGobi produces and sells coal to customers in China.

Contact:

Investor Relations

Kino Fu

Office: +852 2156 7030 Email:kino.fu@southgobi.com

Website:www.southgobi.com