Mr. Ruibin Xu reports

SOUTHGOBI ANNOUNCES ISSUE OF PAYMENT-IN-KIND INTEREST SHARES UNDER CONVERTIBLE DEBENTURE

SouthGobi Resources Ltd. has received from Od Sar Trading Co. Ltd. (the assignee) a notice to exercise the assignee's right to require the company to pay $17-million (U.S.) of the total assigned PIK interest though the issuance of common shares, with a requested payment date of July 13, 2026.

As a result, the company will issue to the assignee a total of 73,497,622 common shares (the PIK interest shares), representing approximately 19.83 per cent of the issued and outstanding shares of the common shares following completion of the PIK interest shares issuance, in satisfaction of the PIK interest payment request. The number of PIK interest shares issuable was determined based on the 50-day VWAP (volume-weighted average price) of approximately 32.72 cents (equivalent to 23.13 U.S. cents) per common share as of the payment date.

The PIK interest shares were issued to the assignee pursuant to an assignment agreement entered into between the assignee and JD Zhixing Fund LP, being the registered holder of the company's $250-million (U.S.) convertible debenture issued on Nov. 19, 2009. Pursuant to the assignment agreement, JD Zhixing Fund had assigned to the assignee the right to receive $19-million (U.S.) of payment-in-kind interest accrued and outstanding under the convertible debenture and certain related deferral agreements.

The company will make a further announcement regarding the issuance of the PIK interest shares in satisfaction of the PIK interest payment request as and when appropriate.

Shareholders and potential investors of the company should exercise caution when dealing in the shares of the company.

As at the date of this announcement, the executive directors of the company are Ruibin Xu, Chonglin Zhu and Chen Shen; the independent non-executive directors of the company are Yingbin Ian He, Jin Lan Quan and Fan Keung Vic Choi; and the non-executive directors of the company are Zhu Gao and Zaixiang Wen.

About SouthGobi Resources Ltd.

SouthGobi, listed on the Hong Kong Stock Exchange and the TSX Venture Exchange, 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.

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