Deferral of payment obligation under a convertible debenture

South Gobi Resources Ltd. (TSX:SGQ)(HK:1878) (“SouthGobi” or the “Company”) announces that reference is made to the Company’s announcement dated August 31, 2022 (the “Announcement”) regarding a private sale between JD Zhixing Fund LP (“JDZF”), Land Breeze and Fullbloom (the “Sale Transaction”) on August 30, 2022. Unless otherwise specified, terms used in this release have the meaning defined in the release.

Upon closing of the sale transaction, JDZF became the registered holder of the company’s US$250 million convertible debenture issued on November 19, 2009 (the “Convertible debenture“). The rights and obligations under (i) the convertible debenture and related security documents; (ii) the cooperation agreement and related documents; (iii) the deferral agreements between Land Breeze, the and certain of its subsidiaries in connection with the deferral of interest payments and other unpaid expenses under the convertible debenture and the cooperation agreement; and (iv) the security holders’ agreement between the Company, Land Breeze and a former shareholder of the Company, were sold to JDZF effective August 30, 2022. .

The Company announces that, on November 11, 2022, the Company entered into a new deferral agreement (the “Deferral agreement from November 2022“) with JDZF, pursuant to which JDZF has agreed to grant the Company (i) a deferral of interest payments that will be due and payable on November 19, 2022 under the convertible debenture; and (ii) a deferral of management fees under the Amended and Restated Cooperation Agreement.

November 2022 efficiencyThe Deferral Agreement and each party’s respective obligations, covenants and agreements under the November 2022 Deferral Agreement are subject to the Company obtaining the required acceptance from the Toronto Stock Exchange.

The main terms of the November 2022 postponement agreement are as follows:

  • JDZF has agreed to grant the Company a deferral of the following payments until November 19, 2023:

(i) a deferral of $7,065,753 on the semi-annual cash interest payment on the aggregate amount of $8,065,753 payable to JDZF on November 19, 2022 under the convertible debenture (the “November 2022 cash interest“);

(ii) a deferral of $1,100,000 on the payment of interest in kind on the aggregate amount of $4,000,000 payable to JDZF on November 19, 2022 under the convertible debenture (the “November 2022 PIK Interest“, as well as the month of November 2022Cash interest, the “Amounts reported“); and

(iii) a deferral of management fees payable to JDZF on November 15, 2022, February 15, 2023, May 16, 2023 and August 15, 2023, respectively, under the Amended and Restated Cooperation Agreement (the “Deferred management fees“);

  • In return for the deferral of the Deferred Amounts, the Company undertakes to pay JDZF a deferral commission equal to 6.4% per annum on the Deferred Amounts (the “Postponement costs“) payable under the convertible debenture, from November 19, 2022;
  • In consideration for the deferred management fee deferral, the Company agrees to pay JDZF a deferral fee equal to 1.5% per annum on the unpaid balance of the deferred management fee (the “Cooperation Agreement Deferral Fee“) payable under the Amended and Restated Cooperation Agreement, from the date on which each such Deferred Management Fee would otherwise have become due and payable under the Amended and Restated Cooperation Agreement ;
  • If at any time before the Deferred Amounts, Deferred Management Fee, Deferral Fee and Cooperative Agreement Deferral Fee are fully repaid, the Company proposes to appoint, replace or remove one or more of its managing directors, its chief financial officer or any other senior executive(s) in charge of its main business function or its main subsidiary, the Company will first consult JDZF and obtain its written consent (this consent will not be unreasonably withheld) prior to making such appointment, replacement or termination;
  • The Company has agreed to comply with all of its obligations under the prior deferral agreements awarded to JDZF; and
  • The Company and JDZF have agreed that nothing in the November 2022 Deferral Agreement shall affect JDZF’s rights to pursue any of its remedies at any time pursuant to prior Deferral Agreements.

The Company expects to pay JDZF a cash payment of US$1,000,000 in partial payment of November 2022 cash interest no later than November 19, 2022. The Company will pay JDZF the remaining US$2,900,000 of November PIK interest 2022 on November 19, 2022 by way of issuing and delivering a number of PIK shares to JDZFwhich will be determined based on the volume weighted average trading price of the common shares of the Company during the 50 consecutive trading days preceding November 19, 2022, all in accordance with the terms of the convertible debenture.

The Company will make further announcements regarding the possibility of other future deferrals of its payment obligations under the convertible debenture, if any. There can, however, be no assurance that an agreement for future deferrals will be reached with the controlling shareholder, either or on favorable terms.

If there is any inconsistency or discrepancy between the English version and the Chinese version, the English version shall prevail.

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 operating licenses for its other metallurgical and thermal coal deposits in the South Gobi region of Mongolia. SouthGobi produces and sells charcoal to customers in China.


Investor Relations
Office: +852 2156 1438 (Hong Kong)
+1 604 762 6783 (Canada)
Email: [email protected]

Forward-looking statements

Certain information included in this press release that is not current or historical factual information constitutes forward-looking statements or information within the meaning of applicable securities laws (collectively, “forward-looking statements”), including information about the potential for future deferrals of its payment obligations under the convertible debenture. Forward-looking statements are often characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “could”, “should”, “seek”, “probable”, “estimate” and other similar words or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on certain factors and assumptions, including, among others, the Company’s ability to successfully negotiate a future deferral of its payment obligations under the Convertible Debenture and other similar factors that could so that actual results differ materially from what the Company currently expects. Actual results may differ from forward-looking statements. Readers are cautioned not to place undue importance on forward-looking statements, which speak only as of the date of this disclosure, and not to rely on such information as of any other date. Although the Company may choose to do so, it is under no obligation and does not undertake to update or revise any forward-looking statements, whether as a result of new information, other events or otherwise any time, except as required by law. Additional information regarding factors that could cause actual results to differ materially from those contained in such forward-looking statements is contained in the Company’s filings with the Canadian securities regulatory authorities and may be viewed under the Company’s profile at SEDAR at

THE SOURCE: South Gobi Resources Ltd.

See the source version on

Source link

Elaine R. Knight