Toronto-listed coal producer SouthGobi Resources has said it will stop production at its Ovoot Tolgoi coal mine in Mongolia by the end of this month, amid a Chinese takeover bid for the Canadian mining company.
Operations at the Ovoot Tolgoi mine will be "entirely curtailed" as of the end of this quarter, SouthGobi Resources said in a statement issued via the Hong Kong stock exchange, citing weak market conditions and regulatory issues. The company also expressed caution as regards the prospects for its output and sales volumes for the full year of 2012.
SouthGobi Resources had earlier said that the Mongolian authorities had asked it to suspend production pending review of a plan by state-owned Aluminum Corp. of China (Chalco) to acquire a majority stake in SouthGobi from Canadian-headquartered Ivanhoe Mines. Both SouthGobi and Ivanhoe have their head offices in Vancouver.
Australian mining giant Rio Tinto owns a 51 percent stake in Ivanhoe, which in turn owns two-thirds of the Ovoot Tolgoi project. The Mongolian government owns the remaining third.
Chalco's plans to purchase a 57.6 percent stake in SouthGobi from Ivanhoe has triggered anxiety in Mongolia about Chinese ownership of a major resource producer.