SouthGobi Energy Resources has sold, subject to regulatory approval, its Metals Division to Ivanhoe Mines for $3 million. The Metals Division consists of certain base and precious metals properties in Mongolia and Indonesia. The transaction will enable SouthGobi Energy to focus solely on its principal business of coal production, development and exploration.

In connection with the sale agreement, the company has established a credit facility with Ivanhoe Mines, which allows SouthGobi to obtain advances from Ivanhoe to an aggregate maximum of $30 million. The credit facility is for a one year term with a one year discretionary extension. The credit facility is unsecured and carries an interest rate equal to LIBOR plus 7.5 basis points.

SouthGobi commissioned an independent valuation report from Stephen Semeniuk, CFA, and engaged Pierre Lebel, Lead Independent Director, to negotiate the sale of the Metals Division to Ivanhoe Mines. “We believe the sale of the Metals Division represents excellent value to SouthGobi shareholders and positions SouthGobi to continue its evolution as a stand-alone coal mining company,” said Peter Meredith, CEO.

SouthGobi Energy Resources is focused on exploration and development of its Permian-age metallurgical and thermal coal deposits in Mongolia’s South Gobi Region and its Eocene-age metallurgical and thermal coal deposits in East Kalimantan, Indonesia. The company’s flagship coal mine, Ovoot Tolgoi, is in production and selling coal to customers in China. The company plans to supply a wide range of coal products and electricity to markets in Asia. The company also is investigating the implementation of clean-coal technologies in the development of coal power generating capacity to benefit all of its stakeholders