Tsagaan Tolgoi coal resource buoys SouthGobi Energy (March 03, 2008)

The Tsagaan Tolgoi coal project has measured plus indicated coal resources of 36.4 million tonnes and an additional inferred coal resource of about 9 million tonnes, South- Gobi Energy Resources (SGQ-V, SGQRF-O) says.

The initial and independent National Instrument (NI) 43-101-compliant resource estimate for the project, about 570 km south of the capital of Ulaanbataar, in southern Mongolia, indicates that there is coal in sufficient quality and quantity to support power generation 115 km to the west, at the massive Oyu Tolgoi copper-gold deposit owned by Ivanhoe Mines (IVN-T, IVN-N).

All of SouthGobi Energy’s coal projects and licences were previously owned by Ivanhoe Mines. But the Vancouver-based Ivanhoe didn’t think its coal portfolio was getting fully valued. So it poured its coal assets into SouthGobi Energy, a publicly traded company that debuted on the TSX Venture Exchange on May 29 last year. Ivanhoe retains a majority stake in the new company, holding 81% of its stock.

Tsagaan Tolgoi hosts eight main coal seams with multiple sub-seams with apparent thicknesses varying from 1.2 metres to 24.7 metres. The coal rank is high-volatile B and C bituminous.

SouthGobi Energy has drilled a total of 86 reverse-circulation and rotary holes and 28 core holes. There is potential for additional resources along strike and at depth, the company noted in a statement.

Additional exploration is planned this year to determine the extent of the coal resource.

Tsagaan Tolgoi is the company’s second coal deposit in southern Mongolia to have a NI 43-101 resource estimate.

SouthGobi’s primary mine development project, Ovoot Tolgoi, is 415 km southwest of Tsagaan Tolgoi.

Ovoot Tolgoi has a NI 43-101-compliant resource of 150 million measured and indicated tonnes of coal, with another 29 million tonnes inferred.

The coal-bearing stratigraphy in the South Gobi is about the same Permian geological age, scale and quality as the Bowen and Sydney basins in Australia — which are some of the most extensive in the world, Ivanhoe reports.

Coal at Tsagaan Tolgoi is found in a steeply dipping sedimentary basin about 4 by 20 km on two adjacent licences stretching over 88 sq. km.

The independent resource estimate was prepared by Norwest of Salt Lake City, Utah.

SouthGobi Energy Resources plans to supply a wide range of coal products and electricity to markets in Mongolia and China.

The company’s shares have traded in a 52-week range of $2.20-11.40 with 129.2 million shares outstanding.