South Gobi suspends E. Kalimantan coking coal project

Vancouver-based firm South Gobi Energy Resources suspends development works at its Mamahak coking coal project in East Kalimantan after updated estimate showed sharp decrease in resource volume.

The company said that latest estimate showed measured and indicated resource of 9.5 million tonnes (MT) and inferred resource of 53,000 tonnes as of September 11, 2009 versus 12.2 MT of measured and indicated resource and 5.2MT of inferred resource as of April 2009.

?The revised resource has been adjusted, primarily in the inferred category, due to excessively high strip ratios in some areas of the project that would preclude open pit mining. The revised approach is in line with the Geological Survey of Canada paper 88-21 and is also considered to be a reasonable upper limit defining the likelihood of economic extraction for the Mamahak Project,? the company said.

?As SouthGobi progressed with efforts to prepare for the mining and shipment of the targeted 30,000 tonne trial cargo from Mamahak, the company became aware of the requirement for additional capital expenditure beyond what was originally budgeted to develop the project. With that in mind, SouthGobi has determined to suspend further development works at Mamahak pending a more detailed operational review.?

In May 2009, SouthGobi signed a coal marketing agreement with Glencore International AG. Under the terms of the agreement, Glencore will provide SouthGobi with coking coal marketing expertise and river barging/vessel loading logistical services. With the completion of the coal marketing agreement, SouthGobi is planning to ship an initial 30,000-tonne test cargo from the Mamahak coal project to potential Asian customers during Q3?09. (alex)