SouthGobi Resources (SGQRF / SGQ.TO) is a junior coal miner focused on Mongolia. It has historically been part of Turquoise Hill Resources' project portfolio but Rio Tinto's backing of that parent company has new implications for SouthGobi. Aluminum Corp. of China (aka Chalco) failed to acquire Turquoise Hill's stake in SouthGobi due to Mongolian political concerns over resource security, so Rio Tinto may decide to accelerate whatever development plan it has for SouthGobi. More bad luck came SouthGobi's way when their legal counsel also ran afoul of Mongolian politics. Mongolia's political spasms are typical of a resource-rich emerging market. I blogged about Turquoise Hill Resources recently and noted that doing business in places Mongolia has a fair share of risk.
The CEO and VP Investor Relations have complementary backgrounds, but IMHO they should switch jobs because their respective backgrounds make them better suited for such a move. Think about it; a sales dude should do external relations and a mining engineer should make decisions on mining operations. Rio Tinto wants them there, so ultimately they will execute their part of a much larger plan. The ultimate strategy for the Ovoot Tolgoi project is to ship coal to China. Infrastructure for rail shipment and coal washing won't be problems. They have MII resources but I would like to know their estimated cash cost of production.
Rio Tinto is now stuck with this project and I am not clear on how hard they will press for full development in light of SouthGobi's recent problems. That's why I'm not an investor.
Full disclosure: No position in SouthGobi Resources at this time.
