Turquoise Hill sale of stake in Mongolia's SouthGobi falls through

Heavy machinery moves coal at the SouthGobi Energy Resources Ltd. Ovoot Tolgoi coal mine in Mongolia. (Image from archives)

Rio Tinto-controlled Turquoise Hill (TSE:TRQ) said Friday that a signed deal to sell the remainder of its stake in SouthGobi Resources (TSE:SGQ), which was supposed to finally cut ties with the Mongolian coal miner that was once worth over $2.4 billion, has fallen through.

The announced and signed share purchase agreement expired on April 30, 2015 "without the transaction contemplated thereunder having been completed," the company said in the statement.

As a result, the Vancouver-based miner continues to own 56,102,000 shares or about 23.3% of SouthGobi's issued and outstanding shares.

As a result, the Vancouver-based miner continues to own 56,102,000 shares or about 23.3% of SouthGobi's issued and outstanding shares.

In July last year, Turquoise Hill agreed to sell the majority of its stake in the coal miner to Hong Kong-listed National United Resources Holdings for Cdn$12.8 million. And in February, it said Novel Sunrise Investments was buying the remainder for Cdn$8.5 million. That deal has been completed, the miner said.

Both deals were expected to close later this year and they would have left Turquoise Hill walking away with Cdn$21.3 million from the sale process, or less than 1% of the Cdn$2.3 billion the stake was once worth.

SouthGobi's Ovoot Tolgoi mine, located 25 miles north of the Chinese border, was once billed as a cash cow. Back in 2008 Friedland dubbed the asset the "beluga caviar of coal."

The Canadian company, previously known as Ivanhoe Mines and run by mining legend Robert Friedland, spun out its coal assets into SouthGobi in 2006 and received a controlling stake in the firm at that time.

SouthGobi's Ovoot Tolgoi mine, located 25 miles north of the Chinese border, was once billed as a cash cow. Back in 2008 Friedland dubbed the asset the "beluga caviar of coal."

Since then, Friedland and later Rio Tinto have tried to monetize the stake in SouthGobi. An agreement to unload a 60% stake in SouthGobi to Chinese aluminum giant Chalco for about Cdn$889 million in 2012, broke down because of obstacles put in place by the Mongolian government.

Turquoise Hill also has a 66% interest in the Oyu Tolgoi mine in southern Mongolia.