SGQ.V · 2026-08-14

Southgobi Announces Second Quarter 2026 Unaudited Financial and Operating Results

Production Results Financials

R E S O U R C E S

August 14, 2026

SOUTHGOBI ANNOUNCES SECOND QUARTER 2026 UNAUDITED FINANCIAL AND OPERATING RESULTS

HONG KONG – SouthGobi Resources Ltd. (Hong Kong Stock Exchange (“HKEX”): 1878, TSX Venture Exchange (“TSX-V”): SGQ) (the “Company” or “SouthGobi”) today announces its financial and operating results for the three and six months ended June 30, 2026. All figures are in U.S. dollars (“USD”) unless otherwise stated.

SIGNIFICANT EVENTS AND HIGHLIGHTS

The Company’s significant events and highlights for the three months ended June 30, 2026 and the subsequent period to August 14, 2026 are as follows:

Operating Results – The Company continues to expand the scale of mining operations in 2026, as well as implementing various coal processing methods, including screening, wet washing and dry coal processing, which have resulted in improved coal quality and enhanced production volume and growth of coal export volume into China. In addition, the Company also continues to expand the categories of coal products in its portfolio, including mixed coal, wet washed coal and dry processed coal, which further increases the Company’s coal export volume.

The Company recorded sales volume of 3.5 million tonnes for the second quarter of 2026 compared to 3.0 million tonnes for the second quarter of 2025, while the Company recorded an average realised selling price of $60.6 per tonne for the second quarter of 2026 compared to $52.6 per tonne for the second quarter of 2025. The increase in the average realised selling price was primarily attributable to a greater proportion of premium semi-soft coking coal was sold with an increased average realised selling price during the second quarter of 2026.

Financial Results – The Company recorded a $14.1 million profit from operations for the second quarter of 2026 compared to a $14.3 million loss from operations for the second quarter of 2025. The financial results were impacted by the increased sales volume, as well as improved average realised selling price per tonne during this period.
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Notice from Mongolian Government Plenipotentiary and designation of Company’s mining deposits as mineral deposits of strategic importance – On April 2, 2025, Southgobi Sands LLC (“SGS”) received a letter from a plenipotentiary representative of the Mongolian government (the “Letter”) which invited SGS to participate in negotiations in relation to determining the Mongolian state’s ownership interest in SGS, being the legal entity which holds the Company’s coal mining and exploration licenses in Mongolia.

The Letter states that, in furtherance of Mongolia’s National Wealth Fund Law which was passed in April 2024, the Mongolian government resolved on February 5, 2025 to appoint a plenipotentiary representative (the “Plenipotentiary Representative of the Mongolian Government”) to negotiate with legal persons holding a mining license for a deposit designated by the Mongolian government as a strategically important deposit (“Mineral Deposits of Strategic Importance”) in relation to determining the proportionate interest the Mongolian state has in such legal entity or whether to replace the Mongolian state’s interest with a royalty interest.

The Company has been advised by its Mongolian legal counsel that, the Government of Mongolia is empowered to participate on an equity ownership basis with the license holder in the exploitation and/or mining of each Mineral Deposit of Strategic Importance on terms to be negotiated between the Government of Mongolia and such license holder. Based solely on the knowledge of the Company’s Mongolian legal counsel, the Company is aware that various other license holders of Mineral Deposits of Strategic Importance have entered into similar negotiations with the Plenipotentiary Representative of the Mongolian Government. The Company also understands that any legal person holding a special license for a Mineral Deposit of Strategic Importance shall not, individually or jointly with other entities having a common interest, hold more than 34% of the total issued and outstanding shares of such legal person. However, there is uncertainty as to how these regulations will be interpreted and applied to a publicly-listed company which is the beneficial owner of a Mineral Deposit of Strategic Importance. The Company’s Mongolian legal counsel has advised that, while there is no clarity as to how the aforementioned ownership restriction will be interpreted and applied in practice to a publicly-listed company, they are of the view that the ownership restriction is likely to be determined with reference to the beneficial shareholders of the publicly-listed company. In the event that the aforementioned ownership restriction is not complied with, the Government of Mongolia shall have the right to appoint a Plenipotentiary Representative to take charge of managing such legal person to ensure legal compliance.

On April 24, 2025, SGS initiated preliminary discussions with the Plenipotentiary Representative of the Mongolian Government. The Company anticipates that the discussion between SGS and the Plenipotentiary Representative of the Mongolian Government will continue and both parties will endeavour to engage in good faith for the purpose of arriving at a mutual and constructive understanding and agreement. The Company intends to fully cooperate with the Mongolian government and provide all necessary information to the extent permitted by applicable law.

As at the date of this press release, the deposits covered by four of the Company’s Mongolian mining licenses have been designated as Mineral Deposits of Strategic Importance by Mongolian government authorities. The relevant mining licenses relate to the Company’s Ovoot Tolgoi open pit coal mine (“Ovoot Tolgoi Mine”) and the Soumber Deposit.

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2026 March Deferral Agreement – On March 23, 2026, the Company and JDZF entered into an agreement (the “2026 March Deferral Agreement”) pursuant to which JDZF agreed to grant the Company a deferral of (i) the cash and payment-in-kind interest (“PIK Interest”), management fees, and related deferral fees in the aggregate amount of approximately $140.5 million which will be due and payable to JDZF on or before August 31, 2026 pursuant to the deferral agreement dated March 20, 2025; (ii) semi-annual cash interest payment of approximately $7.9 million payable to JDZF on May 19, 2026 under the Convertible Debenture; (iii) semi-annual cash interest payments of approximately $8.1 million payable to JDZF on November 19, 2026 and the $4.0 million in PIK Interest payable to JDZF on November 19, 2026 under the Convertible Debenture; and (iv) management fees in the aggregate amount of approximately $7.6 million payable to JDZF on May 16, 2026, August 15, 2026, November 15, 2026 and February 15, 2027, respectively, under the Amended and Restated Cooperation Agreement (collectively, the “2026 March Deferred Amounts”).

The effectiveness of the 2026 March Deferral Agreement and the respective covenants, agreements and obligations of each party under the 2026 March Deferral Agreement are subject to the Company obtaining the requisite approval of the 2026 March Deferral Agreement from shareholders in accordance with the requirements of applicable Canadian securities laws and Rule 14.33 and Rule 14A.36 of the rules governing the listing of securities on the Stock Exchange of Hong Kong (the “Listing Rules”). The Company will be seeking approval of the 2026 March Deferral Agreement from disinterested shareholders at the Company’s upcoming special meeting of shareholders, which will be held at a future date to be set by the board of directors of the Company (the “Board”).

The principal terms of the 2026 March Deferral Agreement are as follows:

Payment of the 2026 March Deferred Amounts will be deferred until August 31, 2027 (the “2026 March Deferral Agreement Deferral Date”).
As consideration for the deferral of the 2026 March Deferred Amounts which relate to the payment obligations arising from the Convertible Debenture, the Company agreed to pay JDZF a deferral fee equal to 6.4% per annum on the outstanding balance of such 2026 March Deferred Amounts, commencing on the date on which each such 2026 March Deferred Amounts would otherwise have been due and payable under the Convertible Debenture.
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As consideration for the deferral of the 2026 March Deferred Amounts which relate to payment obligations arising from the Amended and Restated Cooperation Agreement, the Company agreed to pay JDZF a deferral fee equal to 1.5% per annum on the outstanding balance of such 2026 March Deferred Amounts commencing on the date on which each such 2026 March Deferred Amounts would otherwise have been due and payable under the Amended and Restated Cooperation Agreement.
The 2026 March Deferral Agreement does not contemplate a fixed repayment schedule for the 2026 March Deferred Amounts or related deferral fees. Instead, the 2026 March Deferral Agreement requires the Company to use its best efforts to pay the 2026 March Deferred Amounts and related deferral fees due and payable under the 2026 March Deferral Agreement to JDZF. During the period beginning as of the effective date of the 2026 March Deferral Agreement and ending as of the 2026 March Deferral Agreement Deferral Date, the Company will provide JDZF with monthly updates of its financial status and business operations, and the Company and JDZF will on a monthly basis discuss and assess in good faith the amount (if any) of the 2026 March Deferred Amounts and related deferral fees that the Company may be able to repay to JDZF, having regard to the working capital requirements of the Company’s operations and business at such time and with the view of ensuring that the Company’s operations and business would not be materially prejudiced as a result of any repayment.
If at any time before the 2026 March Deferred Amounts and related deferral fees are fully repaid, the Company proposes to appoint, replace or terminate one or more of its chief executive officer, its chief financial officer or any other senior executive(s) in charge of its principal business function or its principal subsidiary, the Company will first consult with, and obtain written consent (such consent shall not be unreasonably withheld) from JDZF prior to effecting such appointment, replacement or termination.
Build-Transfer Agreement – On April 22, 2026, the Company’s wholly-owned Mongolian subsidiary, SGS, entered into a Build-Transfer agreement (the “BT Agreement”) with Tangshan Shenzhou Manufacturing Group Co., Ltd (“Tangshan”), pursuant to which Tangshan will be responsible for the construction of a new dry coal separation system (the “Dry Coal Separation System”) at the Company’s Ovoot Tolgoi Mine in Mongolia, which will be a standalone plant separate from the Company’s existing dry processing plants. Tangshan will also be responsible for the construction of all related facilities for the Dry Coal Separation System. Tangshan shall transfer the ownership and relevant intellectual property rights of the Dry Coal Separation System and the related facilities to SGS upon the satisfaction of the conditions for transfer under the BT Agreement. Under the BT Agreement, SGS has the right to supervise and inspect Tangshan’s construction progress and safety management.

The total consideration payable by the Company over the term of the BT Agreement is approximately $7.8 million. Subject to the terms as set out therein, the BT Agreement is effective from April 22, 2026 until the consideration has been fully paid by SGS, which is expected to take place on or around April 22, 2031.

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Issue of PIK interest shares under convertible debenture – On July 10, 2026, JDZF, the Company’s largest shareholder and registered holder of the Convertible Debenture, assigned to Od Sar Trading Co. Limited (the “Assignee”) the right to receive $19 million of PIK Interest accrued under the Convertible Debenture and related deferral agreements (the “Assigned PIK Interest”). The payment date of the Assigned PIK Interest was deferred to August 31, 2027 (the “Deferral Date”) pursuant to the terms of the 2026 March Deferral Agreement. The assignment of the Assigned PIK Interest does not have any impact on the Deferral Date nor does it amend or result in a deviation of the terms of the 2026 March Deferral Agreement.

On July 12, 2026, the Company received from the Assignee a notice to exercise its right to require settlement of $17 million of the Assigned PIK Interest through the issuance of Common Shares, with a requested payment date of July 13, 2026. Pursuant to the terms of the Convertible Debenture and related deferral agreements, the Assignee may, at its discretion, require the Company to satisfy the Assigned PIK Interest by issuing fully paid and non-assessable Common Shares in an amount equal to the Assigned PIK Interest divided by the 50-day volume weighted average price (“VWAP”) of the Common Shares as of the requested payment date of the Assigned PIK Interest.

On July 15, 2026 the Company issued 73,497,622 Common Shares to the Assignee, representing approximately 19.83% of the issued and outstanding Common Shares, calculated based on the 50-day VWAP of approximately CA$0.3272 (equivalent to $0.2313) per Common Share. The remaining $2 million of the Assigned PIK Interest remains outstanding and subject to the terms of the Convertible Debenture and related deferral agreements, the Assignee may, at its discretion, require the Company to satisfy the remaining Assigned PIK Interest by issuing Common Shares based on the prevailing 50-day VWAP of the Common Shares at the time of request.

Going Concern – Several adverse conditions and material uncertainties relating to the Company cast significant doubt upon the going concern assumption which includes the deficiencies in assets and working capital.

See section “Liquidity and Capital Resources” of this press release for details.

OVERVIEW OF OPERATIONAL DATA AND FINANCIAL RESULTS

Summary of Operational Data

Three months ended Six months ended June 30, June 30,

2026 2025 2026 2025

Sales Volumes, Prices and Costs

Premium semi-soft coking coal Coal sales (millions of tonnes)

Run-of-mine 0.22 0.17 0.48 0.21
Processed 1.51 0.26 2.46 0.34

Average realised selling price (per tonne)

– Run-of-mine			$	59.84			$	65.57
	$	81.77			$	78.25
– Processed	$	76.88	$	59.06	$	73.49	$	66.19

Standard semi-soft coking coal Coal sales (millions of tonnes)

Run-of-mine 0.82 1.65 1.88 2.60
- 0.01
Processed 0.13 0.35

Average realised selling price (per tonne)

Run-of-mine $ 63.39 $ 60.07 $ 57.48 $ 63.88
Processed $ – $ 56.83 $ 58.03 $ 70.56

Premium thermal coal Coal sales (millions of tonnes)

Processed 0.63 0.67 1.26 1.30

Average realised selling price (per tonne)

Processed $ 36.88 $ 33.36 $ 40.00 $ 34.54

Standard thermal coal Coal sales (millions of tonnes)

Run-of-mine – 0.04 – 0.16

Average realised selling price (per tonne)

Run-of-mine $ – $ 32.55 $ – $ 36.54

Coal by-products

0.32 0.52

Coal sales (millions of tonnes) 0.04 0.06 Average realised selling price (per tonne) $ 9.73 $ 13.31 $ 8.22 $ 9.67 Total

Coal sales (millions of tonnes)		3.50		2.96		6.61		5.02
Average realised selling price (per tonne)	$	60.62	$	52.55	$	57.69	$	55.41
Run-of-mine production (millions of tonnes)		5.12		3.91		10.10		7.83
Cost of sales of product sold (per tonne)	$	54.43	$	53.87	$	53.04	$	58.39
Direct cash costs of product sold (per tonne)(i)	$	42.07	$	44.92	$	41.35	$	48.63

Mine administration cash costs of product sold (per tonne) ⁽ⁱ⁾ $ 1.80 $ 1.28 $ 1.62 $ 1.45 Total cash costs of product sold (per tonne) ⁽ⁱ⁾ $ 43.87 $ 46.20 $ 42.97 $ 50.08

Other Operational Data 21.60 44.07

Overburden stripped (millions of bank cubic meters) 19.86 39.22 Strip ratio (bank cubic meters of overburden per tonne of coal produced) 4.22 5.08 4.36 5.01 Lost time injury frequency rate ⁽ⁱⁱ⁾ 0.00 0.00 0.00 0.00

(i) A Non-International Financial Reporting Standards (“non-IFRS”) financial measure. Refer to “Non-IFRS Financial Measures” section. Cash costs of product sold exclude idled mine asset cash costs.

(ii) Per 200,000 man hours and calculated based on a rolling 12 month average.

Overview of Operational Data

The Company recorded an average realised selling price of $60.6 per tonne for the second quarter of 2026 compared to $52.6 per tonne for the second quarter of 2025. The increase in the average realised selling price was primarily attributable to a greater portion of premium semi-soft coking coal was sold with an increased average realised selling price during the second quarter of 2026. The product mix for the second quarter of 2026 consisted of approximately 49% of premium semi-soft coking coal, 24% of standard semi-soft coking coal, 18% of premium thermal coal, and 9% of coal by-products compared to approximately 15% of premium semi-soft coking coal, 60% of standard semi-soft coking coal, 22% of premium thermal coal, 1% of standard thermal coal and 2% of coal by-products for the second quarter of 2025.

The Company’s unit cost of sales of product sold was $54.4 per tonne for the second quarter of 2026 compared to $53.9 per tonne for the second quarter of 2025. The increase was mainly due to the Company expanding into certain categories of processed coal with higher production costs.

The Company ended the second quarter of both 2026 and 2025 without any lost time injury.

For the six months ended June 30, 2026

The Company sold 6.6 million tonnes for the first six months of 2026 as compared to 5.0 million tonnes for the first six months of 2025. The Company recorded an average realised selling price of $57.7 per tonne for the first six months of 2026 compared to $55.4 per tonne for the first six months of 2025.

The Company’s unit cost of sales of product sold was $53.0 per tonne for the first six months of 2026 compared to $58.4 per tonne for the first six months of 2025. The decrease was due to the improvement of output efficiency and unit production economics of processed premium semisoft coking coal by adjusting the coal processing mix, while more sales were made to closer destinations with lower transportation costs for all coal products.

There was no lost time injury recorded for the first six months of both 2026 and 2025.

Summary of Financial Results

Three months ended Six months ended June 30, June 30, 2026 2026

2025 2025

$ in thousands, except per share information

Revenue(i)	$ 155,289	$ 278,156
	$ 211,672 $	381,037
Cost of sales(i)	(159,452)	(293,141)

(190,502) (350,611)

21,793 31,621

Gross profit/(loss) excluding idled mine asset costs ⁽ⁱⁱ⁾ (3,852) (14,423)

21,170 30,426

Gross profit/(loss) (4,163) (14,985)

(3,277) (4,753)

Other operating expenses, net (7,013) (8,584)

(3,749) (6,920)

Administration expenses (3,128) (6,377)

(22) (43)

Evaluation and exploration expenses (22) (54)

14,122 18,710

Profit/(loss) from operations (14,326) (30,000)

(10,710) (21,212)

Finance costs (9,140) (17,952)

2 24

Finance income 53 74

1,391 2,728

Share of earning of a joint venture 1,011 1,624

(225) (217)

Share of losses of associates (120) (307)

(9,904) (13,393)

Current income tax expenses (284) (2,450)

Net loss attributable to equity holders

(5,324) (13,360)

of the Company (22,806) (49,011)

$ (0.018) $ (0.045)

Basic and diluted loss per share $ (0.077) $ (0.165)

(i) Revenue and cost of sales related to the Company’s Ovoot Tolgoi Mine within the Coal Division operating segment. Refer to note 3 of the condensed consolidated interim financial statements for further analysis regarding the Company’s reportable operating segments.

(ii) A non-IFRS financial measure, idled mine asset costs represents the depreciation expense relates to the Company’s idled plant and equipment.

Overview of Financial Results

The Company recorded a $14.1 million profit from operations for the second quarter of 2026 compared to a $14.3 million loss from operations for the second quarter of 2025. The turnaround from loss to profit was mainly due to the increased sales volume, as well as improved average realised selling price per tonne during this period.

Revenue was $211.7 million for the second quarter of 2026 compared to $155.3 million for the second quarter of 2025. The financial results were impacted by increased sales volume year-overyear, as a result of an expansion of the Company’s sales network, diversification of its customer base and expansion of the categories of coal products in its portfolio.

Cost of sales was $190.5 million for the second quarter of 2026 compared to $159.5 million for the second quarter of 2025. The increase in cost of sales was mainly due to increased sales volume year-over-year.

Cost of sales consists of operating expenses, share-based compensation expense, equipment depreciation, depletion of mineral properties, royalties and idled mine asset costs. Operating expenses in cost of sales reflect the total cash costs of product sold (a Non-IFRS financial measure, refer to “Non-IFRS Financial Measures” section of this press release for further analysis) during this quarter.

Three months ended June 30, 2026

$ in thousands 2025

$ 153,552 $ Operating expenses 136,759

19,620

Depreciation and depletion 11,842

16,707

Royalties 10,540

Cost of sales from mine operations	$	189,879 $	159,141
Cost of sales related to idled mine assets		623	311
Cost of sales	$	190,502 $	159,452

Operating expenses in cost of sales were $153.6 million for the second quarter of 2026 compared to $136.8 million for the second quarter of 2025. The overall increase in operating expenses was due to increased sales volume year-over-year.

Cost of sales related to idled mine assets for the second quarter of 2026 included $0.6 million related to depreciation expenses for idled equipment (second quarter of 2025: $0.3 million).

Other operating expenses was $3.3 million for the second quarter of 2026 compared to $7.0 million for the second quarter of 2025. The decrease was mainly due to an impairment loss on coal stockpiles of $12.3 million and a write-off of other payables of $6.3 million was recorded for the second quarter of 2025, while the Company recorded an increased management fee compared with the second quarter of 2025.

Three months ended June 30, 2026

$ in thousands 2025

$ 3,018 $ Management fee 2,229 Provision for doubtful trade and other receivables – Foreign exchange loss/(gain), net (914)

(10)

Reversal of impairment loss on materials and supplies inventories (40)

–

Impairment loss on coal stockpiles 12,348

–

Written off of other payables (6,272)

–

Gain on contract offsetting arrangement (338)

Other operating expenses, net $ 3,277 $ 7,013

Administration expenses were $3.7 million for the second quarter of 2026 as compared to $3.1 million for the second quarter of 2025.

Three months ended June 30,

$ in thousands		2026	2025
Corporate administration	$	1,074 $	1,052
Legal and professional fees		472	607
Salaries and benefits		1,992	1,369
Depreciation		211	100
Administration expenses	$	3,749 $	3,128

The Company continued to minimise evaluation and exploration expenditures in the second quarter of 2026 in order to preserve the Company’s financial resources. Evaluation and exploration activities and expenditures in the second quarter of 2026 were limited to ensuring that the Company met the Mongolian Minerals Law requirements in respect of its mining licenses.

Finance costs were $10.7 million and $9.1 million for the second quarter of 2026 and 2025 respectively, which primarily consisted of interest expense on the $250.0 million Convertible Debenture.

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For the six months ended June 30, 2026

The Company recorded a $18.7 million profit from operations in the first six months of 2026 compared to a $30.0 million loss from operations in the first six months of 2025. The turnaround from loss to profit was mainly due to the increased sales volume, as well as improved average realised selling price per tonne during this period.

Revenue was $381.0 million in the first six months of 2026 compared to $278.2 million in the first six months of 2025. The financial results were impacted by increased sales volume, as a result of expansion of its sales network, diversification of its customer base and expansion of the categories of coal products in its portfolio.

Cost of sales were $350.6 million in the first six months of 2026 compared to $293.1 million in the first six months of 2025, as follows:

Six months ended June 30, 2026

$ in thousands 2025

$ 284,032 $ Operating expenses 251,441

35,785

Depreciation and depletion 20,617

29,599

Royalties 20,521

Cost of sales from mine operations	$	349,416 $	292,579
Cost of sales related to idled mine assets		1,195	562
Cost of sales	$	350,611 $	293,141

Operating expenses in cost of sales were $284.0 million in the first six months of 2026 compared to $251.4 million in the first six months of 2025. The increase in cost of sales was mainly due to increased sales volume year-over-year.

Cost of sales related to idled mine assets in the first six months of 2026 included $1.2 million related to depreciation expenses for idled equipment (first six months of 2025: $0.6 million).

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Other operating expenses were $4.8 million in the first six months of 2026 (first six months of 2025: $8.6 million). The decrease was mainly due to an impairment loss on coal stockpiles of $12.3 million and write-off of other payables of $6.3 million was recorded for the second quarter of 2025, while the Company recorded an increased management fee in the first six months of 2026.

Six months ended June 30, 2026

$ in thousands 2025

$ 5,448 $ Management fee 3,917

(10)

Reversal of provision for doubtful trade and other receivables (56)

(564)

Foreign exchange gain, net (945) Loss on disposal of items of property, plant and equipment, net –

(122)

Reversal of impairment loss on materials and supplies inventories (70)

–

Impairment loss on coal stockpiles 12,348

–

Written off of other payables (6,272)

–

Gain on contract offsetting arrangement (338)

Other operating expenses, net $ 4,753 $ 8,584

Administration expenses were $6.9 million in the first six months of 2026 (first six months of 2025: $6.4 million).

Six months ended June 30,

$ in thousands		2026	2025
Corporate administration	$	2,129 $	2,094
Legal and professional fees		863	1,148
Salaries and benefits		3,502	2,936
Depreciation		426	199
Administration expenses	$	6,920 $	6,377

The Company continued to minimise evaluation and exploration expenditures in the first six months of 2026 in order to preserve the Company’s financial resources. Evaluation and exploration activities and expenditures in the first six months of 2026 were limited to ensuring that the Company met the Mongolian Minerals Law requirements in respect of its mining licenses.

Finance costs were $21.2 million and $18.0 million in the first six months of 2026 and 2025 respectively, which primarily consisted of interest expense on the $250.0 million Convertible Debenture.

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