SOUTHGOBI (01878) subsidiary invests RMB 53.8 million to enter into a construction contract to build a dry coal selection system.

SOUTHGOBI (01878) announced that on April 22, 2026, the company's Mongolian wholly owned subsidiary Southgobi Sands LLC (SGS) entered into a construction contract (BT agreement) with Tangshan Shenzhou Machinery Group Co., Ltd. (Tangshan Shenzhou). Under this agreement, Tangshan Shenzhou is responsible for the construction of a new dry coal selection system at the Ovoot Tolgoi coal mine in Mongolia for the company (excluding site preparation work), including key equipment such as the ZM600 mineral high-efficiency separator and the IDS-2000 intelligent dry selector (collectively referred to as the "dry coal selection system"). The dry coal selection system will operate independently from the company's existing dry selection plant. Tangshan Shenzhou is also responsible for the construction of all related facilities for the dry coal selection system. After meeting the transfer conditions, Tangshan Shenzhou must transfer the ownership and related intellectual property rights of the dry coal selection system to SGS according to the BT agreement. According to the BT agreement, SGS has the right to supervise and inspect the construction progress and safety management of Tangshan Shenzhou. The total cost payable by SGS during the BT agreement period is approximately RMB 53.8 million (equivalent to approximately $7.8 million USD). In accordance with the terms of the BT agreement, the agreement will be effective from April 22, 2026 until SGS has fully paid the cost (expected by around April 22, 2031). The company is a comprehensive coal mining, development, and trading company. SGS is a wholly owned subsidiary registered by the company in accordance with Mongolian law, primarily engaged in coal mining, development, and mineral exploration in Mongolia. The BT agreement falls within the company's main business scope of coal mining. As the company's total coal production in Mongolia increases, the amount of coal requiring processing before export to the Chinese market also increases. Therefore, the dry coal selection system will benefit the company in processing the coal for export and sale to the Chinese market, thereby expanding its market share, increasing revenue, and profitability. The operation of the BT agreement will increase the company's influence in the local community and enhance overall mining capabilities, aligning with the company's development strategy. The operation of the BT agreement will enable the company to leverage its management and technical resources to improve coal processing efficiency, product quality, and production line performance, thereby enhancing competitiveness and sustainable development capability. However, the company notes that it cannot guarantee or be certain that revenue or profits will increase, as actual results may differ significantly from expectations. The expected benefits of the BT agreement may be influenced by various risks and uncertainties, including but not limited to market conditions, regulatory developments, and costs and expenses associated with the construction, testing, and ongoing operation of the dry coal selection system.