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George Town, Cayman Islands--(Newsfile Corp. - May 26, 2022) - JD Zhixing Fund L.P. (the "Fund") has agreed to acquire 64,766,591 common shares (each, a "Common Share") of SouthGobi Resources Ltd. (the "Corporation") from Land Breeze II S.A.R.L. (the "Vendor") for US$7,000,000 or approximately CAD$8,985,900, using the Bank of Canada May 25, 2022 exchange rate of one (1) United States Dollar to 1.2837 Canadian dollars, representing a price of CAD$0.1387 per share (the "Share Acquisition"). The Fund also agreed to acquire secured convertible debenture of the Corporation representing US$250 million principal amount outstanding dated November 19, 2009 (the "Convertible Debenture") from the Vendor for an aggregate purchase price that does not exceed the principal amount represented by the Convertible Debenture (the "Convertible Debenture Acquisition" and together with the Share Acquisition, the "Proposed Acquisitions"). The Convertible Debenture is convertible into Common Shares of the Corporation at a floor price of $8.88 per share,
The Proposed Acquisitions will take place outside of Canada pursuant to a private arrangement and will not take place through the facilities of any stock exchange or any other marketplace.
Immediately prior to agreeing to complete the Proposed Acquisitions, the Fund held no Common Shares or other securities of the Corporation convertible into Common Shares. Immediately following the Proposed Acquisitions, the Fund will hold 64,766,591 Common Shares, representing 23.62% of the issued and outstanding Common Shares of the Corporation, without giving effect to any conversion of any convertible securities of the Issuer, including the Convertible Debenture.
Assuming the conversion of the entire principal amount of the Convertible Debenture into Common Shares at a conversion price of CAD$8.88 per share, using the Bank of Canada May 25, 2022 exchange rate of one (1) United States Dollar to 1.2837 Canadian dollars, the Fund would receive 36,140,202 Common Shares upon conversion of the Convertible Debenture and would hold 100,906,793 Common Shares representing 32.51% of the issued and outstanding Common Shares, on a partially diluted basis.
The Fund has agreed to acquire the Common Shares and the Convertible Debenture for investment purposes. In connection with the Proposed Acquisitions, certain rights held by the Vendor will be transferred to the Fund, including the right to nominate certain directors for appointment to the Corporation's board of directors. Upon or immediately following the Proposed Acquisitions, the Vendor has agreed to use commercially reasonable efforts to request the Corporation to appoint two nominees of the Fund to the board of directors of the Corporation. The Fund will evaluate its investment from time to time and may, based on such evaluation, market conditions and other circumstances, increase or decrease its ownership of securities in the Corporation through market transactions, private agreements or otherwise.