SouthGobi Announces Inside Information JD Zhixing Fund L.P. Assigns Payment-In-Kind Interest Under Convertible Debenture

JD Zhixing Fund L.P. (JDZF), SouthGobi Resources Ltd.’s largest shareholder and holder of a US$250 million Convertible Debenture, has assigned the right to receive US$19 million of accrued payment-in-kind (PIK) interest to Od Sar Trading Co. Limited. The assignee intends to convert this US$19 million PIK interest into common shares in the near future, subject to the original debenture and deferral terms.

Share issuance will be calculated based on the 50-day volume-weighted average price (VWAP) on the payment date. Illustrative calculations at a CAD$0.327 VWAP suggest approximately 82.1 million shares, representing approximately 21.66% dilution of issued and outstanding common shares.

The payment date for the Assigned PIK Interest is deferred until August 31, 2027, per the March 23, 2026 deferral agreement. The assignment does not alter this deferral date or agreement terms. The Company will announce actual share issuance once finalized and the VWAP is determined.

SouthGobi Resources Ltd. (SGQ) is not issuing an earnings release, meaning there are no new financial results to assess. Prior-period context remains relevant: the first quarter of 2026 reported a $4.6 million operating profit but an $8.0 million net loss, driven by $10.5 million in finance costs. The company also faced a $353 million working capital deficiency and an active going-concern warning.

The PIK assignment represents a mechanical step in the ongoing debt restructuring and deferral process. It does not inject new capital, reduce the principal debt burden, or resolve the going-concern status. Instead, it merely transfers the right to receive equity from JDZF to a third party, likely as part of JDZF's own liquidity management or portfolio positioning. Dilution risk remains fully intact and is quantified at approximately 21.7% if converted at illustrative prices.

There is no material change to operations, the balance sheet, or the strategic trajectory.

SouthGobi Resources Ltd. operates the Ovoot Tolgoi coal mine in Mongolia, with production primarily destined for the Chinese market. The company also holds a paved highway toll road concession through RDCC LLC, which generated $11.4 million in toll revenue over the first nine months of 2025. Operations are heavily dependent on cross-border logistics, Chinese steel production demand, and favorable coal pricing.