SouthGobi shares plunge as Chalco walks away
TORONTO (Reuters) - Shares of SouthGobi Resources Ltd (SGQ.TO) fell more than 17 percent on Tuesday, a day after China's Chalco (2600.HK) said it had dropped its $926 million takeover bid for the Mongolia-focused Canadian coal miner in the face of political opposition.
The state-controlled Chinese aluminum giant blamed the failure of the deal on the difficulty of gaining regulatory approval. SouthGobi's stock tumbled 17.8 percent to C$2.21 on the Toronto Stock Exchange on Tuesday morning.
The coal miner's shares have fallen more than 70 percent since April, when the Chalco deal was announced.
Chalco's offer, worth C$8.48 a share for a controlling stake, was backed by SouthGobi's majority shareholder, Turquoise Hill Resources (TRQ.TO), but faced political opposition within Mongolia, which is fast growing wary of increased Chinese presence in its mining sector.
The proposed deal was the trigger for a law passed in May that limits foreign ownership in Mongolia to 49 percent for companies in strategic sectors, including mining.
SouthGobi, which owns large coal projects close to the border of energy-hungry China, saw its second-quarter profit plunge after Mongolia suspended SouthGobi's mining license following Chalco's bid.
Turquoise Hill holds a 58 percent stake in the coal producer, while China Investment Corp owns 14 percent.
(Reporting by Julie Gordon; Editing by Peter Galloway)