SouthGobi Resources last week filed an appeal against the verdict from the Second District Criminal Court of Justice in Mongolia regarding tax evasion and will continue to vigorously defend itself through the appeal process.

The company announced on February 1, 2015, that on January 30, 2015, the panel of appointed judges from the Court found the three former employees of SouthGobi Sands LLC (SGS), the company's Mongolian subsidiary, guilty of tax evasion and delivered sentences ranging from 5 years and 6 months to 5 years and 10 months of imprisonment in the correctional facilities of strict regimen in Mongolia and fines of MNT1 million (approximately US$510) or the equivalent amount in assets for each defendant. In addition, SGS has been found to be financially liable as a ‘civil defendant’ for a penalty of MNT35.3 billion (approximately US$17.9 million).

The company and its three former employees received the written verdict from the Court of Justice on February 10, 2015.

The company has been informed that following the receipt of the written verdict, Messrs Justin Kapla, Hilarion Cajucom Jr and Cristobal David have requested pardons from the President of Mongolia which, if granted, would allow them to be released from prison and leave the country. The company understands that, as a condition of the potential pardon and whilst in a detention centre in Mongolia, the three individuals were asked by the relevant authorities to elect in writing not to exercise their right to appeal.

SouthGobi says it supports its three former employees who are facing extraordinary and unjust hardships and understands their rationale for requesting a pardon. However, the company continues to believe they have demonstrated their innocence throughout the investigation and court process.

The company reiterates that it has not committed tax evasion, firmly rejects the Court's verdict and what have been gross violations of Mongolian law throughout the investigations and the Court process. Therefore the company filed an appeal against the Court's verdict on February 18, 2015.