SouthGobi Resources Ltd. — Audit Report / Information 2020

Mar 30, 2021

==> picture [98 x 98] intentionally omitted <==

SouthGobi Resources Ltd. Consolidated Financial Statements

December 31, 2020 (Expressed in U.S. dollars)

==> picture [456 x 94] intentionally omitted <==

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of SouthGobi Resources Ltd.

Opinion

We have audited the consolidated financial statements of SouthGobi Resources Ltd. (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 6 to 62 which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended December 31, 2020 and 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”) issued by International Accounting Standard Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our auditor’s report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the consolidated financial statements, which indicates that the Group’s incurred a loss attributable to equity holders of the Company of $20.1 million for the year ended December 31, 2020, and as of that date, had a deficiency in assets of $76.2 million while the working capital deficiency reached $217.6 million. These conditions, along with other matters as set forth in Note 1 to the consolidated financial statements, indicate that a material uncertainty exists that may cast significant doubt about the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

==> picture [105 x 45] intentionally omitted <==

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the "Material Uncertainty Related to Going Concern” section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Impairment of property, plant and equipment

(Refer to note 3.22(b) and 16 to the consolidation financial statements)

We have identified the impairment of property, plant and equipment as a key audit matter because of its significance to the consolidated financial statements of the Group and the Group’s assessment of impairment of property, plant and equipment is a judgemental process which requires estimates concerning the forecast future cash flows associated with the assets in determining the recoverable amount.

The selection of valuation model, adoption of key assumptions and input data may be subject to management bias and changes in these assumptions and input to the valuation model may result in significant financial impact.

How the matter was addressed in our audit

Our procedures in relation to the impairment assessment of property, plant and equipment included:

• Assessing the appropriateness of the Group’s identification of individual cash generating unit;

• Evaluating the competence, capabilities and objectivity of the independent external consultant engaged by the Group (“Management’s Expert”);

• Engaging our internal valuation experts to evaluate the appropriateness of the valuation methodology in the context of the relevant accounting standards, the data and technical information and the reasonableness of significant assumptions used by the Group and the Management’s Expert in the valuation models against information of independent source, our knowledge of the Group and its industry;

• Evaluating the adequacy of the sensitivity analysis on significant assumptions in the valuation models for risk assessment;

• Assessing the reasonableness of the key assumptions used in the valuation models with reference to the historical accuracy of such forecasts and the current operational results; and

• Comparing the input data in the cash flow forecast to the source document.

• We have also considered the overall reasonableness of cash flow forecasts.

==> picture [105 x 45] intentionally omitted <==

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2020, but does not include the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. We obtained the information included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2020 prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s consolidated financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

==> picture [105 x 45] intentionally omitted <==

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements - Continued

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

==> picture [105 x 45] intentionally omitted <==

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements - Continued

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

BDO Limited

Certified Public Accountants Lee Alfred Practising Certificate Number P04960

Hong Kong, March 30, 2021

TABLE OF CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS	CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Statement of Comprehensive Income......................................................................................................	6
Consolidated Statement of Financial Position................................................................................................................	7
Consolidated Statement of Changes in Equity...............................................................................................................	8
Consolidated Statement of Cash Flows.........................................................................................................................	9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.	Corporate information and going concern..............................................................................................................	10
2.	Basis of preparation...............................................................................................................................................	12
3.	Summary of significant accounting policies............................................................................................................	14
4.	Segment information..............................................................................................................................................	29
5.	Revenue................................................................................................................................................................	29
6.	Expenses by nature...............................................................................................................................................	30
7.	Cost of sales..........................................................................................................................................................	30
8.	Other operating expenses......................................................................................................................................	31
9.	Administration expenses........................................................................................................................................	31
10.	Finance costs and income.....................................................................................................................................	31
11.	Taxes.....................................................................................................................................................................	32
12.	Earnings/(loss) per share.......................................................................................................................................	33
13.	Trade and other receivables..................................................................................................................................	34
14.	Inventories.............................................................................................................................................................	35
15.	Prepaid expenses..................................................................................................................................................	35
16.	Property, plant and equipment...............................................................................................................................	36
17.	Investments in joint venture....................................................................................................................................	37
18.	Trade and other payables......................................................................................................................................	38
19.	Provision for commercial arbitration.......................................................................................................................	39
20.	Deferred revenue...................................................................................................................................................	40
21.	Interest-bearing borrowing.....................................................................................................................................	40
22.	Lease liabilities.......................................................................................................................................................	41
23.	Convertible debenture...........................................................................................................................................	41
24.	Decommissioning liability........................................................................................................................................	48
25.	Equity.....................................................................................................................................................................	48
26.	Share-based payments..........................................................................................................................................	49
27.	Reserves................................................................................................................................................................	50
28.	Capital risk management........................................................................................................................................	51
29.	Financial instruments and fair value measurements..............................................................................................	52
30.	Related party transactions.....................................................................................................................................	55
31.	Supplemental cash flow information.......................................................................................................................	56
32.	Commitments for expenditure.................................................................................................................................	58
33.	Contingencies........................................................................................................................................................	58
34.	Events after the reporting period...........................................................................................................................	60
35.	Statement of financial position of the company......................................................................................................	61
36.	Reserve and deficit of the company ......................................................................................................................	62

Additional stock exchange information
A1. Director and employee emoluments.......................................................................................................................	63
A2. Five year summary.................................................................................................................................................	65
A3. Cash......................................................................................................................................................................	65

SOUTHGOBI RESOURCES LTD. Consolidated Statements of Comprehensive Income

(Expressed in thousands of U.S. dollars, except for share and per share amounts)

Revenue Cost ofsales	Notes	Year ended December 31,
		2020 2019 85,951 $ 129,712 $ (58,657) (84,400)
	5 7
Gross profit Other operating expenses Administration expenses Evaluationand explorationexpenses	8 9	27,294 45,312 (4,821) (5,581) (6,971) (9,447) (226) (452)
Profit from operations Finance costs Finance income Share ofearnings ofa jointventure	10 10 17	15,276 29,832 (31,692) (28,010) 2,613 4,417 1,313 1,329
Profit/(loss) before tax Currentincome taxexpense	11	(12,490) 7,568 (7,599) (3,367)
Net profit/(loss) attributable to equity holders of the Company		(20,089) 4,201
Other comprehensive loss to be reclassified to profit or loss in subsequent periods Exchange difference ontranslationof foreignoperation		(7,043) (5,129)
Net comprehensive loss attributable to equity holders of the Company		(27,132) $ (928) $
Basic and diluted earnings/(loss) per share	12	(0.07) $ 0.02 $

The accompanying notes are an integral part of these consolidated financial statements.

December 31, 2019

Page | 6

SOUTHGOBI RESOURCES LTD. Consolidated Statements of Financial Position

(Expressed in thousands of U.S. dollars)

Assets Current assets Cash and cash equivalents Restricted cash Trade and other receivables Inventories Prepaid expenses	Notes	As at December 31,
		2020 2019
	13 14 15	20,121 $ 7,164 $ 918 862 1,305 1,778 42,383 52,237 1,666 2,312
Total current assets Non-current assets Property, plant and equipment Inventories Investmentina jointventure	16 14 17	66,393 64,353 131,425 137,221 680 9,332 16,134 17,521
Total non-current assets		148,239 164,074
Total assets		214,632 $ 228,427 $
Equity and liabilities Current liabilities Trade and other payables Provision for commercial arbitration Deferred revenue Interest-bearing borrowing Lease liabilities Current portionofconvertible debenture	18 19 20 21 22 23	78,730 $ 87,013 $ - 5,593 20,831 16,057 2,826 2,835 202 460 181,411 67,106
Total current liabilities Non-current liabilities Lease liabilities Convertible debenture Decommissioningliability	22 23 24	284,000 179,064 424 108 - 89,868 6,445 8,605
Total non-current liabilities		6,869 98,581
Total liabilities Equity Common shares Share option reserve Capital reserve Exchange reserve Accumulated deficit	25 27 27 25	290,869 277,645 1,098,634 1,098,634 52,702 52,589 396 396 (30,271) (23,228) (1,197,698) (1,177,609)
Total deficiency in assets		(76,237) (49,218)
Total equity and liabilities		214,632 $ 228,427 $
Net current liabilities Total assets less current liabilities		(217,607) $ (114,711) $ (69,368) $ 49,363 $

Corporate information and going concern (Note 1), commitments for expenditure (Note 32) and contingencies (Note 33)

The accompanying notes are an integral part of these consolidated financial statements.

APPROVED BY THE BOARD:

"Mao Sun" "Dalanguerban" Director Director

December 31, 2020

Page | 7

SOUTHGOBI RESOURCES LTD.

Consolidated Statements of Changes in Equity

(Expressed in thousands of U.S. dollars and shares in thousands)

==> picture [468 x 171] intentionally omitted <==

----- Start of picture text -----

Share Exchange
Number of Share option Capital fluctuation Accumulated
shares/units capital reserve reserve reserve deficit Total
Balances, January 1, 2019 272,703 $ 1,098,634 $ 52,542 $ 396 $ (18,099) $ (1,181,810) $ (48,337)
Net profit for the year - - - - - 4,201 4,201
Exchange differences on translation of foreign
operations - - - - (5,129) - (5,129)
Total comprehensive loss attributable to
equity holders of the Company - - - - (5,129) 4,201 (928)
Share-based compensation charged to operations - - 47 - - - 47
Balances, December 31, 2019 272,703 1,098,634 52,589 396 (23,228) (1,177,609) (49,218)
Balances, January 1, 2020 272,703 $ 1,098,634 $ 52,589 $ 396 $ (23,228) $ (1,177,609) $ (49,218)
Net loss for the year - - - - - (20,089) (20,089)
Exchange differences on translation of foreign
operations - - - - (7,043) - (7,043)
Total comprehensive loss attributable to
equity holders of the Company - - - - (7,043) (20,089) (27,132)
Share-based compensation charged to operations - - 113 - - - 113
Balances, December 31, 2020 272,703 1,098,634 52,702 396 (30,271) (1,197,698) (76,237)
----- End of picture text -----

The accompanying notes are an integral part of these consolidated financial statements.

December 31, 2020

Page | 8

SOUTHGOBI RESOURCES LTD. Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

Operating activities Profit/(loss) before tax Adjustments for: Depreciation and depletion Share-based compensation Interest expense on convertible debenture Interest expense on borrowings Interest elements on leased assets Accretion of decommissioning liability Finance income Share of earnings of a joint venture Gain on disposal of items of property, plant and equipment, net Provision/(reversal of provision) for doubtful trade and other receivables Provision for commercial arbitration Impairment of prepaid expenses Loss on disposal of properties for resale Reversalof impairment of inventories	Notes	Year ended December 31,
		2020 2019 (12,490) $ 7,568 $ 8,736 15,942 113 47 27,726 23,751 413 742 69 129 584 402 (2,613) (4,417) (1,313) (1,329) (69) (29) (336) 501 4,634 485 8 253 - 36 - (1,823)
	26 10 10 10 10 10 17 8 13 19 15 14
Operating cash flows before changes in working capital items Net changein working capital items	31	25,462 42,258 (1,153) (17,787)
Cash generated from operating activities Interest paid Income taxpaid		24,309 24,471 (1,192) (3,605) (199) (809)
Net cash flows from operating activities		22,918 20,057
Investing activities Expenditures on property, plant and equipment Disposal of investment in a joint venture Proceeds from disposal of property, plant and equipment Proceeds from disposal of properties for resale Interest received Dividendfroma jointventure	17	(11,886) (20,910) - 9 255 70 - 243 24 55 1,994 2,025
Net cash flows used in investing activities		(9,613) (18,508)
Financing activities Capital elements of lease rental paid Repayment of interest-bearingloans		(647) (639) - (700)
Net cash flows used in financing activities		(647) (1,339)
Effect of foreign exchange rate changes on cash and cash equivalents		299 (5)
Increase in cash and cash equivalents Cash and cash equivalents, beginning of year		12,957 205 7,164 6,959
Cash and cash equivalents, end ofyear		20,121 $ 7,164 $

The accompanying notes are an integral part of these consolidated financial statements.

December 31, 2020

Page | 9

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

1. CORPORATE INFORMATION AND GOING CONCERN

SouthGobi Resources Ltd. is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of British Columbia and its shares are listed for trading on the Toronto Stock Exchange (“TSX”) (Symbol: SGQ) and Hong Kong Stock Exchange (“HKEX”) (Symbol: 1878). The company, together with its subsidiaries (collectively referred to as the “Company”), is an integrated coal mining, development and exploration company. At December 31, 2020, to the Company’s best knowledge, Land Breeze II S.à.r.l., a wholly-owned subsidiary of China Investment Corporation (together with its whollyowned subsidiaries and affiliates, “CIC”) owned approximately 23.8% of the outstanding common shares of the Company. Novel Sunrise Investments Limited ("Novel Sunrise"), a wholly-owned subsidiary of China Cinda (HK) Investments Management Company Limited (“Cinda”), and Voyage Wisdom Limited owned approximately 17.0% and 9.5% of the outstanding common shares of the Company, respectively.

The Company owns the following coal projects in Mongolia: the Ovoot Tolgoi open pit producing coal mine (“Ovoot Tolgoi Mine”), the Soumber Deposit, the Zag Suuj Deposit and the Ovoot Tolgoi Underground Deposit. These projects are located in the Umnugobi Aimag (South Gobi Province) of Mongolia, within 150 kilometers of each other and in close proximity to the Mongolia-China border. The Company owns a 100% interest in these coal projects.

The registered and records office of the Company is located at 20[th] Floor, 250 Howe Street, Vancouver, British Columbia, Canada, V6C 3R8. The principal place of business of the Company is located at Unit 1208-10, Tower One, Grand Century Place, 193 Prince Edward Road West, Mongkok, Kowloon, Hong Kong.

Impact of the Covid-19 pandemic

The closure of the Mongolia-China border during the period between February 11, 2020 to March 27, 2020 and the limitations imposed on the total volume of coal exports subsequent to the re-opening of the border on a trial basis effective as of March 28, 2020 had an adverse impact on the Company’s sales and cash flows in the first and second quarter of 2020. In order to mitigate the financial impact of the border closure and preserve its working capital, the Company temporarily ceased major mining operations (including coal mining), reduced production to only coal-blending activities and placed approximately half of its workforce on furlough in February 2020. On August 2, 2020, the Company resumed its mining operations. The Company will continue to closely monitor the development of the Coronavirus Disease 2019 (“COVID-19”) pandemic and the impact it has on coal exports to China and will react promptly to preserve the working capital of the Company.

December 31, 2020

Page | 10

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

1. CORPORATE INFORMATION AND GOING CONCERN (CONTINUED)

Going concern assumption

The Company’s consolidated financial statements have been prepared on a going concern basis which assumes that the Company will continue operating until at least December 31, 2021 and will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due. However, in order to continue as a going concern, the Company must generate sufficient operating cash flows, secure additional capital or otherwise pursue a strategic restructuring, refinancing or other transactions to provide it with sufficient liquidity.

Several adverse conditions and material uncertainties cast significant doubt upon the Company’s ability to continue as a going concern and the going concern assumption used in the preparation of the Company’s consolidated financial statements. The Company incurred a loss attributable to equity holders of the Company of $20,089 for the year ended December 31, 2020 (compared to a profit attributable to equity holders of the Company for the year ended December 31, 2019), and as of that date, had a deficiency in assets of $76,237 as compared to a deficiency in assets of $49,218 as at December 31, 2019 while the working capital deficiency (excess current liabilities over current assets) reached $217,607 as compared to a working capital deficiency of $114,711 as at December 31, 2019.

Included in the working capital deficiency as at December 31, 2020 are significant obligations, which include the interest amounting to $91,059 in relation to the convertible debenture with CIC (“CIC Convertible Debenture”) and trade and other payables of $78,730, which includes the unpaid taxes of $36,107 that are repayable on demand to the Mongolian Tax Authority (“MTA”).

As detailed in Note 23.1, the Company failed to make payment of convertible debenture interest to CIC in according to the terms of convertible debenture agreement. This constituted an event of default of the relevant convertible debenture agreements as at December 31, 2020 and the 2020 November Deferral Agreement became effective on January 21, 2021. As a result, the entire balance of the CIC Convertible Debenture was classified as current liability as at December 31, 2020.

The Company may not be able to settle all trade and other payables on a timely basis, and as a result any continuing postponement in settling certain trade and other payables owed to suppliers and creditors may impact the mining operations of the Company and may result in potential lawsuits and/or bankruptcy proceedings being filed against the Company. Except as disclosed elsewhere in these consolidated financial statements, no such lawsuits or proceedings were pending as at March 30, 2021.

There are significant uncertainties as to the outcomes of the above events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business. Should the use of the going concern basis in preparation of the consolidated financial statements be determined to be not appropriate, adjustments would have to be made to write down the carrying amounts of the Company’s assets to their realizable values, to provide for any further liabilities which might arise and to reclassify noncurrent assets and non-current liabilities as current assets and current liabilities, respectively. The effects of these adjustments have not been reflected in the consolidated financial statements. If the Company is unable to continue as a going concern, it may be forced to seek relief under applicable bankruptcy and insolvency legislation.

December 31, 2020

Page | 11

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

1. CORPORATE INFORMATION AND GOING CONCERN (CONTINUED)

Going concern assumption (Continued)

Management of the Company has prepared a cash flow projection covering a period of 12 months from December 31, 2020. The cash flow projection has taken into account the anticipated cash flow to be generated from the Company’s business during the period under projection including cost saving measures. In particular, the Company has taken into account the following measures for improvement of the Company’s liquidity and financial position, which include: (i) entering into the 2020 November Deferral Agreement with CIC for a deferral of the 2020 November Deferral Amounts until August 31, 2023; (ii) agreeing to deferral arrangements and improved payment terms with certain vendors; (iii) reducing the outstanding tax payable by making monthly payments to MTA beginning as of June 2020; and (iv) reducing the inventory of low quality coal by wet washing and coal blending. After considering the above, and given the re-opening of the Mongolia-China border since March 28, 2020, the Directors believe that there will be sufficient financial resources to continue its operations and to meet its financial obligations as and when they fall due in the next 12 months from December 31, 2020 and therefore are satisfied that it is appropriate to prepare the consolidated financial statements on a going concern basis.

Factors that impact the Company’s liquidity are being closely monitored and include, but are not limited to, impact of the COVID-19 pandemic, Chinese economic growth, market prices of coal, production levels, operating cash costs, capital costs, exchange rates of currencies of countries where the Company operates and exploration and discretionary expenditures.

As at December 31, 2020 and December 31, 2019, the Company was not subject to any externally imposed capital requirements.

2. BASIS OF PREPARATION

2.1 Statement of compliance

The consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).

The consolidated financial statements of the Company for the year ended December 31, 2020 were approved and authorized for issue by the Board of Directors of the Company (the “Board”) on March 30, 2021.

2.2 Basis of presentation

The consolidated financial statements have been prepared on a historical cost basis except for certain financial assets and financial liabilities which are measured at fair value. The Company’s financial instruments are further disclosed in Note 29.

December 31, 2020

Page | 12

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

2. BASIS OF PREPARATION (CONTINUED)

2.3 Adoption of new and revised standards and interpretations

The following new IFRS standards and interpretations were adopted by the Company on January 1, 2020.

Amendments to International Accounting Standard (“IAS”) 1 and IAS 8 Definition of Material Amendments to IFRS 3 Definition of a Business Amendments to IFRS 9, IAS 39 and Interest Rate Benchmark Reform IFRS 7 Amendments to IFRS 3 Revised Conceptual Framework for Financial Reporting

There have been no new IFRSs or IFRIC interpretations that have a material impact on the Company’s results and financial position for the year ended December 31, 2020. The Company has not early applied any new or amended IFRSs that is not yet effective for the year ended December 31, 2020.

2.4 Standard issued but not yet effective

The following new and revised IFRSs, potentially relevant to the Company’s financial statements, have been issued, but are not yet effective and have not been early adopted by the Company.

Amendments to IAS 1	Classification of Liabilities as Current or Non-current, and Presentation of
	Financial Statements – Classification by the Borrower of a Term Loan that
	Contains a Repayment on Demand Clause4
Amendments to IAS 16	Proceeds before Intended Use2
Amendments to IFRS 16	Covid-19-Related Rent Concessions1
Amendments to IAS 37	Onerous Contracts - Cost of Fulfilling a Contract2
IFRS 17	Insurance Contracts4
Amendments to IFRS 3	Reference to the Conceptual Framework3
Amendments to IFRS 10 and IAS	Sale or Contribution of Assets between an Investor and its Associate or Joint
28	Venture5
Amendments to IAS 39, IFRS 4,	Interest Rate Benchmark Reform – Phase 21
IFRS 7, IFRS 9 and IFRS 16,
Amendments to IFRS 1, IFRS 9,	Annual Improvements to IFRSs 2018-20202
IFRS 16 and IAS 41

1 Effective for annual periods beginning on or after 1 January 2021.

2 Effective for annual periods beginning on or after 1 January 2022.

• 3 Effective for business combinations for which the date of acquisition is on or after the beginning of the first annual period beginning on or after 1 January 2022.

• 4 Effective for annual periods beginning on or after 1 January 2023.

• 5 The amendments shall be applied prospectively to the sale or contribution of assets occurring in annual periods beginning on or after a date to be determined.

The Company is not yet in a position to state whether these new pronouncements will result in substantial changes to the Company’s accounting policies and financial statements.

December 31, 2020

Page | 13

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of consolidation

The consolidated financial statements include the financial statements of SouthGobi Resources Ltd. and its major controlled subsidiaries (Note 30).

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. All intercompany transactions, balances, income and expenses are eliminated on consolidation.

The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

3.2 Foreign currencies

The consolidated financial statements are presented in the U.S. dollar, which is the functional currency of SouthGobi Resources Ltd. Each entity in the Company has its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the U.S. dollar rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the U.S. dollar rate of exchange ruling at the end of each reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate prevailing at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value is determined.

At the end of the reporting period, the assets and liabilities of an entity with the functional currency in a foreign currency are translated into the U.S. dollar at the exchange rates prevailing at the end of the reporting period and the profit or loss is translated into the U.S. dollar at the weighted average exchange rate for the year. The resulting exchange differences are recognized in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognized in profit or loss.

3.3 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalized as part of the cost of those assets. All other borrowing costs are expensed and included in profit or loss.

December 31, 2020

Page | 14

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.4 Inventories

Coal stockpile inventories are measured at the lower of production cost and net realizable value. Production cost is determined by the weighted average cost method and includes direct and indirect labor, operating materials and supplies, processing costs, transportation costs and an appropriate portion of fixed and variable overhead expenses. Fixed and variable overhead expenses include depreciation and depletion. Net realizable value represents the future estimated selling price of the product, less estimated costs to complete production and costs necessary to bring the product to sale.

Materials and supplies inventory consists of consumable parts and supplies which are valued at the lower of weighted average cost and net realizable value, less allowances for obsolescence. Replacement cost is used as the best available measure of net realizable value. Supplies used in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.

3.5 Leases

All leases (irrespective of they are operating leases or finance leases) are required to be capitalized in the statement of financial position as right-of-use assets and lease liabilities, but accounting policy choices exist for an entity to choose not to capitalize (i) leases which are short-term leases and/or (ii) leases for which the underlying asset is of low-value. The Company has elected not to recognize right-of-use assets and lease liabilities for low-value assets and leases for which at the commencement date have a lease term less than 12 months. The lease payments associated with those leases have been expensed on straightline basis over the lease term.

Right-of-use asset

The right-of-use asset is recognized at cost and would comprise: (i) the amount of the initial measurement of the lease liability (refer to below for the accounting policy to account for lease liability); (ii) any lease payments made at or before the commencement date, less any lease incentives received; (iii) any initial direct costs incurred by the lessee and (iv) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Except for right-of-use asset that meets the definition of an investment property or a class of property, plant and equipment to which the Company applies the revaluation model, the Company measures the right-of-use assets applying a cost model. Under the cost model, the Company measures the right-to-use at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liability. Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end of the lease term are depreciated from commencement date to the end of the useful life. Otherwise, right of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. For right-of-use asset that meets the definition of an investment property, they are carried at fair value and for right-of-use asset that meets the definition of a leasehold land and buildings held for own use, they are carried at fair value.

Lease liability

The lease liability is recognized at the present value of the lease payments that are not paid at the date of commencement of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses the Company’s incremental borrowing rate.

December 31, 2020

Page | 15

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.5 Leases (Continued)

The following payments for the right-to-use the underlying asset during the lease term that are not paid at the commencement date of the lease are considered to be lease payments: (i) fixed payments less any lease incentives receivable: (ii) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at commencement date; (iii) amounts expected to be payable by the lessee under residual value guarantees; (iv) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option and (v) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

Subsequent to the commencement date, the Company measures the lease liability by: (i) increasing the carrying amount to reflect interest on the lease liability; (ii) reducing the carrying amount to reflect the lease payments made; and (iii) remeasuring the carrying amount to reflect any reassessment or lease modifications, e.g., a change in future lease payments arising from change in an index or rate, a change in the lease term, a change in the in substance fixed lease payments or a change in assessment to purchase the underlying asset.

3.6 Property, plant and equipment

Property, plant and equipment includes the Company’s operating equipment and infrastructure, construction in progress and mineral properties. Property, plant and equipment is stated at cost less accumulated depreciation and depletion and accumulated impairment losses.

Initial recognition

The cost of an item of operating equipment and infrastructure consists of the purchase price or construction cost, including vendor prepayments, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use, an initial estimate of the decommissioning liability and capitalized borrowing costs.

Construction in progress is classified to the appropriate category of property, plant and equipment when it is completed and is ready for its intended use.

All direct costs related to the acquisition of mineral property interests are capitalized on a property by property basis. The cost of mineral properties also includes mineral property development costs (Note 3.7), certain production stripping costs (Note 3.8) and decommissioning liabilities related to the reclamation of the Company’s mineral properties (Note 3.9).

December 31, 2020

Page | 16

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.6 Property, plant and equipment (Continued)

Depreciation and depletion

Depreciation and depletion are recorded based on the cost of an item of property, plant and equipment, less its estimated residual value, using the straight-line method or unit-of-production method over the following estimated useful lives:

Mobile equipment 5 to 7 years Other operating equipment 1 to 10 years Buildings and roads 5 to 20 years Construction in progress not depreciated Mineral properties unit-of-production basis based on proven and probable reserves

Upon disposal, reclassification to assets held for sale or when no future economic benefits are expected to arise from the continued use of an asset the original cost and related accumulated depreciation is removed from property, plant and equipment. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss.

The Company conducts an annual assessment of the residual balances, estimated useful lives and depreciation methods being used for property, plant and equipment and any changes arising from the assessment are applied by the Company prospectively.

3.7 Mineral properties

Evaluation and exploration expenses

Evaluation and exploration expenses are charged to profit or loss in the period incurred until such time as it has been determined that a mineral property has technically feasibility and commercially viability.

Production phase

Upon a mine development being ready for its intended use it enters the production phase and depletion of the mineral property is recorded on a unit-of-production basis, using the estimated resources that are expected to be mined in the mine plan as the depletion base. Management’s determination of when an asset is ready for its intended use is based on several qualitative and quantitative factors including, but not limited to, the following:

• the elevation or bench where the coal to be mined has been reached; and

• the commissioning of major operating equipment and infrastructure is completed.

December 31, 2020

Page | 17

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.8 Development and production stripping costs

Once a property is determined to have reached technical feasibility and commercial viability, the Company’s subsequent exploration and evaluation and development expenses are capitalized as mineral property costs within property, plant and equipment.

Production stripping activity assets are recognized when the following three criteria are met:

• it is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity will flow to the entity;

• the entity can identify the component of the ore body for which access has been improved; and

• the costs relating to the stripping activity associated with that component can be measured reliably.

If not all of the criteria are met, the stripping activity costs are included in the cost of inventory produced during the period incurred.

3.9 Decommissioning, restoration and similar liabilities

The Company recognizes provisions for statutory, contractual, constructive or legal obligations, including those associated with the reclamation of mineral properties, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for a decommissioning liability is recognized as its present value in the period in which it is incurred. Upon initial recognition of the liability, a corresponding amount is added to the carrying amount of the related asset and the cost is amortized as an expense over the estimated useful life of the asset using the unit-of-production method. Following the initial recognition of the decommissioning liability, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the discount rate and the amount or timing of the underlying cash flows required to settle the obligation. The discount rate used is a credit adjusted risk free rate.

3.10 Joint arrangements

The Company classifies joint arrangements as either joint operations or joint ventures, depending on the rights and obligations of the parties involved in the joint arrangement. Joint arrangements that are classified as joint operations require the venturers to recognize the individual assets, liabilities, revenues and expenses to which they have legal rights or are responsible. Joint arrangements that are classified as a joint venture are accounted for using the equity method of accounting.

3.11 Share-based payments

Share-based payment transactions

Employees (including directors and senior executives) of the Company receive a portion of their remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (“equity-settled transactions”).

December 31, 2020

Page | 18

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.11 Share-based payments (Continued)

In situations where equity instruments are issued to non-employees and the value of some or all of the goods or services received by the entity as consideration cannot be measured reliably, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.

Equity-settled transactions

The cost of equity-settled transactions with employees are measured by reference to the fair value at the date on which the awards are granted.

The cost of equity-settled transactions are recognized, together with a corresponding increase in the share option reserve, over the period in which the performance and/or service conditions are fulfilled and end on the date on which the relevant employees become fully entitled to the award. The cumulative expense recognized for equity-settled transactions at each reporting date reflects the Company’s best estimate of the number of equity instruments that will ultimately vest. No expense is recognized for awards that do not ultimately vest.

When the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of the modification.

3.12 Earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of shares outstanding during the reporting period.

Diluted earnings/(loss) per share is calculated by adjusting the profit or loss attributable to equity holders of the Company divided by the weighted average number of shares outstanding for the effects of all dilutive share equivalents. The Company’s dilutive share equivalents include stock options and convertible debt.

3.13 Taxation

Income tax expense represents the sum of tax currently payable and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are substantively enacted at the end of each reporting period.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences, at the end of each reporting period, between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

December 31, 2020

Page | 19

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.13 Taxation (Continued)

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled by the parent, investor or venturer and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been substantively enacted at the end of each reporting period.

Deferred income tax relating to items recognized directly in equity is recognized in equity and not in profit or loss.

Deferred income tax assets and deferred income tax liabilities are offset if, and only if, a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend to either settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

December 31, 2020

Page | 20

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.14 Financial instruments

(a) Financial assets

All financial assets are initially recorded at fair value and categorized upon inception into one of the following categories: those to be measured subsequently at fair value either through other comprehensive income (“FVOCI”) or through profit or loss (“FVTPL”), and those to be measured at amortized cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in equity investments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at FVOCI.

The Company reclassifies debt investments when and only when its business model for managing those assets changes.

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as other operating expenses in the consolidated statements of comprehensive income.

Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as other operating expenses in the consolidated statements of comprehensive income.

Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

December 31, 2020

Page | 21

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Financial liabilities

Financial liabilities are categorized, at initial recognition, as financial liabilities at FVTPL, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognized initially at fair value and, in case of loans and borrowings and payables, net of directly attributable costs.

Financial liabilities categorized as financial liabilities measured at amortized cost are initially recognized at fair value less directly attributable transaction costs. After initial recognition, financial liabilities at amortized cost are subsequently measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Financial liabilities categorized as FVTPL include financial liabilities designated upon initial recognition as FVTPL. Derivatives, including separated embedded derivatives, are also classified as FVTPL unless they are designated as effective hedging instruments. Transaction costs on financial liabilities classified as FVTPL are expensed as incurred. At the end of each reporting period subsequent to initial recognition, financial liabilities classified as FVTPL are measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which they arise. The net gain or loss recognized in profit or loss excludes any interest paid on the financial liabilities. For liabilities designated at FVTPL, changes due to credit risk are recognized in other comprehensive income.

3.15 Impairment of financial assets

The Company’s trade and other receivables are subject to IFRS 9’s expected credit loss (“ECL”) model.

The Company applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade and other receivables. The Company’s definition of a default scenario is if receivables from a customer are over six months past due, or if there is reasonable and supportable evidence that a customer will no longer be able to settle its receivables with the Company.

3.16 Derecognition of financial assets and financial liabilities

Financial assets are derecognized when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Company has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized directly in equity is recognized in profit or loss.

Financial liabilities are derecognized when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

December 31, 2020

Page | 22

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.17 Impairment of non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the assets belong.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing fair value less costs to sell, recent market transactions are taken into account. The Company also considers the results of an appropriate valuation model which would generally be determined based on the present value of estimated future cash flows arising from the continued use and eventual disposal of the asset. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior periods.

3.18 Cash and cash equivalents

Cash and cash equivalents include cash at banks and short term money market instruments with original maturities of three months or less.

3.19 Revenue recognition

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Depending on the terms of the contract and the laws that apply to the contract, control of the goods or service may be transferred over time or at a point in time. Control of the goods or service is transferred over time if the Company’s performance:

• provides all of the benefits received and consumed simultaneously by the customer;

• creates or enhances an asset that the customer controls as the Company performs; or

• does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.

December 31, 2020

Page | 23

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.19 Revenue recognition (Continued)

If control of the goods or services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods or service.

When the contract contains a financing component which provides the customer a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amounts receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Company and the customer at contract inception. Where the contract contains a financing component which provides a significant financing benefit to the Company, revenue recognized under that contract includes the interest expense accreted on the contract liability under the effective interest method. For contracts where the period between the payment and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in IFRS 15.

Sales of mining coal

Income from sales of mining coal is recognized at a point in time when the goods are delivered to customers and title has passed.

Other income

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

Deferred revenue

Deferred revenue represents the Company’s obligation to transfer services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer.

3.20 Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the obligation. The increase in the provision due to the passage of time is recognized as a finance cost.

December 31, 2020

Page | 24

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.21 Related party transactions

• (a) A person or a close member of that person’s family is related to the Company if that person:

• (i) has control or joint control over the Company;

• (ii) has significant influence over the Company; or

• (iii) is a member of key management personnel of the Company or the Company’s parent.

• (b) An entity is related to the Company if any of the following conditions apply:

• (i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

• (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

• (iii) Both entities are joint ventures of the same third party.

• (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

• (v) The entity is a post-employment benefit plan for the benefit of the employees of the Company or an entity related to the Company.

• (vi) The entity is controlled or jointly controlled by a person identified in (a).

• (vii) A person identified in (a)(i) has significant influence over the entity or is a member of key management personnel of the entity (or of a parent of the entity).

• (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to the Company’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

• (i) that person’s children and spouse or domestic partner;

• (ii) children of that person’s spouse or domestic partner; and

• (iii) dependents of that person or that person’s spouse or domestic partner.

3.22 Significant accounting judgments and estimates

Information about judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:

(a) Going concern assumption

The directors of the Company have prepared the consolidated financial statements on the assumption that the Company will be able to operate as a going concern in the foreseeable future, which is a critical judgement that has the most significant effect on the amounts recognized in the consolidated financial statements. The assessment of the going concern assumption involves making a judgement by the directors about the future outcome of events or conditions which are inherently uncertain. The directors consider that, after taking into account of all major events or conditions, which may give rise to business risks, that individually or collectively may cast significant doubt upon the going concern assumption as set out in Note 1 to the consolidated financial statements, the Company has the capability to continue as a going concern.

December 31, 2020

Page | 25

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.22 Significant accounting judgments and estimates (Continued)

(b) Review of carrying value of assets and impairment charges

In the determination of carrying values and impairment charges, management of the Company reviews the recoverable amount (the higher of the fair value less costs of disposal or the value in use) in the case of non-financial assets. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period. Changes in these assumptions may alter the results of non-financial asset and financial asset impairment testing, impairment charges recognized in profit or loss and the resulting carrying amounts of assets.

Ovoot Tolgoi Mine cash generating unit

The Company determined that an indicator of impairment existed for its Ovoot Tolgoi Mine cash generating unit as at December 31, 2020. The impairment indicator was the fact that the Company suffered loss for the year.

Therefore, the Company conducted an impairment test whereby the carrying value of the Company’s Ovoot Tolgoi Mine cash generating unit was compared to the recoverable amount (being the “fair value less costs of disposal”) using a discounted future cash flow valuation model. The Company’s cash flow valuation model takes into consideration the latest available information to the Company, including but not limited to, sales prices, sales volumes, washing production, operating costs and life of mine coal production estimates as at December 31, 2020. The carrying value of the Company’s Ovoot Tolgoi Mine cash generating unit was $129,379.

Key estimates and assumptions incorporated in the valuation model included the following:

• Coal resources and reserves as estimated by an independent third party engineering firm;

• Sales price estimates from an independent market consulting firm;

• Forecasted sales volumes in line with production levels as reference to the mine plan;

• Life-of-mine coal production, strip ratio, capital costs and operating costs; and

• A post-tax discount rate of 16% based on an analysis of the market, country and asset specific factors.

Key sensitivities in the valuation model are as follows:

• For each 1% increase/(decrease) in the long term price estimates, the calculated fair value of the cash generating unit increases/(decreases) by approximately $12,081/(12,167);

• For each 1% increase/(decrease) in the post-tax discount rate, the calculated fair value of the cash generating unit (decreases)/increases by approximately $(13,991)/14,845;

• For each 1% increase/(decrease) in the cash mining cost estimates, the calculated fair value of the cash generating unit (decreases)/increases by approximately $(6,966)/6,879; and

• For each 1% increase/(decrease) in Mongolian inflation rate, the calculated fair value of the cash generating unit (decreases)/increases by approximately $(897)/815.

December 31, 2020

Page | 26

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.22 Significant accounting judgments and estimates (Continued)

(b) Review of carrying value of assets and impairment charges (Continued)

The impairment analysis did not result in the identification of an impairment loss or an impairment reversal and no charge or reversal was required as at December 31, 2020. A decline of 15% (2019: 19%) in the long-term price estimates, an increase of more than 20% (2019: 35%) in the post-tax discount rate, an increase of 25% (2019: 29%) in the cash mining cost estimates or an increase of 264% (2019: 73%) in Mongolian inflation rate may trigger an impairment charge on the cash generating unit. The Company believes that the estimates and assumptions incorporated in the impairment analysis are reasonable; however, the estimates and assumptions are subject to significant uncertainties and judgments.

(c) Expected credit losses for trade and other receivables

The Company applies the IFRS 9 simplified approach to measuring expected credit losses on its trade receivables and estimates expected credit loss based on the possible default events on its trade and other receivables. The Company has determined that the loss allowance on its trade and other receivables was $23,055 (2019: $21,976) as at December 31, 2020.

(d) Estimated resources

The Company estimates its mineral resources based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data. Changes in resource estimates may impact the carrying value of mining interests, mine restoration provisions, recognition of deferred tax assets, and depreciation and amortization charges.

(e) Estimated recoverable reserves

Reserve estimates involve expressions of judgment based on various factors such as knowledge, experience and industry practice, and the accuracy of these estimates may be affected by many factors, including estimates and assumptions with respect to coal prices, operating costs, mine plan and life, coal quality and recovery, foreign currency exchange rates and inflation rates. Reserve estimates are made by qualified persons, but will be impacted by changes in the above estimates and assumptions.

Estimated recoverable reserves are used to determine the depletion of mineral properties, in accounting for deferred production stripping costs, in performing impairment testing and for forecasting the timing of the payment of decommissioning, restoration and similar costs. Therefore, changes in the estimates and assumptions used to determine recoverable reserves could impact the carrying value of assets, depletion expense and impairment charges recognized in profit or loss and the carrying value of the decommissioning, restoration and similar liabilities.

December 31, 2020

Page | 27

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.22 Significant accounting judgments and estimates (Continued)

(f) Long term F-grade coal inventory

As a result of import restrictions established by Chinese authorities at the Ceke border, the Company has been barred from transporting its F-grade coal products into China for sale since December 15, 2018. The Company intends to realize the value of the F-grade coal inventory upon the coal washing and coal blending in order to meet the import standards from Chinese authorities. Due to the limitation of coal washing and blending capacities, a portion of F-grade coal products was classified as non-current inventory. As at December 31, 2020, $680 of F-grade coal products were classified as non-current (December 31, 2019: $9,332).

(g) Useful lives and depreciation rates for property, plant and equipment

Depreciation expense is allocated based on estimated property, plant and equipment useful lives and depreciation rates except the mineral properties are depreciated on unit-of production basis based on proven and probable reserves. Therefore, changes in the useful life or depreciation rates from the initial estimate could impact the carrying value of property, plant and equipment and an adjustment would be recognized in profit or loss.

3.23 Subsidiaries

A subsidiary is an investee over which the Company is able to exercise control. The Company controls an investee if all three of the following elements are present: (i) power over the investee, (ii) exposure, or rights, to variable returns from the investee, and (iii) the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists, the Company considers all relevant facts and circumstances, including:

• the size of the Company’s voting rights relative to both the size and dispersion of other parties who hold voting rights;

• substantive potential voting rights held by the Company and other parties who hold voting rights;

• other contractual arrangements; and

• historic patterns in voting attendance.

In the Company’s statement of financial position, investments in subsidiaries are stated at cost less impairment loss, if any. The results of investment in subsidiaries are fully impaired as at December 31, 2020 and 2019.

December 31, 2020

Page | 28

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

4. SEGMENT INFORMATION

The Company’s Chief Executive Officer (chief operating decision maker) reviews the financial information in order to make decisions about resources to be allocated to the segment and to assess its performance. No operating segment identified by the Board of Directors has been aggregated in arriving at the reporting segments of the Company. For management’s purpose, the Company has only one reportable operating segment, which is the coal division. The division is principally engaged in coal mining, development and exploration in Mongolia, and logistics and trading of coal in Mongolia and China for the years ended December 31, 2020 and 2019.

The Company’s resources are integrated and as a result, no discrete operating segment financial information is available. Since this is the only reportable and operating segment of the Company, no further analysis thereof is presented. All the revenue of the Company is generated from trading of coal for the years ended December 31, 2020 and 2019.

Information about major customers

During the years ended December 31, 2020 and 2019, the Coal Division had 14 and 13 active customers, respectively. 4 customers with respective revenues contributed over 10% of the total revenue during the year ended December 31, 2020 and 2019, with the largest customer accounting for 26% of revenues (2019: 42%), the second largest customer accounting for 18% of revenues (2019: 36%), the third largest customer accounting for 15% of revenues (2019: 9%) and the fourth largest customer accounting for 12% of revenues (2019: 6%).

The operations of the Company are primarily located in Mongolia, Hong Kong and China.

Revenue(i) For the year ended December 31, 2020 For the year ended December 31, 2019 Non-current assets As at December 31, 2020 As at December 31, 2019	Mongolia	Hong Kong	China Consolidated Total
	- $	- $	85,951 $ 85,951 $
	-	-	129,712 129,712
	147,675 $	84 $	480 $ 148,239 $
	162,865	390	819 164,074

(i) The revenue information above is based on the locations of the customers.

5. REVENUE

Revenue represents the value of goods sold which arises from the trading of coal. The Company recognizes all revenue from the trading of coal at a point in time when the customer obtains control of the goods or services.

December 31, 2020

Page | 29

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

6. EXPENSES BY NATURE

The Company’s profit/(loss) before tax is arrived at after charging/(crediting):

==> picture [468 x 253] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Depreciation $ 8,736 $ 15,726
Auditors' remuneration 637 764
Employee benefit expense (including directors' remuneration)
Wages and salaries $ 7,639 $ 9,790
Equity-settled share option expense (Note 26) 113 47
Pension scheme contributions 531 1,302
$ 8,283 $ 11,139
Lease payments under operating leases $ 101 $ 128
Foreign exchange gain, net (1,586) (706)
-
Reversal of impairment of coal stockpile inventories (Note 14) (1,823)
Royalties 10,563 11,639
CIC management fee (Note 30) 2,170 3,185
Other taxes on foreign payments (Note 8) - 1,881
Provision of commercial arbitration (Note 19) 4,634 485
Provision/(reversal of provision) for doubtful trade and other receivables (Note 13) (336) 501
Impairment of prepaid expenses (Note 15) 8 253
Loss on disposal of properties for resale - 36
Gain on disposal of property, plant and equipment, net (Note 8) (69) (29)
Mine operating costs and others 37,534 56,701
Total operating expenses $ 70,675 $ 99,880
----- End of picture text -----

7. COST OF SALES

The Company’s cost of sales consists of the following amounts:

Operating expenses Share-based compensation expense (Note 26) Depreciation and depletion Royalties Reversalof impairment ofcoalstockpileinventories (Note14)	Year ended December 31,
	2020 2019 36,974 $ 59,549 $ 24 9 6,243 11,028 10,563 11,639 - (1,823)
Cost of sales from mine operations Cost ofsalesrelated toidledmine assets (i)	53,804 80,402 4,853 3,998
Cost of sales	58,657 $ 84,400 $

(i) Cost of sales related to idled mine assets for the year ended December 31, 2020 includes $4,853 of depreciation expense (2019: includes $3,998 of depreciation expense). The depreciation expense relates to the Company’s idled plant and equipment.

Cost of inventories recognized as expense in cost of sales for the year ended December 31, 2020 totaled $38,499 (2019: $67,892)

December 31, 2020

Page | 30

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

8. OTHER OPERATING EXPENSES

The Company’s other operating expenses consist of the following amounts:

CIC management fee (Note 30) Other taxes on foreign payments (Note 6) Provision/(reversal of provision) for doubtful trade and other receivables (Note 13) Provision of commercial arbitration (Note 19) Impairment of prepaid expenses (Note 15) Loss on disposal of properties for resale Foreign exchange gain, net Gain on disposal of property, plant and equipment, net Others	Year ended December 31,
	2020 2019 2,170 $ 3,185 $ - 1,881 (336) 501 4,634 485 8 253 - 36 (1,586) (706) (69) (29) - (25)
Other operating expenses	4,821 $ 5,581 $

9. ADMINISTRATION EXPENSES

The Company’s administration expenses consist of the following amounts:

Corporate administration Legal and professional fees Salaries and benefits Share-based compensation expense (Note 26) Depreciation	Year ended December 31,
	2020 2019 1,268 $ 2,111 $ 1,363 3,076 3,518 3,522 89 38 733 700
Administration expenses	6,971 $ 9,447 $

10. FINANCE COSTS AND INCOME

The Company’s finance costs consist of the following amounts:

Interest expense on convertible debenture (Note 23) Interest expense on borrowing Value added tax on interest from intercompany loan Interest elements on leased assets Accretionofdecommissioningliability (Note24)	Year ended December 31,
	2020 2019 27,726 $ 23,751 $ 413 742 2,900 2,986 69 129 584 402
Finance costs	31,692 $ 28,010 $

December 31, 2020

Page | 31

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

10. FINANCE COSTS AND INCOME (CONTINUED)

The Company’s finance income consists of the following amounts:

==> picture [468 x 70] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Unrealized gain on embedded derivatives in convertible debenture (Note 23) $ 44 $ 69
Interest income 24 55
Modification of convertible debenture (Note 23) 2,545 4,293
Finance income $ 2,613 $ 4,417
----- End of picture text -----

11. TAXES

11.1 Income tax recognized in profit or loss

The Canadian statutory tax rate was 27% (2019: 27%). A reconciliation between the Company’s tax expense and the product of the Company’s profit/(loss) before tax multiplied by the Company’s domestic tax rate is as follows:

==> picture [468 x 171] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Profit/(loss) before tax $ (12,490) $ 7,568
Statutory tax rate 27% 27%
Income tax expense/(recovery) based on combined Canadian federal and (3,372) 2,044
provincial statutory rates
Lower effective tax rate in foreign jurisdictions 377 186
-
Over-provision in prior year (258)
Tax effect of tax losses and temporary differences not recognized 10,352 4,271
Withholding tax on intercompany interest 2,881 2,881
Profit or loss attributable to a joint venture 328 332
Income not subject to tax (6,281) (6,213)
Non-deductible expenses 3,314 124
Income tax expenses $ 7,599 $ 3,367
----- End of picture text -----

11.2 Unrecognized deductible temporary differences and unused tax losses

The Company’s deductible temporary differences and unused tax losses for which no deferred tax asset is recognized consist of the following amounts:

Non-capital losses Capital losses Foreignexchange and others	As at December 31,
	2020 2019 169,173 $ 163,632 $ 30,049 30,049 463,778 487,102
Total unrecognized amounts	663,000 $ 680,783 $

December 31, 2020

Page | 32

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

11. TAXES (CONTINUED)

11.3 Expiry dates

The expiry dates of the Company’s unused tax losses are as follows:

Non-capital losses Canada China Capital losses Canada Non-capital losses Canada China Capital losses Canada	As at December 31, 2020
	U.S. Dollars Expiry Equivalent dates 165,184 $ 2038 - 2040 3,989 2025 169,173 $ 30,049 $ indefinite As at December 31, 2019
	U.S. Dollars Expiry Equivalent dates 159,892 $ 2037 - 2039 3,740 2024 163,632 $ 30,049 $ indefinite

12. EARNINGS/(LOSS) PER SHARE

The calculation of basic and diluted earnings/(loss) per share is based on the following data:

Net profit/(loss) Weighted averagenumberofshares	Year ended December 31,	Year ended December 31,
	2020	2019
		4,201 $ 272,703
	(20,089) $ 272,703
Basic and diluted earnings/(loss) per share	(0.07) $	0.02 $

Potentially dilutive items not included in the calculation of diluted earnings per share for the year ended December 31, 2020 include the underlying shares comprised in the convertible debenture (Note 23) and stock options (Note 26) that were anti-dilutive.

December 31, 2020

Page | 33

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

13. TRADE AND OTHER RECEIVABLES

The Company’s trade and other receivables consist of the following amounts:

==> picture [468 x 59] intentionally omitted <==

----- Start of picture text -----

As at December 31,
2020 2019
Trade receivables $ 995 $ 1,081
Other receivables 310 697
Total trade and other receivables $ 1,305 $ 1,778
----- End of picture text -----

The aging of the Company’s trade and other receivables, based on invoice date and net of provisions, is as follows:

==> picture [468 x 82] intentionally omitted <==

----- Start of picture text -----

As at December 31,
2020 2019
Less than 1 month $ 1,260 $ 1,623
1 to 3 months 20 23
3 to 6 months 25 132
Over 6 months - -
Total trade and other receivables $ 1,305 $ 1,778
----- End of picture text -----

Overdue balances are reviewed regularly by senior management. The Company does not hold any collateral or other credit enhancements over its trade and other receivable balances.

The Company has determined that the loss allowance on its trade and other receivables was $23,055 (December 31, 2019: $21,976) as at December 31, 2020, based upon an expected loss rate of 10% for trade and other receivables 90 days past due and 100% for trade and other receivables 180 days past due. The closing allowances for trade and other receivables as at December 31, 2020 reconcile to the opening loss allowances as follows:

==> picture [468 x 126] intentionally omitted <==

----- Start of picture text -----

Loss allowance for trade and other receivables
Opening loss allowance as at January 1, 2020 $ 21,976
Decrease in loss allowance recognised in profit or loss during the year (336)
Exchange realignment 1,415
Loss allowance as at December 31, 2020 $ 23,055
Opening loss allowance as at January 1, 2019 $ 20,005
Increase in loss allowance recognised in profit or loss during the year 501
Loss allowance included in specific provision made during the year ended December 31, 2018 1,791
Exchange realignment (321)
Loss allowance as at December 31, 2019 $ 21,976
----- End of picture text -----

December 31, 2020

Page | 34

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

14. INVENTORIES

The Company’s inventories consist of the following amounts:

==> picture [468 x 115] intentionally omitted <==

----- Start of picture text -----

As at December 31,
2020 2019
Current inventories
Coal stockpiles $ 28,778 $ 37,597
Materials and supplies 13,605 14,640
42,383 52,237
Non-current inventories
Coal stockpiles 680 9,332
Total inventories $ 43,063 $ 61,569
----- End of picture text -----

Cost of sales for the year ended December 31, 2020 includes a reversal of impairment of $nil related to the Company’s coal stockpile inventories (2019: $1,823).

Coal stockpile inventories of $680 are not expected to be utilized or sold within 12 months and are therefore classified as non-current inventories as at December 31, 2020 (2019: $9,332).

15. PREPAID EXPENSES

The Company’s prepaid expenses consist of the following amounts:

Vendor prepayments Otherprepaid expenses Total prepaid expenses	As at December 31,
	2020 2019 710 $ 871 $ 956 1,441 1,666 $ 2,312 $

For the year ended December 31, 2020, the Company recorded an impairment of $8 on the vendor prepayments (2019: $253).

December 31, 2020

Page | 35

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

16. PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment consist of the following amounts:

Cost As at January 1, 2020 Additions Disposals Written off Exchangerealignment As at December 31, 2020	Mobile equipment	Other operating equipment	Buildings and roads	Right-of-use assets	Mineral properties 211,418 $ 8,693 - - (7,973) 212,138 $	Non- depreciable assets Total 24,742 $ 612,519 $ - 12,489 - (5,239) (23,759) (23,759) (1) (22,089) 982 $ 573,921 $
	278,736 $ 3,187 (4,326) - (11,324) 266,273 $	25,663 $ 6 (98) - (529) 25,042 $	70,834 $ - - - (2,290) 68,544 $	1,126 $ 603 (815) - 28 942 $
Accumulated depreciation and impairment charges As at January 1, 2020 (264,803) $ Depreciation for the year (8,336) Eliminated on disposals 4,253 Eliminated on written off - Exchangerealignment 10,714		(23,662) $ (589) 24 - 597	(55,900) $ (1,089) - - 927	(521) $ (386) 776 - (20)	(106,653) $ (1,429) - - 3,601	(23,759) $ (475,298) $ - (11,829) - 5,053 23,759 23,759 - 15,819
As at December 31, 2020 Carrying amount As at January 1, 2020	(258,172) $ 13,933 $	(23,630) $ 2,001 $	(56,062) $ 14,934 $	(151) $ 605 $	(104,481) $ 104,765 $	- $ (442,496) $ 983 $ 137,221 $
As at December 31, 2020 Cost As at January 1, 2019 Additions Disposals Transfers Exchangerealignment	8,101 $ Mobile equipment	1,412 $ Other operating equipment	12,482 $ Buildings and roads	791 $ Right-of-use assets	107,657 $ Mineral properties	982 $ 131,425 $ Non- depreciable assets Total
	285,921 $ 6,631 (5,244) - (8,572)	25,827 $ 603 (457) 101 (411)	72,734 $ - - - (1,900)	1,159 $ - - - (33)	197,726 $ 18,185 - - (4,493)	25,435 $ 608,802 $ 31 25,450 (538) (6,239) (101) - (85) (15,494)
As at December 31, 2019	278,736 $	25,663 $	70,834 $	1,126 $	211,418 $	24,742 $ 612,519 $
Accumulated depreciation and impairment charges As at January 1, 2019 (266,129) $ Depreciation for the year (12,017) Eliminated on disposals 5,116 Exchangerealignment 8,227		(23,926) $ (640) 457 447	(52,915) $ (4,339) - 1,354	- $ (549) - 28	(102,013) $ (5,640) - 1,000	(23,759) $ (468,742) $ - (23,185) - 5,573 - 11,056
As at December 31, 2019 (264,803) $		(23,662) $	(55,900) $	(521) $	(106,653) $	(23,759) $ (475,298) $
Carrying amount
As at January1,2019 19,792 $		1,901 $	19,819 $	1,159 $	95,713 $	1,676 $ 140,060 $
As at December 31, 2019 13,933 $		2,001 $	14,934 $	605 $	104,765 $	983 $ 137,221 $

16.1 Non-depreciable assets

The non-depreciable assets mainly include the construction in progress. Depreciation on these assets will commence once they are ready for their intended use.

16.2 Pledge on items of property, plant and equipment

As at December 31, 2020, certain items of the Company’s property, plant and equipment with a carrying value of $44 (2019: $439) were pledged as security for a bank loan granted to the Company (Note 21).

December 31, 2020

Page | 36

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

16.3 Right-of-use assets

The right-of-use assets relate to the buildings as at December 31, 2020 and 2019.

16.4 Impairment charges

No impairment nor reversal of impairment was made during the year ended December 31, 2020 (2019: nil).

17. INVESTMENT IN JOINT VENTURE

The Company’s investment consists of the following amounts:

Non-current investment in joint venture Investmentin RDCCLLC	As at December 31,
	2020 2019 16,134 $ 17,521 $
Total investment	16,134 $ 17,521 $

The Company has a 40% interest in RDCC LLC, a joint venture. RDCC LLC has a concession agreement with the State Property Committee of Mongolia to construct a paved highway from the Company’s Ovoot Tolgoi Mine to the Mongolia-China border for the exclusive use of third party coal transport companies. In October 2012, the concession agreement was structured as a 17-year build, operate and transfer agreement. The construction was completed in 2014 and operations commenced in the second quarter of 2015. On September 17, 2015, the Invest Mongolia Agency signed an amendment to the concession agreement with RDCC LLC to extend the exclusive right of ownership to 30 years.

The movement of the Company’s investment in RDCC LLC is as follows:

Balance, beginning of year Dividend received Share of earnings of a joint venture Share ofothercomprehensiveloss ofa jointventure	Year ended December 31,
	2020 2019
	$ 17,521 18,822 $ (1,994) (2,025) 1,313 1,329 (706) (605)
Balance, end ofyear	16,134 $ 17,521 $

December 31, 2020

Page | 37

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

17. INVESTMENT IN JOINT VENTURE (CONTINUED)

Summarized financial statement information of RDCC LLC is as follows (presented on a 100% basis of RDCC LLC in which the Company has a 40% investment):

==> picture [468 x 104] intentionally omitted <==

----- Start of picture text -----

As at December 31,
2020 2019
Current assets $ 1,955 $ 457
Non-current assets 29,537 31,969
Total assets $ 31,492 $ 32,426
Current liabilities $ - $ -
Total liabilities $ - $ -
----- End of picture text -----

==> picture [468 x 137] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Revenue $ 5,684 $ 6,766
Gross profit margin 3,740 3,878
Other operating and finance costs (235) (271)
Profit before tax 3,505 3,607
Net profit $ 3,282 $ 3,215
Other comprehensive income $ 90 $ 708
Total comprehensive income $ 3,372 $ 3,923
----- End of picture text -----

18. TRADE AND OTHER PAYABLES

Trade and other payables of the Company primarily consist of amounts outstanding for trade purchases relating to coal mining, development and exploration activities and mining royalties payable. The usual credit period taken for trade purchases is between 30 to 90 days.

The aging of the Company’s trade and other payables, based on invoice date, is as follows:

Less than 1 month 1 to 3 months 3 to 6 months Over6months	As at December 31,
	2020 2019 27,168 $ 29,750 $ 4,935 13,165 6,365 12,218 40,262 31,880
Total trade and otherpayables	78,730 $ 87,013 $

The trade and other payables of $78,730 (2019: $87,013) included the income tax payable $4,365 (2019: $400) and other tax payables of $31,742 (2019: $31,443).

December 31, 2020

Page | 38

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

19. PROVISION FOR COMMERCIAL ARBITRATION

On June 24, 2015, First Concept served a notice of arbitration (the “Notice”) on SouthGobi Sands LLC (“SGS”), a subsidiary of the Company, in respect of a coal supply agreement dated May 19, 2014 as amended on June 27, 2014 (the "Coal Supply Agreement") for a total consideration of $11,500.

On January 10, 2018, the Company received a confidential partial ruling (final except as to costs) with respect to the commercial arbitration (the “Arbitration Award”). Pursuant to the Arbitration Award, SGS was ordered to repay the sum of $11,500 (which SGS had received as a prepayment for the purchase of coal) to First Concept, together with accrued interest at a simple interest rate of 6% per annum from the date which the prepayment was made until the date of the Arbitration Award, and then at a simple interest rate of 8% per annum until full payment. The Arbitration Award is final, except as to costs which were reserved for a future award.

On November 14, 2018, the Company executed the Settlement Deed with First Concept in respect of the Arbitration Award. The Settlement Deed provides for the full and final satisfaction of the Arbitration Award as well as the settlement of the issue of costs relating to the Arbitration and any other disputes arising out of the Coal Supply Agreement. Pursuant to the Settlement Deed, which provides for the full and final satisfaction of the Arbitration Award as well as the settlement of the issue of costs relating to the Arbitration and any other disputes arising out of the Coal Supply Agreement, SGS agreed to pay to First Concept the sum of $13,891, together with simple interest thereon at the rate of 6% per annum from November 1, 2018 until full payment, in 12 monthly instalments commencing in November 2018. Provided that SGS complies with the terms of the Settlement Deed, First Concept agreed to waive its costs in connection with the Arbitration and interest for the period from January 4, 2018 to October 31, 2018 (the “Waived Costs”).

On October 16, 2019, SGS received a notice from First Concept claiming that the Company is default under the Settlement Deed and demanding payment of the full amount of the outstanding monthly payments due under the Settlement Deed, otherwise First Concept intends to commence legal action against SGS pursuant to the Settlement Deed.

On February 7, 2020, SGS was informed by its Mongolian banks that they received a request from the Court Decision Implementing Agency of Mongolia (the “CDIA”) to freeze the respective bank accounts of SGS in Mongolia in relation to the enforcement of the Arbitration Award. Approximately $800 was frozen by the banks as at February 7, 2020 and such amount was subsequently being transferred to the CDIA on March 6, 2020.

On June 7, 2020, SGS entered into a settlement agreement with First Concept, pursuant to which SGS agreed to pay to First Concept a settlement sum of $8,040 in full and final settlement of any and all claims which First Concept may have against SGS in relation to Arbitration Award, the subject matter of the Arbitration Award including any claims for interests and costs and the fees and expenses of the Arbitration Award, and any and all enforcement proceedings and applications in any jurisdictions, and in relation to the deed of settlement with First Concept (the “Full Settlement Sum”). The Full Settlement Sum was fully satisfied by the Company in June 2020 and the outstanding payable to First Concept as of the date hereof is $nil.

December 31, 2020

Page | 39

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

20. DEFERRED REVENUE

At December 31, 2020, the Company had deferred revenue of $20,831, which represents cash prepayments from customers for future coal sales (December 31, 2019: $16,057).

The movement of the Company’s deferred revenue is as follows:

==> picture [469 x 111] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Balance, beginning of year $ 16,057 $ 12,658
Revenue recognized that was included in the deferred revenue balance at
beginning of the year (15,486) (12,385)
Increase due to trade deposits received, excluding amounts recognized
as revenue during the year 20,913 16,155
Exchange realignment (653) (371)
Balance, end of year $ 20,831 $ 16,057
----- End of picture text -----

The performance obligation related to the revenue from customers for contracts that are unsatisfied (or partially unsatisfied) are expected to be recognized within one year after the reporting date. The Company applies the practical expedient and does not disclose information about any remaining performance obligation that is a part of contract that has original expected duration of one year or less.

21. INTEREST-BEARING BORROWING

On May 15, 2018, SGS obtained a bank loan (the “2018 Bank Loan”) in the principal amount of $2,800 from a Mongolian bank (the “Bank”) with the key commercial terms as follows:

• Maturity date set at 24 months from drawdown (subsequently extended for 12 months on May 18, 2020);

• Interest rate of 15% per annum and interest is payable monthly; and

• Certain items of property, plant and equipment were pledged as security for the 2018 Bank Loan. As at December 31, 2020, the net book value of the pledged items of property, plant and equipment was $44 (December 31, 2019: $439).

As at December 31, 2020, the outstanding principal balance for the 2018 Bank Loan was $2,800 (December 31, 2019: $2,800) and the Company owed accrued interest of $26 (December 31, 2019: $35).

In February 2021, $2,826 was repaid to the Bank by the Company in full settlement of the outstanding principal balance of the 2018 Bank Loan and the accrued interest thereon.

December 31, 2020

Page | 40

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

22. LEASE LIABILITIES

The Company leases certain of its office premises for daily operations. These leases have remaining lease terms ranging from 1 to 5 years.

At December 31, 2020, the total future minimum lease payments and their present values were as follows:

Amounts payable: Within one year In the second year Inthe third tofifthyear,inclusive	2020 2019 272 $ 509 $ 174 101 418 - 864 $ 610 $ (238) (42) 626 $ 568 $ (202) (460) 424 $ 108 $ Minimum lease payments As at December 31,	2020 2019 Present value of minimum lease payments As at December 31,	2020 2019 Present value of minimum lease payments As at December 31,
	2020
			460 $ 108 -
	272 $ 174 418	202 $ 112 312
Total minimum lease payments Futurefinance charges	864 $	626 $	568 $
	(238)
Total net lease payables Portion classified as current liabilities	626 $ (202)
Non-current portion	424 $

23. CONVERTIBLE DEBENTURE

23.1 Key commercial terms

On November 19, 2009, the Company issued a convertible debenture to CIC for $500,000. The convertible debenture bears interest at 8.0% per annum (6.4% payable semi-annually in cash and 1.6% payable annually in the Company’s shares) and has a maximum term of 30 years. The convertible debenture is secured by a first ranking charge over the Company’s assets, including shares of its material subsidiaries. During 2010, the Company exercised a right within the debenture to call and convert $250,000 of the debenture for 21,471 common shares. Following the conversion, the outstanding principal balance was $250,000 and has remained unchanged at that balance to December 31, 2020.

The key commercial terms of the financing include:

• Interest - 8% per annum (6.4% payable semi-annually in cash and 1.6% payable annually in the Company’s common shares, where the number of shares to be issued is calculated based on the 50day volume-weighted average price (“VWAP”)).

• Term - Maximum of 30 years.

• Security - First charge over the Company’s assets, including shares of its material subsidiaries.

• Conversion price - The conversion price is set as the lower of CAD$11.88 or the 50-day VWAP at the date of conversion, with a floor price of CAD$8.88 per share.

• Representation on the Company’s Board - While the convertible debenture is outstanding, or while CIC has a minimum 15% direct or indirect stake in the Company, CIC has the right to nominate one director to the Company’s Board of Directors. As of the date hereof, the Company currently has eight Board of Directors members of which two (Mr. Ben Niu and Mr. Jianmin Bao) were nominated by CIC.

• Voting restriction - CIC has agreed that it will not have any voting rights in the Company beyond 29.9% if CIC ever acquires ownership of such a shareholder stake.

December 31, 2020

Page | 41

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

23. CONVERTIBLE DEBENTURE (CONTINUED)

• Pre-emption rights - While the convertible debenture is outstanding, or while CIC has a 15% direct or indirect stake in the Company, CIC has certain pre-emption rights on a pro-rata basis to subscribe for any new shares to be allotted and issued by the Company for the period which the convertible debenture is outstanding. The pre-emption rights will not apply to new shares issued pursuant to prorata public equity offerings made to all shareholders, exercise of stock options and shares issued to achieve a 25% public float.

• Registration rights - CIC has registration rights under applicable Canadian provincial securities laws in connection with the common shares issuable upon conversion of the convertible debenture.

• Event of default – CIC could demand for the principal and corresponding interest from the Company immediately when certain events, including default of interest payment, suspension of trading and delisting of its shares from the TSX and the HKEX have occurred.

23.2

Debt host and embedded derivatives

The convertible debenture is presented as a liability since it contains no equity components. The convertible debenture is a hybrid instrument, containing a debt host component and three embedded derivatives - the investor’s conversion option, the issuer’s conversion option and the equity based interest payment provision (the 1.6% share interest payment) (the “embedded derivatives”). The debt host component is classified as other-financial-liabilities and is measured at amortized cost using the effective interest rate method and the embedded derivatives are classified as FVTPL and all changes in fair value are recorded in profit or loss. The difference between the debt host component and the principal amount of the loan outstanding is accreted to profit or loss over the expected life of the convertible debenture.

The embedded derivatives were valued upon initial measurement and subsequent periods using a Monte Carlo simulation valuation model. A Monte Carlo simulation model is a valuation model that relies on random sampling and is often used when modeling systems with a large number of inputs and where there is significant uncertainty in the future value of inputs and where the movement of the inputs can be independent of each other. Some of the key inputs used by the Company in its Monte Carlo simulation include: the floor and ceiling conversion prices, the Company’s common share price, the risk-free rate of return, expected volatility of the Company’s common share price, forward foreign exchange rate curves (between the CAD$ and U.S. dollar) and spot foreign exchange rates.

23.3 Valuation assumptions

The specific terms and assumptions used in the Company’s valuation models are as follows:

Floor conversion price Ceiling conversion price Common share price Historical volatility Risk free rate of return Foreign exchange spot rate (CAD$ to U.S. Dollar) Forward foreign exchange rate curve (CAD$ to U.S. Dollar)	As at December 31,
	2020 2019 CAD$8.88 CAD$8.88 CAD$11.88 CAD$11.88 CAD$0.09 CAD$0.09 82% 80% 1.35% 1.76% 0.79 0.77 0.779 - 0.786 0.761 - 0.770

December 31, 2020

Page | 42

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

23. CONVERTIBLE DEBENTURE (CONTINUED)

23.4 Presentation

Based on the Company’s valuation as at December 31, 2020, the fair value of the embedded derivatives decreased by $44 compared to December 31, 2019. The decrease was recorded as finance income for the year ended December 31, 2020.

For the year ended December 31, 2020, the Company recorded interest expense of $27,726 related to the convertible debenture as a finance cost (2019: $23,751). The interest expense consists of the interest at the contract rate and the accretion of the debt host component of the convertible debenture. To calculate the accretion expense, the Company uses the contract life of 30 years and an effective interest rate of 22.2%.

A modification gain of $2,545 was recognised in profit or loss for the year ended December 31, 2020 (2019: $4,293) for the difference between the original contractual cash flows and the modified cash flows under the below six (2019: four) Deferral Agreements discounted at the original effective interest rate.

The movements of the amounts due under the convertible debenture are as follows:

Balance, beginning of year Interest expense on convertible debenture Decrease in fair value of embedded derivatives Modification of convertible debenture Interest paid Balance, end ofyear	Year ended December 31,
	2020 2019 $ 156,974 139,901 $ 27,726 23,751 (44) (69) (2,545) (4,293) (700) (2,316) 181,411 $ 156,974 $

The convertible debenture balance consists of the following amounts:

Current portion Interest payable Debt host Fair value ofembedded derivatives	As at December 31,
	2020 2019 91,059 $ 67,106 $ 90,200 - 152 -
	181,411 67,106
Non-current portion Debt host Fair value ofembedded derivatives	- 89,672 - 196
	- 89,868
Total	181,411 $ 156,974 $

December 31, 2020

Page | 43

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

23. CONVERTIBLE DEBENTURE (CONTINUED)

23.5 Interest deferral and settlement

The Company executed a deferral agreement with CIC on June 12, 2017 (the “June 2017 Deferral Agreement”) for a revised repayment schedule on the $22,254 of cash interest and associated costs originally due on May 19, 2017. The key repayment terms of the June 2017 Deferral Agreement are: (i) the Company was required to repay on average $2,170 of the cash interest and associated costs monthly during the period from May 2017 to October 2017; and (ii) the Company was required to repay $9,731 of cash interest and associated costs on November 19, 2017.

On April 23, 2019, the Company executed the 2019 Deferral Agreement with CIC in relation to a deferral and revised repayment schedule in respect of (i) $41,797 of outstanding cash and payment in kind interest (“PIK Interest”) and associated costs due and payable to CIC on November 19, 2018 under the CIC Convertible Debenture and the June 2017 Deferral Agreement; and (ii) $27,934 of cash and PIK Interest payments payable to CIC under the CIC Convertible Debenture from April 23, 2019 to and including May 19, 2020 (the “Deferral”). Pursuant to Section 501(c) of the TSX Company Manual, the 2019 Deferral Agreement was approved at the Company’s adjourned annual and special meeting of shareholders on June 13, 2019.

The key repayment terms of the 2019 Deferral Agreement are: (i) the Company agreed to pay a total of $14,317 over eight instalments from November 2019 to June 2020; (ii) the Company agreed to pay the PIK Interest covered by the Deferral by way of cash payments, rather than the issuance of Common Shares; and (iii) the Company agreed to pay the remaining balance of $62,602 on June 20, 2020. The Company agreed to pay a deferral fee at a rate of 6.4% per annum in consideration of the Deferral.

At any time before the payment under the terms of the 2019 Deferral Agreement is fully repaid, the Company is required to consult with and obtain written consent from CIC prior to effecting a replacement or termination of either or both of its Chief Executive Officer and its Chief Financial Officer, otherwise this will constitute an event of default under the CIC Convertible Debenture, but CIC shall not withhold its consent if the Board proposes to replace either or both such officers with nominees selected by the Board, provided that the Board acted honestly and in good faith with a view to the best interests of the Company in the selection of the applicable replacements.

As a condition to agreeing to the Deferral, CIC required that the Cooperation Agreement between SGS and CIC, be amended and restated (the “Amended and Restated Cooperation Agreement”) to clarify the manner in which the service fee (the “Management Fee”) payable to CIC under the Cooperation Agreement is calculated, with effect as of January 1, 2017. Specifically, the Management Fee under the Amended and Restated Cooperation Agreement will be determined based on the net revenues realized by the Company and all of its subsidiaries derived from sales into China (rather than the net revenues realized by the Company and its Mongolian subsidiaries as currently contemplated under the Cooperation Agreement). As consideration for deferring payment of the additional Management Fee payable to CIC as a result of the Amended and Restated Cooperation Agreement, the Company agreed to pay to CIC a deferral fee at the rate of 2.5% on the outstanding Management Fee. Pursuant to the Amended and Restated Cooperation Agreement, the Company also agreed to pay CIC the total outstanding Management Fee and related accrued deferral fee of $4,183 over six instalments from June 2019 to November 2019. The Company executed the Amended and Restated Cooperation Agreement with CIC on April 23, 2019.

Pursuant to their terms, both the 2019 Deferral Agreement and the Amended and Restated Cooperation Agreement became effective on June 13, 2019, being the date on which the 2019 Deferral Agreement was approved by shareholders at the Company’s adjourned annual and special meeting of shareholders.

December 31, 2020

Page | 44

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

23. CONVERTIBLE DEBENTURE (CONTINUED)

23.5 Interest deferral and settlement (Continued)

On February 19, 2020, the Company and CIC entered into an agreement (“the 2020 February Deferral Agreement”) pursuant to which CIC agreed to grant the Company a deferral of: (i) deferred cash interest and deferral fees of $1,300 and $2,000 (collectively, the “2020 February Deferral Amounts”) which were due and payable to CIC on January 19, 2020 and February 19, 2020, respectively, under the deferral agreement signed on April 23, 2019 (the “2019 Deferral Agreement”) ; and (ii) approximately $700 of the Management Fee which was due and payable on February 14, 2020 to CIC under the Amended and Restated Cooperation Agreement. The 2020 February Deferral Agreement became effective on March 10, 2020, being the date on which the Company obtained the requisite acceptance of the 2020 February Deferral Agreement from the TSX as required under applicable TSX rules.

The principal terms of the 2020 February Deferral Agreement are as follows:

• Payment of the 2020 February Deferral Amounts will be deferred until June 20, 2020, while the Management Fee will be deferred until they are repaid by the Company.

• As consideration for the deferral of these amounts, the Company agreed to pay CIC: (i) a deferral fee equal to 6.4% per annum on the 2020 February Deferral Amounts, commencing on the date on which each such 2020 February Deferral Amounts would otherwise have been due and payable under the 2019 Deferral Agreement; and (ii) a deferral fee equal to 2.5% per annum on the Management Fee, commencing on the date on which the Managements Fees would otherwise have been due and payable under the Amended and Restated Cooperation Agreement.

• The Company agreed to provide CIC with monthly updates regarding its operational and financial affairs.

• As the Company anticipated prior to agreeing to the 2020 February Deferral Agreement that a deferral was likely required in respect of the monthly payments due and payable in the period between April 2020 and June 2020 under the 2019 Deferral Agreement and Amended and Restated Cooperation Agreement, the Company and CIC agreed to discuss in good faith a deferral of these payments on a monthly basis as they become due.

• The Company agreed to comply with all of its obligations under the 2019 Deferral Agreement and the Amended and Restated Cooperation Agreement, as amended by the 2020 February Deferral Agreement.

• The Company and CIC agreed that nothing in the 2020 February Deferral Agreement prejudices CIC’s rights to pursue any of its remedies at any time pursuant to the 2019 Deferral Agreement and Amended and Restated Cooperation Agreement, respectively.

On March 10, 2020, the Company agreed with CIC (the “2020 March Deferral Agreement”) that the $2,000 which was due and payable to CIC on March 19, 2020 (the “2020 March Deferral Amount”) under the 2019 Deferral Agreement will be deferred until June 20, 2020. The terms of the 2020 March Deferral Agreement are substantially the same as the terms of the 2020 February Deferral Agreement, including that the Company agreed to pay CIC a deferral fee equal to 6.4% per annum on the 2020 March Deferral Amount, commencing on March 19, 2020. The 2020 March Deferral Agreement became effective on March 25, 2020, being the date on which the Company obtained the requisite acceptance of the 2020 March Deferral Agreement from the TSX as required under applicable TSX rules.

December 31, 2020

Page | 45

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

23. CONVERTIBLE DEBENTURE (CONTINUED)

23.5 Interest deferral and settlement (Continued)

On April 10, 2020, the Company agreed with CIC (the “2020 April Deferral Agreement”) that the $2,000 which was due and payable to CIC on April 19, 2020 under the 2019 Deferral Agreement (the “2020 April Deferral Amount”) will be deferred until June 20, 2020. The terms of the 2020 April Deferral Agreement are substantially the same as the terms of the 2020 February Deferral Agreement, including that the Company agreed to pay CIC a deferral fee equal to 6.4% per annum on the 2020 April Deferral Amount, commencing on April 19, 2020. The 2020 April Deferral Agreement became effective on April 29, 2020, being the date on which the Company obtained the requisite acceptance of the 2020 April Deferral Agreement from the TSX as required under applicable TSX rules.

On May 8, 2020, the Company agreed with CIC (the “2020 May Deferral Agreement”) that the $2,000 which was due and payable to CIC on May 19, 2020 under the 2019 Deferral Agreement (the “2020 May Deferral Amount”) will be deferred until June 20, 2020. The terms of the 2020 May Deferral Agreement are substantially the same as the terms of the 2020 February Deferral Agreement, including that the Company agreed to pay CIC a deferral fee equal to 6.4% per annum on the deferred cash interest and deferral fees commencing on May 19, 2020 and a deferral fee equal to 2.5% per annum on the deferred Management Fee commencing on May 15, 2020. The 2020 May Deferral Agreement became effective on June 8, 2020, being the date on which the Company obtained the requisite acceptance of the 2020 May Deferral Agreement from the TSX as required under applicable TSX rules.

On June 19, 2020, the Company agreed with CIC (the “2020 June Deferral Agreement”) that the deferred cash interest and deferral fees in the aggregate amount of $74,047 (the “2020 June Deferral Amount”) and the prior deferral agreements entered into during the period between February and May 2020 will be deferred until September 14, 2020. The terms of the 2020 June Deferral Agreement are substantially the same as the terms of the 2020 February Deferral Agreement, including that the Company agreed to pay CIC a deferral fee equal to 6.4% per annum on the 2020 June Deferral Amount commencing on June 19, 2020. The 2020 June Deferral Agreement became effective on July 17, 2020, being the date on which the Company obtained the requisite acceptance of the 2020 June Deferral Agreement from the TSX as required under applicable TSX rules.

On November 19, 2020, the Company and CIC entered into an agreement (“the 2020 November Deferral Agreement”) pursuant to which CIC agreed to grant the Company a deferral of: (i) deferred cash interest and deferral fees of $75,194 which were due and payable to CIC on or before September 14, 2020, under the 2020 June Deferral Agreement; (ii) semi-annual cash interest payments in the aggregate amount of $16,000 payable to CIC on November 19, 2020 and May 19, 2021; (iii) $4,000 worth of PIK Interest shares (“2020 November PIK Interest”) issuable to CIC on November 19, 2020 under the CIC Convertible Debenture; and (iv) the Management Fee which payable to CIC on November 14, 2020, February 14, 2021, May 15, 2021, August 14, 2021 and November 14, 2021 under the Amended and Restated Cooperation Agreement (collectively, the “2020 November Deferral Amounts”).

December 31, 2020

Page | 46

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

23. CONVERTIBLE DEBENTURE (CONTINUED)

23.5 Interest deferral and settlement (Continued)

On October 29, 2020, the Company obtained an order from the British Columbia Securities Commission (the “BCSC”), the Company’s principal securities regulator in Canada, which partially revoked the CTO (as defined in Note 34) to, amongst other things, permit the Company to execute the 2020 November Deferral Agreement. The 2020 November Deferral Agreement became effective on January 21, 2021, being the date on which the 2020 November Deferral Agreement was approved by shareholders at the Company’s annual and special meeting of shareholders. As a consequence of the Company not entering into a deferral agreement with CIC as at December 31, 2020, IAS 1 requires the Company to classify the entire balance of the CIC Convertible Debenture as a current liability as at December 31, 2020.

The principal terms of the 2020 November Deferral Agreement are as follows:

• Payment of the 2020 November Deferral Amounts will be deferred until August 31, 2023.

• CIC agreed to waive its rights arising from any default or event of default under the CIC Convertible Debenture as a result of trading in the Common Shares being halted on the TSX beginning as of June 19, 2020 and suspended on the HKEX beginning as of August 17, 2020, in each case for a period of more than five trading days.

• As consideration for the deferral of the 2020 November Deferral Amounts, the Company agreed to pay CIC: (i) a deferral fee equal to 6.4% per annum on the 2020 November Deferral Amounts payable under the CIC Convertible Debenture and the 2020 June Deferral Agreement, commencing on the date on which each such 2020 November Deferral Amounts would otherwise have been due and payable under the CIC Convertible Debenture or the June 2020 Deferral Agreement, as applicable; and (ii) a deferral fee equal to 2.5% per annum on the 2020 November Deferral Amounts payable under the Amended and Restated Cooperation Agreement, commencing on the date on which the Management Fee would otherwise have been due and payable under the Amended and Restated Cooperation Agreement.

• The 2020 November Deferral Agreement does not contemplate a fixed repayment schedule for the 2020 November Deferral Amounts and related deferral fees. Instead, the Company and CIC would agree to assess in good faith the Company’s financial condition and working capital position on a monthly basis and determine the amount, if any, of the 2020 November Deferral Amounts and related deferral fees that the Company is able to repay under the CIC Convertible Debenture, the June 2020 Deferral Agreement or the Amended and Restated Cooperation Agreement, having regard to the working capital requirements of the Company’s operations and business at such time and with the view of ensuring that the Company’s operations and business would not be materially prejudiced as a result of any repayment.

• Commencing as of November 19, 2020 and until such time as the November 2020 PIK Interest is fully repaid, CIC reserves the right to require the Company to pay and satisfy the amount of the November 2020 PIK Interest, either in full or in part, by way of issuing and delivering PIK interest shares in accordance with the CIC Convertible Debenture provided that, on the date of issuance of such shares, the Common Shares are listed and trading on at least one stock exchange.

• If at any time before the 2020 November Deferral Amounts and related deferral fees are fully repaid, the Company proposes to appoint, replace or terminate one or more of its Chief Executive Officer, its Chief Financial Officer or any other senior executive(s) in charge of its principal business function or its principal subsidiary, then the Company must first consult with, and obtain written consent from CIC prior to effecting such appointment, replacement or termination.

December 31, 2020

Page | 47

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

24. DECOMMISSIONING LIABILITY

At December 31, 2020, the decommissioning liability relates to reclamation and closure costs of the Company’s Ovoot Tolgoi Mine.

The Ovoot Tolgoi Mine decommissioning liability is calculated as the net present value of the estimated future reclamation and closure costs, which as at December 31, 2020 totaled $10,613 (2019: $10,528). The estimated future reclamation and closure costs are inflated using an estimated inflation rate of 6.6% (2019: 7.4%) and discounted at 16% per annum (2019: 11% per annum) to determine the year end decommissioning liability. The settlement of the decommissioning liability will occur through to 2030.

The movements in the decommissioning liability during the years ended December 31, 2020 and 2019 were as follows:

Balance, beginning of year Adjustments Accretion Exchangerealignment	Year ended December 31,
	2020 2019 8,605 $ 6,852 $ (1,910) 1,609 584 401 (834) (257)
Balance, end ofyear	6,445 $ 8,605 $

25. EQUITY

25.1 Share capital

The Company has authorized an unlimited number of common and preferred shares with no par value. At December 31, 2020, the Company had 272,703 common shares outstanding (2019: 272,703) and no preferred shares outstanding (2019: nil).

25.2 Exchange fluctuation reserve

Gains/losses arising on retranslating the net assets of foreign operations into presentation currency.

25.3 Accumulated deficit and dividends

At December 31, 2020, the Company has accumulated a deficit of $1,197,698 (2019: $1,177,609). No dividend has been paid or declared by the Company since inception.

The Board did not recommend the payment of any dividend for the year ended December 31, 2020 (2019: nil).

December 31, 2020

Page | 48

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

26. SHARE-BASED PAYMENTS

26.1 Stock option plan

The Company has a stock option plan which permits the Board of Directors of the Company to grant options to acquire common shares of the Company at the volume weighted average closing price for the five days preceding the date of grant. The Company is authorized to issue stock options for a maximum of 10% of the issued and outstanding common shares pursuant to the stock option plan. The stock option plan permits the Board of Directors of the Company to set the terms for each stock option grant; however, the general terms of stock options granted under the plan include a maximum exercise period of 5 years and a vesting period of 3 years with 33% of the grant vesting on the first anniversary of the grant, 33% vesting on the second anniversary of the grant and 34% vesting on the third anniversary of the grant.

For the year ended December 31, 2020, the Company did not grant any stock options to officers, employees, directors and other eligible persons. For the year ended December 31, 2019, the Company granted 2,925 stock options to officers, employees, directors and other eligible persons at an exercise prices ranging from CAD$0.11 to CAD$0.13 and expiry dates ranging from September 11, 2024 to November 15, 2024. The weighted average fair value of the options granted in the year ended December 31, 2019 was estimated at $0.03 (CAD$0.04) per option at the grant date using the Black-Scholes option pricing model.

The weighted average assumptions used for the Black-Scholes option pricing model were as follows:

Risk free interest rate Expected life Expected volatility(i) Expected dividend per share	Year ended December 31,
	2019
	1.68% 3.4 years 37.6% $nil

(i) Expected volatility has been calculated based on historical volatility of the Company’s publicly traded shares over a period equal to the expected life of the options.

The total share-based compensation expense for the year ended December 31, 2020 was $113 (2019: $47). Share-based compensation expense of $89 (2019: $38) has been allocated to administration expenses and share-based compensation expense of $24 (2019: $9) has been allocated to cost of sales.

26.2 Outstanding stock options

The option transactions under the stock option plan are as follows:

Balance, beginning of year Options granted Options forfeited Options expired	Number of options Weighted average exercise price Number of options Weighted average exercise price (CAD$) (CAD$) 6,854 0.21 $ 4,695 0.23 $ - - 2,925 0.11 (176) 0.13 (103) 0.13 (379) 0.54 (663) 0.33 Year ended Year ended December 31, 2020 December 31, 2019
Balance, end ofyear	6,299 0.16 $ 6,854 0.21 $

December 31, 2020

Page | 49

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

26. SHARE-BASED PAYMENTS (CONTINUED)

The stock options outstanding and exercisable are as follows:

==> picture [469 x 110] intentionally omitted <==

----- Start of picture text -----

As at December 31, 2020
Options Outstanding Options Exercisable
Weighted Weighted Options Weighted Weighted
average average outstanding average average
Options exercise remaining and exercise remaining
Exercise price outstanding price contractual life exercisable price contractual life
(CAD$) (CAD$) (years) (CAD$) (years)
$0.11 - $0.29 5,349 $ 0.13 3.26 3,138 $ 0.13 3.04
$0.33 - $0.39 950 0.34 1.26 950 0.34 1.26
6,299 $ 0.16 2.96 4,088 $ 0.18 2.63
----- End of picture text -----

Exercise price (CAD$)	As at December 31, 2019 Options Outstanding Options Exercisable	As at December 31, 2019 Options Outstanding Options Exercisable
	Options outstanding Weighted average exercise price (CAD$) Weighted average remaining contractual life (years)	Options outstanding and exercisable Weighted average exercise price (CAD$) Weighted average remaining contractual life (years)
$0.11 - $0.29 $0.33 - $0.39 $0.58 - $0.92	5,750 0.13 $ 4.15 950 0.34 2.26 154 0.92 0.25	1,401 0.15 $ 3.20 950 0.34 2.26 154 0.92 0.25
	6,854 0.21 $ 3.80	2,505 0.27 $ 2.67

27. RESERVES

27.1 Share option reserve

The Company’s share option reserve relates to stock options granted by the Company to officers, employees, directors and other eligible persons under its stock option plan. Details about the Company’s share-based payments are further disclosed in Note 26.

The share option reserve transactions for the years ended December 31, 2020 and 2019 are as follows:

Balance, beginning of year Share-based compensationcharged to operations	Year ended December 31,
	2020 2019 52,589 $ 52,542 $ 113 47
Balance, end ofyear	52,702 $ 52,589 $

27.2 Capital reserve

Pursuant to the applicable laws and regulations of the People’s Republic of China, a portion of the profits of a subsidiary has been transferred to reserve funds (i.e. capital reserve), which the Company is restricted from using.

December 31, 2020

Page | 50

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

28. CAPITAL RISK MANAGEMENT

The Company’s capital risk management objectives are to safeguard the Company’s ability to continue as a going concern in order to support the Company’s normal operating requirements, continue the development and exploration of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares, acquire previously issued shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents. In order to facilitate management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including capital deployment, results from operations, results from the exploration and development of its properties and general industry conditions. The annual and updated budgets are approved by the Board of Directors.

At December 31, 2020, the Company’s capital structure consists of convertible debenture (Note 23), interest-bearing borrowings (Note 21), lease liabilities (Note 22) and the equity of the Company (Note 25). Except for disclosed elsewhere in the consolidated financial statements, the Company is not subject to any externally imposed capital requirements. In order to maximize ongoing development efforts, the Company does not pay dividends.

The gearing ratio at the end of the reporting period was as follows:

Debt Cashand cashequivalents	As at December 31,
	2020 2019 $ 290,869 $ 277,645 (20,121) (7,164)
Net debt	270,748 $ 270,481 $
Equity	$(76,237) $(49,218)
Net debt to equity ratio	-355% -550%

For the year ended December 31, 2020, there were no significant changes in the processes used by the Company or in the Company’s objectives and policies for managing its capital. As at December 31, 2020, the Company had cash of $20,121 (December 31, 2019: $7,164).

December 31, 2020

Page | 51

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

29. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

29.1 Categories of financial instruments

The Company’s financial assets and financial liabilities are categorized as follows:

==> picture [470 x 233] intentionally omitted <==

----- Start of picture text -----

As at December 31,
2020 2019
Financial assets
At amortised cost
Cash and cash equivalents $ 20,121 $ 7,164
Restricted cash 918 862
Trade and other receivables (Note 13) 1,305 1,778
Total financial assets $ 22,344 $ 9,804
Financial liabilities
Fair value through profit or loss
Convertible debenture - embedded derivatives (Note 23) $ 152 $ 196
At amortised cost
Trade and other payables (Note 18) 78,730 87,013
Provision for commercial arbitration (Note 19) - 5,593
Interest-bearing borrowings (Note 21) 2,826 2,835
Lease liabilities (Note 22) 626 568
Convertible debenture - debt host and interest payable (Note 23) 181,259 156,778
Total financial liabilities $ 263,593 $ 252,983
----- End of picture text -----

29.2 Fair value

The fair value of financial assets and financial liabilities measured at amortized cost is determined in accordance with generally accepted pricing models based on discounted cash flow analysis or using prices from observable current market transactions. The Company considers that the carrying amount of all its financial assets and financial liabilities measured at amortized cost approximates their fair value, except as disclosed below.

The fair values of the Company’s financial instruments classified as FVTPL are determined as follows:

• The fair value of financial instruments that are not traded in an active market are determined using generally accepted valuation models using inputs that are directly (i.e. prices) or indirectly (i.e. derived from prices) observable. The fair value of the embedded derivatives within the convertible debenture (Note 23) is determined using a Monte Carlo simulation. None of the fair value change in the embedded derivatives for the year ended December 31, 2020 is related to a change in the credit risk of the convertible debenture. All of the change in fair value is associated with changes in market conditions.

The fair value of all the other financial instruments of the Company, approximates their carrying value because of the demand nature or short-term maturity of these instruments.

The following table provides an analysis of the Company’s financial instruments that are measured and disclosed subsequent to initial recognition at fair value, grouped into Level 1 to 3 based on the degree to which the inputs used to determine the fair value are observable.

December 31, 2020

Page | 52

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

29. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (CONTINUED)

29.2 Fair value (Continued)

• Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1, that are observable either directly or indirectly.

• Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data.

Recurring measurements Financial liabilities measured at fair value Convertible debenture - embedded derivatives		As at December 31, 2020	As at December 31, 2020
	Level 1	Level 2	Level 3 Total
	- $	- $	152 $ 152 $
Total financial liabilities measured at fair value	- $	- $	152 $ 152 $
Recurring measurements Financial liabilities measured at fair value Convertible debenture - embedded derivatives Total financial liabilities measured at fair value		As at December 31, 2019
	Level 1	Level 2	Level 3 Total 196 $ 196 $ 196 $ 196 $
	- $ - $	- $ - $

There were no transfers between Level 1, 2 and 3 for the year ended December 31, 2020 (2019: nil).

29.3 Financial risk management objectives and policies

The financial risk arising from the Company’s operations are currency risk, interest rate risk, credit risk, liquidity risk and commodity price risk. These risks arise from the normal course of operations and all transactions undertaken are to support the Company’s ability to continue as a going concern. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management of the Company manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Currency risk

The Company is exposed to foreign currency risk on its sales or purchases in currencies other than the U.S. dollar. The Company manages this risk by matching receipts and payments in the same currency.

The sensitivity of the Company’s loss before tax due to changes in the carrying values of monetary assets and liabilities denominated in foreign currencies is as follows. A positive number indicates a decrease in loss for the year, whereas a negative number indicates an increase in comprehensive loss for the year.

Increase/decrease in foreign exchange rate against respective functional currency +5% –5%	As at December 31,
	2020 2019 877 $ 1,049 $ (877) $ (1,049) $

December 31, 2020

Page | 53

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

29. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (CONTINUED)

29.3 Financial risk management objectives and policies (Continued)

Interest rate risk

The Company is exposed to interest rate risk on the variable rate of interest earned on its cash. However, the rate of interest earned on these instruments is below 3% (2019: 3%); therefore, the interest rate risk is not significant.

The Company has not entered into any derivative instruments to manage interest rate fluctuations, however, management closely monitors interest rate exposure and the risk exposure is limited.

Credit risk

The Company is exposed to credit risk associated with its cash and trade and other receivables. The Company’s maximum exposure to credit risk is equal to the carrying amount of these instruments.

The Company applies the IFRS 9 simplified approach to measuring ECL which uses a lifetime expected loss allowance for all trade and other receivables.

To measure the expected credit losses, trade and other receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 2 years before December 31, 2020 or 2019 respectively and the corresponding historical credit losses experienced within this period as well as the forecast regarding the industry environment. On that basis, the loss allowance as at December 31, 2020 and 2019 was determined as follows for trade and others receivables:

As at December 31, 2020 Expected loss rate Gross carrying amount-trade and other receivables Loss allowance As at December 31, 2019 Expected loss rate Gross carrying amount-trade and other receivables	Less than 1 month	1to 3 months	3 to 6 months Over 6 months 10% 100%	Total
	(i)	(i)
	1,260 $ - $	20 $ - $	28 $ 23,052 $ 3 $ 23,052 $	24,360 $ 23,055 $
	(i) 1,623 $	(i) 23 $	10% 100% 147 $ 21,961 $	23,754 $
Loss allowance	- $	- $	15 $ 21,961 $	21,976 $

(i) The expected credit loss rate is considered insignificant.

The Company’s credit risk on cash arises from possible default of the counterparty. The Company limits its exposure to counterparty credit risk on cash by only dealing with financial institutions with high credit ratings.

The Company seeks to manage its credit risk on trade and other receivables by trading with third party customers it considers to be creditworthy. It is the Company’s policy that all customers are required to prepay deposits to the Company for future purchasing from the Company, and for those who wish to trade on credit terms are subject to credit verification procedures.

December 31, 2020

Page | 54

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

29. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (CONTINUED)

29.3 Financial risk management objectives and policies (Continued)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to settle or manage its obligations associated with financial liabilities. Based on the Company’s forecasts for the year ending December 31, 2021, the Company is expected to have sufficient capital resources in order to satisfy its ongoing obligations and future contractual commitments. Please refer to Note 1 for further details.

The Company’s current and expected remaining contractual maturities for its financial liabilities with agreed repayment periods are as follows. The table includes the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to satisfy the liabilities.

As at December 31, 2020 Trade and other payables Interest-bearing borrowings(i) Lease liabilities(i) Convertible debenture-cash interest(i)	0 to 6 months	6 to 12 months	1to 5 years	Over 5 years	Carrying amount Total contractual undiscounted cash flow
	78,730 $ 2,983 136 -	- $ - 136 -	- $ - 592 188,800	- $ - - 280,000	78,730 $ 78,730 $ 2,983 2,826 864 626 468,800 181,411
	81,849 $	136 $	189,392 $	280,000 $	551,377 $ 263,593 $
As at December 31, 2019 Trade and other payables Provision for commercial arbitration Interest-bearing borrowings(i) Lease liabilities(i) Convertible debenture-cash interest(i)	87,013 $ 5,593 2,993 255 74,602	- $ - - 255 12,066	- $ - - 100 80,000	- $ - - - 300,000	87,013 $ 87,013 $ 5,593 5,593 2,993 2,835 610 568 466,668 156,974
	170,456 $	12,321 $	80,100 $	300,000 $	562,877 $ 252,983 $

(i) The expected undiscounted cash flows of the above noted financial liabilities include the cash interest payment on the interestbearing borrowings, lease liabilities and convertible debenture for the years ended December 31, 2020 and December 31, 2019. Refer to Note 21, Note 22 and Note 23 for the terms of the interest-bearing borrowings, lease liabilities and convertible debenture, respectively

30. RELATED PARTY TRANSACTIONS

The consolidated financial statements include the financial statements of SouthGobi Resources Ltd. and its significant subsidiaries listed in the following table:

its significant subsidiaries listed in the following table:
Country of Name incorporation	% equity interest As at December 31,
	2020 2019 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 70% 70%
SouthGobi Resources (Hong Kong) Limited Hong Kong SGS Mongolia SGQ Coal Investment Pte. Ltd. Singapore SouthGobi Trading (Beijing) Co., Ltd.(i) China Inner Mongolia SouthGobi Energy Co., Ltd. China Inner Mongolia SouthGobi Mining Development Co., Ltd.(ii) China Inner Mongolia SouthGobi Enterprise Co., Ltd. China

(i) SouthGobi Trading (Beijing) Co., Ltd. was registered as a wholly-foreign-owned enterprise under law of China.

(ii) Inner Mongolia SouthGobi Mining Development Co., Ltd. was established on August 16, 2019.

December 31, 2020

Page | 55

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

30. RELATED PARTY TRANSACTIONS (CONTINUED)

In addition to the transactions detailed elsewhere in profit or loss, the Company had related party transactions with the following company related by way of directors or shareholders in common during the year ended December 31, 2020:

• CIC – CIC is a major shareholder of the Company, CIC holds approximately 23.8% of the issued and outstanding common shares of the Company as at December 31, 2020. The Amended and Restated Cooperation Agreement with CIC states that the Management Fee calculated based on 2.5% of the revenue shall be paid to CIC on a quarterly basis. During the year ended December 31, 2020, $2,170 was recorded in profit or loss (2019: $3,185).

30.1 Related party expenses

The Company’s related party expenses consist of the following amounts:

Finance costs Managementfee Relatedparty expenses	Year ended December 31,
	2020 2019 27,726 $ 23,751 $ 2,170 3,185 29,896 $ 26,936 $

30.2 Key management personnel compensation

The remuneration of the Company’s directors and other members of key management, who have the authority and responsibility for planning, directing and controlling the activities of the Company, consists of the following amounts:

Salaries, fees and other benefits Share-based compensation	Year ended December 31,
	2020 2019 1,536 $ 1,571 $ - 50
Total remuneration	1,536 $ 1,621 $

31. SUPPLEMENTAL CASH FLOW INFORMATION

31.1 Non-cash financing and investing activities

The Company’s non-cash investing and financing transactions are as follows:

Depreciation and amortization capitalized in mineral properties (Decrease) / Addition to decommissioning liability (Note 24) Trade payables settled by items of property, plant and equipment	Year ended December 31,
	2020 2019 2,794 $ 2,931 $ (1,910) 1,609 - 3,855

December 31, 2020

Page | 56

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

31. SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)

31.2 Net change in working capital items

The net change in the Company’s working capital items is as follows:

==> picture [468 x 115] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Decrease/(increase) in inventories $ 16,411 $ (10,211)
Decrease/(increase) in trade and other receivables (823) 4,054
Decrease in prepaid expenses 500 366
Decrease in provision for commercial arbitration (10,227) (7,400)
Decrease in trade and other payables (12,441) (8,366)
Increase/(decrease) in deferred revenue 5,427 3,770
Net change in working capital items $ (1,153) $ (17,787)
----- End of picture text -----

Depreciation and depletion capitalised in inventories for the year ended December 31, 2020 totaled $3,093 (2019: $4,313).

31.3 Reconciliation of liabilities arising from financing activities

At January 1, 2019 Changes from financing cash flow: Repayment of interest-bearing loans Interest payments Capital element of lease rentals paid Interest element of lease rentals paid Total changes from financing cash flows Other charges: Interest expenses Changes in fair value of embedded derivatives Fair value adjustment upon adoption of IFRS 9 Exchange adjustments At December 31, 2019 and January 1, 2020 Changes from financing cash flow: Interest payments Capital element of lease rentals paid Interest element of lease rentals paid Total changes from financing cash flows Other charges: Interest expenses Changes in fair value of embedded derivatives Gain on modification of convertible debenture Increase in finance lease payable Exchange adjustments At December 31, 2020	Interest- bearing borrowings	Lease liabilities	Convertible debenture Total
	4,138 $ (700) (1,160) - -	1,211 $ - - (639) (129)	139,901 $ 145,250 $ - (700) (2,316) (3,476) - (639) - (129)
	(1,860)	(768)	(2,316) (4,944)
	562 - -	129 - -	23,751 24,442 (69) (69) (4,293) (4,293)
	562	129	19,389 20,080
	(5)	(4)	- (9)
	2,835 $	568 $	156,974 $ 160,377 $
	(423) - -	- (647) (69)	(700) (1,123) - (647) - (69)
	(423)	(716)	(700) (1,839)
	413 - - -	69 - - 700	27,726 28,208 (44) (44) (2,545) (2,545) - 700
	413	769	25,137 26,319
	1	5	- 6
	2,826 $	626 $	181,411 $ 184,863 $

December 31, 2020

Page | 57

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

32. COMMITMENTS FOR EXPENDITURE

The Company’s commitments for expenditure that have not been disclosed elsewhere in the consolidated financial statements are as follows:

==> picture [469 x 135] intentionally omitted <==

----- Start of picture text -----

2-3
Within 1 year years Over 3 years Total
As at December 31, 2020
Capital expenditure commitments $ 448 $ - $ - $ 448
Operating expenditure commitments 1,208 47 324 1,579
Commitments $ 1,656 $ 47 $ 324 $ 2,027
As at December 31, 2019
- -
Capital expenditure commitments $ 5,173 $ $ $ 5,173
Operating expenditure commitments 6,807 49 313 7,169
Commitments $ 11,980 $ 49 $ 313 $ 12,342
----- End of picture text -----

Management is currently in discussions with the third party contractor who built the wash plant to negotiate certain terms of the contract.

33. CONTINGENCIES

33.1 Class Action Lawsuit

In January 2014, Siskinds LLP, a Canadian law firm, filed a class action (the “Class Action”) against the Company, certain of its former senior officers and directors, and its former auditors (the “Former Auditors”), in the Ontario Superior Court in relation to the Company’s November 2013 restatement of certain financial statements, which statements were previously disclosed in the Company’s earlier public financial statement filings (the “Restatement”).

To commence and proceed with the Class Action, the plaintiff was required to seek leave of the Court under the Ontario Securities Act (“Leave Motion”) and certify the action as a class proceeding under the Ontario Class Proceedings Act (“Certification Motion”). The Ontario Court rendered its decision on the Leave Motion on November 5, 2015, dismissing the action against the former senior officers and directors and allowing the action to proceed against the Company in respect of alleged misrepresentation affecting trades in the secondary market for the Company’s securities arising from the Restatement. The action against the Former Auditors was settled by the plaintiff on the eve of the Leave Motion.

Both the plaintiffs and the Company appealed the Leave Motion decision to the Ontario Court of Appeal. On September 18, 2017, the Ontario Court of Appeal dismissed the Company’s appeal of the Leave Motion to permit the plaintiff to commence and proceed with the Class Action. Concurrently, the Ontario Court of Appeal granted leave for the plaintiff to proceed with their action against the former senior officers and directors in relation to the Restatement.

The Company filed an application for leave to appeal to the Supreme Court of Canada in November 2017, but the leave to appeal to the Supreme Court of Canada was dismissed in June 2018.

In December 2018, the parties agreed to a consent Certification Order, whereby the action against the former senior officers and directors was withdrawn and the Class Action would only proceed against the Company.

December 31, 2020

Page | 58

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

33. CONTINGENCIES (CONTINUED)

33.1 Class Action Lawsuit (Continued)

Since December 2018, counsels for the parties have proceeded with the action as follows: (1) two case conferences before the motions judge; (2) production of certain documents by the Company to the plaintiffs; (3) review of those documents by plaintiffs’ counsel from May 2020 to November 2020; and (4) setting down examinations for discovery for February and March, 2021. The Company is urging an early trial.

The Company firmly believes that it has a strong defense on the merits and will continue to vigorously defend itself against the Class Action through independent Canadian litigation counsel retained by the Company for this purpose. Due to the inherent uncertainties of litigation, it is not possible to predict the final outcome of the Class Action or determine the amount of potential losses, if any. However, the Company has judged a provision for this matter as at December 31, 2020 and December 31, 2019 is not required.

33.2 Toll Wash Plant Agreement with Ejin Jinda

In 2011, the Company entered into an agreement with Ejin Jinda, a subsidiary of China Mongolia Coal Co. Ltd., to toll-wash coal from the Ovoot Tolgoi Mine. The agreement had a duration of five years from commencement of the contract and provided for an annual washing capacity of approximately 3.5 million tonnes of input coal.

Under the original agreement with Ejin Jinda, which required the commercial operation of the washing facility to commence on October 1, 2011, the additional fees payable by the Company under the washing contract would have been $18,500. At each reporting date, the Company assesses the agreement with Ejin Jinda and has determined it is not probable that this $18,500 will be required to be paid. Accordingly, the Company has determined a provision for this matter at December 31, 2020 and December 31, 2019 is not required.

33.3 Tax legislation

Mongolian tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management’s interpretation of such legislation as applied to the transactions and activity of the Company may be challenged by the relevant authorities. The Mongolian tax authorities may be taking a more assertive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities that have not been challenged in the past may be challenged by tax authorities. As a result, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for five calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods. The Mongolian tax legislation does not provide definitive guidance in certain areas, specifically in areas such as VAT, withholding tax, corporate income tax, personal income tax, transfer pricing and other areas. From time to time, the Company adopts interpretations of such uncertain areas that reduce the overall tax rate of the Company. As noted above, such tax positions may come under heightened scrutiny as a result of recent developments in administrative and court practices. The impact of any challenge by the tax authorities cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the entity.

December 31, 2020

Page | 59

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

33. CONTINGENCIES (CONTINUED)

33.3 Tax legislation (Continued)

Management believes that its interpretation of the relevant legislation is appropriate and the Company’s positions related to tax and other legislation will be sustained. Management believes that tax and legal risks are remote at present. The management performs regular re-assessment of tax risk and its position may change in the future as a result of the change in conditions that cannot be anticipated with sufficient certainty at present.

As of December 31, 2020 and December 31, 2019, management has assessed that recognition of a provision for uncertain tax position is not necessary.

33.4 Mongolian royalties

On September 4, 2019, the Government of Mongolia issued a resolution in connection with the royalty regime. From September 1, 2019 onwards, in the event that the contract sales price is less than the reference price as determined by the Government of Mongolia by more than 30%, then the royalty payable will be calculated based on the Mongolian government’s reference price instead of the contract sales price.

34. EVENTS AFTER THE REPORTING PERIOD

Cease trade order (“CTO”)

Trading in the common shares of the Company on the TSX was suspended on June 19, 2020.

On January 4, 2021, the Company fully remedied its filing defaults under applicable Canadian securities laws, including filing of its 2019 Annual Information Form and its interim financial statements for the threemonth period ended March 31, 2020 and three-month and six-month period ended June 30, 2020, and three-month and nine-month period ended September 30, 2020 and the accompanying Management’s Discussion & Analysis, and filed an application for full revocation of the CTO with the relevant Canadian securities regulatory authorities.

On February 5, 2021, the BCSC and the Ontario Securities Commission granted a full revocation of the CTO. Trading in the Common Shares resumed on the TSX on February 8, 2021.

Suspension of Trading on HKEX

At the request of the Company, trading in the Common Shares on the HKEX was suspended with effect as of August 17, 2020 pending the publication of the audited annual results of the Company for the year ended December 31, 2019.

On February 9, 2021, the Company confirmed that it has fulfilled all the conditions stated in the resumption guidance to the satisfaction of the HKEX. Trading in the Common Shares resumed on the HKEX on February 10, 2021.

TSX Delisting Review

On February 15, 2021, the Company announced that the TSX Continued Listing Committee determined that the Company satisfies the TSX’s applicable requirements for continued listing.

December 31, 2020

Page | 60

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

34. EVENTS AFTER THE REPORTING PERIOD (CONTINUED)

Restoration of Soumber Mining Licenses

On March 2, 2021, SGS received a notice from the Mongolian governmental authority that the Company’s three mining licenses of the Soumber Deposit have been reinstated effective as of March 2, 2021.

35. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

The statement of financial position of the Company prepared on a stand-alone basis is presented below:

Assets Current assets Cash and cash equivalents Other receivables Prepaid expenses	As at December 31,
	2020 2019 8,406 $ 27 $ 6 5 114 280
Total current assets	8,526 312
Total assets	8,526 $ 312 $
Equity and liabilities Current liabilities Other payables Current portionofconvertible debenture	11,546 $ 8,883 $ 181,411 67,106
Total current liabilities Non-current liabilities Convertible debenture	192,957 75,989 - 89,868
Total non-current liabilities	- 89,868
Total liabilities Equity Common shares Share option reserve Accumulated deficit	192,957 165,857 1,098,634 1,098,634 52,702 52,589 (1,335,767) (1,316,768)
Total deficiency in assets	(184,431) (165,545)
Total equity and liabilities	8,526 $ 312 $

APPROVED BY THE BOARD:

"Mao Sun" "Dalanguerban" Director Director

December 31, 2020

Page | 61

SOUTHGOBI RESOURCES LTD. Notes to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares and options in thousands, unless otherwise indicated)

36. RESERVE AND DEFICIT OF THE COMPANY

The reserve and deficit of the Company prepared on a stand-alone basis is presented below:

==> picture [468 x 128] intentionally omitted <==

----- Start of picture text -----

Share option Accumulated
reserve deficit Total
Balances, January 1, 2019 $ 52,542 $ (1,292,636) $ (1,240,094)
-
Net loss for the year (24,132) (24,132)
Share-based compensation charged to operations 47 - 47
Balances, December 31, 2019 $ 52,589 $ (1,316,768) $ (1,264,179)
Balances, January 1, 2020 $ 52,589 $ (1,316,768) $ (1,264,179)
-
Net loss for the year (18,999) (18,999)
Share-based compensation charged to operations 113 - 113
Balances, December 31, 2020 $ 52,702 $ (1,335,767) $ (1,283,065)
----- End of picture text -----

December 31, 2020

Page | 62

SOUTHGOBI RESOURCES LTD. Unaudited Appendix to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares in thousands, unless otherwise indicated)

ADDITIONAL STOCK EXCHANGE INFORMATION

Additional information required by the HKEX and not shown elsewhere in this report is as follows:

A1. DIRECTOR AND EMPLOYEE EMOLUMENTS

Directors’ emoluments

The Company’s directors’ emoluments consist of the following amounts:

==> picture [468 x 89] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Directors' fees $ 279 $ 262
Other emoluments for executive and non-executive directors
Salaries and other benefits 391 390
Share-based compensation - 22
Directors' emoluments $ 670 $ 674
----- End of picture text -----

==> picture [469 x 266] intentionally omitted <==

----- Start of picture text -----

Year ended December 31, 2020
Salaries and Share-based
Name of director Directors' fees other benefits compensation Total
Executive directors
Dalanguerban (i) $ - $ 301 $ - $ 301
Shougao Wang (ii) - 90 - 90
$ - $ 391 $ - $ 391
Non-executive directors
Jianmin Bao (i) $ - $ - $ - $ -
Zhiwei Chen - - - -
Yingbin Ian He 91 - - 91
Ka Lee Ku (i) - - - -
Xiaoxiao Li (ii) - - - -
Ben Niu - - - -
Jin Lan Quan 81 - - 81
Mao Sun 107 - - 107
Wen (Wayne) Yao (ii) - - - -
$ 279 $ - $ - $ 279
Directors' emoluments $ 279 $ 391 $ - $ 670
----- End of picture text -----

(i) Appointed to the Board of Directors during the year ended December 31, 2020.

(ii) Resigned from the Board of Directors during the year ended December 31, 2020.

December 31, 2020

Page | 63

SOUTHGOBI RESOURCES LTD. Unaudited Appendix to the Consolidated Financial Statements

(Expressed in thousands of U.S. dollars and shares in thousands, unless otherwise indicated)

A1. DIRECTOR AND EMPLOYEE EMOLUMENTS (CONTINUED)

Year ended December 31, 2019

==> picture [469 x 228] intentionally omitted <==

----- Start of picture text -----

Salaries and Share-based
Name of director Directors' fees other benefits compensation Total
Executive directors
Shougao Wang (i) $ - $ 390 $ 12 $ 402
$ - $ 390 $ 12 $ 402
Non-executive directors
Zhiwei Chen $ - $ - $ - $ -
- - - -
Lan Cheng (ii)
- - - -
Xiaoxiao Li (iii)
- - - -
Wen (Wayne) Yao (iii)
- - - -
Ben Niu (i)
Yingbin Ian He 83 - 3 86
Jin Lan Quan 77 - 3 80
Mao Sun 102 - 4 106
$ 262 $ - $ 10 $ 272
Directors' emoluments $ 262 $ 390 $ 22 $ 674
----- End of picture text -----

(i) Appointed to the Board of Directors during the year ended December 31, 2019.

(ii) Resigned from the Board of Directors during the year ended December 31, 2019.

(iii) Resigned from the Board of Directors during the year ending December 31, 2020.

Five highest paid individuals

The five highest paid individuals included one director of the Company for the year ended December 31, 2020 (2019: one director). The emoluments of the five highest paid individuals are as follows:

==> picture [468 x 60] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019
Salaries and other benefits $ 1,200 $ 1,358
Share-based compensation - 22
Total emoluments $ 1,200 $ 1,380
----- End of picture text -----

The emoluments for the five highest paid individuals were within the following bands:

HK$1,500,001 to HK$2,000,000 HK$2,000,001 to HK$2,500,000 HK$3,000,001toHK$3,500,000	Year ended December 31,
	2020 2019 4 3 1 1 - 1
	5 5

December 31, 2020

Page | 64

SOUTHGOBI RESOURCES LTD. Unaudited Appendix to the Consolidated Financial Statements (Expressed in thousands of U.S. dollars and shares in thousands, unless otherwise indicated)

A2. FIVE YEAR SUMMARY

The following table contains a five-year summary of the Company’s results, assets and liabilities:

==> picture [469 x 206] intentionally omitted <==

----- Start of picture text -----

Year ended December 31,
2020 2019 2018 2017 2016
(Restated) (Restated)
Revenue $ 85,951 $ 129,712 $ 103,804 $ 120,973 $ 58,450
Gross profit/(loss) 27,294 45,312 23,969 15,115 (28,595)
Net comprehensive loss
attributable to equity holders of
the Company $ (27,132) $ (928) $ (54,145) $ (37,515) $ (69,526)
Basic and diluted earnings/(loss) per share $ (0.07) $ 0.02 $ (0.15) $ (0.14) $ (0.25)
As at December 31,
2020 2019 2018 2017 2016
. . (Restated) (Restated)
Total assets $ 214,632 $ 228,427 $ 227,606 $ 253,436 $ 254,524
Less: total liabilities (290,869) (277,645) (275,746) (245,608) (213,308)
Total equity/(deficiency in assets) $ (76,237) $ (49,218) $ (48,140) $ 7,828 $ 41,216
----- End of picture text -----

A3. CASH

The Company’s cash is denominated in the following currencies:

Denominated in U.S. Dollars Denominated in Chinese Renminbi Denominated in Mongolian Tugriks Denominated in Canadian Dollars Denominatedin HongKongDollars	As at December 31,
	2020 2019
	9,427 $ 39 $ 9,106 6,860 1,390 240 17 20 181 5
Cash	20,121 $ 7,164 $

December 31, 2020

Page | 65