Earlier in the year, Chalco announced a CA$8.48 per share bid for a controlling interest in the company and has until early September to formalise the bid. However, in May, Mongolia introduced a law allowing foreign investors a maximum 49% stake in mining, finance, media and telecomms companies in the country.

SouthGobi owns large coal projects close to the Chinese border in Mongolia, making it very appealing to the Chinese who have been investing in coal, iron ore and electricity projects in order to alleviate high energy costs associated with aluminium production.

According to SouthGobi CEO Alex Molyneux, who was speaking to Reuters, it is unlikely that the bid will go forward.

With no formal contact from Chalco for over a month, another sign that the deal won't be going ahead, SouthGobi shares traded in Toronto and Hong Kong were down, operations at the company's Ovoot Tolgoi mine in Southern Mongolia have been curtailed and second quarter net income attributable to equity holders fell from US$67.3M to just US$230,000.

Molyneux said that the Mongolian Government had done 'everything in their power' to stop the deal, although hopes have been risen by a change of government with Norov Altanhuyag confirmed as prime minister last week and the party broadly in favour of free market ideology and likely to comprise 75% of the new cabinet.