Aluminum Corp of China (Chalco) is expected to drop its $926m bid to acquire SouthGobi Resources amidst fierce opposition to the deal from the Mongolian Government.
The firm decided this month to extend its offer for up 60% of common shares of Toronto and Hong Kong-listed SouthGobi Resources for the second time, as it needs more time to engage with the Mongolian Government and review the terms and conditions of the transaction.
Chalco announced a C$8.48-per-share bid in April for a controlling interest in SouthGobi, which owns several coal projects in Mongolia.
Turquoise Hill Resources, which has a majority stake in SouthGobi, was in favour of the takeover by the state-owned Chalco.
The bid, however, ran into trouble as critics in Mongolia grew tired of the increasing number of Chinese firms operating in the country.
SouthGobi chief executive Alex Molyneux told Reuters that his company believes the takeover will no longer go ahead.
"The evidence I have before me seems highly unlikely that the bid is going to go forward. It's 100% clear that Mongolia has made the deal impossible," said Molyneux.
Chalco has until 4 September 2012 to formalise its bid but such possibility looks unlikely given the Mongolian government's decision in May 2012 to pass a law that regulates foreign investment.
The law restricts foreign ownership to 49% in the finance, media, mining and telecommunications sectors and applies to deals valued at over $75m, while also regulating companies that are state-owned.