--SouthGobi former CEO says departure is Rio Tinto plan

--End of deal for Chalco to buy SouthGobi accelerated shake up

--Mining investment climate in Mongolia "very complex"

(Adds former SouthGobi CEO quotes, Chalco pursuit of SouthGobi and collapse of deal and Mongolia foreign investment law)

 
  By Chuin-Wei Yap 
 

BEIJING--Former SouthGobi Resources Ltd. (1878.HK) Chief Executive Alexander Molyneux said Thursday his dismissal overnight is the final part of a succession plan that gained momentum once the company's sale to Aluminum Corp. of China Ltd. (ACH) fell apart last week.

Mr. Molyneux's departure underscores turbulence at a fledgling mining company whose fortunes have mirrored the rise of Mongolia's mining boom and its stumble amid a backlash of nationalism.

SouthGobi said in a statement Wednesday it dismissed Mr. Molyneux effective Wednesday. It didn't provide a reason.

Mr. Molyneux said this is in line with a Rio Tinto Plc (RIO)-led management shake up typical of most of the Australian mining giant's corporate acquisitions.

His departure comes slightly more than a week after the collapse of a potential $920 million deal to sell SouthGobi to Aluminum Corp. of China, the Chinese mining major also known as Chalco.

Chalco and Rio Tinto weren't immediately available for comment Thursday. SouthGobi's spokesman Dave Bartel didn't immediately respond to a call for comment Thursday.

Chalco bid in April for a majority stake in Hong Kong- and Toronto-traded SouthGobi from Canada's Ivanhoe Mines Ltd., since renamed Turquoise Hill Resources Ltd. (TRQ.T). The collapse of that deal accelerated a plan to replace SouthGobi's board with directors backed by Rio Tinto, which got 51% control of Ivanhoe in January, Mr. Molyneux said.

"I was just the last guy to go," Mr. Molyneux said in a telephone interview with Dow Jones Newswires.

Chalco wanted to keep SouthGobi's management in place until after the sale was finalized, Mr. Molyneux said.

"I would have been happy to stay on, but Rio Tinto is the owner of the business now, and they have a different way to manage a business. They replaced directors at Ivanhoe, they replaced directors at other Rio Tinto businesses; so this is natural," he said.

Ross Tromans, most recently marketing general manager at Rio Tinto Coal Australia, has been nominated president and chief executive, subject to confirmation at the next meeting of SouthGobi's board, SouthGobi said in its statement.

Mr. Tromans has held senior roles at Rio Tinto, including Rio Tinto Alcan, Kennecott Energy and Kaltim Prima Coal.

The end of Chalco's pursuit of a key coal asset it once craved reflects the changing political dynamics in Mongolia and Mr. Molyneux acknowledged the difficulties, saying Thursday the investment climate in Mongolia's mining sector has become "very complex" after Ulan Bator introduced a law earlier this year restricting foreign investment in strategic sectors, including resources.

Chalco's bid for SouthGobi, which sits on about 800 million metric tons of coal resources, triggered a wave of political hostility in Mongolia, which in May also moved to suspend SouthGobi's mining licenses on national-security grounds.

Mongolians fear that the spoils of resource development will favor foreigners, a sentiment that became a campaign issue during elections in June.

In August, Mr. Molyneux twice flagged the likely demise of the Chalco deal, pointing out that Chalco had not contacted SouthGobi in more than a month.

Mr. Molyneux said he plans to start a company focused on coal and uranium assets in Kyrgyzstan.

Write to Chuin-Wei Yap at chuin-wei.yap@dowjones.com

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