Mongolia Energy Corporation Limited Provides Critical Update on Audit Disclaimer Resolution and Major Tax Proceedings

Summary of Key Points

• The auditor has issued a Disclaimer of Opinion on the Group’s consolidated financial statements for FY2025, citing significant uncertainties regarding the Group’s ability to continue as a going concern.
• The Group is actively implementing an Action Plan to resolve issues leading to the audit disclaimer, including addressing substantial Mongolian tax liabilities through both settlements and ongoing legal proceedings.
• Recent developments include full settlement of a significant portion of outstanding tax payables, and an ongoing appeal against a major tax reassessment ruling.

Details of the Audit Disclaimer and Related Uncertainties

The 2025 Annual Report of Mongolia Energy Corporation Limited (the “Company” or “Group”) highlighted that the Group’s auditor did not express an opinion on its consolidated financial statements for the year ended 31 March 2025. This rare and serious action—known as a Disclaimer of Opinion—was due to multiple uncertainties about the Group’s ability to continue as a going concern. These uncertainties are critical for shareholders, as they may impact the Company’s valuation and share price.

Implementation Progress on the Action Plan

To address the auditor’s concerns and resolve the disclaimer, the Group initiated several key measures:

1. Settlement of Royalty Tax Payables (2022-2023):
   • MoEnCo (a major subsidiary) agreed to settle MNT 120.8 billion (approx. HK\$279 million) with Mongolia’s Tax Authority (MTA) for royalty taxes due for 2022 and 2023.
   • The settlement is being paid in six installments over six months—all of which have now been paid in full, demonstrating the Group’s commitment to resolving overdue tax liabilities and potentially improving its financial standing.
2. Major Tax Reassessment Dispute (2017-2020):
   • The TDRC (Tax Dispute Resolution Council) has ruled that MoEnCo must pay approximately MNT 412.3 billion (about HK\$902.6 million) in reassessment taxes for the years 2017 to 2020—a sum significantly larger than the earlier settlement.
   • MoEnCo filed a legal claim with the Administrative Court of Mongolia to annul the tax reassessment but was unsuccessful; the Court ruled in favor of the General Tax Office (GTO), dismissing MoEnCo’s claims.
   • MoEnCo has lodged an appeal with the Appellate Court of Mongolia and is also seeking amicable solutions with the Mongolian authorities to resolve the matter.

Implications for Shareholders and Price-Sensitive Information

• The auditor’s Disclaimer of Opinion and the ongoing uncertainties regarding the Group’s ability to continue as a going concern are critical risk factors for investors and could significantly impact the Company’s share value.
• Resolution of these tax disputes—particularly if MoEnCo is successful in its appeal or negotiates a favorable settlement—could materially affect the Company’s financial position and market perception.
• On the other hand, if the appeal fails and the Group is required to pay the full reassessment tax, there could be a severe adverse impact on the Group’s liquidity and solvency.
• The Company has committed to keeping shareholders and potential investors updated with further announcements on the status of the Action Plan.

Conclusion

Investors should closely monitor further announcements from Mongolia Energy Corporation Limited regarding the outcome of the tax appeal and the Company’s efforts to resolve the audit disclaimer. These issues are highly price sensitive and could drive significant volatility in the Company’s share price depending on their resolution.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult with their financial advisor before making investment decisions related to Mongolia Energy Corporation Limited.

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