Viking Mines announces that a major Mongolian industrial company has signed an initial non-binding Memorandum of Understanding with Auminco Mines relating to future potential coal supply from the Berkh Uul project in northeast Mongolia. Auminco, an unlisted public company, is the subject of a takeover offer by Viking and more than 97% of Auminco’s shareholder base has accepted the offer.

Viking chairman Jack Gardner says the MoU, signed with Khutul Cement and Lime JSC (KCLC), is a significant event for the company, as KCLC is Mongolia’s largest cement manufacturer.

“We understand KCLC has plans to substantially increase cement production to meet growing domestic demand. This would result in its annual coal demand increasing from the current 250,000 tonnes to around 400,000-500,000 tonnes. Viking is optimistic about winning a big slice of KCLC’s business as low sulphur content is a feature of Berkh Uul coal, which is important for cement manufacture.”

KCLC, a semi-privatized Mongolian State-owned industrial company, is about 60km west of Darkhan City in the northern region of Mongolia. The non-binding MoU, signed with Auminco’s Mongolian subsidiary BRX LLC, states KCLC’s intent to enter into future purchase agreements for Berkh Uul project coal.

It is the fourth MoU secured for Auminco’s Berkh Uul Bituminous Coal Project. As with the earlier MoUs from Darkhan Metallurgical Plant, Darkhan Power Station and Erdenet Power Plant, it also establishes testing of a bulk sample as a basis for technical evaluation of the coal.

Jack Gardner says: “Securing these four MoUs since April 2014 confirms Auminco’s ability to liaise with government and local industry for the future potential coal supply from Berkh Uul. It also demonstrates the existence of strong local Mongolian industry demand for Auminco’s potential supply of coal.”

Berkh Uul is 400km north of Ulaanbaatar within the Orkhon-Selege coal district and within 20km of the Russian border. The project is 200km east of Darkhan City and within 40km of rail access to the existing Trans-Mongolian Railway, which provides a transport link to Darkhan to the south and Russia to the north.

The exploration permit is valid to 2015. A Mongolian consultant has been engaged to carry out a study to satisfy government requirements on environmental, social, technical and commercial considerations, with a mining lease application included in the consultant’s engagement.

On March 17, 2014, Viking announced a new JORC 2012 compliant indicated and inferred coal resource estimate for the Berkh Uul project. The resource estimate totals 38.3 million tonnes with 21.4 million tonnes classified as indicated and 16.9 million as inferred.

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