The Cabinet of the Government of Mongolia has authorized the government’s investment agency to execute a concession agreement with Aspire Mining’s subsidiary Northern Railways LLC to build and operate the Erdenet to Ovoot railway in northern Mongolia.
The agreement is for 30 years with 100% of the base railway structure to be transferred to the government at the end of the term. The agreement will be executed by the parties as soon as logistically possible following final edits to be incorporated into the agreement.
Northern Railways will have the exclusive right to build and operate the 547km project to extend Mongolia’s national rail network from Erdenet to Aspire’s Ovoot Coking Coal Project, which represents the first stage of a new rail connection linking Mongolia to Russia.
A pre-feasibility study has been completed on the project with an estimated capital cost to construct of US$1.2 billion.
Aspire says the concession agreement represents a major milestone in future development of the Ovoot project as it now has a defined path to market by rail. Ovoot is planned to initially produce 5 million tonnes annually and increasing to 10 million tonnes of high quality coking coal over a 21 year life of mine, based on a 255 million tonne JORC-compliance probable coal reserve.
Northern Railways’ negotiations for the agreement were supported by a consortium comprising Aspire and China Railway Construction Corporation subsidiaries, China Railway 20 Bureau Group Corporation (CR20G) and China Railway First Survey & Design Institute (FSDI).
Northern Railways will work exclusively with CR20G and FSDI to compete the bankable feasibility study and negotiate the terms of the EPC contract to be awarded to CR20G.
China Railways is a Fortune 500 listed company, and China’s largest rail construction organisation.
Through its various subsidiary companies China Railways are involved in development of a number of rail projects along the planned economic corridor between Russia, Mongolia and China, including the Erdenet to Ovoot railway and construction of the Kuragino to Kyzyl railway which will eventually connect with the Erdenet to Ovoot railway.
The corridor through Mongolia is primarily aimed at improving trade by reducing regulation, improving capacity at borders and to improve road and rail infrastructure to meet increased demand for transport services.
Northern Railways has recently commenced a scoping study over the planned railway extending from Ovoot to the Russian border approximately 180km north of Ovoot and further to the Russian town of Kyzyl to complete this connection. The scoping study is expected to be completed in the current quarter.
Following the execution of the agreement, Northern Railways will work with the consortium to raise funding for construction of the base rail structure and negotiate other key agreements and permits which are conditions precedent to commencing construction under the concession agreement.