The first stage feasibility study for the Northern Rail Corridor in Mongolia has concluded that the project is financially feasible. The study, which was prepared by China Railway First Survey and Design Institute Group Co Ltd (FSDI), covers the Erdenet to Ovoot section.
It demonstrates that the first stage is consistent with Mongolia’s mineral resource development strategy to be supported by growth in rail infrastructure, and will play a significant role in regional and social development. It says the project is necessary and is recommended to be implemented as soon as possible.
FSDI is a subsidiary of China Railways Construction Corporation and is the nominated rail engineer for the rail project under the concession granted to Northern Railways LLC by the Government of Mongolia. Northern Railways is the rail subsidiary of Aspire Mining, which owns the world-class Ovoot Coking Coal Project adjacent to the proposed line and has a 45% interest in the smaller Nuurstei Coking Coal Project which is well placed to be an early rail user.
The capital construction cost is estimated at US$1.25 billion plus contingency for a 20 million tonnes per annum capacity single line at current exchange rates. This compares with the 2013 pre-feasibility capital cost estimate of US$1.2 billion for a 12 million tonne line.
The study includes:
· Two locomotive service depots as well as insurance and service costs not included in the pre-feasibility scope; and
· Provision for a number of tunnels, some of which may not be necessary after a final feasibility study is completed.
The study noted that planned capacity upgrades to the Erdenet to Salkhit line and Trans-Mongolian Railway will be needed to cope with the increased freight volume.
Northern Railways now has the opportunity to continue its review of the study before committing to the final stage feasibility study, which will take around six months. The study will be used by China Development Bank and other Chinese banks in assessing investment in the railway.
Funding for the final stage feasibility study is being sought, as is an extension of the time within which to complete the Concession Agreement Conditions Precedent, which include completion of the study. Discussions with the Government of Mongolia on the time extension are progressing well and Aspire believes that it will be agreed by the end of January.