TerraCom Limited has started deliveries of hard coking coal from the Baruun Noyon Uul (BNU) project in southern Mongolia to the Kingho Group as part of an offtake agreement with the Chinese company. The company’s feasibility study for an on-site coal handling and processing plant (CHPP) at BNU has also been approved.

Recommissioning of the BNU mine has been completed and the mine is in full production. On February 9 TerraCom stated that coal was flowing from the mine to build stockpiles in preparation to supply product for the offtake agreement with Kingho. It said that coal was due to start being delivered from February 10 when the Chinese-Mongolia border reopened following Chinese New Year.

The first 100% US$ irrevocable letter of credit (LC) received from Kingho for sales of January/February production tonnes from BNU was issued by the Agricultural Bank of China and received by TerraCom’s Mongolian banking counterpart.

The tonnage and pricing were agreed by Kingho and TerraCom at the start of the month in line with the agreement, with the price linked to a commercially in confidence mine gate pricing structure that reflects the seaborne market. Funds under the LC will be paid to TerraCom following coal being delivered to Kingho.

TerraCom continues to advance development of the CHPP for the BNU operations. The company says the CHPP feasibility was approved by the Mineral Professional Council (MPC) in December and it had now received the final resolution of the MPC meeting.

The strategy provides a pivotal asset in controlling the volume and quality of coal supplied from BNU through the Shivee Khuren and Ceke border into China. The onsite CHPP will allow TerraCom to increase the BNU cash operating margin through a freight cost reduction as clean coal will only be transported into China, which adds significant NPV value to the existing and future projects in the basin. The CHPP is to be vendor financed.

TerraCom has signed a term sheet and almost completed the long form contracts with Guohua Technology Corporation (GTC), a highly experienced, competent and competitive CHPP provider from Tangshan, China. GTC has designed and built over 500 wash plants in China and has more than 10 patented technologies that are widely accepted within the China coking coal processing industry.

GTC will incorporate a number of these technologies into the BNU CHPP, including the ‘gravity fed three product HM cyclone’, the ‘fine coal HM cyclone’, inline analysis and control systems and their patented flotation cell technology. This technology results in lower capital and operating costs compared to conventional dense medium cyclone plants, and also for meaningfully lower water consumption.

The plant will produce dry rejects and tailings slime, alleviating the need for a tailings storage facility with associated complex management systems. General engineering is complete and detailed engineering will advance with manufacture in China of the modular plant and construction activities on site beginning early in the second quarter. Start up and commissioning of the plant is expected to be begin mid-year.

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