VIKING Ashanti expects to complete its merger with unlisted Sydney-based emerging coal producer Auminco Mines during March. Auminco has two high quality, strategically located coal projects in Mongolia – Berkh Uul and Khonkhor Zag.
Auminco was founded by the founding shareholders and former management of Coalworks which was taken over by Whitehaven Coal for approximately $200 million in June 2012. It is more than 50% owned by ex-Coalworks management and advisers.
During December 2013 Viking Ashanti announced it had entered into an agreement to merge with Auminco in a share exchange transaction which will see Viking Ashanti acquire 100% of Auminco shares and options by the issue of 81 million Viking Ashanti shares, 27 million unlisted Viking Ashanti options exercisable at Aus$0.12 for a term of 30 months from merger completion, and 3 million unlisted options exercisable at Aus$0.20 on or before November 15, 2016.
A further capital raising is planned for the consolidated company to fund operations, with the minimum expected to complete internal production feasibility studies and to make development decisions.
There is near-term production potential from the Berkh Uul bituminous coal project, located near the Russian border, rail infrastructure and potential offtake customers. Khonkhor Zag anthracitic coal project is on a granted 30-year mining lease close to China’s border with only 1.2km of the 4km strike explored by drilling. Further upside potential exists through Auminco’s portfolio of additional coal, base metals and gold projects in Mongolia and Australia.
Berkh Uul is 400km north of Ulaanbaatar in northern Mongolia within the Orkhon-Selege coal district and within 20km of the Russian border. The project is within 40km of rail access into Russian offtake markets, in close proximity to water, infrastructure and transport. The exploration permit is valid to 2015 with a mining lease application imminent.
The deposit consists of shallow, consistent coal seams of high quality bituminous coal amenable to low strip ratio open pit mining, with expected low capital and operating costs. There is local industrial demand for the coal with the unwashed product favoured for its low ash and relatively high calorific value. Berkh Uul is expected to move to production within 12-18 months.
Khonkor Zag is an anthracitic coal project 1400km southwest of Ulaanbaatar in Western Mongolia. It is within 40km of China’s Burgastai border port with an existing haul road adjoining the tenement. The current mining licence was granted in April 2013 for 30 years. A total of 42 drill holes over 1.2 strike km have been completed with further drilling planned to increase the deposit size for a JORC resource estimate.