Aspire Mining last week signed an agreement with a Mongolian Government entity to supply future coal produced from the Ovoot project to the Sainshand Industrial Complex, which is the largest industrial development project in Mongolia.
The non-binding agreement would see future potential supply of coking coal supplied to Sainshand which is along the existing Trans-Mongolian Railway. Importantly, the Ovoot project is now recognized alongside the Tavan Tolgoi Coal operation as being a key supplier of raw materials to the Sainshand park. Blending studies completed by Aspire in 2013 have shown that Ovoot coking coal can add significant value to Tavan Tolgoi’s coal.
The Sainshand Industrial Complex is a Mongolian Government entity established to oversee the development of the Sainshand Industrial Park. Its infrastructure is intended to house both coke and steel plants, amongst other industries.
The agreement covers an intent by Sainshand Industrial Complex to enter into future purchase agreements for Ovoot project coking coal and establishes a basis of information sharing prior to negotiation.
In order to supply the Sainshand Park with Ovoot coking coal, the Erdenet-Ovoot Project Railway connecting to the Trans-Mongolian Railway will need to be completed. Northern Railways, Aspire’s Mongolian rail infrastructure subsidiary, has applied to the Mongolian Government for a rail concession over the Northern Rail Line.
Ovoot has a probable ore reserve of 255 million tonnes run of mine. It has open pit resources of 253.1 million tonnes and underground resources of 27.9 million tonnes.
Aspire last week also signed a non-binding letter of intent for the future supply of power to its Ovoot Coking Coal Project in northern Mongolia. Access to power is critical to a mining operation. The agreement covers the annual supply of between 30 to 35 MW of power supplied from the coal-fired Zavkhan Power Plant, which is expected to be commissioned in late 2015.
Zavkhan is about 70km south of the Ovoot project and is being constructed by New Asia Group LLC. Electricity produced from the power plant will feed directly into the existing 110kv power grid that runs directly through the Ovoot project licence area.
Aspire has also announced the receipt of several non-binding expressions of interest relating to the financing of the Northern Rail Line. This project is the focus of Northern Railways which seeks to extend the Trans-Mongolian Railway from its current terminus at Erdenet through to Aspire’s Ovoot project in Khuvsgul province.
The Northern Rail Line will be multi-use, providing an alternative, cheaper and environmentally friendly transport solution for agricultural products, general freight, bulk materials and passengers. The operation of the Northern Rail Line will assist the sustainable long term growth of local industry and the economy through the creation of jobs, resource and small-medium business development, and export opportunities.
The EOI’s together total US$1.3 billion, the capital expenditure estimate for the Northern Rail Line as highlighted in the Rail Pre-Feasibility Study completed by SMEC International in April 2013. The EOI’s were sourced by Aspire from a number of financial institutions and the Noble Group as part of its ongoing discussions with the Government of Mongolia in relation to the grant of a rail concession.
The EOI’s are non-binding but indicate a broad interest to fund the Northern Rail Line. It is the intent of the company to commence definitive financing negotiations immediately upon the grant of a rail concession by the Government of Mongolia.