Metallurgical coal and rail company, Aspire Mining Limited (ASX: AKM) is engaged in the development of its world-class premium metallurgical coal assets in the Orkhon-Selenge Coal Basin in northern Mongolia to create long-term shareholder returns while also contributing to the social and economic upliftment of local communities.
Aspire Mining’s Coking Coal Asset Portfolio comprises –
- Ovoot Coking Coal Project (100%-owned)
- Nuurstei Coking Coal Project (90%-owned)
- A strategic infrastructure owner via its 80% interest in Northern Railways LLC
Aspire Mining is currently pursuing early production of washed coking coal under the Ovoot Early Development Plan (OEDP), which is first-stage of the Ovoot Project, that hosts a JORC 2012 Probable Reserve of 255Mt while progress is currently deferred at the Nuurstei deposit, where mineral and commercial potential is to be explored in more detail.
So far, Aspire Mining has exhausted ~USD 50 million on OEDP including completion of a Pre-Feasibility Study (PFS) in collaboration with FMS LLC in February 2019, which suggested that Rail and Border charges would constitute 17.6% of the operating expenditure (OPEX) while Trucking would account for 31.4% of OPEX. The PFS also indicated that Road work would account for 60% of the capital expenditure.
The company is now going forward with a Definitive Feasibility Study (DFS) for a decision-to-mine on the OEDP 4Mtpa medium term truck/rail mining solution – having received a mining licence, and approval by the Mineral Resource Authority of Mongolia. The DFS has been scheduled for completion by May 2020.
Further expansion of OEDP to more than 4Mtpa saleable output rate would be undertaken subsequent to the completion of the Erdenet – Ovoot railway.
Erdenet – Ovoot railway Link
Northern Railways LLC (Northern Railways) is a Mongolian registered rail infrastructure company, mandated to pursue the development of the Erdenet to Ovoot Railway, supported by a consortium consisting of China Gezhouba Group, Aspire Mining, and subsidiaries of Fortune 500 listed China Railway Construction Corporation Limited – China Railway 20 Bureau Group Corporation and China Railway First Survey & Design Institute Group Co Ltd.
Aspire’s strategy is to progress with the low capital intensity road-based development to deliver early production whilst the larger scale and longer term Erdenet to Ovoot Railway development continues.
The Erdenet to Ovoot Railway would be a multi-user rail line spanning 547 km linking Ovoot to the town of Erdenet, while also connecting northern Mongolia to foreign markets of China and others.
This rail link is a key constituent for the broader Northern Rail Corridor through Mongolia, which is also the subject of a trilateral program that was agreed upon by the Chinese, Russian and Mongolian Presidents to improve the trade relations through a reduction in regulation, enhancement of capacity at borders and betterment of road and rail infrastructure to meet the rising demand for transport services.
The Northern Rail Corridor would also be closely related to Chinese policies to establish a New Silk Road for advancement of Euro Asian trade as well as establishment of a Euro-Asian economic zone as outlined by Russia.
On 25 April 2019, Northern Railways LLC had informed to have signed an Engineering, Procurement and Construction Agreement (EPC contract) with joint venture (JV) partners China Railway 20 Bureau Group Corporation and China Gezhouba International Engineering Co Ltd for the construction of Erdenet to Ovoot Railway.
- It was a lump sum turnkey contract, also a part of other agreements signed during the Second Belt and Road Forum held in Beijing over 25th to 26th April 2019, with final pricing subject to additional field surveys and engineering with a maximum price of USD 1.58 billion (which includes all contingencies, conservative risk assessment on ground conditions, allowances for inflation over the 5-year construction period as well as guarantee fee for completion).
- The contract is also subject to an approved funding package and certain conditions precedent to be met prior to the Erdenet to Ovoot Rail Concession Agreement such as funding, permitting, environmental impact assessment, and land use agreements.
Thereafter, on 30 April 2019, the company announced that it had further discussed with CGGC (China Gezhouba Group) to incorporate the potential road construction and funding assistance for Ovoot to Erdenet Haul Road, a key component of the OEDP. Accordingly, CGGC provided a Letter of Interest (LoI) to take up the EPC contractor work for construction of the haul road while engaging with local Mongolian subcontractors.
In addition, CGGC also proposed to procure the required funding of up to 75% of the estimated building cost of USD 165 million, for which it identified a range of Chinese commercial and policy banks that could extend support in this regard.
The company is actively evaluating foreign and Mongolian funding sources along with assessment of different financing structures for the delivery of OEDP in a way that reduces dilution to the company shareholders. Recently, AKM raised around $ 33.5 million (before costs) through a Share Subscription Deed signed with its major shareholder Mr. Tserenpuntsag Tserendamba, to contribute to road funding.
However, as announced on 9 October 2019, Aspire Mining is presently engaged with the Khuvsgul airmag to discuss terms of an acceptable alignment for the Ovoot-to-Erdenet haul road, as it passes within the airmag as part of a road development plan 2030.
Khuvsgul is carrying out discussions with several soums, villages and herder groups that would be potentially impacted by the road alignment. Thus, the definitive road engineering studies can only be concluded once the road alignment approval is fetched. With the going dynamics, the DFS is expected to take longer than the planned delivery time.
Aspire Mining’s market capitalisation is around AUD 39.92 million with ~ 3.33 billion shares outstanding. On 22 October 2019, the stock of AKM settled the day’s trading at AUD 0.012.
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