Aspire’s Northern Railways Secures Extension of Erdenet to Ovoot Rail Concession

Pure-play metallurgical coal project developer, Aspire Mining Limited (ASX: AKM) in line with its focus on Ovoot Early Development Project (OEDP) growth, is looking for the extension of the Mongolian rail network to Ovoot in order to cope up with full-scale production of 10Mtpa at Ovoot coal mine.

Interesting Read:Coking Coal Outlook and Mongolian Stance Vis-à-vis AKM.

How is the Company Dealing with Prospective Railway Network For OEDP?

In August 2015, the Company’s 80% owned subsidiary, Northern Railways LLC was awarded a 30-year concession to build, operate and transfer to the Mongolian Government the 545 km Erdenet to Ovoot Railway network.

For the same, Northern Railways nominated the Engineering, Procurement and Construction (EPC) partners, i.e. China Gezhouba International Engineering Co. Limited and China Railways 20 Bureau Group Corporation. The partners then completed a Definitive Feasibility Study (DFS) on the Concession approved rail alignment in March 2018. On the recommendation of Definitive Feasibility Study, the Northern Railways executed a conditional EPC Contract in April 2019 on the matters related to the finance, land access permits and a Definitive Environmental Impact Assessment (DEIA).

Well, that's a lot of Work! How the Fund Will Flow to Support the Construction?

One of the Aspire Mining partners, China Gezhouba Group International Company Limited is ready to fund around US$5 million for the pre-development activities such as DEIA and land access permit. China Gezhouba intends to fund the project to gain 50% interest in the rail project subject to the Mongolian Government approval on DFS and confirmation of the minimum of an additional 10Mtpa of freight from the Northern Rail Line.

The discussion between the Northern Railway and Mongolian Government concerning the preferred rail alignment is in progress for the approval of DFS. For which the Company on 26 March 2020 announces the window to clear conditions precedent before the commencement of railway construction has now been extended 18 months to 18 September 2021.

Also, it is pertinent to mention that the Aspire Mining’s52.5% shareholder, Mr Tserenpuntsag via Placement of A$33.5million and separate exercise of A$2.75 million worth shares, has shown interest in OEDP project. Mr Tserenpuntsag through its Letter of Intent (LOI) has exhibited commitment toward OEDP future funding which include the corporate guarantee of up to A$100 million in terms of project financing and or future debt concerning to the OEDPdevelopment.

Must Read: Cash Backed Bargain – Aspire Mining.

Aspire Mining – Way Ahead

As discussed, AKM is currently working towards the Definitive Environmental Impact Assessment (DEIA) which is the main approval requisite for OEDP DFS along with the extension of freight capacity on the Mongolian rail network.

Approval of DEIA is quintessential for the commencement of site works, the critical parameter of technical studies which is paramount for DFS. Ministry of Environment is a crucial body responsible for approving the DEIA post the survey of flora and fauna, local stakeholder information sharing, ethnological studies and social impact assessments.

The recent update of OEDPannounced on 18 February 2020; the Company expects the DEIA completion by June 2020 Quarter. The total duration for all the events related to approval of DFS, DEIA and other activities before the railway construction commencement has been now extended till next year 18 September.

Stock Information

The share price surge by 21.43% from the previously closed value post the announcement of "Northern Railways Secures Rail Concession Extension". The stock of AKM ended 26 March 2020 at A$0.068 per share and has a market cap of A$28.43 million.

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