Coking Coal explorer, Aspire Mining’s December 2019 Quarter Results

  • Jan 31, 2020 AEDT
  • Team Kalkine
Coking Coal explorer, Aspire Mining’s December 2019 Quarter Results

Aspire Mining Limited (ASX: AKM), engaged in the exploration and development of its world-class metallurgical coal (coking coal) assets and rail infrastructure in northern Mongolia has announced Quarterly Results for the three months to 31 December 2019.

The company made tangible progress toward obtaining approvals for road connection to Erdenet and completing fieldwork for Definitive Feasibility Study (DFS) of the Ovoot Early Development Plan (OEDP), the first stage of Ovoot Coking Coal Project. Around $0.5 million were spent during the quarter on OEDP.

Revised OEDP Pre-Feasibility Study

On 11 November 2019, Aspire Mining released the Updated OEDP Pre-Feasibility Study (PFS) Extended Case based on lower contract mining costs from quotes received from a number of mining contractors in the September 2019 Quarter which resulted in modifications to the start-up mine plan. Some of the noteworthy results included-

  • A 19% reduction in mine gate costs per tonne of product from USD 32.80 down to USD 26.4 on a Life of Mine basis.
  • Lower amount of capitalised pre-stripping costs, down from USD 47 million to USD 31 million.
  • C1 cash costs to the China border reduced from USD 83 per tonne to USD 76 per tonne over the life of mine.

A summary of the Restated OEDP PFS Results and comparison with the OEDP Extended Case are tabulated below:

Updated Mine Pre-Strip Estimates

The updated mining schedule when combined with the current mining contractor cost quotes, results in a deferral of waste removal tonnes and a major reduction in the capitalised waste removal cost before commercial sustainable production can commence. The capitalised waste removal has reduced from USD 47 million to USD 31 million, a reduction of USD 16 million.

The Mine Capital Expenditure comprises:

The Financial Impact of Updated Mine Plan and Costings is given below:

Sensitivity Analysis

Aspire Mining added that the net price received is the most sensitive assumption in the achievement of the assessed returns. The before tax NPV10 and IRR sensitivities based on a range of prices, capital expenditure, operating expenditure and yield demonstrate the robustness of the OEDP Extended Case as set out in the table below:

The results from geotechnical and hydrological drilling at Ovoot would bring the OEDP Extended Case up to a DFS status.

Aspire Mining is advancing engagement with the local community leadership concerning the mining and road approvals. The local communities have tied further on-site work to negotiating a Community Benefits Agreement which is being progressed. Moreover, the local soum administration conducted a poll during the quarter, throughout the community to measure the level of support for a responsible mining industry being developed. The results depicted that a majority of participants support the development of the industry, primarily due to the job and training opportunities it will create and the contributions it will make to local infrastructure.

Currently, the Company has recommenced the Definitive Environmental Impact Assessment which will be required to be completed before any site activities can begin.

Road Connection: Ovoot to Erdenet

A 560 km special purpose road is also planned to be constructed between the Ovoot mine and the nearest rail head at the city of Erdenet.

During the quarter, the Khuvsgul airmag approved its medium-term road master plan which also includes the Ovoot to Erdenet special purpose road. This has paved the way for Aspire Mining to directly negotiate with local soums on approvals, required for completion of the road feasibility study.

Marketing

Aspire Mining and Sinosteel Engineering and Equipment Co Ltd executed a Non-Binding Memorandum of Understanding (MOU) which covers potential trade and EPC (Engineering Procurement and Construction) based funding opportunities for the OEDP.

Sinosteel MECC operates its own coking coal trading platform and can also potentially provide funding instruments such as coal presales and\or a streaming funding facility.

Northern Railways LLC

The deadline to complete the conditions precedent for the 30-year Concession for the Ovoot-Erdenet Railway Project is February 2020. However, Aspire Mining and the Government of Mongolia are in discussions for an extension to this time period to allow for resolution of the preferred alignment and further discussions with more users.

Corporate

At Aspire Mining’s Annual General Meeting held on 29 November 2019, the Company shareholders overwhelmingly approved, amongst other matters, the $33.5 million placement and $2.75 million option exercise to Aspire’s major substantial shareholder, Mr Tserenpuntsag Tserendamba.

The placement and option exercise increased Mr Tserenpuntsag’s stake from 27.5% to 52.5%. This development, along with the appointment of Mr Achit Darambazar as Managing Director, repositions the Aspire Mining as a “Mongolian” company listed on ASX as it seeks to advance the OEDP.

Financial Position

Aspire Mining’s end of quarter cash balance stood at $42.2 million, providing the company with an excellent base to progress towards funding and commencing the OEDP.

Stock Performance: With a market capitalisation of around $60.92 million and ~ 507.64 million shares outstanding, the AKM stock was trading at $ 0.120 at AEDT 03:34 PM on 31 January 2020.


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