Aspire Mining’s Target Commodity Coking Coal and The Market Opportunity

Perth, Australia-based mineral exploration company, Aspire Mining Limited (ASX: AKM) is focused on development of its world-class coking coal (metallurgical coal) assets and related rail & road infrastructure projects in the Orkhon-Selenge Coal Basin in northern Mongolia. The company aims to enhance returns to shareholders in the long-term and is also trying for social and economic upliftment of the local communities.

Coking Coal Project Portfolio

• Ovoot Coking Coal Project (100%-owned)
• Nuurstei Coking Coal Project (90%-owned)
• A strategic infrastructure owner via its 80% interest in Northern Railways LLC

Source: Discover Mongolia Summit 2019 Presentation

The company is currently working towards commencement of early production of washed coking coal under the Ovoot Early Development Plan (OEDP), stage one of the Ovoot Project, which hosts Probable Reserve (JORC 2012 compliant) of 255 million tonnes (Mt). Work at the Nuurstei Coking Coal Project is currently deferred.

Aspire Mining has spent around USD 50 million on OEDP. This amount also includes the delivery of Pre-Feasibility Study (PFS) in February 2019 in collaboration with FMS LLC. The PFS suggested that Rail and Border charges and Trucking would account for 17.6% and 31.4% of the OPEX (operating expenditure) respectively. In addition, Road works would be around 60% of the CAPEX (capital expenditure).

After the mining licence and Mongolia’s Mineral Resource Authority approval already in place, Aspire Mining is progressing with the Definitive Feasibility Study (DFS) to conclude a decision-to-mine on the OEDP 4Mtpa medium term truck/rail mining solution.

Initially, Aspire’s has opted for low capital intensity road-based connectivity to achieve early production whilst further expansion of OEDP to over 4Mtpa saleable output rate would be undertaken after the Erdenet – Ovoot railway is completed. Aspire Mining’s subsidiary Northern Railways LLC has been mandated as per a 30-year Build Operate Transfer Concession from the Mongolian Government to complete this rail infrastructure project.

All about Coking Coal

As per the Chinese coking coal classification system, Ovoot Coking Coal is classified as “Fat” Coking coal as it provides high fluidity coals with good plastic and huge caking properties which are beneficial in blending lower quality coking coals.

• Origin, Production, Applications

Coking coal is used to make coke, an indispensable input in the process of steel production. With other kinds of coal like brown coal, lignite and anthracite also present around the world, what sets the coking coal apart from others is its unique caking ability which makes it the best choice in making coke for steel production.

Coking coals are heated in a coke oven at temperatures up to 1000-1100ºC in the absence of oxygen to drive off the volatile compounds in a reducing atmosphere to create coke. With the increasing temperatures, coal gradually softens and turns into plastic, fuses together and subsequently solidify into coke particles. This whole phenomenon is called the caking process.

The rank, composition, mineral content and the ability to soften upon being heated of the coking coal are the key factors that largely determine the quality of the coke produced. The demand for high quality coking coal mainly comes from steel producers who aim to maximize productivity of their blast furnace operations.

• Market Forecast

Aspire Mining is particularly eyeing opportunities in the Chinese coking coal market that is expected to be the largest consumer for Ovoot coking coal due to the primary reasons being - size and proximity!

Premium coking coals (Fat and Primary) are usually in high demand in China as the country has low proportion of these coals in its overall coal reserves plus there is also an increasing requirement for higher quality coking coals from the coke industry.

As China is moving towards large scale use of big blast furnaces to achieve higher productivity, deploy cutting-edge technology and balance environmental concerns, the demand for premium coking coals is expanding even more. According to the company, the average size of a blast furnace in China is around 1,000 m³ while the same is ~3,814 m³ in Japan. In such huge blast furnaces, premium quality coke is required.

Mongolia being rich in resources and surrounded by largest steel making countries such as Japan, Russia, China and Korea is forecasted to become a key global supplier of coking coal.

Aspire Mining intends to mine, wash and produce “fat coal” from OEDP and transport it 560 km by road from the mine-site to Erdenet. From there, the coal will be transported a further ~1,000 km by rail wagons to Erenhot (Erlian), bordering Inner Mongolia, in China.

Read: Aspire Mining’s Action-Packed September Quarter 2019

Stock Information: On 22 November 2019, the AKM stock price settled the day’s trade at AUD 0.012. Aspire Mining market capitalization is ~ AUD 39.92 million and it has around 3.33 billion shares outstanding.

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