Aspire’s strategy in a weak metallurgical coal market

Aspire Mining Ltd has positioned itself as a Mongolian focused metallurgical coal explorer building up its coal property portfolio during the last 12 months, which has included the purchase of a 50% stake in the Ekhgoviin Chuluu Joint Venture (ECJV) with Singapore listed Noble Group, followed by the ECJV acquiring a further 30% interest in the Nuurstei project. Further, applications for new exploration licences in Mongolia have been successful with the company and the ECJV awarded new licences in south and northwest Mongolia.

Although the current metallurgical coal market is depressed, the company continues to take a medium and long-term view of the metallurgical coal market and continues to believe that there is significant upside to be achieved. The company’s focus is to continue to achieve the infrastructure and commercial related milestones necessary to realise the future development and production from its coking coal assets including the world class 100% owned Ovoot Coking Coal Project (Ovoot).

Due to current very poor market conditions, sustaining capital in operating mines is being deferred and there are no new large coal mines expected to come on line in the next few years. Meanwhile, existing coal mines are coming to the end of their lives. BHP Billiton announced recently that their Crinum/Gregory mining complex will close early 2016, removing up to 6 million tpy of high quality coking coal out of the supply chain. Given the long lead times required to bring any new production online, market commentary has moved to an expectation of improving prices over the medium term.

The market dynamics in coking coal are very different to iron ore even though the demand for both are driven by the steel industry. The iron ore industry is concentrated in three very large companies who make good margins at current prices with new supply still to enter the market. However, for coking coal,most of the participants are losing money at current pricing and rather than new supply, mine closures continue.

Aspire is working to secure both the Nuurstei and Ovoot projects as new low cost production sources that can enter the market in the medium term to meet supply side gaps that are expected to materialise over time.¹

1. Macquarie Wealth Management, May 2015

Edited from press release by Angharad Lock

Read the article online at: https://www.worldcoal.com/coal/08102015/aspires-strategy-in-a-weak-coking-coal-market-2978/