Mongolian coal will be exported to Russia

Prophecy Coal has announced it has entered into two binding coal sale export contracts with a company in Russia, for the sale of coal sourced from the company’s Ulaan Ovoo mine.

The buyer is thought to be based in Russia’s Buryatia region. This region in Russia, with a consumption rate of 6 million tpa of thermal coal, is currently facing a substantial coal shortage due to declining coal production.

Ageing local coal mines in the region have caused coal production in the area to decline. An un-interrupted supply of coal from Ulaan Ovoo through sustainable mining is therefore seen as essential to meeting growing regional demand for premium thermal coal.

Mongolian rail

Under the off-take agreements, 5000 tpm of coal will be exported through Northern Mongolia’s Sukhbaatar rail station, a major Mongolian gateway to Russia, which joins the Russian trans-Siberian railway.

Fresh coal deliveries via the Mongolian rail line are expected to commence in November 2013. This should coincide with the resumption of mining activities at Ulaan Ovoo, following the completion of pit-dewatering activities.

Prophecy has a coal stockyard and rail siding at Sukhbaatar, with a loading facilitiy capable of supporting up to 80,000 tpm of coal movement.

The company continues to work with Russian and Mongolian officials in re-opening the Zeltura crossing between the two countries, which is currently closed. The crossing lies 20 km from Ulaan Ovoo, meaning that if it were to reopen, the mine could further increase export sales volume.

One of Prophecy’s mining competitors in Mongolia, Aspire Mining, has also recently indicated coal from its Ovoot project could be exported to Russia. The company is looking at extending the 406 km of rail line that currently runs between Erdenet and Moron.

Non-binding MOU

The Russian buyer has executed a non-binding memorandum of understanding (MOU), in which the volume of coal sales could increase to 30,000 tpm from Sukhbaatar. Any increase in coal volume would be subject to wagon availability and market conditions.

Resumption of exports to Russia

Prophecy previously exported coal to Russia in 2011 and 2012. The Ulaan Ovoo mine has been curtailed since July 2012. The company has not yet released the estimated capital expenditure it will cost to bring the mine back on line.

According to the company, the new agreements with the Russian buyer will help establish the long-term viability and stability of the mining and logistical operations at Ulaan Ovoo.

Adapted from press release by Sam Dodson

Read the article online at: https://www.worldcoal.com/coal/14082013/mongolian_coal_will_be_exported_to_russia_312/