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First stage of rail feasibility study for Erdenet to Ovoot railway begins

World Coal,


Aspire Mining Ltd has commenced the first stage of the rail feasibility study for the Erdenet to Ovoot railway (first stage rail feasibility study). The Erdenet to Ovoot Railway forms part of the new Northern Rail Economic Corridor linking China with Russia through Mongolia.

The first stage rail feasibility study is expected to be completed by December 2016.

With inclusion in the new Northern Rail Economic Corridor, the Erdenet to Ovoot railway becomes a priority funding project for China’s banks and other funding institutions established to support the infrastructure build out for China’s One Belt One Road Policy. While the first stage rail feasibility study progresses, Aspire and Northern Railways LLC will be working to complete funding arrangements for both the final feasibility study work and EPC funding for construction of the Erdenet to Ovoot railway.

Quam Capital Ltd (the corporate finance arm of Quam Ltd) has secured interim short-term funding of US$2 million from a group of investors, including large shareholders in Aspire, to progress time critical rail pre-development activities on the ground in Mongolia. Funding will enable Aspire’s rail subsidiary, Northern Railways LLC (NR), to complete the first stage rail feasibility study and environmental surveys.

NR has activated an environmental consulting team in Mongolia to commence and complete by October 2016 the collection of flora and fauna data across the alignment. This is important for the completion of the Detailed Environmental Impact Assessment in early 2017.

From the loan proceeds, NR will make a US$800 000 payment to China Rail Construction Corp. subsidiary, First Survey & Design Institute Group Co. Ltd (FSDI), towards the first stage rail feasibility study. China Railways Construction Corp. Bureau 20 Group (CRC) will also provide FSDI with a US$1.05 million contribution to complete the first stage rail feasibility study. The first stage rail feasibility study will amongst other things, provide a confirmed construction schedule, Bill of Quantities and a CAPEX estimate of between -10% to + 20%. This will then provide a basis for discussions to continue with Chinese banks for funding for the rail project itself.

After receiving the first stage rail feasibility study, and should NR not proceed with the final rail feasibility study, all source data, engineering drawings and other materials will be provided to NR on the repayment to CRC of their US$1.05 million contribution.

The US$2 million in funding will allow Aspire and NR the time to identify and complete funding for the balance of rail pre-development activities without diluting the existing shareholder base. NR has budgeted a total of US$15 million in pre-development expenditure and owner’s costs to bring the Northern Rail Project to completion as an EPC funding transaction.

The loan facility is for 12 months, will carry an interest rate of 9% per annum and will be drawn down in three tranches in August, October and December 2016. In the event that the loan is repaid, the lenders will receive 110% of the face value of the loan. In the event that the loan is not repaid in 12 months, the loan may be converted at the lenders’ option to a royalty of US$1.25\t of metallurgical coal sold from the first 10 million t of production.

There is also the potential to commence the development of the Nuurstei Coking Coal Project after around 50% of the Erdenet to Ovoot railway has been constructed.

The company’s Managing Director, David Paull, noted: “the Erdenet to Ovoot Railway is the first stage of the new Northern Rail Corridor linking China, Mongolia and Russia to new markets (a key initiative for the three countries). The corridor is designed to facilitate growing trade between Asia and Europe and given Aspire’s strategic location along this corridor, the value for Aspire’s rail and metallurgical coal assets have been significantly enhanced.”

Read the article online at: https://www.worldcoal.com/exploration-and-development/19082016/first-stage-of-rail-feasibility-study-for-erdenet-to-ovoot-railway-begins-2267/


 

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