NORTHERN RAILWAYS LLC 

Northern Railways LLC (Northern Railways) is a Mongolian registered company, a special purpose investment vehicle established by Aspire Mining, which is responsible for the oversight of all aspects of pre-development, construction, and operation of the Erdenet to Ovoot railway.

The Erdenet to Ovoot Rail Corridor represents a section of the Mongolian Government planned “Northern Rail Corridor”, which extends the national rail network from Erdenet, to Aspire’s Ovoot Coking Coal Project and onto the Russian border at Arts Suuri. The Russian Government has further plans to then link the rail from Arts Suuri to the Trans-Siberian Railway at Kyzyl, thereby creating an international rail link connecting Siberia, and northern Mongolia with China.

The Northern Railway will open up significant new opportunity for various industries, small business, the community and local economy in northern Mongolia, as well as providing a direct route to the Chinese market for Russian transit freight. It is estimated that the Northern Railway will reduce the distance travelled for Elegast Coking Coal field to Chinese markets and freight to/from Kyzl by 40%.

The Northern Railway forms part of a larger regional plan which sees the integration of Russian rail planning, China’s Silk Road and Mongolia’s rail policy to create an international Economic Corridor to facilitate increased levels of trade between the three nations and the wider Asia-European economies.

A Rail Pre-Feasibility Study on the Erdenet to Ovoot railway was completed in February 2012 and was approved by the Mongolian Rail Authority as technically feasible and with a general environment approval for the rail path chosen.

Following an independent review on the rail alignment between Erdenet and Ovoot conducted by Calibre Rail, an Alternative Southern Alignment was identified approximately 50 kms south of the original alignment near Moron, the provincial capital of Khuvsgul Province (refer Figure below). A Revised Rail Pre-Feasibility Study was completed over the western portion of the rail path in April 2013 by SMEC International Limited (SMEC) which confirmed an overall shorter rail path distance of 547 km and cheaper capital cost estimate of US$1.2 billion plus contingencies for the entire line.

Northern Railways partnered with both Noble Group and two subsidiaries of China Railways Corporation to progress the development of the Erdnet to Ovoot railway – China Railways 20 Bureau Group Corporation (CR20G) and China Railway First Design Survey and Design Institute (FSDI).

Northern Railways have executed an EPC Framework Agreement with CR20G, who are the preferred Engineering, Procurement and Construction (EPC) contractor for the Erdenet to Ovoot railway. CR20G have commenced the first stage of a Bankable Feasibility Study.

A 30 year concession was granted to Northern Railways in August 2015 by the Government of Mongolia to progress the development of the Erdenet to Ovoot railway. A consortium, made up of Aspire, CR20G and FSDI are supporting Northern Railways to progress the completion of necessary financing, specialist design and construction for the Erdenet to Ovoot railway. CR20G are the nominated EPC contractor with FSDI the nominated engineering and design company in the Rail Concession Agreement.

In June 2016 the Presidents of China, Russia and Mongolia signed off on a Trilateral Programme to develop an Economic Corridor between the three countries. This programme includes the establishment of the Northern Rail Corridor connecting China with Russia through Mongolia. The Erdenet to Ovoot railway is specifically included in this 'Northern Rail' Economic Corridor, which places the Erdenet to Ovoot project as a priority funding project for the development banks and funds established to support the build of China's One Belt Road Policy. This agreement has created significant value in Northern Rail LLC and Aspire, given the location of its rail and metallurgical coal assets.

Aspire will be advancing the path to construction of the Northern Rail Corridor, with the expected completion of the first stage of the Rail Feasibility Study for the Erdenet to Ovoot railway in December 2016. Northern Railways LLC is now looking to complete discussions on funding for the second stage of the feasibility study and EPC funding negotiations for the Erdenet to Ovoot railway.

The Erdenet to Ovoot railway would take up to five years to complete construction and Northern Railways are currently expecting to complete the second stage of the Rail Feasibility Study in mid 2017.

Background

On September 4, 2014, the Russian president Mr Vladimir Putin signed a number of agreements with the Mongolian President Mr Tsakhia Elbegdorj concerning cooperation on trade and rail infrastructure, and in particular a new rail connection between Mongolia and Russia extending from Erdenet to Ovoot to the Arts Suuri border in Mongolia, and then potentially connecting on the Russian side to the Russian city of Kyzyl.

In October 2014, the Mongolian National Rail Policy was amended to include a new northern or Steppe Railway extending from the current terminus at Erdenet through to the Mongolian/Russian border at Arts Suuri. In November 2014, the Erdenet to Ovoot section of the Steppe Railway was added to the Concession List of Approved Projects available for a Public-Private-Partnership with the GOM.

In late March 2015, the GOM instructed its Investment Agency to enter into a direct negotiation for a concession with Northern Railways over the Erdenet to Ovoot section of this new railway connection with Russia.

In August 2015, the GOM Cabinet resolved to grant the concession to Northern Railways.

For more information on Northern Railways, please click here to visit their website.


Erdenet to Ovoot railway forming part of the Mongolian rail policy forming part of the trilateral Economic Corridor between Russia, Mongolia and China