1. What makes Ovoot special?
2. How will the rail line be funded and will Aspire need to find all the funding itself?
The Erdenet – Ovoot rail line is the responsibility of Northern Railways LLC, requiring US$1.2b plus contingencies (Revised PFS estimate), and will be funded by both debt and equity. Although Northern Railways is currently a subsidiary of Aspire, its equity holding in the longer run will be diluted as other parties become involved which could include multi-lateral banks with interest in regional economic development, rail infrastructure investors, and end users of Ovoot coking coal.
Following the grant of a rail concession and completion of a bankable feasibility study, Northern Railways will negotiate an EPC contract with CR20G which would include tied funding either from development bank/s, and/or export credit agencies. Northern Railways will also seek to access the recent funds and development bank financing (such as the Asian Infrastructure Investment Bank AIIB, and the Silk Road Fund) that are specifically mandated to provide financing to Silk Road infrastructure projects - which includes the Economic Corridor agreements between Mongolia, Russia and China.
Northern Railways has received non-binding letters of interest to finance US$1.3 bn capex requirement. Several large financial institutions within China has already undertaken preliminary due diligence and definitive discussions can be held once the concession has been granted to Northern Railways.
In addition, the Noble Group have an option to fund 10% of the equity capital requirement of the Erdenet to Ovoot railway.
3. Where will funds be sourced from to construct the mine?
The mine capex estimated at US$144m (including contingencies) for the Ovoot Project Development could potentially be funded from:
4. Is there room to grow the current JORC Coal Resource and Reserve base?
The current Probable Coal Reserve is 255 Mt for the Ovoot Project, which is sufficient to sustain a large scale mining project at Ovoot over at least 20 years.
The Ovoot project area covers 430 km2 with the deposits identified so far, located in the western corner. Drilling in the centre and to the east of the Ovoot project is limited and coal potential remains untested in these areas.
5. What markets are Aspire planning to sell coking coal into?
The construction of a rail line connecting Ovoot to the Mongolian and Russian rail networks will open up several markets for selling Ovoot coal into, which include China, Russia, Japan and Eastern Europe.
Aspire has already entered into non-binding Memoranda of Understanding with Chinese companies for their potential purchase of up to 6.1 Mtpa of Ovoot coking coal. Russian interest has been signed for 1.3 Mtpa under non binding MOUs. Additional interest has also been received from steel mills and coke plants located in Russia, Japan, and Eastern Europe is being followed up.
6. What distinguishes Ovoot Coking Coal from other coking coals?
Ovoot is a high quality coking coal displaying very high levels of caking and plastic properties making it a suitable blending product with lower quality coking coals. Its high value in use will see it attract prices similar to hard coking coal prices.
Ovoot coking coal is particularly in demand within the Chinese market due to its high value in use as a blending coal. Studies conducted by the Company have shown that when relatively small amounts of Ovoot coking coal are blended with low or non-coking (oxidised coal) that it can upgrade the poor quality coal to a coking coal equivalent, which in turn creates a better quality coke.
Ovoot coking coal (categorised as Fat coking coal) is in high demand in China where its reserves of fat coal are depleting faster than its lower quality counterparts, and the country focuses on improving coke quality for use in larger plants and balance environmental concerns.
7. When will Aspire commence production?
First production is reliant on the Erdenet – Ovoot railway being constructed. Aspire believes that should a rail concession be granted by end of 2015, with funding provided soon thereafter, the railway and Ovoot mine could be operational in 2019.
The Ovoot Project would take approximately 12 months to complete construction and it would be structured to be completed in line with rail commissioning.