Tuesday, February 11, 2014

Prophecy Coal ramps up Mongolian activities

TORONTO (miningweekly.com) – Mongolia-focused thermal coal producer and power plant project developer Prophecy Coal on Monday reported that it had successfully restarted mining at its flagship Ulaan Ovoo coal mine last November, and had recorded continual sales and deliveries to its customers during the fourth quarter ended December 31.

During the period, Prophecy sold 69 296 t of thermal coal.

In July of 2012, Prophecy temporarily suspended Ulaan Ovoo coal mining operations owing to the coal stockpile at the time, of 187 000 t, being sufficient to meet contractual supply obligations through the balance of the year.

Prophecy said it was focused on securing across-the-border Russian customers, having sold and delivered one such coal shipment this year.

“Management recently visited a number of Russian coal end-users with the goal of establishing continuous shipments to Russia in 2014,” it said.

The Ulaan Ovoo thermal coal mine is strategically located 17 km from the Russian border and 120 km from both Mongolian and Russian rail links. The mine has a Canadian National Instrument 43-101-compliant resource of 174-million tons in the measured category and 34-million tons of coal in the indicated category.

The coal is bituminous with an energy content of 5 040 kcal/kg, has a low ash content at 11.3%, low sulphur at 0.40% and is suitable for export. The mine features a single massive coal seam that is 45 m to 80 m thick with an average strip ratio of 1.8:1. The first eight years of mining requires no coal washing.

Prophecy in October said it had added a third offtake partner for its Ulaan Ovoo mine, after it had struck an accord with a new customer with “substantial presence” in the region to buy 30 000 t/m.

The company’s asset would also supply more than 30 000 t/m of coal to cement plants, a metallurgical plant, a heat plant, chemical plants and Russian traders, all of which signed binding agreements over the past two months.

BORDER CROSSING

The company had also recently executed a coal sales contract of significant quantity with a buyer in Russia, which is contingent on the ability to transport coal through the Zeltura border. Prophecy said a Mongolian government resolution had listed the border as being "under renovation", meaning it was neither open, nor closed.

Despite the company having offered to assist in renovating the associated Zeltura infrastructure, including the customs clearing facility at the mine, and road improvement from the mine to Zeltura, it could not give a definitive timeframe to start transporting coal through the border post.

Prophecy on Monday said that the Mongolia Ministry of Road and Transportation had recently issued the terms of reference (TOR) for the Zeltura road feasibility study. After the TOR was issued, Prophecy started the feasibility study on upgrading the road from Ulaan Ovoo mine, to the Zeltura border crossing.

Given that the mine is just 17 km from the Zeltura border, as opposed to 120 km from the mine to Sukhbaatar, re-opening the Zeltura border would reduce the transport costs and potentially further lift coal sales to Russia.

After the study is complete, expected by May, and if accepted by the Ministry of Road and Transportation, the road upgrade would start and is expected to take up to four months based on preliminary tenders received.

Concurrently, the company said it was working with the Finance Ministry on creating a customs-clearing zone at Ulaan Ovoo for Russian exports.

While the Prohpecy said that it was pleased with the overall progress and appreciated the support from the Mongolian and Russian authorities, it could offer certainty or a definitive time frame to start transporting coal through Zeltura.

POWER PLANT

Meanwhile, Prophecy announced that the Mongolian Cabinet had last month approved the 600 MW Chandgana mine mouth power project as a concession project.

The company had applied for the concession from the Economic Development Ministry in July.

Subject to negotiations, a concession project may be entitled to stable tax rates, favourable value-added tax and customs duties, as well as other forms of government subsidies, endorsement and support; all of which can enhance bankability and lead to better financing options for the project.

The advanced green-field project designed to supply much needed electricity to a rapidly growing domestic Mongolia market, already held a power plant land use right, construction license, and coal mining licence..
Edited by: Creamer Media Reporter

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