Saturday, April 19, 2014

Berkh Uul production on fast track

With Viking Ashanti moving closer to a friendly takeover of private company Auminco Mines, the combined entity believes it could become a producer of thermal coal from the Berkh Uul project within the next 12 to 18 months.

The takeover will see Auminco shareholders emerge with a 47% stake in Viking and play a major role in the evolution of Viking as a participant in the Mongolian thermal and coking coal markets.

Auminco was established by founding shareholders and management of Coalworks Ltd which was sold to Whitehaven Coal for about $200 million in mid-2012.

The lead project, Berkh Uul, is in northern Mongolia next to a rail link that connects with Russian markets and provides quick access to domestic power plants and industrial users at Darkhan and Ulaanbaatar.

Near term and low cost production is forecast from Berkh Uul with a JORC resource of 38.3 million tonnes of high quality and low-cost open pit unwashed bituminous coal. The development risk is considered lower than for most Mongolian coal companies as overall CAPEX for Berkh Uul is low by most standards.

The start-up mining rate will not be large but there is flexibility to build over time with simple and proven mining and processing technology, thus reducing funding and execution risk. In addition to an expanding domestic market, demand from coal-hungry Russia and China is forecast to drive growth in the Mongolian coal market at an exponential rate.

Proactive Investors says Berkh Uul has potential to generate robust operating cash flows. A small-scale conceptual mine may initially annually produce 500,000-750,000 tonnes of thermal coal, generating free cash flow of $3-$5 million.

Viking Ashanti is a resources company that listed on the ASX in 2010 to explore and develop mineral deposits in West Africa. The company currently holds more than 250sqkm of ground at Akoase East/Akoase West and West Star/Blue River, both in southern Ghana within the prolific Ashanti Gold Belt.

The company undertook a takeover of Auminco Mines to secure two near-term low CAPEX and OPEX coal production opportunities, plus a portfolio of coal development projects all in Mongolia. The offer is subject to a shareholders meeting that is scheduled for early May, issuance of a bidder’s statement and acceptance by 90% of the shares issued in Auminco, and an equity raise of from $3-$5.6 million.

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