Friday, June 13, 2014

Aspire Mining and Noble Group to develop Nuurstei Coking Coal Project

Aspire Mining (ASX:AKM) continues to develop its alliance with Noble Group with an agreement to acquire a 50% interest in the Ekhgoviin Chuluu Joint Venture (ECJV) that holds a 60% interest in the Nuurstei Coking Coal Project in northern Mongolia.

The project will be acquired from Xanadu Mines (ASX:XAM) at a highly favourable price. Noble holds the remaining 50% interest in ECJV.

It will issue Xanadu 10 million Aspire shares upon the ECJV entering into an agreement to undertake feasibility studies in the Nuurstei Project area. Or, upon the Mineral Resource Authority of Mongolia granting a mining license over all or part of the Nuurstei Project area.

Nuurstei contains a low volatile bitumous coal with moderate to high ash levels and low sulphur.

There may be operational and marketing synergies with its Ovoot Coking Coal Project.

“Aspire is very pleased to become involved in developing the Nuurstei Project in partnership with the Noble Group as we investigate the possibility of a start to production from the Nuurstei Project pre-rail,” managing director David Paull said.

“There are many potential synergies with the Ovoot Coking Coal Project, not the least of which potentially being an important initial customer for Northern Railways LLC.”

Transaction Details

- 10 million shares in Aspire to Xanadu on the feasibility studies being undertaken in the Nuurstei Project area or upon the Mineral Resource Authority of Mongolia granting a mining license.

- Aspire has also agreed to issue a further 5 million shares in the event that 30 million tonnes of JORC compliant resources are identified in the Nuurstei Project area.

- Aspire will assume Xanadu’s obligation to pay for an additional interest in the Nuurstei Project and will pay the minority vendors in the Nuurstei Project US$200,000 on the grant of a Mining License over the project area.

The ECJV will then hold a 90% interest in the Nuurstei Project. The minority interest of 10% will be free carried through to production.

Noble will retain their 50% interest in the ECJV, along with marketing rights over all Nuurstei Project production.

Both companies have also agreed to work together to identify additional near term Mongolian coking coal production opportunities with terms to be agreed on a case by case basis.

The transaction fits within the company’s strategy to explore and develop Mongolian metallurgical coal projects.

Nuurstei Coking Coal Project

Nuurstei is located just 10 kilometres from the Khuvsgul provincial capital of Moron.

It was acquired by the ECJV in mid-2011 and immediately had drilling success. Subsequent test work has shown that the Nuurstei Project contains a low volatile bitumous coal with moderate to high ash levels and low sulphur.

Washed coal has high indicative coking properties however further testwork is required.

It is relatively close to a public sealed road that is currently being constructed that connects Moron to Erdenet.

The project is also located within a relatively short trucking distance to the proposed Northern Rail Line being developed by Aspire’s subsidiary, Northern Railways LLC.

Preliminary indications are that Nuurstei Project coking coal could also be a useful blending partner for Aspire’s wholly owned Ovoot Project coking coal, and there would be a number of other operational and marketing synergies between the two operations.

Analysis

The acquisition of Xanadu Mines’ 50% interest in the Ekhgoviin Chuluu Joint Venture provides Aspire Mining with another coal project in Mongolia.

The price appears very reasonable with no upfront cash outlay and staged issuance of shares.

As well it enhances the existing alliance with Noble Group which includes a number of transactions relating to project financing, supply chain logistics, port and rail capacity access.

That alliance partner Noble Group holds the remaining 50% in ECJV, which has a 60% interest in the Nuurstei Coking Coal Project, is also encouraging given that both companies are working together on the Ovoot Project.

Also notable are the potential operational marketing synergies between Nuurstei and Ovoot given that the former located within a relatively short trucking distance to the proposed Northern Rail Line.

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