Aspire Mining signs up Russian customers for Ovoot coking coal
Aspire Mining’s (ASX: AKM) Ovoot Coking Coal Project in Mongolia continues to draw interest with two non-binding Memoranda of Understanding signed with large Russian buyers for up to 1.3 million tonnes per annum of coking coal.
This brings its total coking coal MoUs to 6.9Mtpa, well above the 5Mtpa capacity under its low capital development option.
Separately, the company has signed a non-binding Memorandum of Understanding to transport up to 2Mtpa of Ovoot coking coal through Russian Federation rail systems and reloading of coal at Russian Far East coast at competitive tariffs.
This follows its reaching agreements in September to access port capacity in the Black Sea and Russia’s Far East.
“We are very pleased with the initial interest received in Ovoot coking coal, given the relatively short time that preliminary marketing of the coal has been undertaken,” managing director David Paull said.
“We are pleased that we have been able to also now generate buying interest in Russia which has a significant steel making industry and where Ovoot Project coking coal compliments product offerings from established Russian coal miners. We have also been successful at expanding rail and port capacity through Russia to other markets.”
Russian End Users
The MoUs with the large Russian coking coal end users cover an initial commitment to potentially purchase up to 1.3 million tonnes per annum of coking coal, over a minimum period of five years.
Additional interest received from other Russian and Eastern European users indicates that Ovoot Coking Coal will have a significant customer base in the blast and foundry furnace steel making industries outside of China.
Russia is a key market for Ovoot Project coking coal given its proximity and relatively lower transfer and logistics costs in delivering coal to markets.
The Ovoot Project coking coal’s superior blending properties, which is classified as a ‘Fat Coking Coal – an in demand blending feedstock for coke plants in Russia, compliments many coals from Russia’s ageing Kuzbass Basin where fluidity and caking properties are declining due to the increasing depth of mining.
Mongolian Infrastructure
This interest follows recent negotiations between Mongolia, Russia and China to fund and construct upgrades to road, rail and pipeline infrastructure within Mongolia, creating a significant transit corridor between Russia and China.
Proposed changes include upgrading capacity along the Trans-Mongolian Railway to 100Mtpa.
The investment into infrastructure will allow the transport of oil and gas from Russia into the Chinese market, the delivery of Mongolian coal, iron ore and other commodities into China, as well as the delivery of Chinese and Mongolian exports into Russia and through Russia to Eastern European markets.
Russia is an important transit country for Aspire with the agreement to access 2Mtpa of rail and port capacity through the Russian Far East coast at competitive tariffs highlighting this.
Previous agreements had included a port access agreement with the operator of Taman Port at the Black Sea, which has generated additional interest from users, particularly in Eastern Europe, as well as a similar agreement with a terminal operator of the Nakhodka Port on Russia’s Far East coast for exports to north Asian markets.
These are all key parts in its strategy to geographically diversify the customer base for the Ovoot Coking Coal Project.
Ovoot Coking Coal Project
Aspire has progressed the Ovoot Coking Coal Project in recent months with:
- Signing port access agreements to penetrate the lucrative European markets and expanding its access to North Asian markets;
- Identifying a low capital development for the project by using contractors wherever possible for a 5 million tonne per annum initial project, reducing initial capital costs to US$144 million from the original US$459 million for a 6Mtpa Stage 1 plan;
- Financing support with the receipt of non-binding letters of intent from Deutsche Bank and BHF Bank to provide US$40 million and US$50 million respectively in Export Credit Agency backed loans;
- A US$20 million working capital facility made available to the company from Noble Group;
- Interest from potential customers to acquire Ovoot Project coking coal; and
- Studies confirming Ovoot Coking Coal has superior blend carrying capacity and can be blended with coal from the Government owned Tavan Tolgoi mine in southern Mongolia to upgrade the latter’s coking coal properties.
In addition, the operating environment in Mongolia has changed dramatically in November with the Government passing new legislation that makes Mongolia a far more attractive business destination.
This has been achieved by introducing incentives and increasing the confidence for investors to commit to projects or move existing projects into construction and production phases.
For Aspire, the company looks likely to meet criteria for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.
Ovoot has a Probable Ore Reserve of 255 million tonnes Run of Mine. It has Open Pit Resources of 253.1 million tonnes and underground resources of 27.9Mt.
Aspire has a 100% interest in the Ovoot Coking Coal Project in northern Mongolia.
Analysis
While still at an early stage, the MoUs signed with Russian end users for up to 1.3 million tonnes per annum of coking coal demonstrates the strong interest in Aspire Mining’s Ovoot Coking Coal project and is value accretive.
The interest is due to its location between key markets as well as the superior blending properties of its coking coal, which is ranked as one of the highest quality in the world. Aspire is building significant development momentum at Ovoot and we expect this to continue with key milestones ahead.
Adding that to Mongolia’s new business friendly legislation, lower capital costs for an initial development and set financing options in place, this is another plank in place for development of Ovoot.
This brings its total coking coal MoUs to 6.9Mtpa, well above the 5Mtpa capacity under its low capital development option.
Separately, the company has signed a non-binding Memorandum of Understanding to transport up to 2Mtpa of Ovoot coking coal through Russian Federation rail systems and reloading of coal at Russian Far East coast at competitive tariffs.
This follows its reaching agreements in September to access port capacity in the Black Sea and Russia’s Far East.
“We are very pleased with the initial interest received in Ovoot coking coal, given the relatively short time that preliminary marketing of the coal has been undertaken,” managing director David Paull said.
“We are pleased that we have been able to also now generate buying interest in Russia which has a significant steel making industry and where Ovoot Project coking coal compliments product offerings from established Russian coal miners. We have also been successful at expanding rail and port capacity through Russia to other markets.”
Russian End Users
The MoUs with the large Russian coking coal end users cover an initial commitment to potentially purchase up to 1.3 million tonnes per annum of coking coal, over a minimum period of five years.
Additional interest received from other Russian and Eastern European users indicates that Ovoot Coking Coal will have a significant customer base in the blast and foundry furnace steel making industries outside of China.
Russia is a key market for Ovoot Project coking coal given its proximity and relatively lower transfer and logistics costs in delivering coal to markets.
The Ovoot Project coking coal’s superior blending properties, which is classified as a ‘Fat Coking Coal – an in demand blending feedstock for coke plants in Russia, compliments many coals from Russia’s ageing Kuzbass Basin where fluidity and caking properties are declining due to the increasing depth of mining.
Mongolian Infrastructure
This interest follows recent negotiations between Mongolia, Russia and China to fund and construct upgrades to road, rail and pipeline infrastructure within Mongolia, creating a significant transit corridor between Russia and China.
Proposed changes include upgrading capacity along the Trans-Mongolian Railway to 100Mtpa.
The investment into infrastructure will allow the transport of oil and gas from Russia into the Chinese market, the delivery of Mongolian coal, iron ore and other commodities into China, as well as the delivery of Chinese and Mongolian exports into Russia and through Russia to Eastern European markets.
Russia is an important transit country for Aspire with the agreement to access 2Mtpa of rail and port capacity through the Russian Far East coast at competitive tariffs highlighting this.
Previous agreements had included a port access agreement with the operator of Taman Port at the Black Sea, which has generated additional interest from users, particularly in Eastern Europe, as well as a similar agreement with a terminal operator of the Nakhodka Port on Russia’s Far East coast for exports to north Asian markets.
These are all key parts in its strategy to geographically diversify the customer base for the Ovoot Coking Coal Project.
Ovoot Coking Coal Project
Aspire has progressed the Ovoot Coking Coal Project in recent months with:
- Signing port access agreements to penetrate the lucrative European markets and expanding its access to North Asian markets;
- Identifying a low capital development for the project by using contractors wherever possible for a 5 million tonne per annum initial project, reducing initial capital costs to US$144 million from the original US$459 million for a 6Mtpa Stage 1 plan;
- Financing support with the receipt of non-binding letters of intent from Deutsche Bank and BHF Bank to provide US$40 million and US$50 million respectively in Export Credit Agency backed loans;
- A US$20 million working capital facility made available to the company from Noble Group;
- Interest from potential customers to acquire Ovoot Project coking coal; and
- Studies confirming Ovoot Coking Coal has superior blend carrying capacity and can be blended with coal from the Government owned Tavan Tolgoi mine in southern Mongolia to upgrade the latter’s coking coal properties.
In addition, the operating environment in Mongolia has changed dramatically in November with the Government passing new legislation that makes Mongolia a far more attractive business destination.
This has been achieved by introducing incentives and increasing the confidence for investors to commit to projects or move existing projects into construction and production phases.
For Aspire, the company looks likely to meet criteria for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.
Ovoot has a Probable Ore Reserve of 255 million tonnes Run of Mine. It has Open Pit Resources of 253.1 million tonnes and underground resources of 27.9Mt.
Aspire has a 100% interest in the Ovoot Coking Coal Project in northern Mongolia.
Analysis
While still at an early stage, the MoUs signed with Russian end users for up to 1.3 million tonnes per annum of coking coal demonstrates the strong interest in Aspire Mining’s Ovoot Coking Coal project and is value accretive.
The interest is due to its location between key markets as well as the superior blending properties of its coking coal, which is ranked as one of the highest quality in the world. Aspire is building significant development momentum at Ovoot and we expect this to continue with key milestones ahead.
Adding that to Mongolia’s new business friendly legislation, lower capital costs for an initial development and set financing options in place, this is another plank in place for development of Ovoot.
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