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Aspire Mining Ltd begins study to develop valuable rail corridor

The commencement of the feasibility study is an important milestone for Aspire as the construction of this railway extension is essential to the development of Ovoot.

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Aspire Mining Ltd (ASX:AKM) has commenced the first stage of the rail feasibility study to extend Mongolia’s national rail network from the city of Erdenet to its flagship Ovoot Coking Coal Project in Mongolia.

The 547 kilometre extension has recently been included in a new Northern Rail Economic Corridor connecting China and Russia through Mongolia as part of China’s One Belt One Road Policy.

All infrastructure projects on the agreed route will have priority funding status from Chinese banks.  

The first stage feasibility study is expected to complete by December and Aspire will work on securing funding for the final feasibility study and construction in the interim.

Aspire has negotiated a US$2 million loan facility to commence rail pre-development activities for the extension.

David Paull, managing director, commented:

“The corridor is designed to facilitate growing trade between Asia and Europe and given Aspire’s strategic location along this corridor, the value for Aspire’s rail and metallurgical coal assets have been significantly enhanced.”


Loan facility


Quam Capital Limited has secured interim short term funding of US$2 million from a group of investors, including substantial shareholders, to progress time critical rail pre-development activities.

Funding will enable Aspire’s rail subsidiary, Northern Railways LLC, to complete the first stage rail feasibility study and environmental surveys.

The loan facility is for 12 months, will carry an interest rate of 9% per annum and will be drawn down in three tranches in August, October and December 2016.

Aspire has budgeted a total of US$15 million in costs to bring the project to completion as an engineering, procurement and construction (EPC) funding transaction.


Timeline to development

The pathway to construction involves:

- First stage feasibility study;
- Pre-development funding for rail;
- Preliminary EPC funding negotiations;
- Final stage feasibility study;
- Environmental and other permits;
- EPC contract finalisation;
- Final EPC funding negotiations;
- Clearance of concession agreement financing conditions precedent;
- EPC funding drawdown;
- Rail construction commencement; and
- Ovoot Coking Coal mine development.


Background

Aspire is the largest coal tenement holder in Mongolia’s Northern provinces and is the 100% owner of the Ovoot Coking Coal Project which is the second largest coking coal project by reserves in Mongolia.

The Ovoot project development is dependent on the construction of the Erdenet to Ovoot railway which is being progressed by Aspire’s subsidiary Northern Railways.

Production from the Ovoot project can coincide with the commissioning of the Erdenet to Ovoot railway.

Aspire also currently owns a 50% interest in and is the operator of the Ekhgoviin Chuluu Joint Venture (ECJV), and has an option to increase its ownership to 100% of the ECJV.

The ECJV owns a 90% interest in the Nuurstei Coking Coal Project which has a 12.85 million tonne JORC resource.


Analysis

The commencement of the feasibility study is an important milestone for Aspire as the construction of this railway extension is essential to the development of Ovoot.

The US$2 million in funding will allow Aspire the time to identify and complete funding for the balance of rail pre-development activities without diluting the existing shareholder base.

The inclusion of the Erdenet to Ovoot railway in the Northern Rail Corridor is an important milestone for Aspire as it increases the certainty of its construction which is required for the development of Ovoot.

Subject to the completion of a feasibility study, the Erdenet to Ovoot railway may receive priority funding from China’s Policy Banks, Sinosure, Asian Infrastructure Investment Bank (AIIB) and funds such as the Silk Road Fund.

Furthermore, the newly elected Mongolian Government led by the Mongolian People’s Party confirms that commencement of construction of the Erdenet to Ovoot Railway forms part of the new Government’s agenda.

While the feasibility study is expected to be complete by December, news flow is expected in the interim regarding the status of funding negotiations.

The stock is up 100% year to date thanks to Aspire’s inclusion in the Economic Corridor in late June, which acted as a catalyst for the stock price.

 

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Quick facts: Aspire Mining Ltd

Price: 0.012 AUD

ASX:AKM
Market: ASX
Market Cap: $39.92 m
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