Aspire Mining (ASX: AKM) has taken another step towards development and commercialising the Ovoot coking coal project in Mongolia, following the receipt of non-binding Memoranda of Understanding (MOU's) from four North Asian steel mills and coking coal buyers.
Within the Chinese market, Ovoot coking coal falls within the clean fat coal specification, a category of coking coal that is highly valued and in short supply in China.
Combined the MOU's total a possible commitment by Chinese customers to purchase up to 5.6 million tonnes per annum of coking coal, which represents nearly all of the planned total saleable production from the Ovoot Project's Stage 1 development.
The buying interest in Ovoot coal has been strong, with the buying interest also coming from many other large scale potential Chinese customers - as well as steel mills and coke producers in Japan, Russia and Eastern Europe.
David Paull, managing director for Aspire, commented: "We are very pleased with the initial interest received in Ovoot coking coal properties, given the relatively short time that preliminary marketing of the coal has been undertaken.
"It is clear that interest in North Asia is substantial and well in excess of the potential volume of sales from our first stage of development at Ovoot indicated by the non-binding MOU's signed to date".
Marketing efforts are still at a preliminary stage with only half of the Chinese target market approached to date.
Aspire continues to own 100% of the Ovoot Project, which is the second largest coking coal Reserve in Mongolia at 219 million tonnes.
Ovoot coal is highly-valued
The importance of the Ovoot coking coal being within the clean fat coal specification in China, is that this product is highly valued and in short supply - and is used to blend with lower quality, lower caking coals.
This replaces the hard coking coals in coke batches and therefore reduces batch costs and reliance on the seaborne traded hard coking coals.
Ovoot coking coal has an extremely high vitrinite content (97%) which lends it as one of the highest Gray King Coke Types (G11) along with high fluidity and excellent plastic properties.
Testwork of Ovoot coal
Recent testwork confirmed that Ovoot coking coal, when used as part of a coke oven feed blend, could replace the use of hard coking coals and improve the caking ability of lower quality coking coals and coke breeze, a recycled coke oven residue.
Aspire is considering a smaller scale starter pit road based operation whilst continuing to progress access to rail infrastructure and other regulatory approvals to support a larger operation.
The quality of the Ovoot coking coal is driving the interest from end users, with the MOU's a significant milestone from North Asian steel mills and coking coal buyers for future product from Ovoot.
The scale of the buying has increased following meetings with other large scale potential Chinese customers as well as steel mills and coke producers in Japan, Russia and Eastern Europe.
Interest would be expected to continue growing considering the highly quality of the Ovoot product, and with Aspire production of up to 12 Mtpa of saleable coking coal at full capacity over a 20 year life of mine - the company does have the potential to meet this demand.
Producing up to 12 Mtpa Ovoot could deliver the compelling metrics of US$2 - $2.4 billion per annum (at $160-$200/t).
While at non binding stage, the MOU's signal the potential demand for the high vitrinite Ovoot coal from Chinese customers, we consider this to be value accretive in the short term.
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