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Aspire Mining, China Railways To Carry Out First Stage Ovoot Rail Study

Aspire Mining (ASX:AKM) will work with a China Railways Construction Corporation subsidiary to complete the first stage of the Erdenet to Ovoot Rail Bankable Feasibility Study in Mongolia.

This comprises desk top engineering of the entire 547 kilometre alignment based on 1:5000 scale maps currently being prepared and delivered by Aspire subsidiary Northern Railways.

The agreement with China Railway 20 Bureau Group Corporation (CR20G) is a strong endorsement and vindication of the project given that its parent CRCC is a Fortune 500 company.

The rail line is a key requirement to unlock the value of the Ovoot Coking Coal Project and future earnings from mining and production from the project for Aspire.

Adding to the interest, Noble Group - Asia's largest diversified commodities trading company - retains an option to acquire 10% of Northern Railways and fund 10% of the rail development capital.

The execution of the agreement follows the recent inclusion of the Northern Rail Line in the Mongolian Government's National Rail Policy, the inclusion of Phase 1 (Erdenet - Ovoot section) on the Concession List of approved projects, and the signing of an EPC Framework Agreement with CR20G.

"Both Aspire and CR20G see the benefits of maintaining the recent momentum for the Erdenet to Ovoot railway," managing director David Paull said.

"Commencing desktop engineering now will put Northern Railways into a better position to negotiate a Concession Agreement with the Mongolian Government and advance funding discussions."

Rail Bankable Feasibility Study

Preliminary work has commenced on the first 250 kilometres of maps and an initial payment of US$250,000 has been paid.

Further payments will be conditional on Northern Railways receiving a rail concession and funding.

The first stage work comprises desk top engineering for the entire alignment in order to provide additional project definition.

Outputs will include a detailed bill of quantities, detailed construction schedule and a preliminary capital cost estimate.

Post the granting of a Concession Agreement for the Erdenet - Ovoot railway, and given funding is in place, Northern Railways will look to commit to the balance of the Bankable Feasibility Study.

The total cost to Northern Railways will be US$6.5 million (+ VAT) for both the First Stage and the Final Bankable Feasibility Study.

CRCC has significant engineering and construction capabilities working on major projects including roads, highway, light and heavy rail, bridges, tunnels, housing and other projects both domestically in China and internationally.

CR20G employs over 20,000 personnel and has significant international experience completing recent rail projects in Angola, Mongolia and Mozambique.

EPC Framework Agreement

In November 2014, Aspire reached a Framework Agreement with CR20G covering completion of engineering work over the Erdenet - Ovoot section of the Northern Rail Line.

It also provides a basis for negotiations between Northern Railways and CR20G for the award of a fixed price, lump sum turnkey EPC Contract upon the satisfaction of certain conditions.

In addition, CR20G will assist Northern Railways in sourcing project financing from Chinese and other financiers.

Ovoot Coking Coal

The Ovoot Coking Coal Project in northwestern Mongolia has a JORC Resource of 255 million tonnes and is the country's second largest coking coal reserve behind the government-owned Tavan Tolgoi project.

Initial production is estimated to commence in 2018, producing 5 million tonnes per annum of saleable coking coal and increasing in subsequent years to achieve full scale production of up to 10Mtpa from both the open pit and underground operations.

Capital costs to achieve initial production is estimated at US$144 million with operating costs of between US$76 and US$86 per tonnes Free-On Rail at the Chinese border for the first two years of operation, and between US$82 and US S$92/t over the first five years

Current offtake interest in Ovoot coking coal exceeds targeted production with MoUs signed for up to 7.4 million tonnes per annum, or 148% of planned initial production.

It has also signed a non-binding MoU to sell up to 250,000 tonnes of oxidised coal per annum to Zavkhan Power Station about 70 kilometres south of Ovoot.

This provides a potential revenue stream from a product that would otherwise have been considered a waste material.

The MoU includes the construction of transmission infrastructure that will allow the supply of 35 megawatts of power per year to Ovoot.

A recent study demonstrated that a blend of Ovoot coking coal with other selected Mongolian thermal and non-coking coals is ranked as a premium coking coal using Chinese coal classifications.

This is considered to be similar or even better than primary coking coals imported from Australia, the U.S., and Canada due to its medium ash, low sulphur and high G value.

The supply gap for primary coking coals in China is expected to peak at 83 million tonnes by 2020.


The first stage Erdenet to Ovoot Rail Bankable Feasibility Study with CRCC places Aspire Mining in a better position to negotiate a Concession Agreement with the Mongolian Government and advance funding discussions.

That China Railways Construction Corporation is a Fortune 500 company and one of the world's largest international rail engineering construction firms provides a strong endorsement and vindication of the project.

The rail line is a key requirement to unlock the value of the Ovoot Coking Coal Project and future earnings from mining and production from the project for Aspire.

Proactive Investors continues to maintain a 6 - 9 months share price target of $0.125 per share subject to the Northern Rail Line concession being granted for NRL.

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