Delays to coal production at Ovoot project in Mongolia

Energy Global reported that Australian mining firm Aspire Mining has delayed the start up of coal production from its Ovoot project in Mongolia.

The company announced that it has developed a cost saving strategy that will help maximize profits and minimize costs at the metallurgical coal mine.

The new plan hinges on the extension of the existing Trans Mongolian railway being completed in one phase. The extension, known as the Northern Rail Line will be built by Aspire’s wholly owned subsidiary, Northern Railways and is expected to be commiussioned in 2017.

At this point in time, Northern Railways remains in discussions with the Mongolian Government regarding permits. The company hopes to extend the existing rail line which spans approximately 406 kilometers from Erdenet to Moron by a further 222 kilometers that would connect the Ovoot coal project with Erdenet.

Last month, test results confirmed coal from the Ovoot project could be blended with non metallurgical coals from the state owned project at Tavan Tolgoi to produce good quality metallurgical coal.

Aspire have marked the Sainshand Industrial Park as an ideal site for blending this coal. The industrial park could be accessed via the Erdenet Ovoot rail line.

In a press release, Aspire said that construction of the rail extension would alleviate the need to built a sealed coal haul road and reduce capital expenditure by USD 98 million.

The company provided an estimated time line of progression with the rail line;
1. December 2013: Receive grant of rail concession from Mongolian Government for Erdenet Ovoot railway.
2. March 2014: Complete feasibility study for Erdenet Ovoot railway.
3. June 2014: Complete funding for development of railway and commence railway earthworks and construction.
4. 2017: Commissioning of both railway and Ovoot mine.

The company estimate development of the Ovoot project will take approximately 12 months and aim to time the commissioning of the mine with the commissioning of the rail project.

Cost saving strategy;
The rescheduled estimated start of coal production from the Ovoot project represents a fundamental shift in Aspire’s development strategy. The company has identified the lowest capital intensive start up costs, by using contractors wherever possible.

Aspire initially estimated the capital necessary for the Ovoot project would be USD 459 million, plus USD 265 million for the mining fleet. Sweeping changes to the projected costs mean that the revised figure for total mine capital expenditure is now USD 144 million.

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