Aspire Mining signs key power agreement for Ovoot Coking Coal Project

Aspire Mining  has signed a non-binding Letter of Intent for the future supply of power to its wholly-owned Ovoot Coking Coal Project in Mongolia.
Aspire Mining has signed a non-binding Letter of Intent for the future supply of power to its wholly-owned Ovoot Coking Coal Project in Mongolia.
Aspire Mining (ASX: AKM) has signed a non-binding Letter of Intent for the future supply of power to its wholly-owned Ovoot Coking Coal Project in Mongolia.
Access to power is critical to a mining operation, this is a significant plus for the project.

This follows yesterday’s signing of an agreement with a Mongolian Government entity to supply coal produced from the project to the Sainshand Industrial Complex, Mongolia’s largest industrial development.

The power agreement covers the supply of between 30 to 35 megawatts per annum of power supplied from the coal-fired Zavkhan Power Plant, which is expected to be commissioned in late 2015, to the project.

Zavkhan is located approximately 70 kilometres south of the Ovoot Project and is being constructed by New Asia Group LLC.

Electricity produced from the power plant will feed directly into the existing 110kv power grid that runs directly through the Ovoot Project licence area.

“The signing of this letter of intent for power supply highlights the ready accessibility of power to the Ovoot Coking Coal Project,” Aspire managing director David Paull said.

“Access to sufficient quantities of power and water are essential to a successful coal mining operation. We are fortunate that both are readily available to the Ovoot Project.”

Ovoot Project

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 significantly progressed the project in recent months through:

-    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.

Ovoot continues to draw interest - late last year, another two non-binding Memoranda of Understanding were signed with large Russian buyers for up to 1.3 million tonnes per annum of coking coal.
    
This brought the total coking coal under supply agreements to 6.9Mtpa, well above the 5Mtpa capacity under its low capital development option.

Interest followed 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.

Analysis

Aspire continues to progress its Ovoot Coking Coal Project with today’s agreement that brings critical power to the project.

Yesterday's recognition as a key supplier of raw materials to the Mongolian Government owned Sainshand Park is surely building momentum for Ovoot as a key supplier of coal in the Mongolia.

This is further supported by Mongolia passing in late 2013 new legislation demonstrating its support for foreign investment.

Key price catalysts and milestones are significant and include:

-    The award of the Rail Concession in 2014;
-    Detailed Engineering Work & Environmental Impact Assessment in 2014;
-    Fund Raising in 2014; and
-    The start of construction in 2015.
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