August 12, 2015

Go-ahead for $US 1.2bn Mongolian coal line

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Go-ahead for $US 1.2bn Mongolian coal line MTZ

THE Mongolian cabinet gave its approval on August 10 for the country's investment agency to proceed with the implementation of a concession agreement to build and operate the 547km Erdenet - Ovoot line, which will connect new coal mining developments in northern Mongolia to the rail network and eventually form part of a new China - Russia link.

The concession agreement will grant Northern Railways, a subsidiary of Australia's Apsire Mining, exclusive rights to build the railway and operate it for 30 years, after which ownership of the infrastructure will pass to the Mongolian government. The deal gives Northern Railways up to five years to complete construction of the line, which will be built by China Railway Construction Corporation (CRCC) subsidiary China Railway 20th Bureau Group (CR20G).

Following the signing of the concession agreement, Northern Railways will need to meet a number of conditions within 18 months, including completion of EPC contract negotiations with CR20G; the conclusion of a bankable feasibility study by another CRCC subsidiary, China Railway First Survey and Design Institute group (FSDI); and arrange financing for the project.

A pre-feasibility study estimates the capital cost of construction will be around $US 1.2bn. The primary purpose of the railway will be to serve Aspire's Ovoot Coking Coal Project, which is expected to generate output of 5 million tonnes in its first year of operation. However, Aspire says the line will be open-access and other operators are expected to use the route.

Together with Russia's planned Kuragino - Kyzyl railway, the Erdenet - Ovoot will ultimately form part of a new corridor for China - Russia freight traffic via the Mongolian capital Ulaanbaatar. The development of the so-called Tri-lateral Economic Corridor is being supported through an international agreement signed by the presidents of the three countries last month, which aims to facilitate increased trade between Europe and Asia.

Northern Railways has recently launched a scoping study for a 180km extension from Ovoot to Kyzyl, which will complete the planned corridor. The study is due to be completed in the fourth quarter of this year.

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