Aspire Mining signs up Russian customers for Ovoot coking coal(0)
Aspire Mining’s (ASX: AKM) Ovoot Coking Coal Project in Mongolia continues to draw interest with two non-binding Memoranda of Understanding signed with large Russian buyers for up to 1.3 million tonnes per annum of coking coal.
This brings its total coking coal MoUs to 6.9Mtpa, well above the 5Mtpa capacity under its low capital development option.
Separately, the company has signed a non-binding Memorandum of Understanding to transport up to 2Mtpa of Ovoot coking coal through Russian Federation rail systems and reloading of coal at Russian Far East coast at competitive tariffs.
This follows its reaching agreements in September to access port capacity in the Black Sea and Russia’s Far East.
“We are very pleased with the initial interest received in Ovoot coking coal, given the relatively short time that preliminary marketing of the coal has been undertaken,” managing director David Paull said.
“We are pleased that we have been able to also now generate buying interest in Russia which has a significant steel making industry and where Ovoot Project coking coal compliments product offerings from established Russian coal miners. We have also been successful at expanding rail and port capacity through Russia to other markets.”
Russian End Users
The MoUs with the large Russian coking coal end users cover an initial commitment to potentially purchase up to 1.3 million tonnes per annum of coking coal, over a minimum period of five years.
Additional interest received from other Russian and Eastern European users indicates that Ovoot Coking Coal will have a significant customer base in the blast and foundry furnace steel making industries outside of China.
Russia is a key market for Ovoot Project coking coal given its proximity and relatively lower transfer and logistics costs in delivering coal to markets.
The Ovoot Project coking coal’s superior blending properties, which is classified as a ‘Fat Coking Coal – an in demand blending feedstock for coke plants in Russia, compliments many coals from Russia’s ageing Kuzbass Basin where fluidity and caking properties are declining due to the increasing depth of mining.
This interest follows 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.
The investment into infrastructure will allow the transport of oil and gas from Russia into the Chinese market, the delivery of Mongolian coal, iron ore and other commodities into China, as well as the delivery of Chinese and Mongolian exports into Russia and through Russia to Eastern European markets.
Russia is an important transit country for Aspire with the agreement to access 2Mtpa of rail and port capacity through the Russian Far East coast at competitive tariffs highlighting this.
Previous agreements had included a port access agreement with the operator of Taman Port at the Black Sea, which has generated additional interest from users, particularly in Eastern Europe, as well as a similar agreement with a terminal operator of the Nakhodka Port on Russia’s Far East coast for exports to north Asian markets.
These are all key parts in its strategy to geographically diversify the customer base for the Ovoot Coking Coal Project.
Ovoot Coking Coal Project
Aspire has progressed the Ovoot Coking Coal Project in recent months with:
- Signing port access agreements to penetrate the lucrative European markets and expanding its access to North Asian markets;
In addition, the operating environment in Mongolia has changed dramatically in November with the Government passing new legislation that makes Mongolia a far more attractive business destination.
This has been achieved by introducing incentives and increasing the confidence for investors to commit to projects or move existing projects into construction and production phases.
For Aspire, the company looks likely to meet criteria for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.
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 a 100% interest in the Ovoot Coking Coal Project in northern Mongolia.
While still at an early stage, the MoUs signed with Russian end users for up to 1.3 million tonnes per annum of coking coal demonstrates the strong interest in Aspire Mining’s Ovoot Coking Coal project and is value accretive.
The interest is due to its location between key markets as well as the superior blending properties of its coking coal, which is ranked as one of the highest quality in the world. Aspire is building significant development momentum at Ovoot and we expect this to continue with key milestones ahead.
Adding that to Mongolia’s new business friendly legislation, lower capital costs for an initial development and set financing options in place, this is another plank in place for development of Ovoot.
Chinese firms want to buy coal assets overseas, but on the cheap(0)
* Beijing’s new environmental policies to boost demand for high-grade coal
* Companies wait for valuations to fall, see coal prices staying weak
* Tough to wean away China from coal, say consultants
By Sonali Paul
MELBOURNE, Dec 2 (Reuters) – Chinese companies are on the hunt to buy overseas coal mines as Beijing’s switch to cleaner fuels stokes demand for higher-quality coal produced in countries such as Australia, according to people familiar with the firms’ strategies.
A renewed appetite for acquisitions by the world’s biggest coal consumer will be a big boost for miners who are trying to dispose of assets worth billions of dollars to boost shareholder returns.
These include Rio Tinto, which has put Australian and Mozambique coal operations on the block, and Linc Energy , which is selling its New Emerald Coal business.
The Chinese, however, are not rushing to buy. They see asset values coming under further pressure as coal prices remain depressed amid a supply glut that has already driven prices down about a third since 2011.
“We have clients who are interested in taking stakes in coal assets. But the view is the market’s not going to get any better for two years. So why buy something today when it’s going to be a lot cheaper in eight months’ time,” said Sam Farrands, a Hong Kong-based partner at law firm Minter Ellison.
Plans to curb air pollution have raised the prospect of a long-term decline in China’s need for thermal coal, with Beijing aiming to reduce coal’s share of the energy mix to 65 percent or less by 2017 from 73 percent this year.
The lower share, though, will be within an expanding base and it will take a long time to wean China away from coal as it is the cheapest source of fuel for power.
As part of cleaner energy policies announced this week, China will push the use of better quality coal.
This will lead to a split in coal markets, with high-energy coal set to attract a greater premium, which could favour better quality Australian coal, said Michael Elliott, global head of mining and metals at Ernst & Young.
China’s thermal coal imports are forecast to rise 17 percent over five years to 281 million tonnes, and metallurgical coal imports by 23 percent to 107 million tonnes in 2018, according to Australia’s Bureau of Resources and Energy Economics.
“I don’t think (coal use) is going to fall off a cliff. It’s not possible yet,” said Ken Su, Chinametals and mining leader at consultants PwC in Beijing.
Chinese firms hunting for buys include state-owned enterprises, miners, power firms and traders, targeting thermal coal for power stations and coking coal for steel mills, legal and financial advisers in China and Australia said.
Though they declined to name their clients, state-owned Shenhua Group Corp Ltd has looked at assets in Australia, including Whitehaven Coal and Rio Tinto’s stakes in the Clermont Coal mine and Coal & Allied.
Yanzhou Coal Mining Co has already set the ball rolling, seeking to buy out its Australian unit Yancoal Australia, following a one-third slide in Yancoal’s share price this year. The deal, announced in July, still needs Australian government approval.
Aluminum Corp of China (Chalco) has long eyed coal assets in Mongolia, though it ended up dropping a $926 million bid for SouthGobi Resources last year due to political opposition there.
“There’s probably been a pullback in looking at Mongolia after that. Everywhere else is still in the game,” said PwC’s Su, referring to Chinese appetite for coal assets.
Chinese buyers would prefer to pick up operating mines rather than projects, as that removes the risks of developing a mine from scratch, said Ernst & Young’s Elliott.
Operating assets up for sale include a minority stake in Rio Tinto’s Coal & Allied assets, potentially worth around $1.7 billion, and Peabody Energy’s $500 million Wilkie Creek mine in Australia.
Linc Energy wants to spin off its New Emerald Coal arm, which was recently valued at A$440 million ($400 million), including the mothballed Blair Athol mine.
Several undeveloped projects are on the block, including Brazilian giant Vale’s Degulla project in Australia’s untapped Galilee Basin and a minority stake in its Belvedere metallurgical project in Australia.
“There definitely is Chinese appetite for coal assets,” Andrew Lawson, managing director of Cockatoo Coal Ltd, told Reuters last month after lining up funds from three Asian firms for a coal expansion. “That’s the main area we would expect to see demand come from.”
Newera Resources eyes large coking coal deposit in Mongolia(0)
Newera Resources (ASX: NRU) should trade higher alot after revealing results from a mini-sosie seismic survey conducted over sections of its Ulaan Tolgoi coking coal joint venture in Mongolia which indicate it could have a significant deposit on its hands.
While early days, consulting seismic geophysicists, Logantek, identified multiple, flat lying, gently folded seismic reflectors within a 150 to 200 metre thick interpreted P2 late permian strata, considered to have high coal-bearing potential.
Notably, the reflectors are considered consistent with seismic reflectors from previous substantial coal discoveries in the South Gobi basin.
South Gobi basin deposits often contain large tonnages of coking coal, such as the nearby 6 billion tonne Tavan Tolgoi coking coal mine, providing encouragement that significant, undiscovered coking coal deposits may lie in the basin under thin cover.
Given the interpretive results of the seismic survey within Ulaan Tolgoi, Newera has every chance of discovering the next significant deposit in the region.
Logantek and Nordic Geological Solutions have outlined initial drill hole collar locations designed to test the interpreted coal reflectors in a drilling program to commence in early 2014.
In addition, Newera has entered into a series of convertible loans with various parties for a total value of $500,000, which includes a first right of refusalfor Cygnet Capital to manage a future capital raising which is likely by mid 2014.
The various loan agreements, which have been finalised, will be converted to convertible notes at $0.004 per Newera share or 80% of the subscription price of the anticipated capital raising.
Newera looks as if it could be sitting on a significant coking coal deposit, and Cygnet’s eagerness to manage the future capital raising is indicative of the obvious potential.
Newera Resources in halt, pending seismic survey results at Ulaan Tolgoi Project in Mongolia(0)
Recently, a preliminary modelled image of an Exploration Licence known as the Ulaan Tolgoi coal project in the South Gobi region of Mongolia indicated a potential strike of over two kilometres.
Newera entered into an MOU towards completing a formal Joint Venture agreement covering the project, 100 kilometres from the Chinese border.
In terms of location for coal, it doesn’t get much better than where the project is located; the South Gobi province of Mongolia is known as the epicentre of discoveries of coking coal and high energy thermal coal within southern Mongolia.
The Ulaan Tolgoi Licence is a large licence covering 43,000 hectares in area.
Modun Resources study returns US$11.50/t cost at Nuurst coal project(0)
The study by Absolute Mining has identified the potential for a 136.9 million tonne mine producing up to 4.9Mt of raw coal per annum and 500,000 tonnes of dried coal briquettes by year 4.
This will have a mine life of about 30 years while the low production costs reflect the low overall mining ROM strip ratio of 2.4:1.
“The results from the Mongolian feasibility study provides further confidence in the viability of developing the Nuurst Coal Project into a low cost producing mine,” managing director Rick Dalton said.
“This study will also be used as a basis for completing the more detailed feasibility work required to secure financing for the development of the Project.”
The Mongolian Feasibility Study was submitted to the Mineral Resources Authority of Mongolia (MRAM) for review prior to MRAM mining permit applications to commence mining.
Modun is also working through the requirements to produce an internationally recognised Bankable Feasibility Report, subject to raising appropriate finance.
Key to the success of the Nuurst Project is its strategic location just 6 kilometres away from existing railway infrastructure.
Other major infrastructure in the vicinity includes a 35kV power supply within 6 kilometres of the project, and a 220kV powerline runs around 22 kilometres from the licence boundary.
Nuurst has a JORC Resource of 478Mt and is located 120 kilometres south of the Mongolian capital, Ulaanbaatar, and 600 kilometres by rail from the Chinese border.
Notably, the company had last month received a strong endorsement from the Mongolian government, which signed a Memorandum of Understanding to buy coal briquettes from the project.
The briquettes will provide a higher energy coal supply to meet Mongolian power generation demand that will also reduce pollution.
Mongolia had paid about US$130 per tonne for semi-coking briquettes last year.
The country currently has 865 megawatts of power generation capacity in Ulaanbaatar and forecasts point to a further 300MW required in 10 years.
Modun continues to progress its Nuurst thermal coal project towards development with the Mongolian Feasibility Study highlighting the low US$11.50 per tonne cost to produce raw coal which would provide a significant operating profit margin even at current thermal coal prices.
Besides representing a key step in securing its mining permits, the study also provides the basis for a Bankable Feasibility Study that will allow the company to secure financing for the project.
To top it off, Nuurst has many advantages over other coal projects in the country, including proximity to infrastructure and an agreement to supply coal briquettes to the Mongolian Government.
Mongolia’s recent adoption of foreign investment friendly legislation should also open the door for financing by introducing incentives and increasing the confidence for investors to commit to projects or move existing projects into construction and production phases.
These include protection from future tax changes that might negatively impact projects; the formation of a specially appointed Council of non-salaried members; relaxation of the percentage of foreign workforce employed; and provisions protecting against nationalisation of investors’ assets.
In summary, Modun has ticked off a large number of boxes required for development and toward gaining project financing at Nuurst including:
- It would provide regular coal supply to existing power stations to tap increased power demand
With this, Proactive Investors believes Modun Resources is still flying under the radar for most investors and that there is considerable room for the company’s shares to grow beyond $0.006 and its market cap of $5.48 million. There are significant milestones and catalysts ahead.
Aspire Mining poised to benefit: “Mongolia open for business”(0)
The net result is that it should enhance perceptions of foreign companies doing business in the country.
The new Mongolian Investment Legislation achieves this by providing the political and legal stability as well as clarity that investors have been looking for.
In addition, with effect from 1 November 2013, foreign investors will not be distinguished from Mongolian nationals, removing previous requirements for government or parliamentary approval.
It also proactively provides additional investment incentives that are expected to further improve sentiment towards Mongolian related investments.
This gives company’s the confidence to progress their projects from development into construction and production phases.
Mongolia had recently approved a full repeal of the Strategic Entity Foreign Investment Legislation (SEFIL), implemented in May 2012 to protect its minerals, rail infrastructure, telecommunications, media and defence sectors.
This resulted in increased political and legal uncertainty and is linked to a 17% drop in foreign direct investment during 2012 and a further 47% during January – August 2013.
Mongolian President Ts Elbegdorj publically confirmed in December 2012 that implementation of SEFIL “made Mongolia’s investment environment unfavourable”.
The new legislation was enacted on 4 October 2013 with the full bipartisan support by both the Government and the opposition.
New Investment Law
Provided an investor is not 50% or more owned by a foreign government, there are no restrictions on the level of investment.
It also includes provisions to ensure that any future changes must have 66% or more votes in favour by Parliament and has the support of both the major political parties.
The new law also provides the following:
- Tax stabilisation through a Stabilisation Certificate granted to eligible investors upon application which cannot be changed by future legislation unless those changes benefit the investor;
The introduction of a tax Stabilisation Certificate means that investors which meet the criteria will have the current set of rates applied to corporate income tax, customs duties, VAT, and royalty frozen over a period.
Within the “stabilisation period”, these rates cannot be amended by the implementation of future laws unless the amendment benefits the investor.
Criteria must be met upon application for a tax Stabilisation Certificate, one of which is the investment amount to new and existing projects.
Projects that commenced within 5 years of enactment of the new Investment Law, and meet the requirements, will be eligible for tax stabilisation benefits.
Alternatively, an investor who proposes investment of 500 billion Mongolian Tughrik (A$313 million) or greater, has the option of entering into an Investment Agreement with the Government which not only stabilises taxes but also stabilises the operational environment.
The period of the Investment Agreement is similar to that of the Stabilisation Certificate.
For development of rail and mine infrastructure, Aspire would likely meet the criteria applicable for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.
Impact on Sentiment
The new law has resulted in a shift in recent media coverage from negative to positive headlines.
Khan Investment Management, a Mongolian investment fund, noted the new law is a clear sign the country is on the cusp of a significant and sustained recovery.
This would also be positive for companies such as: Aspire Mining, Mongolian Mining Corp (HKG:0975), Modun Resources(ASX:MOU), Centerra Gold (TSE:CG), Prophecy Coal (CVE:PCY), FeOre Ltd (ASX: FEO), SouthGobi Resources (TSE: SGQ, HKG:1878) and Wolf Petroleum (ASX: WOF) which have each received various approvals from the Government within this time.
The new legislation makes Mongolia a far more attractive business destination by introducing incentives and increasing the confidence for investors to commit to projects or move existing projects into construction and production phases.
Significantly, for Aspire, it looks likely to meet criteria for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.
As importantly, the changes are far wider in their scope as they positively impact market sentiment toward companies operating in Mongolia like Aspire, whose Ovoot project ranks as Mongolia’s second largest coking coal reserve and one of the higest quality coking coals in the world.
Sentiment is all important in investment markets and previously the market perceptions were not tuned optimally toward Mongolia. Proactive Investors believes it has held back market valuations of companies operating in Mongolia and we expect a gradual re-rating of the Aspire Mining share price to be not far away as the reverberations of “Mongolia is open for business” – filter through.
Mongolian coal mine resumes operations(0)
Suspended since July 2012, the Ulaan Ovoo thermal coal project in northeastern Mongolia is up and running again.
Prophecy Coal TSX:PCY, the Canadian company that owns the mine, announced on November 1 that it has re-hired all the required staff and that with a fleet of excavators and dump trucks, production should reach up to 50,000 tonnes per month until the end of the year.
The $55-million project was temporarily suspended last year because the stockpile of coal was enough to meet the company’s contractual obligations for the year. Following the suspension, the company said it was in active discussions with potential customers to increase sales.
Earlier this month, the company announced a sales contract with a new customer for 30,000 tonnes of coal. The first shipment is planned for November.
Ulaan Ovoo is located 17 kilometres from the Russian border and 120 kilometres from Mongolian and Russian rail links. Customers include both Russian and Mongolian companies, as well as the Mongolian government-owned power plants.
Prophecy Coal gained nearly 17% on the Toronto exchange on November 4, trading at 11 cents per share.
China’s Shenhua Agrees to Buy 1 Billion Tons of Mongolian Coal(0)
Three companies that mine coal in Mongolia’s Tavan Tolgoi basin have agreed to export 1 billion tons of the fuel to China’s Shenhua Group Corp. in the next 20 years, said the chief executive officer of one of the suppliers.
Erdenes Tavan Tolgoi JSC, Mongolia Mining Corporation (975) and Tavantolgoi JSC signed the memorandum of understanding with Shenhua on October 25, Yaichil Batsuuri, CEO of state-owned Erdenes Tavan Tolgoi, said in an interview yesterday in Ulaanbaatar. The coal delivered by the three companies could generate about $50 billion at current prices, Batsuuri said.
The MOU would ensure a long-term buyer for the companies operating in the Tavan Tolgoi basin, which contains 6.4 billion tons of coal reserves. Shipping 1 billion tons of coal over 20 years would be an average of 50 million tons annually. That’s almost triple the 18 million tons that Batsuuri said he expected the three Mongolian companies to export this year.
Mongolia’s total coal exports fell to 11.38 million tons in the first nine months from 14.29 million tons a year earlier, according to the nation’s statistics bureau. The value of the coal exports dropped to $783.94 million from $1.43 billion a year earlier, according to the agency.
State-owned Erdenes TT may export 5 million tons of coal this year, Batsuuri said. The company doesn’t currently earn revenue from these shipments, which are going to Aluminum Corp. of China Ltd. (2600) to pay back a $250 million loan from 2011.
Batsuuri said 3 million tons of coal, valued at $170 million, needs to be delivered to Chalco to pay off the balance on the loan. He said he expects the debt to be paid in full by January or early February.
MMC exported 3.2 million tons of coal in the first half of 2013, according to an August statement by the company, citing data from the National Statistics Office. It accounted for 42 percent of Mongolia’s total coal exports in the period.
Shenhua, China’s biggest coal producer, also signed a separate MOU with the three companies and Mongolia’s state-owned railway company to build a freight line that will help deliveries to the Chinese border. Shipments of coal from the Tavan Tolgoi basin to the border have stalled this year amid complications with trucking companies, said Batsuuri.
To contact the editor responsible for this story: Andrew Hobbs at firstname.lastname@example.org
With Resolution Of Customs Dispute, Rio Crosses The Last Hurdle At Oyu Tolgoi(0)
October 24th, 2013
In a positive development for Rio Tinto (NYSE:RIO), customers of its copper output from the Oyu Tolgoi mine in Mongolia have resolved a months-long dispute with the Chinese customs authorities. This will allow Rio Tinto to finally start recording revenues for its sales from Oyu Tolgoi. Rio operates in Mongolia through its subsidiary Turquoise Hill Resources, in which the Mongolian government owns a 34% stake. 
The $6.2 billion Oyu Tolgoi project has been marred by many controversies and delays on account of a number of different factors. After overcoming various hurdles and objections from the Mongolian government and the Chinese authorities, there are signs that the project will now stabilize.
Since the production from Oyu Tolgoi has been substantial this year, Rio is expected to report record revenues from the copper business in the fourth quarter. The company said that production and shipment rates are likely to be aligned by the end of 2013.
We have a Trefis price estimate for Rio of $55, which represents 5% upside to the current market price.
Many Ups and Downs At Oyu Tolgoi
Rio’s Oyu Tolgoi project has been marred by delays and controversies throughout. The Mongolian authorities initially sought to renegotiate specific clauses of the contract, much after they had been agreed upon. With a change in the political regime, the new legislators who had made resource nationalism a key poll plank, pressured the government to seek more royalties from Rio as well as a higher equity stake for the government. However, Rio held out in face of a deadlock and was eventually able to thwart these initiatives. 
Next, putting in place a power supply agreement with China proved quite difficult. Without this agreement, Rio would have had to spend additional time and money to establish its own power generation capabilities. This would have led to cost escalation and delays, as there is an absence of any alternative power supply in the region. The Chinese were unhappy with the Mongolian government for thwarting an attempt by Chalco, a Chinese firm, to acquire a large coal mine in Mongolia. This may have made negotiations more difficult because the Mongolian government has a significant stake in Oyu Tolgoi and would have played a part in the final agreement. 
First Shipment Took Place In July
After the power supply agreement was put in place, Rio started producing copper a few months later. Its first shipment was delayed by about 20 days due to some pending issues with the Mongolian government. The first shipment from the mine was finally made in July this year, but in absence of customs clearance at the Chinese border, the metal had to be stored at a warehouse in China near the Mongolia-China border. The documentation issues at the border took a long time to resolve and all further shipments had to be stored in the warehouse, pending resolution. Rio was unable to record sales revenues on its books in this duration because it is permitted to do so only once the customer has received the shipment. 
Rio has produced approximately 160,000 tonnes of copper concentrate from Oyu Tolgoi and shipped 38,000 tonnes to the warehouse since July. At full production levels, the average annual production is expected to be 450,000 tonnes of copper and 330,000 ounces of gold. ((Rio Tinto’s Oyu Tolgoi Customers Get Chinese Customs Approval For Copper, WSJ))
For 2013, Rio expects a company-wide production figure of 590,000 tonnes for mined copper and 270,000 tonnes for refined copper. ((Third quarter 2013 operations review, Rio Tinto Media Release))
Aspire Mining’s shares jump 48%(0)
October 23, 2013
The company said it was not aware of any reason for the sudden investor interest.
However, it noted that there maybe an improvement in investor sentiment towards Mongolia associated with Turquoise Hill Resources (TSE: TRQ), the owner of the Oyu Tolgoi Copper-Gold Project, announcing on 21 October 2013 that it had started concentrate sales from Mongolia to Chinese customers.
Aspire had in September highlighted potential capital expenditure savings for the Northern Railways Erdenet to Ovoot rail project that is key to commercialising its Ovoot Coking Coal Project in Mongolia.
The report also confirmed the project is viable from an engineering and railway operational aspect.
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