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Mongolia Embraces China With Compatible Rail to Cut Costs Mongolia Embraces China With Compatible Rail to Cut Costs(0)

Mongolia’s parliament adopted for the first time a rail gauge compatible with China, to ease transport of its second-biggest export, coal, to its largest customer.

The landlocked nation’s 1900-kilometer (1,200 mile) rail network was built with help from the Soviet Union in the last century, as Mongolia looked westward for markets and political support. Constructing the 240-kilometer railway from the Tavan Tolgoi coal basin using China’s standard gauge will save on transportation costs, and helps draw a line under Mongolia’s historical mistrust of its southern neighbor, now the world’s largest energy consumer.

The Chinese gauge was adopted for two routes to the border with 84 percent of votes in favor, according to the parliament’s website. The passage follows years of discussion.

Winners from the change will include the operator of projects at Tavan Tolgoi, Mongolia’s largest coal deposit with 6.4 billion metric tons of reserves, including Hong Kong-listed Mongolian Mining Corp. and state-owned Erdenes Tavan Tolgoi JSC.

Track Contract

South Korea’s Samsung C&T Corp. was awarded a $483 million contract in May 2013 to build the tracks. Securing power and building signaling and maintenance depots will increase the costs of the project to $820 million.

Using standard gauge rail instead of the broad gauge used elsewhere in the country will reduce the cost of transporting coal to China by $2 a ton to $4 a ton, Zorig said. Broad gauge adds costs because of the need to unload and reload coal before it reaches China, he said.

Imperial Russia adopted a gauge of 1,524 millimeters in 1842 for military purposes, as a way to slow down an invasion by rail. The gauge was built across the Soviet Union and many of its allies, including Mongolia. Standard gauge, used in China, is 85 millimeters narrower.

To contact the reporter on this story: Michael Kohn in Ulaanbaatar at mkohn5@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Iain Wilson

Mongolia Embraces China With Compatible Rail to Cut Costs Mongolia Embraces China With Compatible Rail to Cut Costs(0)

Mongolia’s parliament adopted for the first time a rail gauge compatible with China, to ease transport of its second-biggest export, coal, to its largest customer.

The landlocked nation’s 1900-kilometer (1,200 mile) rail network was built with help from the Soviet Union in the last century, as Mongolia looked westward for markets and political support. Constructing the 240-kilometer railway from the Tavan Tolgoi coal basin using China’s standard gauge will save on transportation costs, and helps draw a line under Mongolia’s historical mistrust of its southern neighbor, now the world’s largest energy consumer.

The Chinese gauge was adopted for two routes to the border with 84 percent of votes in favor, according to the parliament’s website. The passage follows years of discussion.

“With this debate now put to rest, investors are likely feeling a sense of relief,” Chris MacDougall, managing director of Ulaanbaatar-based Mongolia Investment Business Group, said in an e-mail.

Winners from the change will include the operator of projects at Tavan Tolgoi, Mongolia’s largest coal deposit with 6.4 billion metric tons of reserves, including Hong Kong-listed Mongolian Mining Corp. and state-owned Erdenes Tavan Tolgoi JSC.

Track Contract

South Korea’s Samsung C&T Corp. was awarded a $483 million contract in May 2013 to build the tracks. Securing power and building signaling and maintenance depots will increase the costs of the project to $820 million.

In May, Mongolia Railway, the state-owned company overseeing the line, said construction was slated for completion in late 2016, according to Zorig Alimaa, the head of the project department at the time.

Using standard gauge rail instead of the broad gauge used elsewhere in the country will reduce the cost of transporting coal to China by $2 a ton to $4 a ton, Zorig said. Broad gauge adds costs because of the need to unload and reload coal before it reaches China, he said.

Imperial Russia adopted a gauge of 1,524 millimeters in 1842 for military purposes, as a way to slow down an invasion by rail. The gauge was built across the Soviet Union and many of its allies, including Mongolia. Standard gauge, used in China, is 85 millimeters narrower.

In April, a consortium of four companies established the Gashuunsuukhait Railway joint venture, which is planning to build and operate an 18-kilometer standard gauge railway to straddle the Chinese-Mongolian frontier. The 240-kilometer railway from Tavan Tolgoi will connect with this trans-border line. The shorter line didn’t require parliamentary approval.

To contact the reporter on this story: Michael Kohn in Ulaanbaatar atmkohn5@bloomberg.net

To contact the editors responsible for this story: Jason Rogers atjrogers73@bloomberg.net Iain Wilson

Mongolia Has To Change Its Railroads To Account For An 85 Millimeter Difference In Track Spacing Mongolia Has To Change Its Railroads To Account For An 85 Millimeter Difference In Track Spacing(0)

The planned extension of a trans-border railway in Mongolia will make it faster and cheaper to ship coal to China.

Currently, most coal from Mongolian mines is transported to the Chinese border by trucks on paved roads. The railroad would be a less costly shipping method, but until now, a tiny difference in the spacing of rails has made this a less viable option.

Mongolia and China use two different rail gauges. Mongolia’s 1,520 millimeter broad gauge dates back the Soviet-era. China uses the slightly smaller 1,435 millimeter standard gauge, 85 millimeters narrower than the rail gauge used in Mongolia.

Mongolia has long resisted moving to the standard smaller gauge — which would remove the time-intensive process of changing wheels — partly as an effort to keep its “powerful neighbor at arm’s length amid fears about China’s political and economic hegemony in the region,” Reuters noted.

Last year, for example, Mongolian officials said a new railroad tracks stretching from the country’s biggest coal field, Tavan Tolgoi, to the Chinese border would be built using Russia’s wider broad gauge instead of China’s standard gauge, even though using the broad gauge would increase transport costs.

Using the broad gauge rail will cost $3 more per ton of coal than the standard gauge, but “the overall cost of exporting coal by rail will [still] be 60 percent, or $14 per ton, lower than the current method of exporting by truck,” Bloomberg writes.

In an interview with Bloomberg, Dale Choi, founder of Ulaanbaatar-based Independent Mongolian Metals and Mining Research, suggested that Mongolia’s decision to stick with the broad gauge was related to issues of national security.

“The business community would have preferred the standard gauge,” Choi told Bloomberg last May. “I guess the geo-political consideration is much more important to authorities.”

Mongolia was under Chinese rule from 1691 to 1911 and the two countries share a large border. Although the BBC notes that both nations have “managed to overcome historical tensions” while strengthening their business relationship, fears about China’s economic dominance in the region do not seem to have completely dissipated.

In April, it was announced that a separate railway linking Mongolia to China would be built using China’s smaller rail gauge, according to Reuters.

Khaltmaa Battulga, chairman of the Mongolian Democratic Union, an opposition party, publicly denounced the project. According to Business News Europe, Battulga said on a TV show in June that, “Tanks can easily penetrate into Mongolia in no time if we build a railway with a [narrower] gauge track, the same used in China.”

Business News Europe explains:

This minor detail represents a huge technical barrier between the two countries, since each train crossing the border is forced to make long stops to change the wheels. But while Mongolia’s growing army of mining companies consider it a logistics bottleneck, Mongolians themselves see it as a matter of national sovereignty – a necessary shield protecting their sparsely populated homeland and its vast mineral resources from the ever-present “Chinese threat.”

According to the report, Mongolian president Tsakhiagiin Elbegdorj was critical of Battulga’s comments, as it jeopardized Mongolia’s efforts to improve its economic partnership with China.

Meanwhile, the Mongolian Ministry of Roads and Transportation and JSC Russian Railways agreed in September to extend the main trans-Mongolian railway to increase trade between Russia and China.

Here’s a map of the proposed updated rail system:

Aspire MiningThe Mongolian Rail system with planned upgrades and extensions. The extension to Russia in the north is highlighted in blue in blue and the rail to China in the south is in yellow.

China signed an agreement of establishing railway company with Mongolia China signed an agreement of establishing railway company with Mongolia(0)

On April 7th China and Mongolia signed an agreement of establishing a joint venture railway company.

According to the agreement, the 2 countries will build a railway from Gashuun Sukhait to Ganqimaodao port with length of 18 kilometers, which made it convenient for China to import coal from the world’s largest unmined Tavan Tolgoi mine.

Source – www.steelhome.cn/en China steel information centre and industry database

(www. www.logisticguru.in)

Aspire Mining’s Ovoot on the express line with rail funding EOI’s in Mongolia Aspire Mining’s Ovoot on the express line with rail funding EOI’s in Mongolia(0)

Aspire Mining’s (ASX: AKM) Ovoot Coking Coal Project could take a major step forward after it received several non-binding Expressions of Interest totalling US$1.3 billion for financing of the key Northern Rail Line in Mongolia.

Binding rail funding and grant of a rail concession would unlock the riches of the Ovoot project, which has coal quality comparable with the best in the world.

The US$1.3 billion in EOIs meets the capital expenditure estimate highlighted in the Rail Pre-Feasibility Study completed by SMEC International in April 2013.

This is interesting given that a follow-up report in September 2013 had identified potential capital expenditure savings by taking a more direct route further to the south for the proposed rail line.

The EOIs were sourced by Aspire from a number of financial institutions and the Noble Group as part of its ongoing discussions with the Government of Mongolia in relation to the grant of a rail concession.

While the EOIs are non-binding, they indicate a broad interest to fund the Northern Rail Line and the company intends to commence definitive financing negotiations immediately upon the grant of a rail concession.

Northern Rail Line

The proposed multi-use Northern Rail Line is a key requirement for commercialising the Ovoot project in the Khuvsgul province in northern Mongolia.

It is the focus of Northern Railways LLC, Aspire’s Mongolian infrastructure subsidiary which seeks to extend the Trans-Mongolian Railway from its current terminus at Erdenet through to Ovoot.

The Northern Rail Line will be multiuse, providing an alternative, cheaper and environmentally friendly transport solution for agricultural products, general freight, bulk materials and passengers.

Besides serving the Ovoot project, the Northern Rail Line will assist the sustainable long term growth of local industry and the economy through the creation of jobs, resource and small-medium business development, and export opportunities.

Aspire had in April 2013 received a Rail Pre-Feasibility Study Revision from SMEC International confirming that it could save US$200 million on the Northern Rail Line to US$1.3 billion by taking a more direct route further to the south.

It also highlighted the potential for further capital expenditure cost savings by de-rating haulage capacity from 22 million tonnes per annum to an initial starting capacity of between 10Mtpa and 12Mtpa.

A follow-up report in September confirmed the viability of the project from an engineering and railway operational aspect.

This also noted that some minor changes to the alignment would eliminate major river crossings and the associated bridges while taking the more direct southern route would allow Aspire to take advantage of widespread  sources of ballast.

Ovoot Coking Coal 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

There is strong momentum building for Aspire Mining’s Ovoot Coking Coal Project with the US$1.3 billion in non-binding Expressions of Interest representing a massive step towards progressing the Northern Rail Line that would link the project with the existing Trans-Mongolian Railway.

Ovoot has coal that ranks amongst the best in the world. This includes a superior blend carrying capacity that can add significant value to Tavan Tolgoi’s low and non-coking coals.

Coupled with the increased recognition from this week’s recognition as a key supplier of raw materials to the Mongolian Government owned Sainshand Park and confirmation that power is easily available to the project under its non-binding Letter of Intent with the coal-fired Zavkhan Power Plant, Aspire is clearly running at full steam for Ovoot.

Binding rail funding and grant of a rail concession would unlock the economic riches and returns of Ovoot and send the Aspire Mining valuation sky-bound.  The EOI’s are value accretive as they are with a number of financial institutions and the Noble Group.  With the new momentum is opportunity and we see potential share price upside to $0.07 – $0.075.

China’s Shenhua to invest in cross-border rail link from Mongolia China’s Shenhua to invest in cross-border rail link from Mongolia(0)

(Reuters) – Shenhua Group, China‘s top coal producer, will form a joint venture with partners in Mongolia to build a cross-border rail link that will help ship coal to China, the company confirmed on Wednesday.

The deal marks a change in attitude in Mongolia, which has long sought to keep its powerful neighbour at arm’s length amid fears about China’s political and economic hegemony in the region. China buys more than 90 percent of Mongolia’s exports and has sought big stakes in the country’s strategic assets.

A signing ceremony for the new rail joint venture was held in the Mongolian capital of Ulan Bator on Monday. A spokesperson for the Chinese company, the parent of listed Shenhua Energy Group, confirmed the deal to Reuters on Wednesday.

The spokesperson said the final share structure for the joint venture has not been decided.

A Mongolian government official, however, told Reuters the Chinese firm will own 49 percent of the project, which will involve the construction of a 13-kilometre rail link from the Chinese border to a terminal where coal is delivered by trucks.

Yondon Manlaibayar, the director general of the department of railways at the Roads and Transportation Ministry, said a consortium of Mongolian firms, including state-owned miner Erdenes Tavan Tolgoi and the Hong Kong-listed Mongolian Mining Corporation, would share the remaining 51 percent.

Mongolia plans to spend $5.2 billion on the expansion and upgrade of its railway network, and last year hired Samsung C&T to lead construction of a 217-kilometre route south from the Ukhaa Khudag mine in the South Gobi region towards China.

A route to China would reduce the cost of shipping coal to customers in China – now largely done by road – and would also improve Mongolia’s access to China’s ports.

But an additional 27 kilometres of rail connecting the Shenhua line and Samsung C&T’s line will be needed to complete the route. In the meantime, the temporary drop-off point will be established for trucks to deliver coal to the Shenhua joint venture rail to be carried into China, said Manlaibayar.

“They (the joint venture partners) don’t want to wait for us to complete the whole line,” said Manlaibayar.

Mongolian Prime Minister Norov Altankhuyag concluded a visit to China last October with an announcement that an agreement was made for the delivery of one billion tonnes of coal to Shenhua over the next 20 years.

The Shenhua joint venture project and the connecting 27 kilometres of line will be built using China’s rail gauge, while the rest of the line uses the Russian standard, said Manlaibayar. A station for gauge transference will be built where the Samsung-led rail line ends, he said.

Mongolia’s rail policy requires the use Russia’s wider gauge standard, but some in the industry worry about the added costs of having to change standards at the end of the Samsung line.

(Additional reporting by David Stanway in BEIJING; Editing by Tom Hogue)

Opportunities of the international container block train Mongolian Vector discussed in Lithuania Opportunities of the international container block train Mongolian Vector discussed in Lithuania(0)

During the meeting with the Mongolia’s delegation in Lithuania’s Ministry of Transport and Communications, the new opportunities of the international container block train Mongolian Vector were discussed. Lithuania suggested new branch line of one of the routes of the Mongolian Vector, informs LETA/ELTA.

The country suggested including the Klaipeda State Seaport in the route Ulan Bator-Moscow-Brest.

“I hope that Lithuania’s striving to connect the route of the train Mongolian Vector to our project Viking will be implemented,” said Deputy Minister of Transport and Communications Arijandas Sliupas.

Amarjargal Gansukh, Minister, Ministry of Road and Transportation of Mongolia, should conduct a visit to Lithuania on June 3. It is planned to sign the bilateral memorandum of the Lithuania-Mongolia cooperation in the transport sphere.

Lithuanian and Mongolian Foreign Ministries held the 4th political consultations on 28 March in Vilnius. The sides discussed issues of bilateral cooperation, relations between the European Union and Mongolia, partnership within the United Nations and other international organizations as well as regional issues, the Ministry of Foreign Affairs has informed.

The Lithuanian delegation was led by the Vice-Minister of Foreign Affairs of Lithuania Neris Germanas and the Mongolian delegation was headed by the Deputy Minister of Foreign Affairs of Mongolia Damba Gankhayag.

According to Germanas, the potential for bilateral economic cooperation has not yet been fully exploited. The officials shared their opinions on future actions in this area, discussed cooperation in the transport sector and the advancement of bilateral economic relations.

Lithuanian and Mongolian diplomats also discussed events in Russia, the situation in Ukraine and Crimea.

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