Aspire Mining finds path to European markets for Ovoot Coking Coal

Aspire Mining (ASX: AKM) has reached a port access agreement with the operator of Taman Port at the Black Sea, opening up the European market for its Ovoot Coking Coal Project in Mongolia.

Separately, it has also signed a non-binding Memorandum of Understanding signed with a terminal operator of the Nakhodka Port on Russia’s Far East coast for exports to north Asian markets.

“These non-binding MOU’s are important in outlining the Company’s strategy for geographically diversifying the customer base for the Ovoot Coking Coal Project,” managing director David Paull said.

“There is now an identified path for Ovoot Project coking coal from Northern Mongolia to penetrate European markets.

“The agreement with the Russian Coal Terminal operator along with the previously disclosed Noble Agreement now provides for sufficient volume and flexibility in meeting the Ovoot Project’s Far East Russian port needs in delivering coking coal into North Asia’s seaborne markets”.

Taman Port

The company has reached a non-binding MoU with OTECO, a Russian port capacity provider, to access a coal terminal, currently under construction at the Black Sea port of Taman, which is expected to be completed in 2015.

The Taman Port is designed to accommodate up to capesize bulk vessels – commonly used to transport coal, ore, and other commodity raw materials – that can travel to destinations either bordering the Black Sea or Europe.

This opens up the ability to deliver Ovoot Project coking coal to steel industries in Turkey, eastern and southern Europe.

The MoU term covers a period of five years commencing from the first delivery of coal, handling volumes up to two million tonnes per annum.

Taman Port is directly accessible by Russian Railways Trans-Siberian Railway from the Mongolian/Russian border town of Naushki.

Nakhodka Port

Aspire has also reached an agreement with a terminal operator in Russia’s Far East. This covers access to the Port of Nakhodka specifically but does not limit the provision of port services to this terminal alone.

The term of the MoU is for a period of 5 years commencing from first delivery of coal, handling volumes of up to 2 million tonnes per annum.

The Nakhodka Port non-binding agreement compliments a MoU entered into in January 2013 with Noble Group that provided a mechanism to access Noble’s recently acquired interest in a Russian Far East Port.

Accessing Russian Far East ports enables Ovoot Project coking coal access to north Asian markets including Japan, Korea, Taiwan, Vietnam and southern China.

Ovoot Coking Coal Project

The company had recently made a fundamental shift in its development strategy with the identification of a low capital development for the project by using contractors wherever possible for a 5 million tonne per annum initial project.

This has reduced initial capital requirements to US$144 million from the original US$459 million for the original 6Mtpa Stage 1 plan.

Financing has also received 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 to fund the wash plants and associated site works and engineering while a US$20 million working capital facility from Noble would be made available to the company.

Together, the new development plan and funding options remove a significant area of funding risk for its wholly-owned owned subsidiary Northern Railwaysand its proposed Erdenet to Ovoot Railway.

The company has also recently noted interest from potential customers to acquire Ovoot Project coking coal and had signed non-binding Memoranda of Understanding for coal sales for up to 5.5 million tonnes per annum, with significant additional interest from Russian, Chinese and Japanese customers.

Studies also found that coking coal from Ovoot had superior blend carrying capacity and could be blended with coal from the Government owned Tavan Tolgoi mine in southern Mongolia to upgrade the latter’s coking coal properties.

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.

Analysis

Aspire Mining is ringing in further markets for Ovoot Coking Coal Project, this time a deal to penetrate the lucrative European markets.

With the company having already reduced capital requirements and set financing options in place, it is likely to find faster favour from financiers for the remaining capital spend.

This is a building block for value accretion for Ovoot and for Aspire Mining.

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