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Erdenet to ovoot railway determined to be feasible

Coal News - Published on Wed, 11 Jan 2017

Image Source: World Coal
Mongolian metallurgical coal explorer and infrastructure company, Aspire Mining Limited, has, through its rail subsidiary, Northern Railways LLC, received the First Stage Feasibility Study from China Railway First Survey and Design Institute Group Co Ltd for the Erdenet to Ovoot Railway in Mongolia. FSDI is a subsidiary of China Railways Construction Corporation and is the nominated rail engineer for the rail project under the Concession granted to NR by the Government of Mongolia.

First Stage Feasibility Study received from China Railway First Survey and Design Institute Group Co Ltd and concludes that the Erdenet to Ovoot Railway:
- is financially feasible.
- is consistent with Mongolia’s mineral resource development strategy to be supported by growth in rail infrastructure.
- will play a significant role in the promotion of regional and social development.
- is necessary and is recommended to be implemented as soon as possible.

Capital cost to construct the Railway estimated at US$1.25bn plus contingency for 20 Mtpa capacity single line at current exchange rates.

- compares with 2013 Pre-Feasibility capital cost estimate of
US$1.2bn for 12 Mtpa line.
- First Stage Feasibility Study includes:
- Two locomotive service depots as well as insurance and service costs not included in the Pre- Feasibility scope.
- The provision for a number of tunnels, some of which may not be necessary after Final Feasibility Study completed.

Freight volume forecasts do not include transit freight from Russia and China – Europe container shipments.

In August 2015, Northern Railways was granted an exclusive 30 year concession by the Mongolian Government to build and operate the Erdenet to Ovoot Railway.

The Study commenced in September 2016 and provides an interim review of the Erdenet to Ovoot Railway including sufficient design engineering to provide a +\- 10% capital estimate, a construction schedule, a bill of quantities and financial analysis including the capital and operating cost estimates.

The Study was prepared in Mandarin and translated into English. The capital and operating costs were prepared by FSDI in Renminbi and converted by the Company to USD at the current exchange rate of 7
Renminbi:US$1.

The Study noted specifically that planned capacity upgrades to UBTZ’s Erdenet to Salkhit line and the Trans-Mongolian Railway will be needed to cope with the increased freight volume from the Erdenet to Ovoot Railway of up to an additional 20 mtpa over the long term. The freight forecast for the Erdenet to Ovoot Railway does not include additional freight volumes from Russia’s Elegest Coking Coal Basin or trans-Eurasian trade as the feasibility of rail links into Russia will need to be the subject of future feasibility studies. This is recognised as a future upside to freight volumes for the Erdenet to Ovoot Railway.

NR now has the opportunity to continue its review of the Study prior to commitment to the Final Stage Feasibility Study where significant additional engineering and design will be conducted in order to provide a bankable capital estimate and the basis for the turnkey engineering, procurement and construction contract (EPC Contract) negotiation. The Final Stage Feasibility Study will take around 6 months to complete from commissioning.

The Study will be used by China Development Bank and other Chinese policy banks in assessing an investment in the Erdenet to Ovoot Railway.

Funding for the Final Stage Feasibility Study is being sought, as is an extension of the time within which to complete the Concession Agreement Conditions Precedent (which include completion of the Feasibility Study). Discussions with the Government of Mongolia on the Concession Agreement Conditions Precedent time extension are progressing well and the Company believes that it will be agreed by the end of January 2017.

Source :

Posted By : Rabi Wangkhem on Wed, 11 Jan 2017
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