Aspire Mining subsidiary, Northern Railways, and China Gezhouba Group Company (CGGC) signed a MoU to complete the second stage of the bankable feasibility study for the Erdenet – Ovoot railway line.
Under the contract, the study will be completed by March 2018 and, in return, Northern Railways has agreed to seek to include CGGC along with China Railways Construction Bureau 20 Group to jointly work on the design, procurement and construction of the project. If CGGC is not included in the design, procurement and construction of the rail project, NR has agreed to compensate CGGC for the work performed on the feasibility study.
The MoU also sets out a pathway for the development of the Erdenet – Ovoot project as well as the potential extension of the line from Ovoot through to the Mongolian/Russian border. To this end, CGGC will assist Northern Railways to seek investors to fund the Northern Rail Corridor, will support NR efforts to extend the corridor to eventually connect to Russia at the Arts Suuri border and will assist Aspire source investment to fund the development of the Ovoot Coking Coal Project.
The MoU also provides the framework by which CGGC can provide additional equity investment in Northern Railways in order to fund the company through to meeting the outstanding conditions precedent for the Erdenet –Ovoot Rail concession and for EPC funding, with such additional equity investment proposed to be made on or before 15 February 2018.
If CGGC will provide such funding to Northern Railways, the MoU stipulates that CGGC would acquire a 51% equity interest in Northern Railways during this predevelopment stage. CGGC’s equity interest in Northern Railways post EPC funding would be expected to dilute below 50% once the project moves into the development phase as a result of the significant new investment required to fund the development of the project.
The 547 km Erdenet – Ovoot line will be Russian gauge rail compatible with the existing Mongolian rail network and is part of Northern Rail Corridor.
The first phase of the feasibility study, completed at the end of 2016, proves the technical and economic reliability of the project. The railway line will have a capacity of over 30 million tonnes in both directions, ensuring not just the transport of coal, but being available also for the transport of bulk cargo, agricultural products, as well as for passenger transport.
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