Northern Railways gets 30-year concession for Erdenet-Ovoot project in Mongolia

The cabinet of the Government of Mongolia (GOM) has granted approval to Aspire Mining’s subsidiary Northern Railways to build and operate the 547km Erdenet to Ovoot railway.

Mongolian metallurgical coal explorer and infrastructure company Aspire is said to be the largest coal tenement holder in the country’s Northern provinces.

The Mongolian Government’s Investment Agency has been authorised to execute the 30-year concession agreement with Northern Railways.

“The Mongolian Government’s Investment Agency has been authorised to execute the 30-year concession agreement with Northern Railways.”

As part of the agreement, 100% of the base railway structure is to be transferred to the GOM at the end of the concession term.

The rail project forms a crucial step in the establishment of an economic corridor through Mongolia, which was signed as part of a trilateral agreement by the presidents of China, Russia and Mongolia last month.

The project will extend Mongolia’s national rail network from Erdenet to Aspire’s Ovoot Coking Coal Project and represents the first stage of a new rail connection linking Mongolia to Russia.

The Ovoot Project is expected to produce 5Mtpa of coking coal initially and then increase production to up to 10Mtpa over a 21-year life of mine, based on a 255Mt JORC Compliance Probable Coal Reserve.

A prefeasibility study has already been carried out on the project with an estimated $1.2bn capital cost to construct.

Northern Railways will now work with China Railway Construction Corporation subsidiaries, China Railway 20 Bureau Group Corporation (CR20G) and China Railway First Survey & Design Institute (FSDI) to complete the bankable feasibility study and negotiate the EPC contract terms to be awarded to CR20G.

After the concession agreement is executed, Northern Railways will work to raise funding to build the base rail structure as well as negotiate other key agreements and permits prior to starting construction.

A scoping study is currently being conducted by Northern Railways for the planned railway extension from Ovoot to the Russian border that is approximately 180km north of Ovoot and further to the Russian town of Kyzyl.

The study is expected to be completed in this September quarter.