After resuming mining operations at Ulaan Ovoo Coal Project in early November 2013, Prophecy Coal Corp produced 66,869 tonnes of coal in the December quarter and sold 69,296 tonnes. The stockpile balance at the start of the quarter was 98,499 tonnes and at the end of the quarter it was 96,036 tonnes.
The company says it is pleased with coal production and sales volumes and earlier this month said that mining and road conditions to the Sukhbaatar rail siding were currently normal and coal was being sold on a continual basis to a number of Prophecy customers.
Earlier this year, the company sold and successfully delivered a coal shipment from Sukhbaatar to a Russian customer. The coal was approximately 5300kcal/kg GCV, 0.5% sulphur and 5% ash. Management recently visited a number of Russian coal end users with the goal of establishing continuous shipments to Russia in 2014.
In addition, the Mongolia Ministry of Road and Transportation recently issued the terms of reference for the Zeltura Road feasibility study. After the terms were issued, Prophecy started the feasibility study on upgrading the road from Ulaan Ovoo mine to Zeltura border.
Given that the mine is just 17km from the Zeltura border, as opposed to about 120km from the mine to Sukhbaatar, re-opening of the Zeltura border would reduce the transportation cost and potentially further increase coal sales to Russia. After the study is complete, which is targeted for May 2014, and if accepted by the Ministry of Road and Transportation, the road upgrade can begin and is expected to take up to four months based on preliminary tenders received.
Concurrently, the company is working with the Ministry of Finance on creating a customs clearing zone at Ulaan Ovoo for Russian exports. While the company is pleased with the overall progress and appreciates the support from the Mongolian and Russian authorities, it cannot offer certainty or a definitive time frame to start transporting coal through Zeltura.
Last July Prophecy applied for a concession with the Ministry of Economic Development (MOED) for the 600MW Chandgana mine mouth power project. Already with the power plant land use right, construction licence, and coal mining license, Chandgana is an advanced greenfield project designed to supply much needed electricity to a rapidly growing domestic Mongolia market.
After extensive document submissions and discussions, the Mongolian Cabinet approved Chandgana as a concession project in January 2014. Subject to negotiations, a concession project may be entitled to stable tax rates, favourable VAT and customs duties, as well as other forms of government subsidies, endorsement and support, all of which can enhance bankability and lead to better financing options for the project.