Aspire Mining and its subsidiary Northern Railways LLC have entered into a binding Memorandum of Understanding (MOU) with China Gezhouba Group International Company Limited (CGGC) to advance the Erdenet-Ovoot Railway Project as part of the Northern Rail Corridor in Mongolia. Under the MOU, CGGC has agreed to complete the second and final stage of a bankable feasibility study by March 31, 2018.
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 this process, Northern Railways has agreed to compensate CGGC for the work performed on the feasibility study.
The MOU follows a non-binding agreement between the parties to cooperate on developing the Erdenet-Ovoot Railway announced on June 6, 2017.
The MOU also sets out a pathway for the development of the Erdenet to Ovoot Railway Project as well as the potential extension of that project from Ovoot through to the Mongolian/Russian border.
To this end, CGGC have expressed a willingness, on a best efforts basis, to assist Northern Railways to seek investors to fund the Northern Rail Corridor. It also intends to support Northern Railways’ efforts to extend the corridor to eventually connect to Russia at the Arts Suuri border and to assist Aspire source investment to fund 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 February 15, 2018.
The Erdenet-Ovoot Railway is a Public Private Partnership with the Mongolian Government. Northern Railways as the concessionaire has the right to build, operate and then transfer 100% ownership of the railway to the Mongolian Government. Under the concession agreement at least 30% of the sub-contract work needs to be allocated to Mongolian construction companies and suppliers.
The railway will be Russian gauge rail compatible with the existing Mongolian rail network managed by UBTZ. This railway is open access and available for bulk and container freight as well as potentially passenger services.
The establishment of the Erdenet-Ovoot Railway and the Northern Rail Corridor from 2023 onwards will add significant additional demand for rail capacity on the Trans Mongolian central line which will attract additional investment for its staged expansion plans.
Aspire’s managing director David Paull said, “Aspire is very pleased to be able to add a very large and experienced sponsor for the Erdenet to Ovoot Railway Project. Being able to attract a large and significant engineering and construction company such as Gezhouba provides clear affirmation of the importance and role of the Ovoot to Erdenet Railway in fulfilling Mongolia’s potential to become a transit corridor for China-Europe Trade.”