MONGOLIA'S Ministry of Economic Development has announced a tender for Prophecy Power Generation's Chandgana Power Plant project and the Baganuur to Underkhan to Choibalsan Overhead Transmission Lines project. The company is a subsidiary of Prophecy Coal, which has prepared the project's technical and financial proposals for submission to the Ministry.
Following submission, the Ministry will be responsible to conclude the concession agreement and coordinate the approval and signing of the power purchase agreement, tariff agreement and other material agreements necessary to implement the power plant project.
Prophecy is also continuing to actively consider project financing options which include either debt, equity or a combination thereof in addition to joint ventures with international power project developers.
Earlier this year Prophecy filed a revised NI43-101 compliant technical report and preliminary economic assessment on its Chandgana Tal coal mines, which are expected to feed the plant. The PEA examines the economics of coal production from the licences and excludes the Chandgana Khavtgai exploration licence. Prophecy's subsidiary Chandgana Coal intends to mine the coal and supply it to the proposed 600MW mine-mouth power plant.
The two Chandgana Tal licences contain an estimated 124 million tonnes of coal resources all in the measured category. The average in-place coal gross calorific value is 3306 kcal/kg. After a short ramp-up period, annual mine production will be 3.5 million tonnes throughout the 30 year life of the mine, in order to meet the demands of the power plant. The mine will be an open pit operation and is 2km from the proposed power plant site.
The financial evaluation indicates that the project is potentially economically viable given the coal price assumption of US$17.70 per tonne sold at the mine gate directly to the power plant. Therefore, the coal project is expected to provide stable return throughout the life of mine.
Meanwhile, since resuming operations at its Ulaan Ovoo project, Prophecy management primarily works towards improving practices in the areas of safety, cost containment and coal quality improvement. With these mandates and since near-surface oxidized coal was removed in 2011 and 2012, Prophecy has consistently mined higher grade thermal coal with GCV greater than 5000 kcal/kg.
With consistent, effective and efficient mining practices, management expects that approximately 90% of the coal mined will have GCV greater than 5000 kcal/kg in 2014. As such the company is transitioning to supplying to a market for coal of GCV greater than 5000 kcal/kg which realizes premium pricing, both in the domestic and neighbouring Russian markets.
Inquiries regarding coal purchases from the state Republic of Buryatia in Russia continue and discussions with local and national governments relating to re-opening the Zeltura border crossing to facilitate exports to Russia also continue.