Aspire Mining Ltd’s (ASX:AKM) rail subsidiary Northern Railways LLC has received a draft feasibility study which confirms the financial viability of the Erdenet to Ovoot Railway in Mongolia.
The comprehensive draft was delivered by China Gezhouba Group International Ltd (CGGC) and Northern Railways has started reviewing and assessing the document.
Costs comparable to first study
After a preliminary review of the draft, Northern Railways has identified that costs of construction are comparable to the first stage feasibility study completed in January 2017.
CGGC continues to engage with a range of debt and equity providers interested in funding the project.
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These funding sources are conditional on completing outstanding conditions of the rail concession agreement, including a capacity guarantee on the Trans Mongolian Railway.
This section of rail is the first stage of the proposed Northern Rail Corridor linking Erdenet to Kyzyl in Russia.
CGGC a nominated EPC contractor
The rail concession agreement for the Erdenet to Ovoot section was recently amended to include CGGC as a nominated EPC contractor for the project.
All participants in the agreement, including the Mongolian Government, agreed to the amendment.
The combination of CGGC and the China Railway Construction Corp subsidiaries involved in the project provides a strong technical, operational and financially powerful alliance.
These subsidiaries are China First Survey & Design Institute Group Co Ltd and China Railway 20 Group Bureau Corporation, which is the other joint EPC contractor.
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The Northern Rail Corridor has attracted a high level of interest in China, partly owing to its implications in that country’s New Silk Road initiative to improve Euro-Asian trade.
The Northern Rail Corridor would form part of China’s New Silk Road initiative.
As such, China Development Bank and Silk Road Fund along with other potential investors have expressed some funding interest.
Russian design agreement
Northern Railways recently entered into an agreement with Russian design institute Mosgiprotrans to jointly prepare a preliminary economic assessment (PEA) for the next section of the Northern route.
This section will potentially extend from Ovoot to Arts Suuri at the Russian border and onto the city of Kyzyl in Russia.
Northern Railways will work with a Mongolian design institute to complete the PEA for the Mongolian section.
This PEA will then be jointly presented to Chinese funding institutions, including the Asian Infrastructure Investment Bank to seek funding for a feasibility study.
The agreement with Mosgiprotrans is evidence of the Russian support for the Northern Rail Corridor.