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Mongolia’s Northern Railways signs EPC agreement

03 May 2019

MONGOLIA: The Northern Railways subsidiary of coking coal mine project developer Aspire Mining Ltd has signed an engineering, procurement and construction agreement for the proposed 547 km Erdenet – Ovoot railway with a joint venture of China Gezhouba International Engineering Co and China Railway 20 Group Corp.

The agreement was signed on April 25 during the Second Belt & Road Forum in Beijing.

The lump-sum turnkey contract has a maximum price of US$1·58bn, including ‘conservative’ risk assessments for ground conditions as well as all contingencies, inflation and a completion guarantee fee.

The go-ahead is conditional on a funding package for the project being agreed, permits being granted and the conditions of Aspire’s rail concession agreement being met by Febraury 20 2020. A guarantee of capacity on the existing rail network is also required.

China Gexhouba Group also provided a letter of interest in being EPC contractor for a 560 km haul road which would be used to move 4 mtpa of coal from the Ovoot Early Development Project to the existing railhead at Erdenet until the new line has been completed. CGGC expressed interest in sourcing up to 75% of the required US$165m from Chinese commercial banks, with Aspire to raise the remainder from its shareholders and elsewhere. Commissioning of the OEDP is envisaged from Q1 2021.

Aspire’s Executive Chairman David Paull said CGGC was ‘a leading Chinese state-owned enterprise working on the implementation of the Belt & Road Initiative’. He said bringing the OEDP into production using road transport would ‘significantly enhance the financial viability of the Erdenet to Ovoot Railway and the larger scale development of Ovoot.’