Ulaan Ovoo: In my opinion, we can not expect much in regards to Ulaan Ovoo until the second half of 2012.
August 29:
"...22,000 tonnes of coal have been sold....This coal will be consumed in local Buryat power stations and boilers....coal stockpiled at Sukhbataar rail station will be loaded and railed into the the Republic of Buryatia in Russia via Naushki. Energy LLC had imported a landmark trial shipment from Prophecy in June."
With no coal follow up sales since August 29, I have concluded that the 22,000 tonnes of coal sold to Energy LLC was rooted in removing the coal stockpiled at the Sukhbataar rail station. It was, afterall, just sitting there taking up valuable space. Meanwhile, and per the pre-feasibility study on Ulaan Ovoo: "The marketing option used in this study is to sell the Ulaan Ovoo coal at the Russian border post of Naushki, for ongoing transportation to either the Russian domestic market or for export via the Russian East coast port."
Maybe its wagon availability. Maybe its higher costs to transport and lower prices offered to purchase. Whatever the problem, the only viable marketing option at present simply is not working. To work, it looks as though any coal transportated to the Naushki border post needs to be exported via the eastern sea port(s) to be economic. As for coal sold to the Russian domestic market, it looks as though the only economical pathway is to open the Zeltura border post. If so, we are looking at the second half of 2012 to arrive at any true commercial sales.
Per the Chairman letter:
"We anticipate Ulaan Ovoo to produce 300,000 to 500,000 tonnes of coal in 2012, with increasing sales to Russia and at higher selling prices. We also expect the Russia border crossing at Zeltura...to open in 2012, which will reduce the transportation costs of our coal to Russia. While selling coal through the Russian eastern seaports proved to be complex and difficult in 2011, we will further pursue this option in the latter part of 2012, after we focus first on the Chandgana project."
Via a post by Fritz sometime back, there was word that the Russian side of Zeltura had infrastructure where the Mongolian side did not. Hence, and if Zeltura is infact opened in 2012, we will most likley have to wait til spring to have the infrastructure constructed. In addition, and if Zeltura is opened, I think it fair to suggest it will be opened on a temporary basis and or not on a 24 hr basis much like the primary border post(s) South Golbi had to deal with on the China side. Nonetheless, a "mine gate" sales model is what will really get Ulaan Ovoo moving imo. We just have to wait a little longer.
In regard to local coal sales in Mongolia, the best view taken is that of "goodwill". Per the Q report dated November 25, 2011: "The mine has been allowed to recieve an allocation of diesel because it produces coal for local Mongolian power stations."
As to why we do not get revenue numbers of coal sales:
"Since the mine is still in pre-commercial production status, revenue from coal sales and the related costs of production are currently being capitalized." (Nov 25 Q report).
To close, that's my take on Ulaan Ovoo. In summary, little to no activity til the second half of 2012.