Interesting Ulaan Ovoo data from 12/2010
A Short Refresher on Ulaan Ovoo From the 13th December 2010 Pre Feasibilty Study.
Sorrt I couldn;t copy Map, for Map see Markets Section 21.0 of https://www.prophecycoal.com/pdf/coal_prefea_ulaan2.pdf
2 1 . 0 M A R K E T S
2 1 . 1 I NT RODU CT ION
The primary options for the sale of the coal from Ulaan Ovoo are either using the coal at
site in a thermal power generation plant or by transporting the coal to the domestic or
international market by road or rail, or a combination of the two transport methods.
Previous studies have considered either supplying coal to a power plant adjacent to the
project site or building a rail spur, either westwards from Sukhbaatar station to the mine
site, or from the mine site north to Zheltura Port at the Russian border and then east to
join the existing rail line in Russia at Dzida station and selling coal to the domestic or
international markets.
Results from previous financial evaluations have indicated that the project is very
sensitive to capital costs (CAPEX). As a result, this PEA considers a much smaller
operation, selling 2 Mt of low ash thermal coal per year, with a low initial CAPEX. There
is no plan to build a coal washing plant, no plan to build a thermal coal power plant and
no plan to build a rail connection, either east to Sukhbaatar, or north to Dzida via
Zheltura Port.
The remote location of the Ulaan Ovoo coal deposit in the north of Mongolia makes the
transport and market component of the project one of the key financial drivers.
2 1 . 2 TRA NS POR T
The Ulaan Ovoo project site is located 137 km to the west of Sukhbaatar station on the
existing rail line running from Ulaanbaatar to the Russian border port of Naushki and 17
km south of Zheltura Port on the Russian border. The nearest rail link in Russia is a
further 145 km to the east at Dzida station. (See Figure 21.1) Prophecy have negotiated a haulage contract to transport the coal by road from the Ulaan Ovoo mine site to Sukhbaatar rail siding and have secured loading facilities at Sukhbaatar to transfer the coal from the road trucks to the rail wagons. Sukhbaatar
station is located on the Trans-Mongolian railway which links to the Trans-Siberian
railway. Both the Mongolian and Russian rail networks share the same track gauge.
Prophecy is currently in negotiations to supply coal to either the Russian domestic
market, or as export from the Russian East Coast ports.
The base case for this study is therefore road haulage to Sukhbaatar Station and rail
haulage to Naushki Port at the Russian border.
An alternative transport route, which has the potential to provide savings in both
operating cost (OPEX) per tonne, road re-refurbishment CAPEX and road truck
purchase, is via the border port of Zheltura. This route is currently being investigated, but
has not been used for this study.
Table 21.1 Transport Costs
Location Cost /t
Road Haulage from Ulaan Ovoo to Sukhbaatar (Offsite Charge) US $8.00
Loading of Rail Wagons at Sukhbaatar Station (Offsite Charge) US $1.50
Rail Haulage from Sukhbaatar Station to Naushki Port (Offsite Charge) US
.90
TOTAL US $10.40
21.2.1 MARKETS
Figure 21.2 indicates a breakdown of costs to reach various market options, both in
Mongolia and Russia.
The marketing option used in this study is to sell the Ulaan Ovoo coal at the Russian
border port of Naushki, for ongoing transportation to either the Russian domestic market
or for export via a Russian East Coast port. The cost incurred to reach the point of sale
at Naushki Port, including mining and transportation costs, are US $20.63 /t.
The coal selling price used in the pit optimisation work and the financial evaluation is
US$ 40 /t of thermal coal sold at the Russian border port of Naushki. This is a price
agreed to by Prophecy and is less than the pricing in current negotiations, it also allows
for a level of conservatism to the financial analysis results.
Export thermal coal through Russian East Coast ports is currently realising US $88 to
US $90 /t, providing confidence to the US $40 /t price at the Russian border.
Prophecy is researching export markets in Russia, South Korea and India, as well as the
internal Mongolian market.