Aspire Mining : AKM - Quarterly Activities Report

Aspire Mining Limited

ABN: 46 122 417 243

69 Kewdale Road, Welshpool WA 6106

PO Box 1918

Subiaco WA 6904

Tel: [phone] ASX RELEASE

Fax: [phone]

Web: www.aspiremininglimited.com Email: [e-mail]

For Immediate Release - 31 January 2017

QUARTERLY REPORT

Quarter Ended 31 December 2016

Northern Railways Investment Update

• First Stage Bankable Feasibility Study received and confirms that the Erdenet to Ovoot Rail Project is feasible.
• Discussions with Mongolian Government progressing to extend the time to complete conditions precedent for the Rail Concession.
• EPC funding negotiations continuing with China Development Bank and other Chinese Policy Banks.
• Report received by Northern Railways LLC from a specialist rail logistics consultant confirming the advantages of the Northern Rail Corridor for growing Eurasian trade and as part of China's One Belt One Road Policy.
• Northern Railways LLC and its advisers continue discussions with potential funders of the second stage feasibility study for the Erdenet to Ovoot Railway. Nuurstei Coking Coal Project.
• The ECJV received an Exploration Plan and Budget of US$1.5m to improve deposit interpretation and provide additional quality samples with the aim of converting qualifying Inferred Resources to Indicated and to support further economic studies.
• Scoping Study and Mining License Application process progressing. Corporate Update
• A small A$218k placement was completed in the Quarter for working capital purposes and the US$2m loan announced in the September 2016 Quarter is now fully drawn down. Cash totalled A$1.1m at 31 December 2016.
• Seaborne metallurgical coal prices proved to be volatile during the quarter. March 2017 Benchmark Quarter prices set at US$285 per tonne. Spot prices have retreated from multi year highs in December but are still more than double 2016 lows.
• Mongolian coking coal exports to China have increased by 85% in 2016 to 23.5 million tonnes.

  Aspire Mining Limited (ASX: AKM, Aspire, or the Company), focussed on the exploration and development of metallurgical coal assets in Mongolia and the rail infrastructure required to bring production from these assets to market, is pleased to present its Quarterly Activities Report to Shareholders for the period ending 31 December 2016.

  The Company is the largest coal tenement holder in the Orkhon-Selenge Coal Basin in northern Mongolia. Aspire currently wholly owns the large scale, world class Ovoot Coking Coal Project (Ovoot Project), Through its 50% ownership in the Ekhgoviin Chuluu Joint Venture (ECJV), Aspire also holds an interest in the Nuurstei Coking Coal Project (Nuurstei Project) and the Erdenebulag Coal Project (Erdenebulag Project) in the south.

  Northern Railways LLC (Northern Railways), Aspire's Mongolian rail infrastructure subsidiary, is responsible for activities associated with the construction and commercialisation of the 549 km Erdenet to Ovoot Railway in northern Mongolia. The Erdenet to Ovoot Railway is a part of Mongolian Rail Policy included in the "Northern Rail" Economic Corridor, an initiative to establish an international economic corridor between China and Russia through Mongolia and supported by all three Governments to facilitate trade between the three nations and the wider Asian and European economies.

  Figure 1: Location of Projects and New Economic Corridor

  NORTHERN RAILWAYS LLC

  Mongolian registered Northern Railways LLC is the responsible entity progressing the development of the 549 kilometre Erdenet to Ovoot railway project in northern Mongolia (Rail Project) The Rail Project will be implemented under a private-public-partnership with the Government of Mongolia which has granted Northern Railways the exclusive right to build and operate the Rail Project under the terms agreed within the Concession Agreement executed in August 2015.

  Northern Railways LLC is currently owned 90% by Aspire and 10% by the Noble Group.

  Figure 2: Northern Railways Rail Project forms part of a planned international trade corridor between Russia, Mongolia and China

  Erdenet to Ovoot Railways Feasible

  Northern Railways has received the First Stage of the Rail Feasibility Study for the Erdenet to Ovoot Rail Project (the Study) which concludes that the Rail Project is feasible . The Rail Project forms part of the new Northern Rail Economic Corridor linking China with Russia through Mongolia.

  The Study was received from China Railway First Survey and Design Institute Group Co Ltd ("FSDI"), a subsidiary of China Railway Construction Corporation and concludes that the Erdenet to Ovoot Railway:

  • is financially feasible.

  • is consistent with Mongolia's mineral resource development strategy to be supported by growth in rail infrastructure.

  • will play a significant role in the promotion of regional and social development.

  • is necessary and is recommended to be implemented as soon as possible.

The Study commenced in September 2016 and provides a review of the Erdenet to Ovoot Railway including sufficient design engineering to provide a +- 10% capital estimate, a construction schedule, a bill of quantities and financial analysis including the capital and operating cost estimates.

The Study will be used by China Development Bank and other Chinese policy banks in assessing an investment in the Erdenet to Ovoot Railway.

The Study noted specifically that planned capacity upgrades to UBTZ's Erdenet to Salkhit line and the Trans-Mongolian Railway will be needed to cope with the increased freight volume from the Erdenet to Ovoot Railway of up to an additional 20 mtpa over the long term. The freight forecast for the Erdenet to Ovoot Railway does not include additional freight volumes from Russia's Elegest Coking Coal Basin or trans-Eurasian trade as the feasibility of rail links into Russia will need to be the subject of future feasibility studies. This is recognised as a future upside to freight volumes for the Erdenet to Ovoot Railway.

The Study was prepared in Mandarin and translated into English. The capital and operating costs were prepared by FSDI in Renminbi and converted by the Company to USD at the exchange rate of 7 Renminbi:US$1.

Northern Railways now has the opportunity to continue its review of the Study prior to commitment to the Final Stage Feasibility Study where significant additional engineering and design will be conducted in order to provide a bankable capital estimate and provide the basis for the turnkey engineering, procurement and construction contract (EPC Contract) negotiation. The Final Stage Feasibility Study will take around 6 months to complete from commissioning.

First Stage Feasibility Study Results

Construction

The construction timeframe for the entire line is programmed out at 60 months from commencement to commissioning. However, there is an opportunity, subject to pricing and cost, to truck coal from Ovoot to a loading point prior to the full completion and commissioning of the Erdenet to Ovoot Railway. This would bring in revenue to Northern Railways earlier than contemplated in the Study.

The capital cost is estimated at US$1.25bn plus contingencies, which includes US$27m for two locomotive service centres and depots as well as 11 by-pass loops for the single line track to be able to provide network capacity of 20 Mtpa.

There is also a total length of 10 kms of tunnels across 7 separate tunnel areas which adds US$67m to construction costs. The maximum cut size is set at 20 metres as a risk mitigation measure due to the lack of geotechnical information in the areas of the larger designed cuts. The 2013 Rail Pre-Feasibility Study had no tunnels but did have cuts as large as 47 metres. The Mongolian rail standard allows for up to 50 metres with appropriate supports. With further geotechnical information, appropriate trade-offs can be made between the use and length of tunnels versus appropriate and safe cut sizes.

The rail design includes minimum curvatures at 800 metres and maximum gradients at 0.9% which adds 2 kms to bring the total rail distance to 549 kms. The target speed is 80 kmhr based on 3 diesel locomotive train sets hauling 10,000 tonnes per consist. Locomotive depots are to be located at Erdenet and Ovoot.