Prophecy said two binding coal sale export contracts for the sale of 30,000 tons of coal had been signed with a Russian buyer, with annual volume turnover in excess of 2 million tons, in the country’s Buryatia region.
The region has been struggling to meet demand for coal due to decreased domestic production at its aging coal mines and restarting supply from Ulaan Ovoo was “essential to meeting growing regional demand”, Prophecy commented.
Mining at Ulaan Ovoo has been curtailed since July 2012 because the company had sufficient coal stockpiles to meet contractual supply obligations.
“The new contracts are an important step in Prophecy’s drive to restart Ulaan Ovoo on a meaningful mining scale with sales prices that can potentially generate investment return,” Prophecy said in a statement.
“The sales price is robust and management believes the offtake agreements and potential additional coal sales contemplated by the memorandum of understanding will help establish the long-term viability and stability of the mining and logistical operations at Ulaan Ovoo.”
Under the offtake agreements, 5000t per month of coal will be exported initially, with a second non-binding MoU contemplating the potential increase in monthly coal sales volume to 30,000t, subject to wagon availability and market conditions.
Prophecy successfully exported coal to Russia in 2011 and 2012.
It has a coal stockyard and rail siding at northern Mongolia’s Sukhbaatar rail station with loading facilities to support up to 80,000tpm of coal exports.
Prophecy said it also continued to engage Mongolian and Russian officials to work towards the reopening of the Zeltura border crossing between Mongolia and Russia, which is currently closed.
The first deliveries are anticipated to start in November when mining operations are expected to resume after pit-dewatering activities at Ulaan Ovoo are completed.