Northern Railways LLC, Aspire’s 80% owned subsidiary, signed a conditional engineering, procurement and construction contract with the JV formed by China Gezhouba Group International Engineering (CGGC) and China Railways 20 Bureau Group Corporation (CRB20G) for the Erdenet – Ovoot railway. The contract has a maximum lump sum turnkey amount of USD1.58 billion, depending on the reductions based on the results of further field surveys, engineering and commercial works to reduce the risks and contingency currently reflected in the contract price. This maximum price includes conservative assumptions regarding ground conditions as well as a full allowance for price inflation over the 5 year construction period. It also reflects a 5% fall in the USD\CNY exchange rate since the Erdenet – Ovoot feasibility study was completed in 2018.
The EPC contract is an important condition on project’s funding, permitting, environmental impact assessment, land use agreements under Erdenet – Ovoot rail concession agreement which is expected to be completed in February 2020. There is also a continuing requirement for a future capacity guarantee along the existing Mongolian rail system to be able to distribute freight from the Northern Rail line to export markets.
In 2018, CGGC delivered the draft on the feasibility study on the 547 km Erdenet – Ovoot railway, which will be part of the Northern Rail Corridor, providing a direct route to the Chinese market for Russian transit freight.
In October 2017 Northern Railways and Aspire entered into a binding MoU with China Gezhouba Group Corporation to complete the definitive feasibility study on the railway line. There was also agreement on a path for CGGC to acquire a 51% interest in Northern Railways through further investment in order for Northern Railways to complete conditions precedent relating to the rail concession agreement.