JOHANNESBURG (miningweekly.com) – ASX-listed Guildford Coal has signed a memorandum of understanding (MoU) to acquire an 80% stake in a large thermal coal project and associated power station project in Mongolia.

The company said on Monday that it would acquire the 600 MW mine-mouth-coalfired Tsaidamnuur project, located 15 km from the Trans-Mongolian Railway line, which traverses Mongolia connecting Russia and China. The project consisted of three mining licences, containing a large thermal coal deposit.

Based on exploration conducted to date, these licences were estimated to contain more than 630-million tonnes thermal coal and were located less than 1 km from the power station project.

The power station project was a circulating fluidised bed combustion boiler design, incorporating  four 150 MW units, with a double circuit twin conductor 220 kV overhead power transmission line for connection to the nearby grid of the Central Energy System of Mongolia. A belt conveyer system would transport coal from the mine to the power plant.

Guildford Coal said it had conducted positive preliminary discussions with Chinese power providers to finance, build and operate the new power station.

In terms of the MoU with Tsaidam Energy, which holds the Tsaidamnuur project, Guildford waive the $2-million refundable deposit previously paid for the acquisition of Mongolian Petroleum Corporation, which it had decided not to proceed with. It would also issue 60-million new and fully paid Guildford share to Tsaidam.

In exchange, Guildford would gain an 80% stake in Tsaidam and the remaning 16.13% stake in one of its subsidiaries, Guildford Coal (Mongolia), which controlled a mining lease and premining lease of the greater South Gobi coking coal project.

“If completed, [it] adds a further large-scale and near-term project to [our] portfolio in Mongolia, which will allow us to be part of supplying electricity to the rapidly growing domestic market in [the country],” MD Michael Avery said in a statement.

The transaction was subject to detailed due diligence, agreement on acceptable long form transaction documents and Guildford board final approval.