Originally posted by Mrgtrades
Really like your post...
My observations:
2018 PEA:
The PEA concludes that the favoured route for construction of the Ovoot - Arts Suuri rail link would see a 238.6km extension from the Ovoot railway heading west/north-west to the Mongolian border port at a current estimated capital cost of US$581.82M (excluding contingencies) or approximately US$2.44M/km. This confirms the capital cost is in the range estimated by an earlier scoping study completed in 20151 and comparable to the Erdenet to Ovoot Feasibility Study recently completed by NR consortium partner China Gezhouba Group International Limited1.
2015 scoping study:
Capital costs per kilometre to construct the base infrastructure range between US$2m to US$2.6m per kilometre.
Ovoot – Arts Suuri, distance 230-250kms, capex estimate US 450-550M.
Per kilometre estimate at that time was a range of 2M to 2.6m.
2M x 230kms= 460M
2M x 250kms= 500M
2.6Mx 230kms=598M
2.6Mx250kms=650M
Except to believe that 550 was a typo,I don’t see much issue. I would prefer to see more accuracy in per kilometre cost which is now determined as 2.44M for 238.6kms =582.18M(excluding contingencies)
Now coming to one belt one road and economic corridor... I think it has become stronger now even japan wants to be part of it given US trade war. Bigger countries will not fear debt, they are self funded if required to make their part of OBOR.
I really don’t see a point in toning down what they discovered and said, if it’s proven comparatively cheap, fast and economically feasible then why not? Toning down won’t get project funded.
My point about the cost per km relates to the Capex cost for the Ovoot – Arts Suuri extension coming in at $32.1M over the upper range estimate for that particular stretch of track in the 2015 study. The cost per km range of the 2015 study was based on both Ovoot - Arts Suuri - Kyzyl sets of track, as opposed to the sole stretch of Ovoot – Arts Suuri track. If they were within the per km range for the Ovoot - Arts Suur track as per the 2015 study, they would not exceed their Capex estimates for Ovoot – Arts Suuri by ~$32M.
I know its chump change in the grand scheme, I just thought the guys at AKM would be a bit more upfront and transparent about the marginal increase in Capex for that stretch of track - especially given they are not in a position to provide confirmation on the PEA for Arts Suuri - Kyzyl stretch of rail just yet. They must be very confident.
My point about toning it down is because the 2016 report being used to support this claim is out of date and provides no evidence. In fact, all evidence suggests the quickest most cost effective way to link Northern China to Europe, will be to send it to Urumqi over 200km/h of deomestic track, then onto Almaty and Tehran at over 120km/h without any gauge switch. I'm only being fussy about the spurious European fastest and most cost effective claims.
You make a great point about the debt. Which is why I'm more than a bit curious why the Chinese and Russian governments haven't already committed funds form the
RCIF already. The whole rail extension from Ovoot – Arts Suuri seems a no-brainer for Russia / China, and they have all but completed the
Amur bridge link. I suspect they want private banks to stump up...and private banks will need more than a Capex cost as the basis of economic viability.
All good discussion.
(20min delay)
