(EnergyAsia, January 14 2013, Monday) — Mongolia may have found a way to export coal by sea, thus reducing its current overwhelming dependence on land-based sales to China.

Singapore-listed commodities trader Noble Group has agreed to invest in a multi-billion-dollar coal and rail development project in Mongolia that will include the use of a Russian Far East port to open up exports to other markets, according to its Australian developer Aspire Mining.

Aspire said Noble will help pay for the development and connection of a proposed A$1.25 billion 580km railway line to the existing Trans-Mongolian trunk line to facilitate exports from the Ovoot coking coal project in northern Mongolia to China and Russia. The mine is expected to start producing in 2014, while the proposed Northern Rail line is due to start up in 2016.

Apart from satisfying Chinese demand, Aspire said the deal will enable it to use Noble’s Russian Far East port to reach markets beyond China. Mongolian coal has yet to be exported by sea as the massive landlocked country does not access to an ocean-going port.

“Access to seaborne markets is a key part of Aspire’s development strategy for its world class Ovoot project. Mongolian coking coal is largely being sold to Chinese steel producers and it is a key part of Mongolian development policy to establish access to seaborne markets, to provide pricing tension with Chinese customers and establish seaborne price benchmarks for Mongolian coking coal,” said Aspire.

Noble will have up marketing rights for up to 20% of the coal output from Ovoot, which is estimated to hold one of the world’s second largest coking coal reserves.

As part of their agreement, Noble will also raise its shareholding in Aspire from 10.1% to 14.9% by acquiring 35 million shares for A$2.8 million, or eight Australian cents a share. (US$1=A$0.96).