Celsius Coal Limited is very pleased with the announcement by the Kyrgyz Republic Ministry of Transport regarding the completion of the feasibility study for the Trans-Asia Railway. Based on the announcement and related reports, the study is now being translated into Kygyz and Russian (the official languages of Kyrgyz Republic) to allow for more formal discussions to take place regarding implementation. Completion of the feasibility study is in line with various statements made by the governments of People’s Republic of China and Kyrgyz Republic in September and December 2012 regarding accelerating the project. The railway is currently anticipated to be completed by the end of 2016. The current mapped route comes within 10 kilometers of Celsius’ Uzgen Basin coking coal projects and will connect to the existing Chinese railway network at Kashgar (Kashi) in Xinjiang.

China has an explicit policy to bring investment to Xinjiang with an estimated RMB 2,100bn (USD 340m) of policy-led investments planned between now and 2020. This investment includes the establishment of a Special Economic Zone at Kashgar (Kashi) to become a manufacturing centre for export to Central Asia and Russia. The 2015 Xinjiang development goals include: 60% urbanization; additional 170,000 kilometres of roads; 8,200 kilometres of railway expansion; and 22 new airports.
Xinjiang is forecast to import 30 million tonnes of coking coal from other countries and provinces of China by 2015 and will be the important ‘beach head’ market for Celsius’ plans to export its coking coal to China. Celsius’ Uzgen Basin coking coal projects is approximately 250km from Kashgar (Kashi) via the proposed Trans-Asia Railway.

Celsius has undertaken a review of transport options to facilitate coal export prior to completion of the Trans-Asia Railway. For the Uzgen Basin coking coal projects, two options exist for export to China: one route of approximately 385km via Osh and then to export via the Irkeshtam border crossing between Kyrgyz Republic and China; and the second being approximately 465km via Naryn for export via the Torugart border crossing (Figure 1). Both options appear feasible. However, the route via Osh is more favourable based on road conditions and distance. Generally paved and rehabilitated roads are available on the route via Osh. Utilizing this route, the Company estimates a transport cost of approximately $10 per tonne to the Kyrgyz Republic-China border.