Russian Railways will invest $7bn in improving Mongolian railways, a precursor to developing its coal and copper mining industries.

An agreement has been signed by Russian Railways (RZD) with Erdenes MGL – the Mongolian state mining company – and Mongolia’s MTZ national railway company to create a joint venture to build railroads that connect to key mining sites.

Russian Railways CEO Vladimir Yakunin said that expanding the existing network and replacing the rolling stock were key priorities.

“The creation of the JV is Phase 1 of a project by the two countries to jointly develop the Ulan Bator Railway and build new rail infrastructure in Mongolia,” he said.

“The newly created Infrastructure Development Company will produce a development framework for Mongolia’s railway system, including a feasibility evaluation of the investment required and a repayment mechanism.”

He also said that the investment in the railway infrastructure will be recouped via income from additional freight shipments and participation by the new JV in promising mining projects.