Tian Poh signed a memorandum of understanding with Shenzhen Stock Exchange ChiNext-listed Shenwu Environmental Technology, formerly known as Tianli Environmental Engineering, for "strategic co-operation" to advance the project sourcing coal from the Perth company's Nuurst coal deposit.

Phase 1 of the project targets gas production by 2020 to supply both the Mongolian and Chinese markets, with the special-purpose vehicle - 81% owned by Tian Poh and the rest by Shenqu - to own the plant and associated infrastructure.

Shenwu will provide the engineering, procurement and construction services, and discussions are now underway to finalise the contractual terms of the arrangement.

Both Tian Poh and Shenwa are exploring the potential to obtain Chinese government funding to help develop the project.

It's all part of Tian Poh's plans to develop a 3.9 billion cubic metres of annual capacity plant at Nuurst by using the 478.3 million tonnes of JORC resource coal that Modun Resources has 120km east of Ulaanbaatar where a number of other coal mines are operating.

Nuurst is also 6km from a rail line allowing direct access onto the existing Trans-Mongolian Railway line, with a 35kV power line about 5km southwest of the project area and a 220kV one to the east.

The Nuurst project is consistent with China's famed One Belt, One Road plan announced in 2013, otherwise known as the Belt and Road Initiative, which aims to reconfigure global trading by placing Chinese investments like railways and power grids in at least 69 countries that mirror the ancient Silk Road.

That initiative aims to cover not only parts of Asia but the Middle East, Europe and Africa.

Tian Poh closed at 5.9c yesterday on the ASX.