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Gazprombank, VEB.RF, Sberbank and BMC Signed a Syndicated Loan Agreement for Udokan Development

Gazprombank, VEB.RF, Sberbank and BMC Signed a  Syndicated Loan Agreement for Udokan Development
The overall project budget totals approximately USD 2.9 bn, up to USD 1.79 bn out of which is obtained as a loan from a bank syndicate for up to 12 years. Shareholders` investment into the project has already exceeded USD 870 mn (for license acquisition, survey, engineering and early construction works).

Udokan Mining & Metallurgical Plant coming on stream shall provide more than 2 thousand new jobs net of related industries and more than RUR 750 bn of additional tax revenue to the budgets of all levels during the first 25 years of operation.

Gazprombank acted as an arranger and financial advisor for the deal being also one of the loaners granting up to USD 650 mn. Besides, Gazprombank plans to raise foreign financing. Other participants are Sberbank (up to USD 650 mn) and VEB.RF (up to USD 490 mn). VEB adopted the role of a loan manager in the syndicate.

As Chairman of the Board of BMC Valery Kazikaev stated: “It was originally planned to use project financing tool. We raise loan funds to provide for the whole cycle of works: supply of the main equipment for the concentrator, hydrometallurgical production, construction and installation works including those relating to infrastructure construction, as well as supply of auxiliary equipment and transport.”

Construction works have been under way at site starting from Q1 2019. It is expected to commence delivery and installation of the main equipment in mid-2020 and put Udokan MMP into commercial operation in 2022.

“The deal became a major project in Russia based on project financing Factory principles the operator of which is VEB.RF. A provision is made for a state subsidy for all ruble tranches, including the tranche of partner banks, for the whole term of the loan to make up for the key rate growth. A special Factory tool – tranche B – provides an additional liquidity cushion. Tranche B is provided by VEB.RF to cover interest costs at the investment phase and potential cost overruns,” the First Deputy Chairman of VEB.RF and Member of the Management Board Nikolay Tsekhomsky stated.

“Due to joint work of the lenders and project proponents, we managed to find an optimal investment and structure financing in such a way as to achieve a high credit quality of the deal. In particular, use of the Factory financial tool enables to get interest rate subsidies for the loan and actually hedge the project company against the growth of the key rate of the Central Bank for the whole term of the loan,” Deputy Chairman of the Management Board of Gazprombank Alexey Belous noted.

“Implementation of this project is a strategically important task for the industry as well as for the country`s economy as a whole. I am sure that it will enable to considerably improve the efficiency of the Russian mining complex, create new jobs and state-of-the-art infrastructure. We are happy to have been able to participate in such an important project unique for the Russian market and, together with our partners, propose an individual financial solution satisfactory to the client,” Deputy Chairman of the Executive Board of Sberbank Anatoly Popov said.

Udokan (Zabaikalye Region) is the largest undeveloped copper deposit in Russia and one of the largest globally. Its development includes development and construction of the Mining and Metallurgical Plant Phase 1 for the production of cathode copper and copper concentrate, the pit with the capacity of up to 12 mtpa of ore and up to 125 ktpa of copper and creation of the relevant infrastructure.

11 July 2019