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EBRD signs financing for gold mining venture in the Russian far east
The first large-scale international financing in the Russian mining sector was finalised today when the European Bank for Reconstruction and Development (EBRD) signed a US$ 47.5 million loan agreement with the Russian-US joint venture Omolon Gold Mining Company. The US Overseas Private Investment Corporation (OPIC) also signed a separate US$ 52.5 million finance agreement.
President of the EBRD, Jacques de Larosière, said: “Based on our experience gained in leading this financing, the EBRD will remain at the forefront of providing financial assistance for the Russian mining sector, particularly for gold projects where we see significant potential given the Russian Federation’s reserve base. I believe that this will also give a signal to the international mining community that financing is available for quality mining projects in the Russian Federation”.
The American sponsor of the joint venture, Cyprus Amax Minerals Company of Denver, Colorado, owns Cyprus Magadan Gold Mining Company, which is a 50 per cent owner of the Omolon Gold Mining Company. Omolon will manage the commercial development of the Kubaka field, a gold and silver deposit located about 600 miles northeast of Magadan, Russian Federation, and 200 miles south of the Arctic Circle. Cyprus-Magadan’s Russian partners include four mining companies based in the Magadan region (Magadan Gold-Silver Company, Geometal, Dukat Mining Kombinat, Elektrum) as well as a Russian commercial bank (the Russian Credit Bank) and the Association of Native Peoples of the Severo-Evensk District East.
Omolon has begun construction on the site that will, when completed, process gold and silver ore into dore, a gold/silver compound, and sell it to the Russian Committee for Precious Metals. The mine is expected to produce an average of over 300,000 ounces of gold and 200,000 ounces of silver annually. About 475 Russians will work on the site during its construction with nearly 250 permanent workers during mining operations. Omolon’s activities will also bring economic development to the Magadan region as many of the company’s shareholders are small local enterprises.
The Board of Directors of the EBRD has so far approved financing for three gold mining projects in the former Soviet Union, providing US$ 175 million of financing in aggregate, with total project costs of over US$ 750 million. The Bank is also working on the financing of additional mining projects in Russia, the Central Asian republics of the former Soviet Union and central Europe.
In addition to providing project finance, OPIC will be offering Cyprus Amax about US$ 60 million in political risk insurance, bringing total OPIC support to US$ 112.5 million.
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