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EBRD finances two gold mines in the Russian Republic of Buryatia
Two gold mines in the Republic of Buryatia (eastern Siberia, Russia) are to be upgraded and expanded with a US$ 17.5 million (ECU 13.5 million) finance package which the European Bank for Reconstruction and Development (EBRD) is extending to the mine owner and operator, AO Buryatzoloto, a recently privatised Russian company.
Ron Freeman, First Vice President of the EBRD, said: "The EBRD's investment will enable Buryatzoloto to strengthen its corporate and technical structure as well as implement important environmental improvements. In doing so, it will be able to position itself alongside other Western-style private sector mining companies and help arrest the decline in Russia's gold production."
Leonid Potapov, President of the Republic of Buryatia and Chairman of the Government of Buryatia, noted "the EBRD's participation in the project financing is very important. The Government of the Republic of Buryatia pays great attention to efforts which boost gold production and is sure that the Buryatzoloto project will become an important catalyst for attracting foreign investment in mining and other industries of the Republic."
The two mines, Zun-Holba and Irokinda, are located in separate and remote areas in the south-western and north-eastern regions of the Republic of Buryatia. The proceeds of the financing will be used to install new technology, allowing the company to produce gold doré at the Zun-Holba mine, open new veins at both mines and fund an environmental clean-up at Irokinda. Once upgraded, the mines should produce 75,000-90,000 ounces of gold a year. By expanding and upgrading the mines, Buryatzoloto can become operationally self-sufficient and significantly reduce its operating costs.
The total project is expected to cost approximately US$ 59.5 million (ECU 45.77 million). The EBRD is providing a US$ 10 million loan (ECU 7.71 million), under which the cost of debt service is partially linked to the level of the London gold price. It is also making a further US$ 7.5 million equity investment (ECU 5.78 million) in the company, equal to 19.6 per cent. An additional US$ 7.5 million (ECU 3.86 million) in financing is being raised through a private placement of new equity with institutional investors and a Canadian company, High River Gold Mines Ltd, which owns 22.9 per cent of Buryatzoloto.
Buryatzoloto has calculated its total gold reserves at about 280,000 kg, of which approximately 37 per cent of this is proven. About 90 per cent is in the Zun-Holba deposit.
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