The Project consists of the expansion of an existing bauxite mine, which is the first phase of the potential development of a greenfield alumina refinery and aluminium smelter in the Komi Republic, Russian Federation (the Komi Aluminium Project).
This ‘Phase 1’ development to be financed by the EBRD will comprise:
(a) the expansion of the Middle-Timan bauxite mine from the current capacity of 1.5 million tonnes per annum up to a capacity of 6 million tonnes per annum by 2007 (Mine Expansion)
(b) appraisal studies for the Komi Aluminium Project as well as early infrastructure works (Early Works) in relation to the alumina refinery which may be constructed near the town of Sosnogorsk.
The Project’s main objective is to support the development of state-of-the-art production capacity of ‘Bayer’ grade bauxite in the Russian Federation thus enhancing the competitiveness of the Russian aluminium industry while ensuring that a best practice approach is implemented by the SUAL group in terms of environmental management and corporate governance.
The project companies are OAO Bauxite Timana (Russia) and ZAO Komi Aluminium (Russia) - both established and controlled by the SUAL group to develop the planned Komi Aluminium Project.
The SUAL group is Russia’s no.2 aluminium producer (among the top 10 worldwide) and a major exporter. The ultimate parent company is SUAL International Ltd (Bahamas) and its management company is OAO SUAL-Holding (Russia). The SUAL group operates an integrated bauxite mining, alumina refining and aluminium smelting business as well as various downstream activities such as aluminium foil and cables.
The EBRD finance comprises a loan of US$ 75 million including an A loan of US$ 45 million and a B loan to be syndicated of US$ 30 million split into two distinct tranches: a US$ 50 million tranche to finance the Mine Expansion and a US$ 25 million tranche to finance the Early Works. The Project will be co-financed by the International Finance Corporation with a parallel loan of US$ 75 million.
The total ‘Phase 1’ project cost is estimated at US$ 300 million including US$ 112 million of past costs incurred by the SUAL group for the early development of the Middle-Timan bauxite mine and US$ 188 million of future costs for the Mine Expansion and Early Works.
The Project is screened as A/1. The environmental audit (EA) and environmental and social impact assessment (ESIA) reports have been disclosed on 19 December 2003 and 7 April 2004 respectively:
(a) Mine Audit: the audit of the existing mine and railway revealed a relatively small mining operation with one active pit and no significant environmental and social impacts. Identified issues include solid waste management, need for in-situ rehabilitation, domestic sewage treatment and limited aspects of H&S. These issues are addressed in the agreed Environmental and Social Action Plan (ESAP);
(b) Mine Expansion: the ESIA on the ultimate expansion plan for the Middle-Timan bauxite mine to 6Mtpa identified impacts of high-significance associated with groundwater abstraction and subsequent discharge to surface water. Such discharge would have significant impact on fish population in the receiving river. The proposed design calls for dewatering to begin in year 5 of the mine expansion (circa. 2011) and will result in high volumes from year 9 (circa. 2015). The exact impacts of the proposed dewatering are not known; however, it is clear that they would be significant and further studies are required to:
(i) identify accurate volumes of water to be extracted;
(ii) identify and review potential options for discharge of the water; and
(iii) accurately assess the impacts of the various options and identify an alternative with acceptable impacts, if available.
The proposed solution must be acceptable to the Russian authorities and the Bank. An appropriate and meaningful consultation will be held with the local population on this issue, once an acceptable solution is identified. Presenting the project to the Board without resolving this issue constitutes derogation from EBRD’s Environmental Policy; however, the proposed conditions provide adequate leverage to mitigate this problem. The loan tranche to finance the Mine Expansion would not be disbursed until such water management plan has been designed and disclosed to the public to the satisfaction of the Bank, which is anticipated to occur towards year end 2004;
(c) Early Works: since the Early Works may be evolutive in scope depending on the proposed design for the Sosnogorsk refinery or even sacrificial if the refinery eventually does not go ahead, SUAL will provide a feasibility study for any material physical construction components of the Early Works with accompanying environmental impact assessment satisfactory to the lenders. If studies indicate that the refinery project is not feasible, any early works will be fully reclaimed/restored.
Mr. Brent Hegger, Project Director
ZAO Komi Aluminium
Ulitsa Pyatnitskaya, 69
Tel. +7 095 504 0749
Fax: +7 095 504 0748
For business opportunities or procurement, contact the client company.
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