Projects financed by the EDB
Financing Development of Gold and Metallic Ore Deposits in the CIS
The success of the Customs Union and the emerging Single Economic Space, which form the institutional basis of a new economic integration model in the post-Soviet space, must be supported by corporate integration. Trans-border capital investment is the most important element of this process. The magnitude of such investment is dependent upon the geographical ties between the countries and the economic logic for such activity.
In the 2000s mutual investment in the CIS was booming. Investors remained active even during the global economic crisis. Russia, as the region’s largest economy, is the clear leader in this respect, accounting for about 80% of all investment in the CIS.
Mutual investment is an important indicator of the sustainability of economic ties. The investment and trade links between CIS countries are the platform for developing economic integration in Eurasia. Corporate investment in industrial sectors is becoming the growth point for national economies as it helps to improve their competitiveness in global markets and to develop and diversify their export potential.
In pursuance of its mission EDB supports private initiatives aimed at advancing its member states and their mutual investment.
In October 2012 EDB signed a US $100 m loan agreement with Russia’s Polymetal for 7.5 years to finance its investment projects in the CIS.
Polymetal is Russia’s largest and the world’s fifth largest producer of silver and one of Russia’s top five gold-mining companies. It is a vertically integrated group of companies which mines precious metals incorporating the whole production cycle from geological prospecting to processing. The group has created a portfolio of mining companies by developing deposits from scratch and restarting idled facilities. Polymetal is now mining gold and silver and carrying out geological exploration in four Russian regions (Magadan, Sverdlovsk , Khabarovsk Krai and Chukotka) and in Kazakhstan.
FUNDING FROM THE BANK WILL BE USED TO DEVELOP MINING INFRASTRUCTURE AND TO PURCHASE EQUIPMENT AND RAW MATERIALS FOR EXISTING CONCENTRATION FACILITIES, AS PART OF POLYMETAL’S INVESTMENT PROGRAMME IN THE CIS COUNTRIES (EXCEPT RUSSIA).
Polymetal is particularly interested in the potential purchase of gold-mining assets in Kazakhstan and other CIS countries.
The project also includes the upgrade of the Varvara gold and copper deposit in Kazakhstan, which the company has been operating since 2009. The deposit is located in the northwest of the country, 130 km from Kostanai and 10 km from the Russian border. Varvara’s plant has a gold processing and concentration capacity of 4.2 million tonnes of ore per year. Gold and copper ore is extracted from open pits. Varvara’s finished products are gold and copper concentrate (float material) and gold dore. In 2011 the plant produced 4 tonnes of gold and 6,915 tonnes of copper. Production in 2012 is expected to be 3 tonnes and 6,000 tonnes respectively.
A 21 km rail spur is due to be built before the end of 2013 to connect the deposit with the plant and increase the quantities of ore transported.
IN ADDITION, NEW LEACHING TANKS WILL BE PURCHASED FOR THE PLANT, THE PIT WILL BE PARTIALLY REEQUIPPED AND EXPLORATION OF THE DEPOSIT WILL BE EXTENDED.
A key element of Polymetal’s strategy is the creation of major regional processing centres. This approach offers opportunities for significant savings on capital and operating expenditure and an increase in the rate of return. One of the processing ‘hubs’ would be set up at Varvara. This will promote exploration and the development of gold and copper deposits in Kazakhstan and Russia.
Polymetal views investment in the assets in the CIS, primarily Kazakhstan, as one of its strategic priorities. “We plan to expand our presence,” says Vitaly Nesis, CEO of Polymetal.
In addition to expanding the company’s geographic reach, investment in CIS countries will increase Polymetal’s production and raw materials base. Polymetal’s investment programme is set to create a major trans-border mining and metallurgical group involving several of the region’s countries.