RNS Number : 0445J
23 March 2010
23 March 2010
Chinese funding and co-operation agreements re Iron Ore Assets
Petropavlovsk PLC ("Petropavlovsk" or the "Company") today announces that it has agreed the terms of a Term-Sheet for the funding of stage 1 of its Kimkano-Sutarskiy ("K&S") iron ore mining operation in Russia's Far East ("Stage 1") and has entered into a Co-operation Framework Agreement for the implementation of the K&S and Garinskoye projects.
Petropavlovsk, which owns the licences for the K&S deposits and has concluded the preliminary design for Stage 1 of the construction and operation of the mining and processing operation at K&S, has agreed an indicative loan Term-Sheet with Industrial and Commercial Bank of China ("ICBC") and mandated them for the financing of Stage 1.
Furthermore, Aricom Limited and LLC KS GOK (both wholly owned subsidiaries of the Company) (together, "the Group"), have entered into a Co-operation Framework Agreement jointly with China National Electric Equipment Corporation ("CNEEC") and ICBC for CNEEC to act as engineering, procurement and construction ("EPC") contractors and ICBC to act as finance providers, for the development of Stages 1, 2 and 3 of the K&S and Garinskoye projects.
The Co-operation Framework Agreement was signed today in Moscow in the presence of Mr. Xi Jinping, Vice President of the People's Republic of China and First Secretary of the Secretariat of the Communist Party of China Central Committee and Russian Deputy Premier Aleksandr Dmitriyevich Zhukov.
The Term-Sheet for the loan, agreed by the Group and ICBC as part of the mandate, relates to the facility for the development of Stage 1. The amount to be lent would constitute 85% of the total amount of theproposed cost of the EPC contract (currently estimated at c.US$400m and with a total limit of US$500m to include other possible items). It is also proposed that Sinosure will provide ICBC with a credit guarantee appropriate for a facility of this kind. The loan term would be for up to 10 years and would be guaranteed by the Company. The availability of the loan is subject to the entry into definitive documentation and to a number of conditions precedent, including due diligence, credit committee approval and Sinosure approval.
The broader Cooperation Framework Agreement was signed by the Group, ICBC and CNEEC to record the intentions and respective roles of the three parties to implement Stages 1, 2 and 3 of the K&S and Garinskoye projects, with ICBC providing the debt finance, and CNEEC acting as the EPC contractor. Signature of the agreements is a significant step forward for the Group's non-precious metals division.
Founded in 1984, ICBC is China's largest bank and has become the largest bank in the world in terms of market value. As of 2009, it had assets of US$1.6 trillion, with over 18,000 outlets including 106 overseas branches and agents globally.
CNEEC is a large Chinese State-owned group of companies, primarily engaged in EPC contracting, equipment supply, engineering consultation, design, project management and engineering supervision in the sphere of thermal power, hydropower, transmission and distribution of power, environmental, industrial and commercial projects, both in China and abroad.
Stage 1 of the K&S project development contemplates a 10mtpa mining operation yielding c.3.2mpta of 65% iron ore concentrate with commercial production commencing in 2013. Total capital expenditure is estimated at c.US$400m. Initially, the processing plant will have a design capacity capable of processing 10 mtpa of run-of-mine ore from Kimkan deposit. Stages 2 & 3 of the project envisage the development of the Garinskoye deposit and the further beneficiation of the 65% concentrate to a form of metallised nuggets.
Peter Hambro, Petropavlovsk Chairman, said:
"With iron ore prices at recent highs and the imminent start of full commercial production at our Kuranakh project, it is timely to announce the next step in the development of our non-precious metal division.
Sourcing appropriate funding for the K&S project has been a priority for the Group and we are delighted that we have found strong partners in ICBC and Sinosure. CNEEC is a strong EPC contractor with significant experience and we look forward to working with them."
This information is provided by RNS
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