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Feb. 23, 2019, 3:24 p.m. EST

Russian Federation : Sberbank, Gazprombank and VEB.RF agree to finance construction of Udokan mining and smelter works as part of Project Finance Enterprise

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Feb 23, 2019 (Euclid Infotech Ltd via COMTEX) -- Sberbank, Gazprombank, VEB.RF and Baikal Mining Company (part of USM Holding) have agreed on the financing of a project for first-stage development of the Udokan Copper Field and the construction of a mining and smelter works in the Kalarsky District of the Zabaikalsky Region. The framework conditions for financing are established by an agreement between the partner banks and the Baikal Mining Company, which was signed at the Russian Investment Forum in Sochi.

The credit facilities will be structured in accordance with principles of project financing in the form of a syndicate of Russia banks, and will feature single-purpose tranches and a subsidised interest rate. On behalf of Sberbank the document was signed by Deputy Chairman of the Executive Board Anatoly Popov, on behalf of Gazprombank by Deputy Chairman of the Executive Board Alexey Belous, on behalf of VEB.RF by First Deputy Chairman and Member of the Board Nikolay Tsekhomsky, and on behalf of Baikal Mining Company by Chairman of the Board of Directors Valery Kazikayev. The project has a total budget of $2.9 bln (including investments of shareholders, VAT and financing costs). The 12-year syndicated loan will be used to finance investment and operating costs, including equipment delivery and construction work.

Sberbank will provide 40% of the financing, Gazprombank will provide 40%, and VEB.RF will provide 20% under the framework conditions. Deputy Chairman of the Executive Board of Sberbank Anatoly Popov: Lending to Udokan is a matter of national importance because Russian companies need copper, and it continues to be a strategic export. As one of Russias biggest banks, Sberbank always plays a leading role in national economic issues, both as part of state programmes, and under separate agreements.

First Deputy Chairman and Member of the Board of VEB.RF Nikolay Tsekhomsky: This is the Enterprises first deal involving three lenders two major commercial banks and VEB.RF. This tool creates the conditions for mutually beneficial cooperation between commercial banks when organising high-value financing. All the rouble-denominated tranches, including those provided by the partner banks, will be covered by a state subsidiary that offsets the growth of the key rate throughout the lending term. VEB will also provide an additional tranche to pay interest at the investment stage of the project.

Chairman of the Board of Directors of Baikal Mining Company Valery Kazikayev: Initially we planned to use project financing. However, shareholder participation will account for no less than 30% of the total investment, taking into account the 28.5 bln roubles that have already been invested. I am certain that participation of Russian state-owned banks and a major development institution will help us achieve the most effective terms for financing and a 100% guarantee that the production facility will be launched in 2022. Udokan is Russias largest undeveloped copper field and among the largest in the world. It is planned that in late 2021 commissioning work will begin, and by mid-2022 the facility will reach its annual projected capacity of 12 mln tonnes of ore.

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