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EBRD loans to help develop gold deposit in Kyrgyzstan
Two loans from the European Bank for Reconstruction and Development (EBRD) will help Kyrgyzstan increase its gold production and generate hard currency. A US$ 30 million (ECU 22.5 million) senior loan and a US$ 10 million (ECU 7.5 million) subordinated loan to the Kumtor Gold Company were announced today at a signing ceremony in Bishkek, the capital of Kyrgyzstan.
Gunther Vowinckel, Director of Natural Resources at the EBRD, said: “Given the large size of the project relative to the size of the Kyrgyz economy, these loans will have a significant impact on the government’s foreign currency revenue and local employment. The project will demonstrate to the international community the viability of mining projects in the Central Asian region, and will help Kyrgyzstan acquire the technology and management skills to develop further its non-ferrous mining industry.”
The sponsor of the project is Cameco Corporation, a large uranium-mining company in Canada, which has been working in Kyrgyzstan over the past three years evaluating mining opportunities. Cameco - through the wholly-owned Kumtor Mountain Company - formed the joint venture, Kumtor Gold Company, with Kyrgyzaltyn, the Kyrgyz State Concern for gold mining enterprises. Kumtor Operating Company, a wholly-owned subsidiary of Cameco, is to operate the mine for the first 10 years of commercial production.
The total project cost is US$ 360 million, of which US$ 270 million will be debt financed with the balance to be provided by Cameco in the form of equity and shareholder loans. The International Finance Corporation (IFC) will make parallel loans equal to the EBRD’s participation. The Export Development Corporation (EDC) of Canada will provide a US$ 50 million senior loan, and commercial banks, led by Chase Manhattan Bank, will participate with US$ 140 million in parallel loans plus an additional US$ 15 million standby facility which will be insured against political risks by the Overseas Private Investment Corporation (OPIC).
The Kumtor deposit, located in the Issyk-Kol region of Kyrgyzstan, is among the largest in the world. Geological reserves are estimated to contain 16.6 million ounces of gold. Of these, 9.3 million ounces have been identified as mineable by open pit methods at a diluted grade of 3.6 grams per tonne. Production of 500,000 ounces per year is expected to begin in 1997.
In May, the EBRD also signed a US$ 38 million loan to the Kyrgyz Energy Company, guaranteed by Kyrgyzstan, to upgrade the electricity infrastructure in the region and ensure a reliable supply of power to the Kumtor project. Bert van der Toorn, Kumtor project leader at the EBRD, said: “These complementary loans demonstrate the unique mandate of the EBRD to work with public and private sector clients to facilitate the transition process in its countries of operations.”
The EBRD has to date signed loans for three gold-mining projects in the former Soviet Union, providing a total of US$ 175 million of financing with project costs of over US$ 750 million. The Bank is also working on the financing of additional mining projects in the Russian Federation, the Central Asian republics of the former Soviet Union and in central Europe.
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