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The International Finance Corporation (IFC), the private-sector arm of the World Bank Group and the European Bank for Reconstruction and Development (EBRD), have each signed a US$75mn loan agreement that will provide Russia’s privately-owned Sual group a total of US$150mn to boost Russian production of bauxite, the raw material for the aluminium industry.
IFC and the EBRD will each provide a nine-year loan of US$45mn, making it the longest credit ever obtained by the Russian metal sector. The remaining US$30mn portion of each organisation’s US$75mn facility is syndicated to international banks under an A/B loan structure. The term of the syndicated portion will be seven years.
The plan is to increase annual bauxite output at Sual’s Middle-Timan mine, situated 250km south of the Arctic Circle, to 6mn tonnes from the current 1mn tonnes over the next four years. This will help overcome a major shortage in domestic supplies of bauxite and improve the competitiveness of the Russian aluminium industry as a whole.
This financing supports the first phase of Sual’s Komi Aluminum project, an integrated bauxite mine, alumina refinery and aluminium smelter complex located in Russia’s northern Komi region.
Peter Woicke, IFC’s executive vice-president and managing director of the World Bank Group for Private Sector Development, notes that the project could be a milestone in modernising Russian industry, transforming Komi’s development and employment prospects, and generating important supply opportunities for local businesses. He also notes with pleasure the extensive public consultation on the project being carried out by Sual.
For the EBRD, the logic of this deal is using Russia’s natural resources as a catalyst to develop the economy and reduce bottlenecks, while at the same time setting high standards of business conduct and improving environmental protection, said Noreen Doyle, the EBRD’s first vice-president.
The IFC-EBRD loan is split into two portions: US$100mn for the expansion of the Middle-Timan bauxite mine and US$50mn to fund feasibility studies and preparatory works for an alumina refinery at Sosnogorsk, 245km southeast of the Middle-Timan mine, and feasibility studies for an aluminium smelter at Pechora, 250km northeast of Sosnogorsk. (Alumina is refined from bauxite and then smelted into primary aluminum.)
The refinery and smelter represent phases two and three of Sual’s Komi Aluminum Project. IFC and the EBRD are prepared to consider participating in the next phases of the project once the necessary conditions are met.