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Russia's Intergeo Eyes China to Fund $2 Billion Copper Project
Billionaire Prokhorov's company seeks to develop Ak Sug field
China seen as main consumer of copper-concentrate from project
Billionaire Mikhail Prokhorov’s Intergeo MMC Ltd. is turning to China to help develop a $2 billion copper deposit in southern Siberia.
There’s a “strong possibility” the company, which holds the license to the Ak Sug field in the Tyva region, will get Chinese financing for the project, Intergeo Chief Executive Officer John Lill said by e-mail on Monday. It’s working on a loan feasibility study adhering to Chinese standards and may attract at least one equity partner, he said.
Intergeo retained some mining licenses when Prokhorov and his long-time business partner Vladimir Potanin split their assets in 2008. At the time, Prokhorov also sold his stake in Russia’s biggest mining company, GMK Norilsk Nickel PJSC. Intergeo had considered an initial public offering in Canada to fund the development and planned a merger with Vancouver-based producer Mercator Minerals Ltd. to gain a listing, but the deal collapsed last year. Russian companies are looking to China for more funding after relations with Europe and the U.S. worsened because of the conflict in Ukraine.
"Assuming successful financing, we would likely be starting production in around four-and-a-half years,” Lill said. China will probably be the main consumer of copper concentrate produced at Ak Sug, he said.
Intergeo signed an agreement with China Overseas Engineering Group Co. Ltd. and China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. earlier this month for engineering, procurement and construction at Ak Sug, which contains 4.9 million metric tons of copper reserves.
The agreement “is part of a package with the financing and we expect a large Chinese policy bank to join the project," Lill said. "Eximbank has already voiced interest to our partners at NFC,” he said, referring to the Export-Import Bank of China.
Russian companies have had mixed success agreeing on Chinese funding, which may be link to hiring Chinese companies as contractors and having off-take agreements in place ahead of time.
Eximbank didn’t respond to two phone calls and a fax seeking comment.
Developing Ak Sug is still attractive even after copper’s plunge to a six-year low, Lill said. Intergeo should recoup its outlay within about four years from the start of production because higher ore grades will be mined in the first few years, he said.
Lill is a mining veteran who previously held executive positions at BHP Billiton Ltd. and Barrick Gold Corp. and was chief operating officer at Dynatec Corp., overseeing growth projects. He has headed Prokhorov’s company since 2011.
While the market is currently unfavorable for a share offering, there may be “attractive opportunities” in the future, Lill said.
“Such a move would provide additional capitalization for Intergeo’s other projects and also allow existing investors to realize value," he said. Intergeo also holds licenses for other deposits including the Kingash nickel field and the Arbinsk copper-gold project.