Alrosa board approves Timir iron ore project shareholders agreement
MOSCOW. Oct 16 (Interfax) - The supervisory board at mining company Alrosa on October 15 approved an agreement to be signed by Evraz plc, Alrosa and Vnesheconombank (VEB), which are shareholders in the Timir iron ore project, Alrosa said in a statement.
The board also approved the sale of one share in Timir to VEB.
The board approved the sale of 51% of the Timir iron ore project to Evraz at a meeting on September 12.
The companies planned to close the Timir deal, worth 5 billion rubles, in the first quarter of 2012. The deal was approved by Russia's Federal Anti-Monopoly Service (FAS) and the European Commission, which took an interest because Evraz is registered in the UK. The FAS approved the application of Cyprus-based Cybridge Limited, a unit of the steel group, at the end of December 2011.
But closure of the deal was held up by the absence of a directive for the government representatives on the board to vote. The directive took time to prepare because Evraz is domiciled abroad and Timir is a strategic deposit. The document was not signed until last week.
The government envisages Timir CJSC becoming an OJSC and Vnesheconombank (VEB) receiving one share in the company by April 1, giving it first right of refusal to buy out a shareholder which wishes to sell. Also, shareholders cannot pull out of the project until key milestones in Timir's development have been reached. Alrosa will retain 49% minus one share in the project.
Alrosa acquired the license to the Timir group of iron ore deposits in May 2008 for 5.39 billion rubles. Under the license terms, Alrosa is supposed to build two processing plants with design capacity of 15 million tonnes each, one for ore from the Tayezhnoye and Desovskoye deposits and the second for the Tarynnakhskoye and Gorkitskoye deposits. It was expected that the plants could reach average annual production of 20 million tonnes of ore in 2018. The company commissioned the calculation of the deposits' JORC resources in 2010.
Alrosa is not planning major investments in the near-term in the Timir project. "Right now only the documentation is being developed, the geology is being clarified and the financial model of the project is being built. Current expenditures on this project in 2012 will fall within 1 billion rubles. We are not talking about big capital investments in the Timir project in the next three years. This is a large project, but it is also very long-term," the company has said. Alrosa and Evraz Group have secured an extension of the license for Timir.
Evraz said earlier that it plans to invest $1.5 billion over five years in the Tayezhnoye iron ore deposit, one of Timir's four iron ore fields. Alrosa planned to open-pit mine 10 million tonnes of ore at this deposit, and process the ore at the Tayezhny GOK plant with capacity for 20 million tonnes per year (another 10 million tonnes of ore would come from the Desovskoye deposit). The plant will produce agglomerate and iron ore concentrate, as well as construction stone.