On 13 December, the Supervisory Board of the state-owned development corporation VEB.RF approved a syndicated financing transaction for the Acron’s project to develop the Talitsky area of the Verkhnekamsk potassium-magnesium salt deposit in Perm Krai. The meeting was chaired by VEB.RF Supervisory Board Chairman and Russian Prime Minister Dmitry Medvedev.
In his opening remarks, Medvedev noted: “The projects we are talking about will help boost non-resource, non-energy exports. Today we will discuss VEB’s participation in developing the Talitsky area of the Verkhnekamsk potassium-magnesium salt deposit, including construction of the ore mining facilities and the beneficiation plant. Commissioning is scheduled for 2023, and full capacity is expected to be reached in 2026. This will create 2,300 new jobs in Perm Krai”.
At the St. Petersburg International Economic Forum (SPIEF) 2019, Acron, VEB.RF and a number of commercial banks agreed to finance the Talitsky area development. Operated by Verkhnekamsk Potash Company (a subsidiary of PJSC Acron), the project involves creating an export-oriented production facility to extract 7.5 million tonnes of ore and produce 2 million tonnes of potassium chloride per year.
VEB.RF Chairman Igor Shuvalov said, “Acron has been working to launch this project for several years. We put the transaction together using our Project Finance Factory mechanism in the form of a syndicate in cooperation with some of the largest commercial banks”.
Capital expenditures are expected to total USD 2.6 billion (including previously incurred expenses and VAT). USD 1.45 billion in debt financing is required, of which USD 1.17 billion will be provided by Gazprombank, Otkritie Bank, Sberbank and VTB, and USD 280 million will be financed by VEB.RF. In addition, VEB.RF provides a reserve tranche of USD 360 million, which can be used to pay interest and cover possible cost overruns. A syndicated loan for up to 13 years will be provided to finance the project’s investment costs. In particular, credit facilities will be allocated to finance the completion of construction (sinking) of vertical shafts, mine development and construction of the beneficiation plant and related infrastructure.
Chairman of Acron’s Board of Directors Alexander Popov commented: “We are confident that VEB.RF‘s Project Finance Factory has restarted project financing and made it available to Russian companies. Acron has learned through experience that foreign banks are not ready to provide financing for large-scale projects in the Russian Federation without recourse to the main business. The Factory’s support tools made it possible to cover a significant portion of the risks, which removed friction for the commercial banks. As a result, about 80% of the loan will be provided by four leading Russian banks: Gazprombank, Otkritie Bank, Sberbank and VTB. Our potash project will create more than two thousand new jobs in the region and increase the nation’s non-resource exports. We have already signed a special investment contract with the Ministry of Industry and Trade of Russia and Perm Krai, and our project was recently recognised among corporate competitiveness programmes (CCP). I am certain that successful implementation of our potash project will become a landmark for the Russian market and serve as an example for other major projects in the industry”.
The Talitsky area is located in the eastern edge zone of the southern part of the Verkhnekamsk potassium-magnesium salt deposit in Perm Krai. The site measures 12.1 km at it widest point and 10.6 km at its longest point, with a total area of over 69 sq km. A detailed exploration of the Talitsky area was carried out in 1968. Category A + B + C1 balance reserves total 726 million tonnes. The average content of KCl in the ore is 31%. Verkhnekamsk Potash Company acquired its licence to develop the Talitsky area in 2008. The aim of the project is to further the Group’s vertical integration by creating a potash resource base for the production of complex fertilisers and to boost the nation’s non-resource exports.