Monday, March 28, 2011

ENRC could face row over £1.3bn Chinese aid By Richard Orange

 ENRC, the FTSE 100 mining giant, has yet to accept a £1.3bn Chinese loan arranged for it by the Kazakh government, putting it on course for a clash with Nursultan Nazarbayev, the country’s long-standing president.

 Mr Nazarbayev last month presented the loan from China Development Bank as one of the greatest successes of a three-day state visit to Beijing. He earmarked almost £1bn to the Sokolovsko-Sarbaiskoye iron-ore unit, and £250m for development at the company’s Kazchrome unit.
 But Zaure Zaurbekova, ENRC’s finance director, revealed in an interview with The Telegraph that the company’s management had not been involved in arranging the loan, and had yet to sanction either of the two projects.
 “We are not party to this agreement,” she said. “These two projects were included in the government’s list of 30 important industrial projects, and the government of Kazakhstan looked to the Chinese side for the possible financing of these projects.”
 She said that the company’s finance department planned to meet with Samruk-Kazyna, the Kazakh Sovereign Wealth fund which signed the loan agreement, to discuss the terms. ENRC would then benchmark any loan offered with loans available through international banks. “For us, it is very important whether this money is competitive or not,” she said.
 ENRC’s board will soon meet to discuss whether to give the go-ahead to the expansion projects at Sokolov-Sarbai and Kazchrome, she added.
 The projects, both part of the company’s investment plan when it listed on the London Stock Exchange at the end of 2007, were deferred after metals prices slumped shortly afterwards. Since then the company has instead invested in a string of acquisitions in Africa and Brazil, drawing criticism from its home country.
 The company said at last week’s preliminary results that a feasibility study into the construction of a high quality pelletiser plant and a hot briquetted iron (HBI) plant, the most important planned investments at its iron ore business, was still ongoing, and would be completed by 2014, if sanctioned by the board.
 Ms Zaurbekova said ENRC’s management had only been informed of plans for a loan for ENRC in December, by which time talks between Samruk-Kazyna and China Development Bank were already far-advanced.


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