A team from international legal practice Norton Rose LLP has advised IRC Limited in relation to the construction of a major new iron ore processing and beneficiation facility
Friday, December 17th, 2010
A team from international legal practice Norton Rose LLP has advised IRC Limited in relation to the construction of a major new iron ore processing and beneficiation facility at its K&S site in the EAO region of east Russia, about 60 kilometres from the Chinese border.
The project will be financed in part by a US$340 million loan facility agreed with the Industrial and Commercial Bank of China Limited (ICBC).
Kimkano-Sutarsky Mining and Beneficiation Plant LLC (“KS”) (a wholly owned subsidiary of IRC Limited) entered into an engineering procurement and construction (EPC) contract with China National Electric Equipment Corporation (CNEEC) to construct the new facility, in a deal worth US$400 million. US$312 million will be put towards the design and construction of the iron ore processing and beneficiation plant, and US$88 million will be put towards the related infrastructure works. The remaining funding will come from the US$240 million IPO carried out on the Hong Kong Stock Exchange by IRC Limited in October 2010, on which Norton Rose also advised.
The site itself is expected to yield more than 3 million tonnes of ore concentrate per year once Stage 1 is fully operational. KS is also developing further rail, road and mining support infrastructure at the site in order to put the mine and beneficiation facilities into initial operation in 2013.
With the financing in place, construction is now expected to start in early 2011. The project constitutes the first stage of development on the site which will eventually lead on to further stages of mining infrastructure development at the site in order to exploit IRC Limited’s other extensive iron ore deposits in the region.
The project is a number of firsts for Chinese support of Russian mining projects including no sovereign guarantee requirements, the first Sinosure financing into a mine in Russia and a first mining transaction for CNEEC into Russia.
Martin McCann, London based partner and group head of infrastructure and commodities at Norton Rose LLP, commented:
“This is the first Sinosure financing into a mine in Russia. Like all firsts they can take some time as there are no precedents to follow. This is a great result for all parties and IRC is delighted. It required us to link in mining experts across our London, Beijing, Hong Kong and Moscow offices.
“This is by no means a first for our mining practice in terms of advising on accessing Chinese finance for mines. We have advised international developers or the Chinese banks on many of the largest Chinese financings. Examples include advising Anshan Steel & Iron on the US$1.2bn project financing for the development of the Karara iron ore project in Western Australia. We have a team dedicated to such work. The liquidity gap tends to preclude international banks competing for the larger deals and hence we see a massive surge in debt and supplies sourced from Chinese providers. This is also a natural fit for IRC Limited, which is Hong Kong incorporated and listed, a factor which is very important in the Sino-Russian dynamic.”
The Norton Rose LLP team advising on the loan facility was led by London based partner and group head of infrastructure and commodities Martin McCann (London), assisted by Daniel Metcalfe (senior associate – London). Vladimir Loktionov (senior associate – Moscow) and Maxim Filimonov (associate – Moscow) assisted on Russian law aspects of the financing arrangements.
The team advising on the EPC agreement was led by Mark Berry (partner – London), assisted by Matthew Hardwick (associate – London) and Elena Razina (associate – Moscow).
Mark Berry, London based partner in the infrastructure and commodities team at Norton Rose LLP, commented:
“This represents a major success for IRC, allowing it to start working in earnest on releasing the huge potential of its K&S site. We know that Chinese contractors are willing to adopt international precedents and recognise the project financing sensitivities provided they have the opportunity to negotiate their own key project specific concerns. Our extensive mining and infrastructure experience and knowledge of previous deals involving Chinese contractors enabled us to help broker a deal to achieve a key goal of delivery of iron ore processing facilities on time and on budget.”