China Development Bank provides $148.5 million loan for Bozymchak Copper and Gold Mine Development Project

In June 2009, China Development Bank (CDB) agreed to provide a $3 billion line of credit to JSC Sovereign Wealth Fund Samruk-Kazyna (also known as ‘Samruk-Kazyna’). Borrowings through the line of credit were to be used for the development of infrastructure and resource projects in Kazakhstan. Then, on October 13, 2009, KAZ Minerals PLC (also known as ‘Kazakhmys Corporation LLC’ and ‘Kazakhmys’) announced that it was in discussions with CDB and Samruk-Kazyna regarding a major unsecured loan facility. Following a memorandum of financial cooperation that was signed by Kazakhmys, Samruk-Kazyna and CDB on November 14, 2009, $2.7 billion from the $3 billion line of credit was allocated to various projects of KAZ Minerals PLC. Then, on December 30, 2009, KAZ Minerals Finance PLC (also known as Kazakhmys Finance PLC) — a special purpose vehicle and wholly owned subsidiary of KAZ Minerals PLC — and Samruk-Kazyna signed a $2 billion facility (loan) agreement for the Bozshakol Copper Mine Development Project. On the same day, KAZ Minerals Finance PLC and Samruk-Kazyna signed a $100 million facility (loan) agreement for the Bozymchak Copper and Gold Mine Development Project. Thirteen days later, on January 12, 2010, KAZ Minerals Finance PLC and Samruk-Kazyna signed a $200 million facility (loan) agreement for the Abyz Copper Mine and Nurkazgan Copper Mine Development Project. Then, on June 11, 2012, KAZ Minerals Finance PLC and Samruk-Kazyna signed two additional loan agreements: a $200 million facility (loan) agreement for the Akbastau-Kosmurun Copper Mine Development Project and a $200 million facility (loan) agreement for the Zhomart Copper Mine Development Project. All five loan agreements (collectively worth $2.7 billion) were financed by Samruk-Kazyna via borrowings from the $3 billion CDB line of credit. All of the loans carried the following borrowing terms: maturities of between 12 and 15 years (with final maturity dates falling between January 2022 and August 2025), 3 year grace periods (with the first loan repayment scheduled for January 2013), annual interest rates of LIBOR plus a 4.80% margin, and 1.5% management fees. A separate fee of $3 million was also payable under the loan agreements for the Akbastau-Kosmurun Copper Mine Project and the Zhomart Copper Mine Development Project. All of the loans were also backed by repayment guarantees from KAZ Minerals PLC and a subsidiary of Samruk-Kazyna. All five loans reportedly disbursed in full by January 2013. The remaining $300 million under the $3 billion CDB line of credit was utilized (drawn down) by Samruk-Kazyna for an unknown purposes and fully repaid in January 2013. In January 2014, KAZ Minerals PLC fully repaid its loans for the Akbastau-Kosmurun Copper Mine Development Project and Zhomart Copper Mine Development Project (since the development of these projects was no longer expected to commence in the near future). Then, on December 29, 2014, two of the loan agreements that KAZ Minerals Finance PLC had previously signed with Samruk-Kazyna (via on-lending from the CDB line of credit) were transformed into bilateral loan agreements with CDB: the loan agreement for the Bozshakol Copper Mine Development Project and the loan agreement for the Bozymchak Copper Mine Development Project. At that time, the face value of the loan for the Bozshakol Copper Mine Development Project was $1,844,000,000 (most likely because some repayments were made between January 2013 and December 2014) and the face value of the loan for the Bozymchak Copper Mine Development Project was upsized to $148,500,000 (for an unknown reason). At that time the borrowing, terms of the two loans with outstanding balances were rescheduled. The interest rate was lowered from LIBOR plus a 4.80% margin to LIBOR plus a 4.50% margin; and an arrangement fee of 0.5% was agreed upon, of which 60% was paid in December 2014 and 40% was paid in January 2016. The maturities and grace periods of the loan were left unchanged. KAZ Minerals PLC continued to serve as a guarantor for the loans. However, as an additional credit enhancement, the borrower pledged a $100,000,000 minimum cash balance in a charge account (collection account) as a source of collateral. The amended, bilateral loan (facility) agreements between CDB and KAZ Minerals also clarified that the loan proceeds were to be used by the borrower ‘principally for the development of the Bozshakol and Bozymchak [mine] projects.’ As of December 31, 2020, $1.0 billion was drawn down by the borrower under the $1,844,000,000 CDB loan agreement and the $148,500,000 CDB loan agreement. During 2020, the borrower made a $183 million repayment. An additional $181 million repayment was due in 2021. Both CDB loans are repayable in semi-annual installments each January and July with final maturity dates in August 2025. Project ID#61056 captures the $1,844,000,000 loan for the Bozshakol Copper Mine Development Project and Project ID#40241 captures the rescheduling of that loan. Project ID#96105 captures the $148,500,000 loan for the Bozymchak Copper and Gold Mine Development Project and Project ID#96106 captures the rescheduling of that loan. Project ID#95747 captures the $200 million loan for the Abyz Copper Mine and Nurkazgan Copper Mine Development Project, while Project ID#95748 captures the $200 million loan for the Akbastau-Kosmurun Copper Mine Development Project and Project ID#95749 captures the $200 million loan for the Zhomart Copper Mine Development Project. Project ID#95750 captures the $300 million borrowing by Samruk-Kazyna for an unspecified purpose. The Bozshakol mine is a large copper mine located in the North Kazakhstan Region. The scope of the Bozshakol Copper Mine Development Project included the construction of 22 km of highway and 18 km of access roads connected to the mining production site, the construction of 26 km of railroad, the installation of 130 km of pipelines and 500 km of cabling, the installation of fully automated Production Control Systems, the construction of a 5.5 km long Tailing Dam and related structures, the construction of various permanent buildings (measuring 39.000 m²), and the construction of concrete, steel-prefabricated buildings. The project sought to establish facilities able to mine 30 million tons per year. A $560 million EPC contract for the Bozshakol Copper Mine Development Project was signed between KAZ Minerals PLC and Alarko Contracting Group on September 20, 2011. China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (NFC) was also involved in the project’s complementation. Mobilization work started in March 2012 and construction of the temporary site building and facilities were completed in the same year. Approximately 42.000 m³ of concrete production and 5.000 tons of steel construction were completed by May 2013. The panel coating works of the process buildings started in May 2013. The project was originally scheduled to reach completion on March 15, 2015. The completion of construction activities and the commencement of commissioning works was ultimately held on September 29, 2016. The Bozymchak mine is an open-pit copper and gold mine and concentrator in Ala-Bukinsky region, Jalal-Abad, Kyrgyzstan (exact locational coordinates: 41.2586, 71.0647). It is estimated to contain combined indicated and inferred resources of 16.5 million tons with 0.95% copper and 1.58 g/t gold. The scope of the project involved the development of the mine and its ancillary facilities. NFC was responsible for implementation. The project’s pre-feasibility study was completed in July 2008. It was originally expected to reach completion by December 2014. However, the mine was not initially commissioned until March 2014. The mine was fully commissioned and reached its commercial operations date (COD) on or around August 5, 2015. The Bozymchak mine restarted operations on December 26, 2020 after a temporary suspension that began on October 7, 2020, following political instability in the Kyrgyz Republic. The Abyz Copper Mine and Nurkazgan Copper Mine Development Project involved the development of the Abyz copper mine and the Nurkazgan copper mine (exact locational coordinates: 50.16861, 73.00333). Stripping works at Abyz mine commenced in January 2014. At that time, it was expected that the mine would recommence production in Q3 of 2014. The Akbastau-Kosmurun Copper Mine Development Project involved the development of the Akbastau-Kosmurun copper mine (exact locational coordinates: 48.60611,77.78861 and 48.6437, 77.7102). The project commenced on January 30, 2009. Its completion date is unknown. The Zhomart Copper Mine Development Project involved the development of the Zhomart copper mine, which exploits the 14 km long Zhaman-Aybat orefield deposits that are located approximately 160 km southeast of Dzhezkazgan. The first stage of the mine’s development was commissioned in 2006 with a planned capacity of around 4 million tons of ore a year. The second phase of the project was schedule for implementation from 2012 to 2017 with a production start in 2018. The de facto completion date of the $300 million loan that Samruk-Kazyna contracted for an unspecified purpose was January 2013 (when it was fully repaid).

Additional details

1. AidData has estimated the all-in interest rate by adding 4.8% to average 6-month LIBOR in December 2009 (0.453%). 2. The maturity was set to 15.66 years (as the loan was contracted on December 30, 2009 and the final maturity date was in August 2025). 3. The December 30, 2016 account charge agreement can be accessed in its entirety via https://www.dropbox.com/s/4ltc43plbpdibad/Kaz%20Minerals%202016%20Account%20Charge%20Agreement.pdf?dl=0.

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