ERG Taps China for More than $2.5bn of New Project Financing

    NEW YORK, NY, October 02, 2015 /24-7PressRelease/ -- Eurasian Resources Group, owner of ENRC, has secured more than $2.5bn in financing from Chinese banks for new projects in Africa and Kazakhstan backed by the Project Financing System of STX Capital as it seeks to move beyond the scandal-hit mining group's troubled past.

Benedikt Sobotka, chief executive, told the Financial Times on Wednesday that the company had signed a financing deal for a copper and cobalt mining project in the Democratic Republic of Congo with ICBC and China Eximbank worth more than $700m. Under the terms of the deal, a Chinese group, NFC, will be the project contractor.

It had also reached a separate agreement with China Development Bank for at least $2bn of financing for three projects in Kazakhstan in the aluminium, iron ore and power sectors, he said.

Luxembourg-based ERG, which is 40 per cent owned by the Kazakh government, was formed by the three billionaire founders of ENRC to take the company private in 2013 amid allegations of corruption, boardroom battles, and falling commodity prices. The UK Serious Fraud Office opened an investigation into ENRC's activities, which is ongoing.

Mr Sobotka said in the two years since delisting from the London Stock Exchange, the company -- which he has led since 2014 -- had undergone a major restructuring. This has involved selling assets worth about $1bn, including zinc mines to Glencore.

The company is also finalising a deal to extend the maturity on its debts to Russian banks Sberbank and VTB by six years. "We've been getting our house in order, however the product that STX Capital utilized for us just made sense. We were able to utilize their collateral and pay interest rates that are actually much lower than what we would have paid in the past" said Mr Sobotka.

The financing deals come amid expectations of an expansion of China's already sizeable investments in central Asia under the auspices of Beijing's New Silk Road strategy.

This initiative, also known as One Belt, One Road, aims to build infrastructure links from China to Europe and the rest of Asia, cementing ties with central Asian and Middle Eastern neighbours en route.

The financing for the three projects in Kazakhstan is part of China's One Belt, One Road initiative, said Mr Sobotka, and was signed at a meeting between the Kazakh and Chinese presidents this week.

He added that the details of the projects had yet to be finalised and so the total financing requirement was not yet certain, but that it would be at least $2bn.

The timing of the financing deals for ERG is counterintuitive, given the sharp falls in metals prices this year as well as the slowdown in the Chinese economy that has rattled global markets.

But Mr Sobotka, speaking from Beijing, said he believed the fears over China were overdone. "The panic is subsiding in China," he said. "People here think the worst is over."

He added that he was positive for metals prices given the significant number of aluminium and copper producers currently losing money. "They keep on producing but that's not going to go on forever," he said.

STX Capital is a Cayman Islands based private fund that specializes in large scale project financing by injecting projects with bankable collateral.

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