Russia good as gold for Cyprus Amax

Far Eastern Russia is the site of the latest historic business agreement between the former Soviet Union and Western nations. The U.S. Overseas Private Investment Corp. (OPIC) and the London-based European Bank for Reconstruction and Development (EBRD) have agreed to lend a total of US$100 million so that the Kubaka gold mine can be developed.

Representatives of both the Russian and the American governments were on hand for the signing. Russian Prime Minister Viktor Chernomyrdin and U.S. Vice-president Al Gore took time away from their discussions to witness the event. Gore was in Russia for the meeting of a commission interested in discussing economic co-operation between the two countries.

The operation, situated 600 miles northeast of the city of Magadan and 200 miles south of the Arctic Circle, is owned by Omolon Gold Mining, a joint venture consisting of Cyprus Amax Minerals (NYSE) and six Russian partners.

The partners include Magadan Gold-Silver, Geometal, Dukat Mining Kombinat, Elektrum, Rusiski Credit Bank and the Native Peoples of the Severo-Evensk District East.

Cyprus Amax, through its wholly owned subsidiary, Cyprus Magadan Gold Mining, owns half of Omolon and will operate the project.

OPIC will contribute a US$52.5-million loan and issue US$60 million in political risk insurance to Cyprus Amax, while EBRD will pitch in another loan for US$47.5 million. This is the first financial commitment in Russia for both OPIC and EBRD. (The remainder of the funding, which amounts to US$80 million, will come from the Omolon partners.)

The Kubaka open-pit mine is expected to produce 310,000 oz. gold and 235,000 oz. silver annually over the 7-year life of the mine. According to a Reuter’s report, the processed ore will be sold to the Russian Committee for Precious Metals.

Construction of the mine and processing facilities have already begun, with startup scheduled for 1996.

Milton Ward, chairman of Cyprus Amax, descibes the project as a pioneering venture for Russia as well as for the company, adding that it will “benefit all parties with jobs and local business.”