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. Last Updated: 07/27/2016

Sibirsky Plans Major Expansion

LONDON -- Russia's Sibirsky Aluminum Group plans to increase output at its Sayansk Aluminum Plant to 620,000 tons a year from its current output of 380,000 tons, Senior Vice President Alexander Boulygine said.

The company is seeking banks and a foreign industry partner to finance the enlargement of the smeltery, which would require around $480 million, Boulygine said Tuesday.

"We consider this to be a very interesting and attractive project, given that the world average cost to increase output by one metric ton is between $4,000 and $5,000 while in our case it would cost only between $1,500 and $2,000," he said.

Ideally, the scheme would be 20 percent self-financed, with 30 percent from a foreign partner and 50 percent from foreign banks, Boulygine said in an interview late on Monday.

Sibirsky plans to decide on foreign partners and bankers by October and, after fully structuring the deal, construction could start in May 2000, lasting for three years. Boulygine mentioned Japan's Mitsubishi Corp. as a potential partner.

Monday, Belgium's KBC Bank held a presentation in London for other banks on raising syndicated trade credit facilities for the Sayansk plant on international markets, marking a breakthrough after last year's Russian banking crisis, Boulygine said.

He declined to reveal the sum which was being sought.

"We are very optimistic about the success of this syndication," Boulygine said. He hoped it would pave the way to securing financing for the planned enlargement.

He said foreign banks had faced difficulties during Russia's crisis last year through investments in high-risk instruments but would finance Russian industrial entities which could offer security and show a reliable record.

As a vertically integrated company, Sibirsky could link the expansion with an increase in domestic consumption, avoiding a flood of extra primary aluminum exports which could otherwise hit the international aluminum price.

Apart from Sayansk, Russia's third largest and most modern smeltery, Sibirsky owns an adjoining foil plant, which produces 45,000 tons of foil per year, and Rostar Holding in the Moscow region, which produces 1.5 million beverage cans a year.

Material for the cans comes from Sibirsky's Samara Metallurgical Plant, which was acquired a year ago and has since tripled production to 13,500 tons a month.

Currently, at least 15 percent of output goes to the domestic market, while between 55 and 75 percent is exported directly or via other Sibirsky plants under various forms of tolling agreements, Boulygine said.

He said while there was a already a trend towards a decline in tolling - where the raw material, aluminum, is processed for a third party for a fee and the metal sold - the government might also apply a tax on it.