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. Last Updated: 07/27/2016

EBRD, SBL Team Up For Gold Export Project




The European Bank for Reconstruction and Development and Standard Bank London on Tuesday announced a three-year joint program to finance Russian gold exports that aims to back as much as $120 million a year worth of exports by 2001.


Under the initial program this year, EBRD and SBL will advance 35 percent of the agreed amount in advance payment and pay out the remaining 65 percent upon completion of the deal, allocating funds to mining customers of Moscow-based Bank Zenit.


Before the end of this year, the two banks intend to buy 2.2 metric tons, worth some $21.7 million at current gold prices.


"This is an entirely new source of financing for the sector," Paul Shapiro, principle banker for natural resources at the EBRD's London office, said at a Moscow news conference Tuesday.


All of the gold exported from Russia under the EBRD facility will be bought by SBL, which has agreed to contribute 30 percent of the project's financing.


"We can take gold that is not considered good delivery in London and place it directly with our customers," said Chris Frith, general marketing manager with SBL


Under the terms of the agreement, EBRD and SBL may buy up to 12 tons of gold a year, more than 10 percent of local production.


The local gold industry is expected to up output to some 115 tons this year from 100 tons in 1999.


The Central Bank's gold reserves remained virtually unchanged in recent years at 500 tons because up to 90 percent of extracted gold is being exported.


The local gold industry received a boost after the August 1998 crisis, which stimulated some commercial banks to start lending to producers. The collapse of the Russian treasury- bill market destroyed most financial institutions' easiest source of earnings, so many banks were forced to find new areas of activity.


"The choice of instruments for commercial banks is very limited," said Vadim Nikolayev, deputy head of the precious-metals department with Lanta Bank.


The top operators on the market include Sberbank, Vneshtorgbank and Rosbank, but the industry faced a tide of newcomers this year.


"There are precious-metals departments in almost any decent bank," Nikolayev said.


Banks operating on the gold market can sell purchased gold to the Central Bank, local industrial companies or individuals and those foreign banks that have traditionally had a strong presence on the world gold market.


The EBRD program is starting up at a time when local gold producers do not face difficulties in raising financing, Nikolayev said.


By the beginning of this month, banks had signed contracts for extraction of 107 tons of gold this year, said Valery Braiko, chairman of the Union of Gold Producers.