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Eurasian Resources Group and VTB Group reach agreement on six-year, €300M prepayment deal for aluminium supplies
Eurasian Resources Group (ERG), a leading diversified natural resources producer, and VTB Group have concluded a strategic agreement to provide a six-year, €300M financing arrangement for aluminium supplies from ERG.
The financing is provided by VTB Capital for JSC Kazakhstan Aluminium Smelter (KAS) in the form of a prepayment, with aluminium supplies serving as a guarantee. Over the term of the agreement, the aluminium supplies will total 660 kt. The long-term contracts between VTB Capital and the end users of the metal are already in place.
A hedging strategy will provide KAS with an opportunity to set the aluminium sale price within a certain range, and to fix it at a level not below this range in order to provide higher cash flow stability.
Benedikt Sobotka, Chief Executive Officer of Eurasian Resources Group, said: ‘The agreement with VTB is our first long-term financing arrangement that will ensure steady operation of the Kazakhstan Aluminium Smelter and secure guaranteed sales for the duration of the agreement. As the only aluminium producer in the Republic of Kazakhstan, we are well-positioned to maintain our leadership in the high-grade aluminium market.'
Vitaly Buzoverya, Head of the Credit Department and Senior Vice President of VTB, said: ‘The current agreement will reinforce our market operations in the commodities sector, a priority area for VTB’s activities. The extension of the range of products and services to our clients in the commodities market is of strategic importance.’
KAS has a production capacity totaling 250 ktpa of aluminium per year with a trademark registered on the London Commodity Exchange.
Its production technology is commended for its excellence in innovation and has secured high environmental credentials, which puts KAS among the top ten best aluminium plants worldwide.
The plant operates a closed waste management cycle and uses unique gas cleaning equipment from the French engineering group Alstom which can capture up to 99.7% of all harmful atmospheric emissions. KAS launched an ISO 50001 energy management system in 2014. Since then, it reduced electrolytic aluminium power consumption by 1.4% vs. standard value, and by 2.7% vs. design value, which is the world’s best practice. Overall, in nine years since the commissioning of the plant, power consumption to produce a ton of primary aluminum was reduced threefold. The plant also independently produces anodes used for aluminium production, which allows it to further reduce the production costs.