OREANDA-NEWS. November 13, 2012. Acron Group has attracted Russian and international investors to participate in its project to develop the Talitsky area of the Verkhnekamsk potassium-magnesium salts deposit in Perm Krai, which is being implemented by Verkhnekamsk Potash Company (VPC). As part of this project VPC will construct and commission the Talitsky mine to provide Acron Group’s facilities with potash for complex mineral fertiliser production, and enter the supplier market for this raw materials.

The project finance structure involves both equity and debt financing. For the first stage, as part of the equity financing, VPC’s share capital has been increased by RUB 16.4 bn (USD 522.5 mn)[1], of which RUB 12.8 bn (USD 405.7 mn) is provided by third-party investors represented by State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’, Eurasian Development Bank and ZAO Raiffesenbank. The private placement of additionally issued shares among interested investors has been completed.

Based on the additional share issue report and the registration of changes in VPC’s constituent documents, Acron Group and other investors currently own the following stakes in the company’s authorised capital:

Vnesheconombank — 20% minus 1 share

Eurasian Development Bank — 9.10%

ZAO Raiffeisenbank — 8.95%;

Acron Group (via JSC Acronit) — 61.95%.

The investments attracted shall be used to finance the Talitsky mine construction, primarily to perform shaft boring as the most important stage of the potash project. The total amount of capital expenditures required for the project is estimated at USD 2 bn, excluding the cost of the mining licence for the Talitsky area, which was about USD 700 mn. At this stage the external investments will allow full-scale construction of the Talitsky mine to start as early as Q4 2012.

Debt financing by Vnesheconombank in a form of USD 1.1 bn credit line facility is planned for further project development in 2014 on the terms agreed upon by the parties.

Chairman of Acron’s Board of Directors Alexander Popov commented on the transaction results:

“Development of the Talitsky area of the Verkhnekamsk potassium-magnesium salts deposit is a key factor for demonopolisation of this industry and will therefore allow Acron Group to implement in full its strategy of converting into a vertically-integrated holding.

“It is obvious that implementation of any greenfield project in the mining industry is risk-bearing. However, Acron Group has already been successful with several large-scale investment projects, including raw material projects, and proved its responsible approach and commitment, ability to meet deadlines and stay within budget. The government’s estimation of the project’s importance and potential and its confidence in our Company have helped us attract important financial investors as VPC shareholders.

“At present, we have attracted sufficient financing for full-scale construction of the Talitsky mine. We intend to use the Vnesheconombank credit line facility in the future which guarantees further financing of the project’s development. We are confident in our ability to launch the new potash production facility at the Talitsky area in 2016 and that our investors will benefit from the upside of the company’s value.”

Deputy Chairman of Vnesheconombank Anatoly Ballo said:

“The project of development of Verkhnekamsk potassium-magnesium salts deposit is the first experience of cooperation between Vnesheconombank and Acron Group and is the bank’s largest project in the Privolzhsky Federal District.

“At the moment, we are satisfied with the cooperation results and we are looking forward to expanding it in future in order to execute the potential of Vnesheconombank as the Bank for Development”

Chairman of the Managing Board of ZAO Raiffeisenbank Sergey Monin commented on the completed transaction:

“Participation of our bank in this long-term project proves the interest of ZAO Raiffeisenbank in the Russian market in general, and witnesses our confidence in further growth and development of the Russian economy.

“I would like to note that this transaction is unique for the Russian market, taking into account that the financing was attracted at the earliest initial stage of the project. Not only do we consider this sector as greatly promising and investment-attractive both on the Russian and the international markets, but we also highly appreciate the experience and expertise of Acron’s management and shareholders, and we are confident that they are able to successfully implement this project.”

“Direct participation of Eurasian Development Bank in the capital of the company set up to implement the project of Acron Group amounts to approximately USD 100 mn, – noted the Deputy Chairman of the EDB Executive Board Dmitry Zhurba. – This is the first project of EDB using a direct participation in the capital of a real sector company. The EDB participation in the capital as an international development bank is due to the significant influence of this large-scale project on achieving a sustainable growth of the Russian Federation economy, on developing an export-oriented production in Russia and on expanding the competition on the potash fertiliser market and its demonopolisation. Furthermore, the project will have innovative and social effects. The former will involve introduction of modern technologies and installation of high-efficiency equipment on the production facility which will allow integrated and efficient utilisation of minable resources. The latter effect suggests creating a large number of jobs, regional development and increasing tax revenues.”