June 13, 2011 / 6:11 AM / 6 years ago

UPDATE 2-Kazakhmys secures $1.5 bln China copper loan

* China Development Bank to supply loan by year-end

* Loan will help develop Aktogay copper deposit

* Kazakhmys reverses plan to sell stake to Jinchuan

(Adds details, quotes, background)

By Olga Orininskaya

ASTANA, June 13 (Reuters) - Kazakhmys (KAZ.L), the world’s 10th-largest copper miner, secured a $1.5 billion loan from China on Monday to develop one of its most prospective copper fields and increase supplies of the metal to its largest market.

Kazakhmys expects to conclude the full loan agreement with state-run China Development Bank this year, allowing it to develop its Aktogay field in Kazakhstan without selling a stake in the deposit to China’s Jinchuan Group Ltd.

The loan would be disbursed at close to market rates, Chief Executive Oleg Novachuk said after signing a memorandum of understanding with China Development Bank Vice-President Gao Jian.

“Today, Kazakhmys supplies around 60 percent of its entire production to China,” Novachuk told reporters. “We are working on increasing our supplies to China.”

China’s growing clout in Kazakhstan and other former Soviet states in Central Asia is underpinned by billions of dollars of investment in the region’s oil, gas and metals reserves. Chinese companies now control 22.5 percent of Kazakhstan’s oil output.

Beijing’s foray across its 1,530 km (960 mile) border with Kazakhstan represents a challenge to Russia, which sees the country as part of its sphere of influence, as well as to European hopes it can be a major new supplier of resources.

The latest loan, agreed during a visit to Kazakhstan by Chinese President Hu Jintao, complements a separate loan of $2.7 billion from the China Development Bank to Kazakhmys in 2009.

The earlier loan is being used to develop a second major copper deposit, Bozshakol, as well as several mid-sized projects at the company.

“Our two major growth projects, Aktogay and Bozshakol, should produce around 200,000 tonnes of copper-in-concentrate each year, equivalent to 60 percent of our current production,” Novachuk said in a statement released after the signing.

RETAINING OWNERSHIP

The Aktogay deposit contains an estimated 5 million tonnes of copper. Kazakhmys has said investment of around $2 billion will be required to bring the field into operation at an annual rate of 100,000 tonnes of copper-in-concentrate from 2015.

Novachuk told reporters Kazakhmys would supply the additional $500 million required to develop Aktogay from its own means.

The company had earlier announced plans to sell a 49 percent stake in the Aktogay deposit to Jinchuan Group [JCGRP.UL], China’s third-biggest copper producer and its biggest nickel refiner. This plan has now been abandoned.

“This funding will allow is to develop Aktogay and yet retain full ownership of the asset,” Novahcuk said in the statement.

Kazakhmys produced 303,000 tonnes of copper cathode from its own concentrate last year, down from 320,400 tonnes in 2009. The company operates 17 mines, 10 processing plants and two copper smelters in the Kazakh cities of Zhezkazgan and Balkhash.

Around 40 percent of the company’s exports go to Europe, mainly Italy, Spain and Germany.

Novachuk said the company had invested $75 million this year in exploration of new deposits in Kazakhstan. The company’s current reserves are enough to sustain production for more than 30 years, he said. (Writing by Robin Paxton; editing by Jason Neely)

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