CORRECTED-(OFFICIAL)--Russian giant copper project aims to raise $1.25 bln in 2018

(Corrects “reserves” to “resources” in the 3rd paragraph of the story from September 17 after the company amended the information on its website)

* Udokan is one of the world’s largest untapped copper deposits

* Udokan will celebrate 70 years since discovery in 2019

* Usmanov’s firm aims to launch plant at Udokan by 2022

* Global mining, Chinese giants have expressed interest in Udokan

MOSCOW, Sept 17 (Reuters) - Baikal Mining Company, operator of Russia’s biggest untapped copper deposit Udokan, plans to raise $1.25 billion in project financing from a Russian bank by the start of 2019, its chairman, Valery Kazikayev told Reuters.

Spurred by high global appetite for cooper, which many expect to be in demand for use in electric vehicles, the company in September started preparing the site for construction of a massive plant at the deposit, which has remained in limbo in Siberia for almost 70 years.

With total resources of 26.7 million tonnes of copper, Udokan is one of the biggest untapped deposits in the world. However, it remained virgin since its discovery in 1949 due to lack of technology for its unique and difficult ore.

When Kazikayev was receiving a PhD in Economics from the Moscow Mining Institute in 1976, one of the ideas being researched by his fellow students was a “clean” nuclear blast but that remained on paper.

It took 10 years for Baikal Mining Company, owned by Russian billionaire Alisher Usmanov, to solve the difficult parts of the project. Usmanov bought the right to develop Udokan for $500 million from the Russian government right before the 2008 financial crisis.

An additional $330 million was spent on creation of a new geological model for the deposit as it turned out that the Soviet estimate did not correspond with the real content of copper in Udokan’s ore, Kazikayev said in a rare interview.

A mix of flotation and hydrometallurgy was chosen as production technology for the project, mainly focused on Chinese and other Asian markets.

The Baikal Mining Company needs $1.35 billion to build a plant able to mine 12 million tonnes of ore a year and produce 130,000 tonnes of copper from it. Half of the product will be cathode copper and the other half copper concentrate.


The company plans to invest $100 million in the project and raise the $1.25-billion project financing for the rest of the sum, Kazikaev said. With annual capacity of 12 million tonnes of ore, the project will have an internal rate of return of at least 21 percent.

Udokan, which can potentially be expanded to 48 million tonnes in future, may speed up expansion subject to favourable market conditions for copper.

“Copper is one of the most promising metals,” Kazikaev said. “That is why I think that the timeline of the project’s capacity reaching 24, 36 or 48 (million tonnes of ore) may be tightened.”

Two of four global mining giants and three Chinese companies have expressed interest in the project, and while the Russian company remains in contact with them, it currently plans to go ahead with the project on its own.

“We have not been offered enough (for a stake in the project) to make us strongly interested in this. We believe that we can do the first stage of the project on our own and thus increase the capitalisation of our project to a beneficial level,” Kazikayev said.

Any foreign investment in the project, Kazikayev added, would be limited by Russia’s law, which allows foreign investors to own a stake of only up to 25 percent in deposits like Udokan, deemed strategic for Russia, and also limits investment from companies owned by other countries’ governments.

The operator plans to start sub-commercial production at the deposit at the end of 2021 which will reach its full production capacity in 2022. (Reporting by Polina Devitt and Diana Asonova; writing by Polina Devitt; Editing by Emelia Sithole-Matarise)