EDB to invest EUR 196 million in Kazakhstan’s coal mine project

ASTANA (TCA) — The Eurasian Development Bank (EDB) and Kazakhstan’s largest coal producer Bogatyr Komir have signed a loan agreement to finance Bogatyr Komir’s investment program aimed at modernizing coal production processes at the Bogatyr mine. The EDB will extend a loan facility of EUR 196.6 million for eleven years, the Bank said.

The loan will be used to finance an investment project to modernize production at the Bogatyr mine by introducing continuous mining technology. This is expected to raise output to 50 million tons, improve the quality of end products, cut mining costs, and reduce adverse environmental impacts. A part of end products will be exported to Russia.

“The project supports the development of the country’s power sector,” Andrey Beliyaninov, Chairman of the Management Board at the EDB, commented. “It is also important to the EDB that it has a significant integration effect. In particular, it will help to enhance the efficiency of coal mining, maintain output for a longer period of time, and promote trade between Russia and Kazakhstan.”

The EDB’s new loan agreement with Bogatyr Komir, one of Kazakhstan’s largest coal miners and the main employer in Pavlodar Region for over 6,000 people, is the third one, in addition to the loan facilities opened in December 2011 and November 2013. Then, the Bank extended some US $50 million and US $25 million for seven years, respectively.

The Bank’s experts estimate that the project will help to increase production by arranging preparatory construction work to the tune of US $60.7 million. Over the first ten years from its start, the project is expected to raise coal output by an average of US $75 million a year and increase mutual trade between the EDB countries as a result of coal exports by US $27 million a year on average. It will also help to minimise adverse environmental impacts, as extracted coal will be stored within the mines.

Kazakhstan boasts vast coal reserves: in 2016, it ranked eighth in the world in terms of proved reserves and tenth in terms of output. In 2017, the situation in the sector improved significantly after a decline in 2012-2016. Over the first eleven months of 2017, coal output rose by 7.3% (95.9 million tons compared to 91.7 million tons over the same period of 2016). This growth was due to the recovery of global coal prices (by an average of 32% in 2017), as well as stronger external demand and accelerated GDP growth (4% in 2017 compared to 1.1% in 2016). Over the first eleven months of 2017, coal exports grew by 14.7%, to 24.5 million tons. Russia has been historically the primary destination for Kazakhstan’s coal (81% of all coal exported in 2016), primarily black lignite from the Ekibastuz basin supplied to the Urals power plants. Metallurgical coal from the Karaganda basin is also supplied in significant quantities to Russia’s metallurgical and other industrial enterprises. High-quality coal from the Shubarkol deposit is exported to Finland (8.6% of coal exports in 2016). Other destinations for Kazakhstan’s coal include Ukraine and Kyrgyzstan and, in smaller amounts, Belarus, China, Japan and Uzbekistan, among other countries. In the medium term, the coal sector is expected to maintain its importance to the nation. Domestic coal-fired heat and power plants are expected to remain the main source of demand for Kazakhstan’s energy coal. At the same time, it is essential to develop high-tech coal businesses.

Bogatyr Komir is Kazakhstan’s largest coal producer, accounting for approximately 60% and 40% of all coal produced in the Ekibastuz basin and Kazakhstan respectively. Over 1 billion tons of coal has been extracted to date. The company’s core business is open-pit coal mining from the Bogatyr mine in the Ekibastuz basin.

The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB’s charter capital totals US $7 billion. The member states of the Bank are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan.

Sergey Kwan

TCA