VTB Bank assigned two loans to Kaz Minerals for a total amount of $1.8 billion

VTB Bank, which came under Western sanctions and lost the opportunity to receive payments on loans worth $1.8 billion issued by the Kazakh mining company Kaz Minerals, transferred them to Oleg Novachuk’s Finnaccord companies and the unknown City Invest 6. Oleg Novachuk is a co-owner of Kaz Minerals; the beneficiaries of City Invest 6 are not disclosed, but the company is managed by Trinfico structures. As a result of the assignment of loans, City Invest 6 received 99% of Baimskaya Holding, which owns the Baimsky copper project in Chukotka, as collateral.

VTB Bank assigned two loans to Kaz Minerals for a total amount of $1.8 billion. According to the annual report of Kaz Minerals, City Invest 6 and Finnaccord became new lenders from October 2022. The terms of the change of creditors were not disclosed. The company only noted in its reporting that the assignment of loans was made without its consent. These companies and VTB did not provide comments. $1.8 billion is half of Kaz Minerals’ total debt.

The need to assign loans arose due to the fact that in 2022 VTB was included in the SDN list of the US Treasury. Kaz Minerals itself, whose shareholders are Vladimir Kim and Oleg Novachuk, is registered in the UK (see “Kommersant” dated August 3, 2022) and, accordingly, could not service loans due to sanctions. The company’s annual report said it had been unable to pay interest since April 2022 and had not paid it for a year, giving creditors the opportunity to seek accelerated repayment of loans, use guarantees or foreclose on collateral. New creditors did not take advantage of this opportunity.

If Finnacord is Oleg Novachuk’s company, then the beneficiaries of City Invest 6 are unknown. The owner of SFO City Invest 6 is the Progress-1 fund, the beneficiaries of which are not disclosed. The management company of SFO City Invest 6 is TPM Securitization LLC, owned by Trinfico Holdings JSC. There were no comments provided.

According to SPARK-Interfax, SFO City Invest 6 received 99% of the shares of Baimskaya Holding as collateral. This company is the operator of the Baimsky copper project in Chukotka and is owned by the main owners of Kaz Minerals through Trianon Limited. Kaz Minerals reported in August that it had sold the Baimsky project to Trianon Limited. The deal, according to the annual report, cost $200 million, while in 2019 the field was purchased from Roman Abramovich and Alexander Abramov for $900 million and shares.

Kaz Minerals is one of the leading copper producers in Kazakhstan. It operates the Aktogay mine in East Kazakhstan and Bozshakol mine in the Pavlodar region, three underground mines and associated processing plants in East Kazakhstan, and the Bozymchak gold and copper mine in Kyrgyzstan. The Baim copper deposit, which now belongs to the company’s shareholders, is one of the largest undeveloped. Investments in its development are estimated at $8 billion. The resources of the Peschanka deposit, located within Baimskaya, are estimated by JORC at 9.9 million tons of copper and 16.6 million ounces of gold. The Russian authorities are financing the port and power grid infrastructure for the development of Baimsky, including the construction of power transmission lines from Cape Nagleynin – Bilibino – Baimsky GOK.

The problem of servicing loan obligations in connection with the inclusion of banks in sanctions lists has become especially relevant in the current conditions, says Maria Lyubimova, head of the “Legal support of foreign trade activities” practice at the Regionservice bar association. She recalls that there are already examples of legal disputes between banks participating in the syndicate due to the termination of loan payments after being included in the sanctions lists. To avoid such situations, the lawyer says, creditor banks try to minimize risks by assigning claims, including to a third party.

Evgeniy Zainullin