Newmont-Zarafshan Joint Venture

MIGA issued $40 million in guarantees to Newmont Mining Corporation of the United States, against the risks of expropriation and war and civil disturbance, for a $150 million gold ore processing venture at a mine in Uzbekistan. This was MIGA's first guarantee in Uzbekistan, and the project marks the first foreign investment in the country's gold sector.

The project is a joint venture with the Government of Uzbekistan at the Muruntau open-pit gold mine, near Zarafshan in the Kyzylkum Desert. Newmont owns a 50 percent equity interest in the Zarafshan-Newmont Joint Venture (ZNJV); two Uzbeki partners own the remaining equity.

Uzbekistan is second only to Russia in gold production in the former Soviet Union. The Muruntau mine processes about 20 million metric tons of ore and produces 1.8 million ounces of gold per year. Since the beginning of the mine's operation in 1967, it has stockpiled 300 million metric tons of low-grade gold-bearing ore. Foreign participation in this project was essential to obtain the technology to profitably process the ore.

ZNJV will purchase a total of 190 million metric tons of stockpiled ore from its Uzbeki partners, and process it using conventional crushing, leaching, and smelting technology. A facility will be constructed to process 37,800 metric tons of ore per day, at an annual rate of 450,000 ounces of gold. The ore will then be refined and the gold shipped to Europe. The more efficient technology will increase the country's competitiveness in the global gold market.

The enterprise is projected to generate average annual export earnings of about $58.3 million during the first five years of operations. It will also provide jobs for 757 people during construction, and 189 jobs for Uzbeki nationals during future operations.

The project financing marks a significant breakthrough in terms of collaboration between various partners. In addition to Newmont's $24 million equity investment, the project will be financed by a $52.5 million 'A' loan from the European Bank for Reconstruction and Development (EBRD), and by loans totaling $52.5 million from a number of European and U.S. commercial banks under the EBRD's 'B' loan program.

This collaboration of multilateral and bilateral development agencies highlights the critical role that MIGA's insurance program plays in facilitating investments. By insuring a portion of its equity investment with MIGA, Newmont secured a commitment from the Agency to issue coverage up to $40 million to the commercial banks upon completion of project construction. Newmont had earlier-during the construction period-acquired MIGA coverage for its guaranty of the commercial banks' loans against the risks of expropriation and war and civil disturbance. Newmont was also able to insure a portion of its investment with the Overseas Private Investment Corporation, the U.S. national investment insurer. This is the first project in which both MIGA and the EBRD have been jointly involved, setting a precedent for future cooperation between these two agencies.