Apr 02 2009

Orsu defaults on Investec, Nedbank debt

Published by at 9:48 pm under Companies,Top Stories

Orsu Metals Corporation, a London-based mining company with operations in Kazakhstan, missed its second deadline for debt repayment to a consortium of South African and French banks on 31 March.

Today the company said attempts to have the debt rescheduled have been unsuccessful, but negotiations with the banks continue.   

The consortium consists of Investec Bank, Nedbank, French investment bank Natixis Bank and Export Credit Insurance Corporation South Africa (ECIC). Orsu is listed in London and Canada. Here is the full background to the company.

On 30 September 2008 the consortium extended a loan of $61 million (about R560 million) to Varvarinskoye, an Orsu subsidiary operating a gold and copper mine in Kazakhstan. An amount of $36.1 million had to be repaid within one year, including a first tranche of $16.65 million, which was due on 31 December 2008. 

Orsu guaranteed the loan and hedge facilities of its subsidiary to the banks.  

Varvarinskoye then defaulted on the $16.65 million (roughly R160 million) on 31 December 2008. On 8 January and again on 27 February Orsu announced the banks had set 31 March as a new deadline for repayment of the amount originally due on 31 December 2008.

On 31 March neither Varvarinskoye, nor Orsu could cough up the money. 

On 2 April Orsu announced: ”A definitive agreement has not been reached with the banks regarding the restructuring, but the company is working with its advisor Endeavour Financial to reach a satisfactory arrangement with the banks.

“On 31 March 2009 the company reneged on the interest, loan repayments and gold hedge contract settlement obligations due on that date. The banks have not taken any action in respect of these defaults, nor have they announced an intention to do so.” 

As a LSE-listed company, one can understand how Investec Bank got involved with Orsu. But, why Nedbank and the Export Credit Insurance Corporation of SA (ECIC) have exposure to a gold and copper mine in Kazakhstan, is not immediately clear.

(I’ll try to find out why…)

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