Barclays backs gold project: Bank provides dollars 90m loan for joint venture in Uzbekistan

BARCLAYS BANK yesterday launched a dollars 90m loan for a gold project in the former Soviet Union in co-operation with the European Bank for Reconstruction and Development.

The syndication was for the Zarafshan-Newmont joint venture, Newmont Mining Corporation's gold project in Uzbekistan.

The joint venture, owned 50 per cent each by Newmont and Uzbek interests, is based on the construction of a processing plant and the treatment of nearly 14 million tonnes a year of stockpiled ore. The ore grade is in excess of one gramme per tonne, Barclays says.

The stockpiles have been produced from the nearby Muruntau mine, the largest open pit gold mine in the world. Total cost of the project is estimated at dollars 130m.

Guarantees for the project would end when construction was completed, leaving lenders with recourse to the project only, Barclays said. The maximum term of the debt will be five years.

The deal represents the debut of Uzbekistan in Western capital markets. It is a member of the EBRD and became independent of the former Soviet Union in August 1991.

The country is a leading producer of gold and cotton.

Meanwhile, hopes in the gold market that official holders of gold will not spark a new sell-off were overshadowed by statements from Canadian officials.

Canada planned to continue to reduce its holdings of gold 'substantially', a senior Finance Department official said.

Figures released by the department showed that sales of bullion from government reserves reached about 1.5 million ounces in the first five months of 1993.

Those figures are about 43 per cent up over the same period of last year, when officials said sales were slow.

'We are going to reduce our holdings substantially,' the Finance Department official said. 'The sales will continue until we feel the levels are right.'

He added that Canada was trying to ensure that the bullion sales did not disrupt the markets.

Experts also predicted that demand from China, the powerhouse of the recent growing gold demand that has fuelled price rises, is expected to grow to 350 tonnes in 1993 from 250 tonnes in 1992.

It would be supported by consumer demand for jewellery and increased availability, said Kerr Cruikshanks, chief executive officer of WGC (Far East).

'As long as people are becoming more wealthy and cultural affinity for gold continues, we expect demand to grow,' he added.

The key to China's gold demand growth was increased availability as well as economic growth, he said.