Preparatory work for the construction of the Dashkesan ore processing plant has begun

Turan: As a result of the sale and purchase of assets by the liquidation commission of Dashkesan Ore Company OJSC, property worth AZN 18.6 million was transferred to the balance of Dashkesan Iron Ore LLC. Excluding a small part of the shares, the enterprise belonged to the state and was opened for privatization in 2016. In this case, to whom and from what sources was payment made under the property purchase and sale agreement?

AzerGold: First of all, we note that AzerGold CJSC has completely eliminated dependence on the state budget for the exploitation of gold deposits. By 2025, as determined by the strategic goals, it is planned to eliminate the CJSC from the state budget in connection with the implementation of projects for deposits of other non-ferrous metals In order to implement projects on iron ore deposits, appropriate steps are being taken to minimize dependence on the state budget. So, for this purpose, it is possible to attract foreign direct investment, bank loans, issue bonds. Discussions are underway on the introduction of various financing mechanisms.

As you know, according to the order of President Ilham Aliyev dated September 1, 2020 No. 2245, AzerGold CJSC is entrusted with the study, exploration, development and management of iron ore deposits in the country, the application of new technologies in this area, the modernization of the material and technical base, as well as the performance of other works related to the development of this area. Along with this, the specified document entrusted the Cabinet of Ministers with the implementation of the necessary measures in connection with the liquidation of the open joint-stock company "Dashkesan Ore Company". In order to resolve the issues arising from the order, with the participation of the State Service for Property Issues under the Ministry of Economy, a liquidation commission of the Dashkesan Ore Cleaning OJSC was created.

Preparatory work for the construction of the Dashkesan ore processing plant has begun.

Turan: As a result of the sale and purchase of assets by the liquidation commission of Dashkesan Ore Company OJSC, property worth AZN 18.6 million was transferred to the balance of Dashkesan Iron Ore LLC. Excluding a small part of the shares, the enterprise belonged to the state and was opened for privatization in 2016. In this case, to whom and from what sources was payment made under the property purchase and sale agreement?

AzerGold: First of all, we note that AzerGold CJSC has completely eliminated dependence on the state budget for the exploitation of gold deposits. By 2025, as determined by the strategic goals, it is planned to eliminate the CJSC from the state budget in connection with the implementation of projects for deposits of other non-ferrous metals In order to implement projects on iron ore deposits, appropriate steps are being taken to minimize dependence on the state budget.So, for this purpose, it is possible to attract foreign direct investment, bank loans, issue bonds.Discussions are underway on the introduction of various financing mechanisms.

As you know, according to the order of President Ilham Aliyev dated September 1, 2020 No. 2245, AzerGold CJSC is entrusted with the study, exploration, development and management of iron ore deposits in the country, the application of new technologies in this area, the modernization of the material and technical base, as well as the performance of other works related to the development of this area. Along with this, the specified document entrusted the Cabinet of Ministers with the implementation of the necessary measures in connection with the liquidation of the open joint-stock company "Dashkesan Ore Company". In order to resolve the issues arising from the order, with the participation of the State Service for Property Issues under the Ministry of Economy, a liquidation commission of the Dashkesan Ore Cleaning OJSC was created.

Dashkesan Iron Ore LLC (a subsidiary of AzerGold CJSC) and Dashkesan Ore Company OJSC, which is in the process of liquidation, signed an agreement for the purchase and sale of existing assets aimed at restoring activities in the iron ore field of Dashkesan. According to an independent appraiser, the purchase and sale of assets totaling AZN 18.6 million was carried out. This amount was financed from public funds.

Turan: What is the investment demand for the construction and equipment of the iron ore concentrate plant, which is planned to be commissioned in 2023, and from what sources is it financed or expected to be financed? Does the international consulting company have estimates on this?

AzerGold: At the Dashkesan iron ore deposit, iron makes up approximately 30-35% of 1 ton of ore contained in the bowels of the earth. According to the planned production chain, at the initial stage it is planned to carry out the process of enrichment of the mined ore with the production of a rich iron-containing concentrate from it up to 67%. At the next stage, it is planned to produce granules and direct reduced iron (DRI). The enrichment plant is scheduled to be commissioned in 2023 and the DRI plant in 2025.

The main goal of this project is to launch iron ore deposits in a short time and ensure demand for raw materials that replace scrap metal, as well as the production of better types of metallurgical products. The commissioning of the Dashkesan iron ore deposit and the creation of an industrial chain will make an important contribution to the creation of permanent jobs, increase the export potential of iron products, reduce dependence on raw materials and create new jobs.

To form the raw material base of ferrous metals in the country, a total investment of about 1 billion manats (excluding VAT) is provided for the construction of factories for the production of concentrate, granules and direct reduction iron. As noted above, in order to minimize dependence on the state budget in connection with the implementation of the project, relevant work continues to address alternative sources of financing and attract investors.

Regarding your direct question, it should be noted that according to the preliminary appraisal document, the reputable consulting company WOOD Group in South Africa estimated the capital cost for the construction and rehabilitation of the concentrator and supporting infrastructure at 168.2 million US dollars. For the implementation of the enrichment plant project consulting services were engaged in project management. Preliminary design work is currently underway. After determining the factory parameters and the technological chain, information on the full investment demand is expected. The preliminary assessment document by the consulting company WOOD Group is scheduled to be completed by the first half of March.

Turan: Are there procurement processes in connection with construction works?

Dashkesan Iron Ore LLC (a subsidiary of AzerGold CJSC) and Dashkesan Ore Company OJSC, which is in the process of liquidation, signed an agreement for the purchase and sale of existing assets aimed at restoring activities in the iron ore field of Dashkesan. According to an independent appraiser, the purchase and sale of assets totaling AZN 18.6 million was carried out. This amount was financed from public funds.

Turan: What is the investment demand for the construction and equipment of the iron ore concentrate plant, which is planned to be commissioned in 2023, and from what sources is it financed or expected to be financed? Does the international consulting company have estimates on this?

AzerGold: At the Dashkesan iron ore deposit, iron makes up approximately 30-35% of 1 ton of ore contained in the bowels of the earth. According to the planned production chain, at the initial stage it is planned to carry out the process of enrichment of the mined ore with the production of a rich iron-containing concentrate from it up to 67%. At the next stage, it is planned to produce granules and direct reduced iron (DRI). The enrichment plant is scheduled to be commissioned in 2023 and the DRI plant in 2025.

The main goal of this project is to launch iron ore deposits in a short time and ensure demand for raw materials that replace scrap metal, as well as the production of better types of metallurgical products. The commissioning of the Dashkesan iron ore deposit and the creation of an industrial chain will make an important contribution to the creation of permanent jobs, increase the export potential of iron products, reduce dependence on raw materials and create new jobs.

To form the raw material base of ferrous metals in the country, a total investment of about 1 billion manats (excluding VAT) is provided for the construction of factories for the production of concentrate, granules and direct reduction iron. As noted above, in order to minimize dependence on the state budget in connection with the implementation of the project, relevant work continues to address alternative sources of financing and attract investors.

Regarding your direct question, it should be noted that according to the preliminary appraisal document, the reputable consulting company WOOD Group in South Africa estimated the capital cost for the construction and rehabilitation of the concentrator and supporting infrastructure at 168.2 million US dollars. For the implementation of the enrichment plant project consulting services were engaged in project management. Preliminary design work is currently underway. After determining the factory parameters and the technological chain, information on the full investment demand is expected. The preliminary assessment document by the consulting company WOOD Group is scheduled to be completed by the first half of March.

Turan: Are there procurement processes in connection with the construction of the plant?

AzerGold: Preliminary procurement plan for 2022 etender.gov.az posted on the public procurement portal etender.gov.az on October 14, 2021. Given the conclusion on December 28, 2021 of a contract with the international company Encotec LLC for the procurement of consulting services for preliminary design and project management for the construction of an enrichment plant and related infrastructure and the completion of design estimates in May of this year, in the initial procurement plan for the construction of the plant not yet reflected. Also, in accordance with the Law of the Republic of Azerbaijan “On Public Procurement”, the procuring entity can make changes to the procurement plan no more than once a month. After determining the likely price and method of purchase, relevant information will be provided.