MACEDONIAN GOLD MINES AND GREEK BONDS
THE SKOURIES MINE IS A WORLD-CLASS GOLD AND COPPER MINE UNDER CONSTRUCTION IN NORTHERN GREECE . THE MINE ’ S € 680M PROJECT FINANCING CLOSED ON APRIL 5 2023 , ELEVEN YEARS AFTER CONSTRUCTION OF THE SKOURIES MINE BEGAN IN 2012 . BY NATALIE KEDIKOGLOU , GENERAL COUNSEL AT HELLAS GOLD , FRANK HERBERT , EVP AND GENERAL COUNSEL , AND PAUL FERNEYHOUGH , SVP AND CHIEF STRATEGY AND COMMERCIAL OFFICER , AT ELDORADO GOLD CORPORATION , AND RO LAZAROVITCH , PARTNER , AND BAGYA NAMBRON , SENIOR COUNSEL AT BRACEWELL .
Mining in northern Greece dates back at least to the 6th century BC – gold and silver mines flourished during the reigns of Philip II of Macedon and his son , Alexander the Great . They were one of the Macedonian kingdom ’ s main sources of wealth . While Greece today is not considered a large mining jurisdiction , mining has continued in northern Greece since these ancient times , without much interruption .
“ Kassandra mines ” was first used to describe a mining area in the Halkidiki Peninsula in northern Greece around 1893 , when the French- Ottoman SA company gained the mining rights to that area . Those rights were succeeded by the Greek Limited Company of Chemical Products & Fertilizers ( GLC-CPF ) after 1920 , which built additional infrastructure and , during the 1970s , started production at the Olympias mine , which continues today .
GLC-CPF went into liquidation in 1992 and was kept operating by the National Bank of Greece ( NBG ) until 1995 , when the rights to the Kassandra mines and infrastructure were sold to TVX Hellas , a subsidiary of TVX Gold .
TVX worked to expand operations at the Kassandra mines . However , by 2003 TVX ’ s plans were abandoned after a series of regulatory challenges and negative decisions of the Greek Council of State . The villages in the region suffered economic decline and the Greek government implemented a special social programme to support former workers at the Kassandra mines .
Change was around the corner , however . The Kassandra mines licences and assets were transferred to Hellas Gold SA ( Hellas Gold ) in 2004 and , in 2006 , a special business plan was approved for the development of the Olympias and Skouries mines . Eldorado purchased Hellas Gold in 2012 and commenced construction of the Skouries mine in 2013 .
However , political changes in Greece created a more challenging environment for the Skouries mine ’ s development . Eldorado put construction on hold in 2016 . Protracted negotiations between Hellas Gold and the Greek government led to an amended investment agreement being signed by the parties in 2021 . The agreement created a foundation for significant , new investment in the Kassandra mines on the basis of a new legal and regulatory framework for the benefit of all stakeholders .
Earlier this year , after closing its project financing , Hellas Gold restarted construction of the Skouries mine . The high-grade goldcopper porphyry deposit will be mined using a combination of conventional open pit and underground mining techniques . The total life of mine is approximately 20 years , and it is expected to produce an average of 140,000 ounces of gold and 67m pounds of copper per year . Restarting construction is creating thousands of new jobs , injecting hundreds of millions of euros of private investment creating social and economic benefits at the local and national levels , and harking back to the golden days of Philip II ’ s mines in the Halkidiki region .
Collaboration The mandated lead arrangers for Hellas Gold ’ s project financing were NBG – again , involved in a critical moment of the Kassandra mines ’ development after its role in the 1990s – and Piraeus Bank . It primarily comprises a tenyear term facility of € 680m , of which € 480m is a commercial loan and € 200m is funding from the Greek Recovery & Resilience Facility ( RRF ), provided by the EU via the Greek State . Availability is three years and then seven years of repayments through semi-annual instalments . In addition , the package included a € 30m VAT facility and a contingent cost overrun facility of an additional 10 % of capital costs , funded by both the lenders and through equity .
The financing is without recourse to Eldorado Gold , except for an equity commitment equal to approximately 20 % of the project funding including the contingent facility . In addition , the EBRD provided C $ 81.5m of funding for the Skouries project by way of an equity investment in Eldorado , which was passed down to Hellas Gold .
Historically , project financing in Greece primarily related to infrastructure assets , the power sector and PPPs , and there are no previous transactions of a similar nature to the
70 Project Finance International October 4 2023