ALMATY (Reuters) – IFG Capital, a Luxembourg-based company with roots in the former Soviet Union, plans investments to develop seven tungsten deposits in Uzbekistan, aiming to account for 6 percent of global output, a company executive told Reuters.
The planned series of deals would be the first foreign direct investment in the mining and metals sector of the Central Asian nation since President Shavkat Mirziyoyev came to power in 2016, promising to open up and reform the economy.
Using its own funds and borrowed money, IFG Capital plans to invest $300 million in the tungsten deposits in Uzbekistan’s southern Samarkand province, Olga Ponkratova, one of the three partners in the firm, said in an interview.
Indian private equity firm SUN Group, which has investments in India, Russia, West Africa and other emerging markets, has agreed to co-invest with IFG, subject to further due diligence.
Together, the seven deposits will produce up to 5,700 tonnes of tungsten per year, or roughly 6 percent of the world’s total output by 2024, she said.
“We expect to become world’s third-biggest producer,” Ponkratova said.
The global market for tungsten, used to strengthen steel, is dominated by China, which accounts for about 80 percent of production. IFG Capital plans to sell the metal under an off-take agreement with traders for resale in Europe and the United States.
Ponkratova’s partners in IFG Capital are Dmitri Musienko, a former banker and commodities trader at Credit Suisse and Barclays, and Olim Shadiev, a Moscow-educated entrepreneur with Uzbek roots.
Shadiev’s uncle, Patokh Chodiyev, is one of the three billionaire co-owners of Eurasian Resources Group, a metals and mining company with assets in Kazakhstan, Brazil and several African countries.
Ponkratova said Chodiyev was not involved in the operations of IFG Capital, which is acting independently and has been advising the Tashkent government on economic reforms for the last two years.
“We believe Uzbekistan is the rising star of the region,” she said.
She said IFG Capital expected to develop the tungsten deposits under concession agreements.
The company is also considering investments in Uzbekistan’s gold mining industry, the nation’s biggest source of exports, and the financial sector, Ponkratova said.
Uzbekistan’s Committee on Geology and Mineral Resources declined to comment on the planned deal.
Mirziyoyev, a former prime minister, came to power after the death of Uzbekistan’s first president, Islam Karimov, who resisted market reforms and largely kept in place a Soviet-style state-dominated economy.
Seeking to end the economic stagnation which has led millions of Uzbeks to seek employment abroad, Mirziyoyev promised to implement broad economic reforms and bring in foreign investment.
So far, however, money has been flowing in mostly from international institutions such as the World Bank or the European Bank for Reconstruction and Development, rather than from private companies.
Reporting by Olzhas Auyezov; Editing by Christian Schmollinger