VZCZCXRO4449
PP RUEHDBU
DE RUEHNT #1187 1760321
ZNY CCCCC ZZH
P 250321Z JUN 07
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC PRIORITY 8051
INFO RUEHAH/AMEMBASSY ASHGABAT 3111
RUEHTA/AMEMBASSY ASTANA 9249
RUEHEK/AMEMBASSY BISHKEK 3723
RUEHDBU/AMEMBASSY DUSHANBE 3587

C O N F I D E N T I A L TASHKENT 001187 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR SCA/CEN 
 
E.O. 12958: DECL: 06/20/2017 
TAGS: ECON EINV EBRD PGOV UZ
SUBJECT: GOU PAYS OFF NEWMONT LOAN TO EBRD 
 
 
Classified By: CLASSIFIED BY CDA BRAD HANSON FOR REASONS 1.4 (B, D). 
 
¶1. (C) Summary: The Head of the Representative Office of the 
European Bank for Reconstruction and Development (EBRD), 
Fernand Pillonel, said the remainder of its loan to the 
Zarafshan-Newmont Joint Venture will be paid in full by the 
GOU by the end of June.  As EBRD is a third tier creditor, 
this move is more political than business.  Meanwhile, the 
defunct joint venture's creditors are increasingly frustrated 
by the continuing failed auctions and have demanded fiscal 
and operational information from the State Committee on 
Geology, the current operator of the business.  End summary. 
 
¶2. (C) Pillonel told Charge and poloff that the State 
Committee on Geology agreed to pay EBRD the last $2.6 million 
of an outstanding $60 million loan.  As EBRD is a third tier 
creditor and debts to the first and second creditors remain 
outstanding, this move was not a business decision. Instead, 
opined Pillonel, the Uzbeks want to remove EBRD from the 
issue, as the bank refuses to ignore Newmont's expropriation 
and holds the GOU up to international standards. 
 
¶3. (C) The Zarafshan-Newmont creditors have increasingly 
pressured the GOU to follow international norms, stressing 
that all bankruptcy proceedings must accord with the law. 
Pillonel said half of the joint venture's outstanding loans 
are owed to banks and many of these creditors are interested 
in pulling out of the former joint venture.  At the last 
creditors' meeting, the group demanded the State Committee on 
Geology outline current operation procedures and sources of 
new financing.  They also issued a written inquiry into 
Zarafshan's assets and production statistics.  Since 
Newmont's departure last summer, the defunct joint venture 
has produced 100 million dollars of gold, according to 
Pillonel, and opened up a second storage warehouse.  GOU 
officials told him they are very confident that they can run 
the operation better than Newmont.  They have already 
procured Chinese chemicals at a price much lower than Newmont 
received from a different supplier. 
 
¶4. (C) Comment:  The GOU's readiness to pay off EBRD's loan 
signals a move closer to state control of the operation.  The 
State Committee on Geology has been officially in control of 
the defunct joint venture, pending a new buyer, since the GOU 
declared Newmont bankrupt in August of 2006.  If truly intent 
on selling the joint venture, the GOU would have lowered the 
asking price by 10 percent after each of the failed auctions, 
according to Uzbek state auction rules. Thus, the current 
asking price would be $85 million, down from $130 million. 
Because the price has not been lowered and Zeromax, 
controlled by Presidential first-daughter Gulnora Karimova, 
has yet to snatch it up, something else is afoot.  Rumors 
persist that Zeromax is interested, but counter forces in the 
government are trying to prevent such a buyout.  What we know 
for sure is that the GOU will try to maximize its profits, 
and business dealings related to Zarafshan-Newmont will not 
be transparent. 
HANSON