Russia's Sberbank has signed a master agreement on letters of credit (L/Cs) with Metalloinvest subsidiary, Mikhailovsky GOC, which operates the second largest open pit iron ore mine in Russia.

The agreement is for a project to construct a hot briquetted iron (HBI) facility at the Mikhailovsky mine in Kursk, Russia.

Green credentials

The new HBI facility is expected to contribute significantly to Metalloinvest's aim to become carbon-neutral by 2050.

Metallurgy accounts for almost a tenth of global emissions, and the use of HBI reduces direct greenhouse gas emissions in steelmaking by 60 per cent compared with the traditional blast furnace converter process.

Initial L/Cs

The bank's first L/Cs are expected to be used to mobilise EUR 246 million (US$291 million) of financing for the construction of the HBI facility.

The agreement matures in 2025 and the initial L/Cs are expected to be followed by further financings of the project.

Popular L/C solutions

Sberbank says its solutions for structuring secure international settlements using L/Cs are increasingly popular and especially relevant in such a large investment project since they allow the company to optimise financial resources and ensure comfortable terms for equipment supplies.

Metalloinvest is a subsidiary of USM Group. Its deputy CEO, Pavel Mitrofanov, says the import L/Cs opened by Sber guarantee stable long-term settlements with foreign suppliers, facilitate the timely delivery of equipment and will allow the project to be implemented ahead of schedule.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.