Utter determination, a clear vision and the unwillingness to give up, are traits that Bill Trew, chief executive of Oxus Gold, and his team possess in spades. The deal to finance phase one of their Amantaytau open-pit gold mine in Uzbekistan is a triumph over adversity. Moreover, it looks set to pave way for future transactions in what many bankers view as a tricky region to do business

When the Amantaytau deal was signed in April 2003, it was Uzbekistan's first project financing by western banks for a foreign owned and operated mine. The mine has passed through various owners but Oxus [then called Oxus Mining], a junior gold exploration and development company with assets in Uzbekistan and Kyrgzstan, began examining the site in 1996, forming a 50:50 joint venture with the Uzbek government.

However, finding the cash to develop the funds proved more difficult than expected.

Some of the financing was initially set to come from Oxus's flotation in 2001. But a drop in Oxus's share price after the IPO meant that tapping the debt market for the rest of the funding was seen as the best way to raise the money without risking a massive share dilution.

At this point SG entered the frame, and, supported by HVB and the National Bank of Uzbekistan, agreed to provide financing for what at the time was a complex heap-leaching extraction project.

Very quickly a key issue of that financing was that the sponsors raise some form of equity. However, a year on and the deal was still languishing as Oxus struggled to find the equity amid a far from buoyant market and with the price of gold well below recent highs.

Other options were considered. "We were led to believe that there was a possibility of obtaining subordinated debt through an insurance bond, but that proved fruitless," says Steve Sharpe, managing director at the project's financial adviser Endeavour Financial in London. "We looked at various other alternatives such as reducing the overall cost by leasing equipment."

At that point SG withdrew, placing Oxus in a quandary over where to go from there and facing serious cashflow problems.

Enter MAED, the South African-based building contractor already employed on the project. MAED, then headed by Trew, saw the potential for the project and started negotiations with Newmont, a key shareholder in Oxus. "Our view was that the best way to sort the project out was from inside" says Trew. Having built up a 30% stake and replacing the entire Oxus board, Trew says the situation that faced them was of a company about to "implode".

"We came in, relooked at the project and decided to approach it from a different angle." This meant scrapping plans to use heap leach extraction and instead revitalising an existing mill, so dramatically bringing down the overall costs. Oxus also went ahead with leasing equipment and began to make headway with a considerably re-engineered and cheaper project.

With the operations already underway, Oxus approached Standard Bank and WestLB. "We said to the banks one way or another we are going to build this project," says Trew. "With the cash we can build it in 1 year, without it, it will take six."

The banks agreed to provide in excess of 100% of the amount required for the project. And the new deal that emerged took only a matter of months to put together. It was signed in April 2003.

As SG had already gone some way towards drafting the documentation, it remained involved in the deal as a security trustee. Standard and WestLB, meanwhile, arranged a $36 million credit, some $6 million of which will be used to cover cost overruns.

The loan has a three-year tenor but with a cash sweep that should pay it back within about 18 months to two years.

The sponsors did not seek help from a multilateral, though both the European Bank for Reconstruction and Development and International Finance Corporation had looked at the deal under previous incarnations and owners.

Instead the lenders found other ways to mitigate risks. They have taken out political risk insurance with an unnamed provider and all cashflow is directed to an escrow account. Amantaytau Gold has provided a fixed and floating rate charge over the project assets and all the sponsors have pledged its ownership interest in Amantaytau to the lenders.

In addition, the credit facility obligations are also guaranteed by Oxus Gold and its wholly owned subsidiary Oxus Resources. These stay in place until the project is able to satisfy certain mining and production tests. MAED and BCM Mining, the open-pit mining contractor, are also providing various guarantees.

Oxus is also required to hedge about 70% of the project's initial output over the life of the loan. The group has also agreed to hedge its interest rate risk - to the tune of 3bp over Libor.

A few years on and how different the situation looks now. The project poured its first gold in January 2004 and Oxus' share price, only last January ailing at 8.5p, touched a 52-week high of 92.50p by the end of 2003.

The weakness of the dollar has had a direct impact on all precious metal prices. When the project was conceived it was constructed on the basis that it would produce 190,000 ounces of gold a year at cash costs of $106 an ounce and with a $320 gold price during the first two years of production. The gold price is over $400 an ounce, a welcome bonus to the participants.

Set in this context, the situation could not be more different for phase two of the deal, which is bigger in size and scope. The feasibility study is scheduled for completion this July and phase two will be part-financed from cashflow from phase one.

The rest of the funding will come from either debt or equity - both of which are now options in the current climate.

Amantaytau Gold

Status: closed April 2003

Cost: $36 million (all debt)

Location: Amantaytau, Uzbekistan

Description: financing for open-pit gold mine

Sponsors: 50:50 venture between Oxus Gold and the Uzbek government

Tenor: 3 years

Lenders: Standard Bank and WestLB

Financial adviser: Endeavour Financial

Contractors: MAED and BCM Mining

Market consultant: SKR

Lawyers to the borrowers: CMS Cameron McKenna

Lawyers to the lenders: Denton Wilde Sapte