Large greenfield projects in Russia's energy and mining sector slowed after Russia was hit by Western sanctions four years ago, limiting the economy's access to foreign finance, but some of the bigger projects are now being revived with home-grown financing.

Usmanov's Baikal Mining Company, operator of the Udokan copper deposit, is betting on strong global appetite for the metal, which many expect to be in demand for use in electric vehicles.

"Russia’s largest banks have expressed interest in our project," Baikal Mining Company Chairman Valery Kazikayev told Reuters, adding that the progress in talks had been especially good with one of them.

With total reserves of 26.7 million tonnes of copper, Udokan is one of the biggest untapped deposits in the world. However, it remained virgin since its discovery in 1949 due to lack of technology for its unique and difficult-to-extract ore.

When Kazikayev was receiving a PhD in Economics from the Moscow Mining Institute in 1976, one of the ideas being researched by his fellow students was a "clean" nuclear blast to extract the ore at Udokan, but that remained on paper.

Usmanov bought the right to develop Udokan for $500 million from the Russian government right before the 2008 financial crisis. It has taken 10 years for Baikal Mining Company to solve the technical challenges of the project.

An additional $330 million was spent on creating a new geological model for the deposit as it turned out that the Soviet estimate did not correspond with the real content of copper in Udokan's ore, Kazikayev said in a rare interview.

Now, the company has reached the stage when it is ready to start preparing the site for construction of the plant this month, which will use a mix of flotation and hydrometallurgy as production technology.

Project finance is being sought from banks because the Baikal Mining Company needs $1.35 billion to build a plant able to mine 12 million tonnes of ore a year and produce 130,000 tonnes of copper from it.

Kazikayev did not identify the banks the company was in discussions with. Russia's top banks - Sberbank, VTB and Gazprombank - did not reply to Reuters requests for comment.

TIMELINE

The company plans to invest $100 million in the project, mainly focussed on Chinese and other Asian markets, and raise the $1.25-billion project financing for the rest of the sum, Kazikayev said. With annual capacity of 12 million tonnes of ore, it willhave an internal rate of return of at least 21 percent.

Udokan, which can potentially be expanded to 48 million tonnes, may speed up expansion subject to favourable market conditions for copper.

"Copper is one of the most promising metals," Kazikayev said. "That is why I think that the timeline of the project's capacity reaching 24, 36 or 48 (million tonnes of ore) may be tightened."

Two of four global mining giants and three Chinese companies have expressed interest in the project, and while the Russian company remains in contact with them, it currently plans to go ahead with the project on its own.

"We have not been offered enough (for a stake in the project) to make us strongly interested in this. We believe that we can do the first stage of the project on our own and thus increase the capitalisation of our project to a beneficial level," Kazikayev said.

(Reporting by Polina Devitt and Diana Asonova; additional reporting by Tatiana Voronova; writing by Polina Devitt; editing by Emelia Sithole-Matarise)

By Polina Devitt and Diana Asonova