The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region
Issue link: https://asiaminer.epubxp.com/i/632337
Volume 13 • Issue 1 | 2016 | ASIA Miner | 9 THE US$4.4 billion project fnancing agree- ment for the Oyu Tolgoi (OT) underground mine is a global vote of confdence in Mon- golia that reopens the doors to leading glob- al banks for Mongolian projects, according to the country's Prime Minister Saikhanbileg. In a press statement the government said, "The funding has been secured from a very high quality syndicate of global lenders and underlines the market's support for and con- fdence in the project and our country. "The cooperative partnership forged in reaching this important milestone, augurs well for the future success of the project and paves the way for increased foreign investment into Mongolia. The Government of Mongolia has garnered valuable experi- ence in interacting with foreign investors and in managing the country's strategic assets, and is fully committed to maintaining an in- vestment environment that is conducive for foreign capital. "Development of the underground phase of Oyu Tolgoi will unlock the remaining value of the entire mine. It will contribute signif- cantly to the economy of Mongolia and play an integral role in assisting the Government in its efforts to improve the quality of life of Mongolian citizens," it said. Mongolia's national investment company Erdenes Mongol said, "This major fnancing, which represents 80% of the value of the entire mine, is being funded by international fnancial institutions and export credit agen- cies representing the governments of the United States, Canada and Australia, along with 15 commercial banks. "Drawdown of funds is expected to occur in the second quarter of 2016, with work on the underground development expected to resume in the frst half of 2016. Construction on the mine is expected to last between fve to seven years, with production anticipated to commence in 2021." The facility was signed by Oyu Tolgoi LLC in December and represents one of the largest ever provided in the mining industry. Oyu Tolgoi LLC is the Mongolian operator of OT and is 66% owned by Turquoise Hill Resources and 34% by the Government of OT fnance reopens Mongolia's doors Mining in the open pit at Oyu Tolgoi Copper-Gold Project in southern Mongolia. Signing of the US$4.4 billion fnancing agreement will unlock the underground component of the project, which represents 80% of its entire value. Mongolia. Turquoise Hill is majority owned by Rio Tinto. Turquoise Hill's chief executive offcer Jeff Tygesen said, "The signing of project fnance is an unprecedented milestone for Turquoise Hill and Oyu Tolgoi as well as an historic vote of confdence in the project and Mongolia. We look forward to working with the Mongolian Government and Rio Tinto to complete the remaining steps lead- ing to restart of underground development." The facility will be funded by Export De- velopment Canada, European Bank for Reconstruction and Development, Interna- tional Finance Corporation, Export-Import Bank of the United States, Export Finance and Insurance Corporation of Australia and commercial lenders comprising BNP Parib- as, ANZ, ING, Société Générale Corporate & Investment Banking, Sumitomo Mitsui, Standard Chartered Bank, Canadian Im- perial Bank of Commerce, Crédit Agricole, Intesa Sanpaolo, National Australia Bank, Natixis, HSBC, The Bank of Tokyo-Mitsub- ishi UJF, KfW IPEX-Bank and Nederlandse Financierings-Maatschappij voor Ontwik- kelingslanden. The Multilateral Investment Guarantee Agency (MIGA) provided political risk insurance for the commercial banks. Turquoise Hill, Rio Tinto and Oyu Tolgoi are working towards completing the 2015 feasibility study, including the updated capi- tal estimate and securing all necessary per- mits for development. Once these steps have been completed and subject to the boards approving a formal notice to pro- ceed, the full facility will be drawn down. Net proceeds after fees and taxes are anticipated to be approximately $4.1 billion. As well as the draw down, proceeds will be used by Oyu Tolgoi to pay down sharehold- er loans payable to Turquoise Hill. As part of the fnance agreements, Rio Tinto will provide a completion support un- dertaking in favour of the lenders. In con- sideration for this, Oyu Tolgoi and Turquoise Hill have agreed to pay Rio Tinto an annual completion support fee equal to 2.5% of the amounts drawn under the facility, of which 1.9% is payable by Oyu Tolgoi and 0.6% by Turquoise Hill.