Two banks picked to structure part of the loan to Oyutolgoi project - News.MN

Two banks picked to structure part of the loan to Oyutolgoi project

Old News! Published on: 2010.06.21

Two banks picked to structure part of the loan to Oyutolgoi project

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Pending approval by the Board of
Oyutolgoi LLC, BNP Paribas and Standard Chartered Bank will work on structuring
the proposed USD1.2 billion B loan for the Oyutolgoi project as  part of the debt financing backed by the EBRD
and the IFC, according to a Reuters report.  The two international institutions are
considering providing a two-part debt package in a limited-recourse project
financing consisting of up to USD300 million each as part of a group of primary
lenders and mobilizing of a further USD1.2 billion from commercial banks under
a B loan structure.

Ivanhoe Mines has received
expressions of interest from export credit agencies to provide up to a further
USD500 million in direct financing. Canada”s EDC is likely to be involved.
Other agencies could be U.S. Ex-Im and KfW. In addition, it is believed the
Oyutolgoi funding package could include a Chinese bank tranche totaling USD1
billion. However, the eventual size of all the tranches in the deal will depend
on what can be raised in the market at the time of financing. It is not
expected that the deal will be in the market officially until at least early
next year.

The financing options are
complicated by the scheme being essentially two projects – a surface operation
and an underground mine. If both were financed together, the project would take
seven years to complete. It might be easier to finance the first phase and then
to start producing cash flows. The underground part would enable more export
credit type financing to be procured, based on heavy equipment orders. A total
of 13 commercial banks submitted expressions of interest on the deal. Other
banks shortlisted for the structuring mandate are believed to have included
Credit Agricole, ING, HSBC, SG and Standard Bank. Hatch Corporate Finance is advising
Ivanhoe.

It
is possible that the Chinese will become more involved in the project. Chinalco
has a 9% stake in Rio Tinto and Chinese co-operation and involvement would also
be sensible, albeit politically sensitive. 
The Mongolian government is aiming to list the Oyutolgoi mine on the
local and international stock markets.

The
recently released 2010 Oyu tolgoi Integrated Development Plan (IDP-10)
estimated that the initial capital cost required to achieve first production
from the open-pit mine was USD4.6 billion. This amount includes USD1.1 billion
to be spent advancing underground development in preparation for the start of
block-cave mining following the start of production from the open pit.

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