The European Bank for Reconstruction and Development (EBRD) and the IFC are considering providing funding for mining company Ivanhoe Mines’ Oyu Tolgoi mining complex in Southern Mongolia.
Ivanhoe Mines executive chairman, Robert Friedland and John Macken, the company’s president and chief executive officer, announced that they have signed a joint mandate letter with the EBRD and IFC for the evaluation of the major financial package which could come to around US$1.8bn.
The proposed deal would see the EBRD and IFC providing up to US$300mn each as part of a group of primary lenders in limited-recourse project financing and the mobilisation of a further US$1.2bn from general syndication under a B loan structure.
Furthermore, Ivanhoe Mines claims to have received interest from export credit agencies to provide up to US$500mn in direct project financing.
Friedland says: “Oyu Tolgoi will be one of the largest and highest-grade copper-gold mines in the world and this indication of interest in participation by some of the world’s leading financial institutions starts a process that will help to ensure that we meet our objective of commercial production in 2013.
“Securing the proposed financing package, and combining it with possible additional subscriptions of more than US$1 billion through our existing agreements with Rio Tinto and the funds from our cash position that are earmarked for project development expenditures, would advance Ivanhoe a long way toward completion of the construction of the Oyu Tolgoi mine,” Friedland adds.
Ivanhoe Mines recently released its development plan for the mining complex and estimated that the initial capital cost required to achieve first production from the open-pit mine on the Southern Oyu deposits is US$4.6bn.
Macken states that a total of 13 banks have submitted expressions of interest in providing amounts totalling more than US$2bn, “the keen interest that has been expressed by all of the potential lenders that we have consulted gives us confidence that our financing plans are achievable without imposing undue burden or dilution upon our balance sheet, our shareholders and our project partners,” he adds.
The IFC and EBRD financings are subject to detailed due diligence, including a review of the extensive environmental and social studies conducted by the Oyu Tolgoi Project, and approval of their respective managements and boards. The arrangements also are subject to agreement of the Ivanhoe Mines board and other related approval processes.
Last Updated May 24, 2010
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