A US$2.1bn project debt facility for the Ambatovy Nickel Project in Madagascar has been signed with an international syndicate of lenders. The project is set to be one of the largest-scale nickel and cobalt projects in the world to date.
The project debt consists of five tranches arranged by five development banks; the Japan Bank for International Cooperation (JBIC), Export-Import Bank of Korea (Kexim), Export Development Canada (EDC), European Investment Bank (EIB), and The African Development Bank.
JBIC is providing US$700mn facility, which is co-financed with a syndicate of commercial banks.
Kexim is contributing a US$650mn tranche. This includes US$455mn in direct loans, and US$195mn in financial guarantees. The provision of the guarantees aims to help more Korean banks participate in regions usually considered too risky due to political instabilities.
EDC is lending US$300mn, and EIB is also contributing US$300mn. The African Development Bank is lending US$150mn. The funds will become available once all conditions of financial close have been met.
The project is owned by Sumitomo (27.5%), Sherritt International Corporation (45%) and Korea Resources Corporation (Kores) (27.5%). At financial close, SNL-Lavalin of Canada (SNC) is to acquire a 5% interest from Sherritt, whose interest will be reduced to 40%.
Ambatovy Minerals will carry out the mining, and Dynatec Madagascar will handle the processing and refining aspects of the project. Both corporations were set up via the project owners.
Sumitomo and Kores are supporting the project in terms of arranging the project financing. Total exposure for Sumitomo is approximately US$1.4bn, consisting of approximately US$550mn in equity and subordinated debt, and a further US$850mn for the completion guarantees. The Japanese insurer Nippon Export and Investment Insurance (Nexi) will be providing political risk for the equity funding.
The project will involve the development of a vertically-integrated production facility, covering the mines, the processing and refining of the raw materials and the necessary infrastructure such as railway and port facilities.
Annual estimated annual production will be around 60,000 tonnes of nickel metal, 5,600 tonnes of cobalt metal and approximately 190,000 tonnes of ammonium sulphate. Production is expected to start in mid-2010, will full production commencing by early 2013.
The nickel will mainly be sold to the Asian market, and Sumitomo and Kores are guaranteeing that they will take 50% of nickel from the project, up to 30,000 tonnes per year. This will help Korea meet 25% of its annual nickel consumption.
The project is the largest foreign investment project to date in Madagascar, and is strongly supported by the country’s government, which expects the project will contribute to an increase in export and tax revenue and job creation.