Export Finance and Insurance Corporation (EFIC), the Australian government’s export credit agency, is providing debt financing and finalising political risk insurance to support Australian involvement in the development and operation of the Lumwana Project in Zambia, which will become Africa’s largest open-pit copper mine.

EFIC will provide debt financing of US$43mn to Lumwana Mining Company, a subsidiary of Australian and Canadian listed mining company, Equinox Minerals. This commitment makes EFIC one of the largest lenders in the debt financing package totalling US$584mn provided by a syndicate of international financiers for the development of the mine and related infrastructure.

In addition to assisting Equinox, these facilities underpin the participation of Australian exporters and joint venture partners Ausenco and Bateman Engineering. The joint venture has been awarded the US$407.6mn engineering, procurement and construction (EPC) contract for the Lumwana Project.

EFIC has been mandated to lead a syndicate of private sector insurers and reinsurers, to provide the necessary political risk insurance covering both the commercial debt and the commodities hedging exposures necessary to support the project. The policies will represent some of the largest syndicated risk policies written for an African project, and are scheduled to be in place prior to the first drawing under the project finance facility, early in 2007.

Peter Field, executive director of origination and portfolio management at EFIC, says “EFIC provides finance and insurance for Australian companies to succeed internationally, often beyond the limits of the commercial market, but within EFIC’s mandate to operate profitably. This transaction demonstrates the capacity of Australia’s mining companies, which typically have limited access to capital, to reach their full potential when finance is available. The development team at Equinox, lead by president and CEO, Craig Williams, is bringing this world-scale mine to a reality, emphasising the depth of skills present amongst smaller/mid cap Australian mining companies.

“This project will export Australia’s mining expertise through two successful and experienced mining engineering companies, Ausenco and the Australian arm of Bateman Engineering, both having established track records in Africa.”

As a leading assessor of country risk, EFIC tracks closely worldwide economic and political developments. EFIC chief economist, Roger Donnelly says that Zambia was a functioning, multi-party democracy, with no history of political violence, “Zambia is characterised by a high, but declining, risk of debt default for external creditors and low to moderate political risk for direct investors.”