The Danish export credit agency (ECA) EKF has guaranteed a loan made by a pension fund to an Armenian mining project.

Pension Danmark has lent DKr350mn (about US$62mn) to the Teghut copper mine in northwest Armenia. The finance will be used to buy mining equipment from the Danish company FL Smidth. The finance was structured by BNP Paribas, but Pension Danmark is the only lender. GTR understands that the tenor is less than 10 years.

It takes the value of projects supported by a collaboration of Pension Danmark and EKF to around DKr1.6bn. In 2011, the pair signed a three-year deal that will see EKF guarantee DKr10bn of Pension Danmark loans supporting Danish exports. The ECA has inked an identical agreement with Denmark’s largest pension fund PFA.

EKF’s deputy CEO Soeren Moeller admits that it’s an unorthodox setup: ECA’s predominantly deal with banks (although this is a stance which has come in for some criticism – particularly in the UK, where UK Export Finance has been urged to open its coverage to non-banking lenders to compensate for the low take-up among the so-called Merlin banks).

He tells GTR: “I believe it is quite unusual to have these co-operations with pension funds. It’s something we established almost two years ago. We haven’t seen that in a lot of other countries, but we’ve had quite a bit of interest in this model from various institutions. It originally stems from the lack of banking appetite. We’re talking long-term finance here, up to 18 years. When banks weren’t doing as well as they are now, there was a need to bring in alternative funding channels. At EKF, we don’t have direct lending, we only do the guarantees.”

Torben Möger Pedersen, CEO of Pension Danmark says:”We’re killing two birds with one stone through our partnership with EKF. On the one hand, the partnership will ensure a return for our members well above the bond rate, and on the other hand it will help make more Danish export orders possible at a time when more traditional financing is difficult.”

The Teghut mine will produce copper for use in mobile phones but has been targeted by activists since its initiation in 2007. The project sponsor, the Armenian Copper Programme, a division of Vallex Group, has been engaging in mountaintop removal in order to access underground metal reserves. There are more than 400 active mines in Armenia – a country the size of Maryland, and human and environmental activists have protested against the loss of property rights and rare and endangered ecosystems and biodiversity.