Successfully digging for a Chilean copper deal

ING’s Metals & Mining team in New York recently secured a USD 650m project finance facility for the Minera Antucoya copper mine project in Chile, the largest mining project financing in the Americas for 2013. ING also led the technical and market due diligence on behalf of other MLAs.

 

The mining sector is one of the most important industries in Chile, the largest global producer of copper. Its exports alone account for around a third of all government income. Among the most important players is London Stock Exchange-listed Antofagasta Plc, the world’s sixth largest global copper producer, with extensive experience in constructing and operating copper mines in northern Chile and an estimated annual production of around 709,600 tons.

 

Minera Antucoya is a world scale greenfield copper mine project owned by Antofagasta Plc (70%) and Marubeni Corp (30%), one of Japan’s largest general trading companies and a long-term mining partner. The USD 2.1bn mine is expected to reach an average annual production of 77,000 tons over the 20 years of its expected lifespan.

 

Over the years, ING has had successful relationships with both Antofagasta and Marubeni. In 2008, ING was the mandated lead arranger for the project financing of their Esperanza copper mine, where it has since been involved as a technical agent.

 

For Minera Antucoya, the ING Metals & Mining team based in New York secured the senior secured project finance facility of USD 650m and led the technical and market due diligence on behalf of other MLAs. This facility, which was the largest mining project financing in the Americas for 2013, in a time when debt financing for mining projects was scarce. It included the integration of financing tranches of commercial banks, export credit agencies and development banks.

 

In order to accommodate the construction and ramp up period until the project begins to generate cash flow for repayment of the loan, the facility tenor was structured over 12 years, consisting of a 2.5 year grace period and 9.5 year repayment period. This was a notable achievement given the current pressures for shorter tenors. As a result of the long expected mine production life of over 20 years and structural features to reduce the tenor during periods of higher copper prices, lenders were able to provide this ING tenor.

 

The project will increase the overall copper production of Antofagasta by over 10% and Marubeni will benefit from being one of the largest offtakers of the copper produced. Once the project has reached completion the financing will also become non-recourse to them.

 

ING has a very strong track record in lead arranging these large multi tranche mining project financings, and having structured their previous copper mining finance, the Sponsors were very comfortable with working with ING in order to structure and execute such a high profile transaction efficiently.

 

In 2014, this transaction won the PF Latin America Mining Deal of the Year Award, it also won the IJ’s Global Mining Deal of the Year Award and was runner up for the overall deal of the year. Main reasons for winning these awards was that this was the largest mining financing concluded in a very challenging financial environment, while involving various financing tranches with long tenors.