China Development Bank (CDB) contributes to syndicated M&A loan for the acquisition of Simandou Iron Mine Project (Linked to Record IDs #108566 and #108567)

Project narrative

Winning Consortium Simandou S.A.U. — a Guinea-incorporated special purpose vehicle — won the public tender (mining concession) to develop Simandou Iron Ore Blocks #1 and #2 (also known as Simandou North Blocks 1 & 2) on November 12, 2019 and signed a Base Convention agreement with the Guinean Government on June 9, 2020, which was approved by the Guinean National Assembly on June 26, 2020. Winnng Consortium Simandou Railway Pte. Ltd. (WCSR) and Winning Consortium Simandou S.A.U. signed a Rail Infrastructure Agreement for Simandou Iron Ore #1 and #2 with the Guinean Government on November 12, 2020, which was approved by the Guinean National Assembly on November 23, 2020. The same process applied for the Winning Consortium Simandou Port Pte. Ltd. (WCSP) and Winning Consortium Simandou S.A.U.; they signed a Port Infrastructure Agreement for Simandou Iron Ore #1 and #2 with the Guinean Government on November 12, 2020, which was approved by the Guinean National Assembly on November 23, 2020. Then, on March 25, 2022, the Government of Guinea, Rio Tinto SimFer (joint venture), and Winning Consortium Simandou Pte. Ltd. (WCS) signed the Simandou framework agreement. Under the terms of the framework agreement, the parties agreed to complete the construction of the port and rail infrastructure no later than December 31, 2024, with its commissioning no later than March 13, 2025. Then, on July 27, 2022, a La Compagnie du TransGuinéen SA (CTG) — a special purpose vehicle and joint venture of Simfer Jersey Ltd. [42.5% equity stake], WCS [42.5% equity stake], and the Government of the Republic of Guinea [15% ‘free carry’ equity stake] — was legally incorporated. Until June 2024, WCS, a Singapore-incorporated SPV that owns Winning Consortium Simandou S.A.U., was itself owned by Winning Consortium Holdings Pte. Ltd. (WCH), a joint venture of a Singaporean company called Winning Logistics (Africa) Company Limited (part of Winning International Group) [50% equity stake], a Chinese company called Weiqiao Aluminium (part of the China Hongqiao Group) [50% equity stake], and a Guinean company called United Mining Supply Group [nominal equity stake]. WCS is the concession holder of Simandou North block 1-2 (with the Government of Guinea holding a 15% interest in the mining vehicle and WCS holding 85%) and associated infrastructure. The Simfer joint venture comprises Simfer S.A., the holder of Simandou South Blocks 3 & 4, which is owned by the Government of Guinea (15%) and Simfer Jersey Limited (85%). In turn, Simfer Jersey Limited, is a joint venture between the Rio Tinto Group (53%) and Chalco Iron Ore Holdings (CIOH) (47%) – a Chinalco-led joint venture of leading Chinese SOEs (Chinalco (75%), Baowu (20%), China Rail Construction Corporation (CRCC) (2.5%) and China Harbour Engineering Company (CHEC) (2.5%). On December 22, 2022, CTG signed term sheets with its ‘industrial partners’ — including the Baowu group (a Chinese state-owned steel company) — for the financing, development, construction and operation of the railway and ports infrastructure. On the same day, Baowu Group joined the CTG joint venture. Then, on January 11-22, 2023, and Government of Guinea delegation traveled to China to meet with potential lenders and insurers for the Simandou Project, including China Development Bank (CDB), the Export-Import Bank of China (China Eximbank), the Industrial and Commercial Bank of China (ICBC), and Sinosure. Approximately two months later, on March 18, 2023, a formal recommencement ceremony for the Simandou Project took place. The ceremony was attended by the Guinean President, Colonel Mamadi Doumbouya, at the port of Moribaya (Forecariah). Then, on May 1, 2023, a bridge in Kolata (Maferinyah) — that was built by Winning Consortium Simandou as part of the Simandou Project — was officially commissioned. On July 26, 2023. CTG’s consolidated shareholders’ agreement — with all associated annexes — was signed by the relevant stakeholders. Approximately two weeks later, on August 10, 2023, a series of agreements were signed, including (1) a CTG joint venture agreement, (2) an infrastructure co-development agreement relating to a 600 km railway and a 160 mtpa mineral port, (3) an agreement relating to the third-party access regime (and related multi-user, multi-purpose and tariff arrangements); (4) an agreement relating to the definition of a new tax regime; and (5) amendments to the existing mining conventions of Simfer and WCS. Under the terms of the infrastructure co-development agreement, Simfer and WCS will deliver separate infrastructure scopes to leverage expertise. Simfer will construct the approximately 70 km Simfer spur rail line and a 60 million tonne per year transhipment vessel (TSV) port, while WCS will construct the dual track approximately 536 km main rail line, the approximately 16 km WCS spur rail line and a 60 million ton per year barge port. Once complete, all co-developed infrastructure and rolling stock will be transferred to and operated by CTG. Then, on February 4, 2024, CTG received approval to move forward with the project from Guinea’s National Transition Council, the country’s quasi parliamentary body. The approval covered the construction of a mine, rail line, and port with an anticipated completion date of 2025, and production date of 2026. Approximately two months later, on April 1, 2024, China Railway Signal & Communication Corporation Limited (CRSC) and WCS signed an RMB 1.245 billion commercial (EPC) contract on the motor, power battery and electronic control system (EIC system) of Guinea’s Morebaya-Simandou Railway Project. On June 19, 2024, Baowu Resources Company Limited completed the acquisition of a 49% equity stake of the WCS mine project (via a Singapore-incorporated SPV known as Winning Consortium Simandou Pte. Ltd.) and the WCS infrastructure projects (via a Singapore-incorporated SPV known as Winning Consortium Simandou Infrastructure Pte. Ltd.) for $1.78 billion. To facilitate the acquisition, Baowu Resources Company Limited — via Baowu Simandou Mining (Shanghai) Company Limited — acquired a syndicated M&A loan from China Eximbank, ICBC, and China Development Bank (CDB) in 2023. The loan was collateralized against the mining titles on Simandou blocks 1 and 2, which were purchased by Winning Consortium Simandou S.A.U. in November 2019 for $14 billion. It was also backed by a Sinosure credit insurance policy and an independent guarantee from Weiqiao Aluminum & Power (a subsidiary of China Hongqiao Group Limited). Baowu Resources Company Limited achieved financial close with its lenders (China Development Bank, ICBC, and China Eximbank) on April 2, 2024, which signified the date on which all conditions precedent had been achieved for the first loan disbursement. The total expected cost of the Simandou Project is approximately $24 billion and is being financed with a mix of debt and equity. The total estimated cost of the Simandou South mining complex (covering mining blocks 3 & 4 and owned by Simfer S.A.) is $4.6 billion. The total estimated of the Simandou North mining complex (covering mining blocks 1 & 2 and owned by Winning Consortium Simandou S.A.U.) is unknown. The total estimated cost of the co-developed (rail and port) infrastructure for the Simandou South mining complex and the Simandou North mining complex -- including the Simfer Spur Line, the Main Rail Line, the port infrastructure (WCS Barge Port and Simfer Port) -- is $12.3 billion ($8.8 billion for the WCS infrastructure project scope, which involves the construction of a 552 km main rail line and WCS spur line as well as a 60 Mtpa barge wharf, and $3.5 billion for the Simfer infrastructure project scope, which involves the construction of a 70 km Simfer spur rail line (“spur”) from Simfer mine to the mainline and a 60 million ton per year transhipment vessel port). The total estimated cost of the Simfer transhipment vessels is $600 million. The project has four major components: (1) An open-pit iron mine in the Simandou mountain range in south-eastern Guinea, approximately 600 km from the Guinean coast, with an estimated potential capacity of up to 100 million tons per year, located east of the town of Kérouané. (2) The construction of a 600km railway. In order to exploit the iron ore from blocks #1 and #2, WCS has undertaken, within the framework of the mining agreement signed with the Guinean Government, to build a “trans-Guinean” railway of approximately 600km length, to link the Simandou mine to the Guinean coast, and to build new port facilities to export the iron ore. (3) During the project’s first phase, port facilities will be built on the Morébayah River estuary near Senguelen, in the Prefecture of Forecariah, to load iron ore onto barges, then load onto large ocean-going vessels through its high-capacity transhipment terminals at sea. (4) The construction of a new deep-water port is planned in a second phase. The footprint of the future river port covers an area of approximately 3.45km², on the left bank of the Morébayah. Phase 1 infrastructure consists of: -- Two general cargo berths with an unloading facility for barges, including one for handling petroleum products; -- Four berths equipped with gantry loaders for loading iron ore onto barges; -- A railway loop which is the terminal of the rail transport line for iron ore export and sending supplies to the mine; -- A storage yard for general cargos including construction material during the construction phase; with a spur railway line during the operation phase to load equipment, materials and fuels onto trains to be transported to the Simandou mine; -- An iron ore storage yard equipped with stackers and reclaimers; -- Rotary dumpers to unload the iron ore wagons, connected to conveyor belt systems for handling the iron ore; -- An office building and base camp; -- An electrical station with heavy fuel generators; -- Freshwater supply and distribution system; -- Workshops for maintenance, repair and welding; -- Warehouses for spare parts and consumables; -- A wastewater treatment plant and a settling tank; -- A waste storage area, to be followed by the construction of an incinerator; -- An Oxygen-Acetyline factory within the port limit; -- 4G mobile phone towers, required for communication within the port area, for boats positioning and for communication in the channel and transhipment anchorage; and -- Two quarries for construction materials: one for granite at Senguelen equipped with a crushing station, and one for laterite at Bamboro. The existing rural track between the N4 road at Maferinya and the port has already been repaired by WCSP. An access road along the railway is also expected to be built to connect the port to the N4 road in order to provide bypass for the communities as well as for the urban area of Maferinya. Besides the above onshore facilities, a river channel is expected to be dredged to allow the barges and ships to navigate to the transhipment anchorage suitable for large ocean-going vessels. The railway starts near Port Morébaya, runs eastward to Forécariah, then runs along the border between Guinea and Sierra Leone, passing Kelemou, Madina, and then the Kuru Mountains to the south of the Fouta Djallon Highland via the Kindia Tunnel (11.80 km) and passing Kassa Station. After Kassa, the railway extends northeast and crosses the highland mountains via the Mamou Tunnel (8.95 km), passes along the southern foothills of the mountains until Ouré-Kaba Station, past Tagagna and Liaya, and then the route leaves the border. It then runs parallel with the N1 Highway heading to the east and southeast, before crossing the Niger River and again running in parallel with the N1 Highway until Faranah Station. After Faranah, the railway extends east along the southern boundary of the Upper Niger National Park, crosses the Mafou River, the Niandan River and the N33 Highway, passes Nialinko Station and runs along the mountains. It then passes Diankoya Station, crosses Sonamba River to the south of Médina, runs southeast until the west of Kérouané Township where the Station is established, crosses the Milo River and finally arrives at the foothills of the Simandou Mining Area. The project's Simandou South mining complex (covering mining blocks 3 & 4) component consists of the following elements: -- Mine Access: access to the open-pit mine will be via access roads going uphill to the top of the mountain, most probably on both east and west sides during construction. The pioneer mining area will comprise one or two open pits, using the blasting and excavation method to exploit the iron ore blocks, with haulage by heavy duty trucks to feed into the prime crushing stations at the designed fringe of the open pits. Conveyor systems will then carry the ore downhill to reach the processing plant. -- Mineral Processing: the crushed iron ore will be transported from the pit areas to the mineral processing plant via two or three surface conveyors. The mine plant site will be located on relatively flat ground close to the train loading facility northwest of the deposits. Mineral processing will consist of screening and secondary crushing. The final product is high-grade iron ore fines and lumps ready for rail shipment and sea shipment. -- Mine Support Facilities: support facilities will be located adjacent to the railway terminal on the west side of the mine. These include a mining camp, mobile equipment workshop, fuel storage, power generation, concrete batch plant, administrative offices, temporary ore storage and water management infrastructure. Rock waste material left over after mining will be stored in a dumping pit. The location of the dumping pit will be carefully chosen, taking into consideration environmental and safety factors. Proper preservation measures will be deployed to ensure the stability of the waste stockpiles and to avoid waste rocks to be flooded by heavy rain. -- Other supporting facilities will include a water reservoir, to be constructed to maintain fresh water supply to the mining facilities both for living use and for environmental purposes such as dust suppression. Other miscellaneous facilities required are being assessed and designed. -- A supporting airport 20km north of Kérouanéis being planned to improve the logistics to the mine. The airport will be constructed in three separate phases. The runway will be initially laterite in Phase 1A, then to be hardened by concrete in Phase 1B. There is a potential plan to expand to a longer airstrip during Phase 2. Phase 1B includes constructing buildings and facilities required for airport operation. The scope of the project component involving the Simandou North mining complex (covering mining blocks 1 & 2) is currently unknown. CTG is reportedly designing and implementing the Simandou Project in compliance with the Equator Principles requirements (version IV, June 2020). As a result, CTG has agreed to comply with IFC Performance Standards (PS) -- in particular, PS1, PS2, PS4, PS4, PS5 and PS6.