Narrative
Full Description
Project narrative
In October 2018, China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. (NFC) purchased a 51% equity stake in PT Dairi Prima Mineral (DPM) from PT. Bumi Resources Mineral Tbk. for $200 million. Then, in April 2019, PT Dairi Prima Mineral (DPM) — a special purpose vehicle and joint venture of NFC (Hong Kong) Metal Resources Co. Ltd. (51% equity stake) and PT. Bumi Resources Mineral Tbk. (49% equity stake) — signed a $361.84 million syndicated loan agreement with China Eximbank and other Chinese banks for Phase 1 of the Dairi Prima Mineral Zinc-Lead-Silver Mine Construction Project. The borrowing terms of the loan are unknown. However, it is known that the total cost of the first phase of the project is $452.3 million and it is being financed according to a 80:20 debt-to-equity ratio. The purpose of Phase 1 is to construct a zinc, lead, and silver ore processing facility at the Dairi Prima Mineral (DPM) mine, which is located in a mountainous region of the Dairi Regency in North Sumatra, Indonesia. The processing facility is located at the Anjing Hitam deposit, which is located in the Sopokomil area around 25 kilometers WNW of the Dairi Regency's main town of Sidikalang. Sidikalang is approximately 150km SSW of the provincial capital of Medan, Indonesia's third largest city. Medan and Sidikalang are linked by a standard bitumen public road. DPM plans to use underground mining techniques to extract zinc, lead, and silver ore, which will be concentrated at a facility close to the mine. DPM claims the majority of the tailings from the mine will be mixed with cement and injected back underground, and the remaining toxic waste will be stored in a tailings dam two kilometers from the mine. China Nonferrous Metal Industry's Foreign Engineering and Construction Co., Ltd. (NFC) is the engineering, procurement, and construction (EPC) contractor responsible for the implementation of Phase 1. China Nerin Engineering Co., Ltd., whose biggest shareholder is NFC, was contracted for the design and technical service of the project in 2018. JCHX Mining Construction Group Co., Ltd, — another Chinese state-owned enterprise — was contracted in 2019 to develop the underground mining system. China No.15 Metallurgical Construction, a subsidiary of NFC, is responsible for the project’s site leveling work. Construction began on or around September 2018. As of 2022, construction was ongoing. The project has been characterized by a disregard for the wellbeing of villagers who live downstream of the toxic waste that would be produced by the mine, especially considering the earthquake-prone area in which the mine is being built. In August 2024 Indonesia's highest court revoked the mine's environmental permit, siding with community residents. However, DPM has stated that it will appeal the ruling and continue construction of the mine.
Staff comments
1. The Chinese project title is Dairi铅锌矿项目 or 印度尼西亚Dairi铅锌矿项目 or 印度尼西亚达瑞铅锌矿 or 达瑞铅锌矿项目 2. Evidence of China Eximbank’s role as a lead arranger for the syndicated loan is provided on the website of the lender’s legal counsel (see https://www.dropbox.com/scl/fi/wvmugjx53ao8nb5y5te19/182273734089b8fa-a.pdf?rlkey=5hz479x2ux8u6brtwczo6wkdx&dl=0). 3. In its 2022 Annual Report, NFC reported that it ‘worked hard on project financing and the full amount of loans has been approved.’ 4. There is some circumstantial evidence (https://www.ptdpm.co.id/images/stories/pressrelease/bumi%20resources%20minerals%20reported%20progress%20on%20cooperation%20with%20chinas%20nfc%20to%20develop%20dairis%20zinc%20%20lead%20project.pdf) that suggests the borrower may have purchased credit insurance from Sinosure. This issue warrants further investigation. 5. There is some circumstantial evidence (https://www.ptdpm.co.id/images/stories/pressrelease/bumi%20resources%20minerals%20reported%20progress%20on%20cooperation%20with%20chinas%20nfc%20to%20develop%20dairis%20zinc%20%20lead%20project.pdf) that suggests the other Chinese bank participants in the syndicate are Bank of China and ICBC. This issue warrants further investigation. 6. The mine has been under consideration since 1998, when the Indonesian Government granted DPM permission to explore for metals over a 27,420-hectare area (which has since been reduced to around 24,600 hectares).