ICBC pledges syndicated loan financing to a Tanzania-China Joint Venture for the Mchuchuma-Liganga Twin Projects (Linked to #59969)

On 21 September 2011, Tanzania and China signed an agreement to develop two projects in the Mtwara Development Corridor: (1) Liganga Iron and Steel Project and (2) Mchuchuma Coal to Electricity Project (other project names: Coal and Iron Ore Mining and Iron and Steel Complex Plant or Liganga and Mchuchuma Project or Mchuchuma Iron Ore and Liganga Coal Mining or Mchuchuma-Liganga Twin Projects or 宏达坦桑尼亚项目煤铁矿项目 or 姆楚楚马-利甘加煤铁电一体化). The agreement stipulated that these projects be implemented on a public-private partnership (PPP) basis -- more specifically, on a Build, Own, and Operate (BOO) basis. The agreement was signed between Chrisant Mzindakaya, chairman of the National Development Corporation (NDC) of Tanzania, and the Sichuan Hongda Group board of directors. NDC (20% ownership stake) and Sichuan Hongda (Group) Company Limited (80%) signed a joint venture agreement establishing Tanzania China International Mineral Resources LTD (TCIMRL) as a special purpose company to implement the Mchuchuma Coal to Electricity Project and the Liganga Iron and Steel Project. Per paragraph 2.9 of the agreement, Sichuan Hongda (Group) agreed to contribute up to USD $600 million of equity (project #59969) to TCIMRL in accordance with the progress of the implementation of the project. In addition, Sichuan Hongda (Group) agreed to seek debt financing of up to USD $2.4 billion, to be secured by the assets of TCIMRL including the mining rights owned by TCIMRL in connection with these projects and guaranteed by Sichuan Hongda (Group). Then, on 11 September 2012, TCIMRL signed a strategic cooperation agreement with Stanbic Bank Tanzania and Industrial and Commercial Bank of China (ICBC) for $3 billion USD. ICBC and NDC signed another cooperation framework agreement to support TCIMRL on 24 March 2013. However, it is unclear is a final syndicated loan agreement was ever signed with ICBC and/or Stanbic Bank Tanzania. Several sources suggest that China Development Bank (CDB) is funding or has indicated interest in funding Hongda investment activities overseas, including these Tanzania projects. However, it is unclear whether whether CDB actually signed a financing agreement or whether CDB financing is supplementing or replacing ICBC. The Liganga Iron and Steel Project involves the establishment of an Iron Ore Mine and Steel Plant. The iron ore reserve according to drilling exploration conducted in 2013 at an area (10 km2) is 126 million tons, which can be processed to produce iron and steel, vanadium and titanium products. Planned production capacity is 1.0 million tones annum (t/a) of Steel Products (can be increased to 2 million t/a), 175,400 t/a and 5,000 t/a of Titanium and Vanadium concentrates respectively. Feasibility and ESIA studies have been completed. ESIA Certificates, License for mining Iron and Water Right for use of Lupali River have been obtained. Strategic Investor Status Certificate and subsequently Performance Contract and its Addendum for Incentive Package were signed between the Government through Tanzania Investment Center (TIC) and TCIMRL. Total investment for the iron ore mine including the associated infrastructures and steel plant is about USD $1.623 billion. The sponge iron plant will be established in Ludewa district utilizing iron ore from Maganga Matitu (part of Liganga) and coal from Katewaka to produce sponge iron. Maganga Matitu Resource Development Limited (MMRDL), a joint venture between NDC and MM Steel Resources Public Limited Company (MMSR PLC), was the implementing contractor. Project due diligence and bankable documents are being finalized. The project intends to establish a 400,000 tpa of Sponge Iron Plant that will be used to produce 300,000 tons of iron and steel products per year. Production is expected to start in 2018/19. The Mchuchuma Coal to Electricity Project is located at Mchuchuma area, Ludewa District, Njombe Region about 950 km from Dar es Salaam. It is being implemented by Tanzania China International Mineral Resources Limited (TCIMRL), a Joint Venture Company (JVC) between the Government through NDC (20% non-cash) and Sichuan Hongda Group from China (80%). According to the signed Joint Venture Agreement (JVA), the project involves establishment of Coal Mine with production capacity of 3 million tons per annum (t/a), Power Station with a capacity of 600MW (4 x 150MW) including 220KV Power Transmission Line between Mchuchuma and Liganga. The 250 MW out of the 600 MW will be utilised by Liganga Iron Ore project and the balance 350 MW will be connected to the National Grid at Makambako through a proposed 400 kV Power Transmission line. Drilling exploration was completed in 2012/13 has established coal reserve of 428 million tons. Feasibility and Environmental and Social Impact Assessment (ESIA) studies have been completed. However, after 2012, the project experienced various construction delays and funding problems. There was no Power Purchase Agreement (PPA) between Tanesco, NDC and the JVC concerning the 600MW of power to be generated by the project, pending Tanesco’s due diligence on Sichuan Hongda. Tanesco had slated PPA discussions for early 2017, thus delaying the two projects and incurring additional costs. As of February 2019, the Mchuchuma Coal to Electricity Project is reported to be finished, while the Liganga Iron & Steel Project is expected to be finished in late 2019. As of November 2022, the Liganga Iron & Steel Project is still under construction.

Number of official sources

24

Number of total sources

39