China Development Bank provides RMB 1 billion loan for Aktogay Copper Mine Development Project (Linked to Record ID#41941 and #53580)

Project narrative

On June 13, 2011, Kazykhmys PLC (now called KAZ Minerals PLC) signed a memorandum of understanding (MoU) with China Development Bank (CDB) for a $1.5 billion loan to develop its Aktogay Copper Mine Project. Then, on December 16, 2011, CDB signed two bilateral facility (loan) agreements with KAZ Minerals Aktogay Finance Limited — a special purpose vehicle and wholly-owned subsidiary of KAZ Minerals Aktogay LLP, which is itself a wholly-owned subsidiary of Kazykhmys PLC (Kaz Minerals PLC) — for the Aktogay Copper Mine Development Project: an RMB 1 billion ($158 million) loan agreement (as captured via Record ID#39557) and a $1.34 billion loan agreement (as captured via Record ID#41941). The RMB 1 billion loan tranche (facility) and the $1.34 billion loan tranche (facility) were available to the borrower for draw down over a three year period. The maturity of each loan was 15 years from the date of first draw down and the grace period of each loan was 3 years. The interest rate for the USD-denominated loan tranche was LIBOR plus a 4.20% margin and the interest rate for the RMB-denominated loan tranche was based on the applicable benchmark lending rate published by the People's Bank of China (PBoC). KAZ Minerals PLC provided a guarantee for both loans. As an additional credit enhancement, the borrower pledged a $100,000,000 minimum cash balance in a charge account (collection account) as a source of collateral. As of December 31, 2015, the RMB facility was fully drawn down (disbursed). To protect against currency risks, KAZ Minerals swapped the interest basis from a RMB interest rate into a USD LIBOR interest basis. As of December 31, 2016, the USD facility was fully drawn down. Arrangement fees with an amortized cost of $15 million, were netted off against these borrowings in accordance with IAS 39. The USD facility was repayable in half-yearly installments beginning in March 2018. The 2016 audited KAZ Minerals financial report identified the interest rates of the USD-denominated and RMB-denominated loan tranches as 5.12% and 4.33% (as of December 31, 2016) and 5.12% and 3.93% (as December 31, 2015), respectively. The 2017 report identified the interest rates of the USD-denominated and RMB-denominated loan tranches as 5.60% and 4.54% (as of December 31, 2017) respectively. AidData has used this information to estimate the interest rates that apply to these loans. The initial development cost of the copper mine was $2 billion, with KAZ Minerals seeking to fund the remaining $500 million. The mine was eventually expected to produce up to 100,000 tons of copper concentrate annually beginning in 2015. The project was comprised of an open-pit mine and an on-site concentrator to produce copper cathode from oxide ore and copper concentrate from the sulphide ore, with molybdenum as a by-product. Alarko was the engineering, procurement, and construction (EPC) contractor responsible for the processing plant at Aktogay. BIR provided engineering and consultancy services for architectural, civil, mechanical and electrical works for the project. ABB provided complete electrification and automation solutions and three gearless mill drive systems, while Ausenco was contracted to work on the open-pit mine. China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (NFC) was awarded the contract for the construction of the sulphide concentrator. Construction began in 2013). Copper cathode production from oxide began on December 1, 2015. CDB would later commit $300 million in 2016 specifically for the construction of the sulphide concentrator by NFC, as captured via Record ID#53580.