China Eximbank provides $507 million loan — via deferred payment arrangement — for Aldoga Aluminum Smelter Project

Project narrative

On October 24, 2003, the Export-Import Bank of China (China Eximbank) pledged one or more loans worth $770 million AUD ($542.6 million USD) for the Aldoga Aluminum Smelter Project. On the same day, Chinese state-owned company China Non-ferrous Metal Industry's Foreign Engineering & Construction Co. (NFC) signed an agreement with Australia's Aldoga Aluminum Smelter Ltd. (AAS) in which NFC would supply technology and equipment worth $1 billion AUD ($700 million USD) for the construction of an $2 billion AUD Aldoga aluminum smelter with a capacity of 420,000 tons of primary aluminum annually. The plant was to be located in a 248 hectare site on a 30-year lease west of Gladstone, Queensland. Then, on December 10, 2003, China Eximbank, NFC, and AAS signed a seller's credit (deferred payment or 工程与供货合同) agreement worth approximately $507 million for the Aldoga Aluminum Smelter Project. The borrowing terms of the loan are unknown. However, it is known that the borrower was expected to repay the loan in installments after the completion of the construction phase and the commencement of the smelter operation phase. It is also known that AAS was expected to use the loan proceeds to finance a commercial contract with NFC worth approximately $599.9 million. As of October 2003, the project site had been cleared, with earthworks to be completed in February or March 2004 and construction expected to begin in the second quarter of 2004, with the first metal to be received in 2006. A further second stage, including the construction of a third electrolysis line to increase the plant's capacity to 630,000 tons of metal per year, was planned as well. Under the agreement, China Eximbank required Aldoga to put $1.3 million USD in equity funding by the end of September 2004 in place; however, Aldoga failed to do so. In November 2004, after the resignations of important Aldoga figures including the company chairman, managing director, and several directors and the Hong Kong arrest of Lee Ming Tee, a Malaysian billionaire, former director of Aldoga, considered 'Aldoga's point man in China', and the impetus behind Aldoga's turn towards Chinese technology and debt refinancing, sources reported that the Government Queensland believed the project to be 'dead.' Aldoga was now run by Uzbekstani industrial tycoon Azam Aslanov on behalf of British Virgin Islands entity Transal Holdings Ltd, owner of 51% of Aldoga's stock (the remainder held by a unit trust that the New York-based trader Marco Group and Ukraine's Industrial Union of Donbass each held an interest in), who had reportedly 'baulked at the prices being demanded for use of the Chinese technology, power and earthworks' and had unsuccessfully attempted to on-sell the project in Europe. In 2005, there were attempts to revive the project with Chinese capital and engineering, but these were delayed and on shaky ground, with criticism of the project's financial viability.