ICBC contributes $100 million to $1.8 billion syndicated loan with Sociedad Minera Cerro Verde S.A. for general corporate purposes and the Cerro Verde Mining Expansion Project

Project narrative

In March 2014, Sociedad Minera Cerro Verde S.A.A. (Cerro Verde) — a special purpose vehicle and joint venture of SMM Cerro Verde Netherlands N.V., Freeport-McMoRan Copper & Gold Inc. (FCX), and Compañía de Minas Buenaventura S.A.A.— signed a five-year, $1.8 billion senior unsecured term loan credit agreement with 22 banks. Participants in the loan syndicate included Mitsubishi UFJ Financial, SMBC, Mizuho Financial, Credit Agricole, Citi, ING, BNP Paribas, Banco Santander, Natixis, SG, HSBC, BBVA, Scotiabank, Intesa Sanpaolo, KfW IPEX-Bank, CBA, Sumitomo Mitsui Trust, and ICBC, among others. The Bank of Tokyo-Mitsubishi UFJ, Ltd., BNP Paribas, Citigroup Global Markets Inc., and HSBC Securities (USA) Inc., served as joint lead arrangers and joint bookrunners, and Citibank, N.A., as administrative agent. Amounts are expected to be drawn over a two year period to fund a portion of Cerro Verde’s $4.6 billion mining expansion project and for Cerro Verde’s general corporate purposes. The loan is not guaranteed, is subject to amortization, matures in March 2019 and bears interest at LIBOR plus 190 basis points, subject to adjustments based on Cerro Verde’s leverage ratio. The credit facility amortizes in three installments in amounts necessary for the aggregate borrowings and outstanding letters of credit not to exceed 85 percent of the $1.8 billion commitment on September 30, 2017, 70 percent on March 31, 2018, and 35 percent on September 30, 2018, with the remaining balance due on the maturity date of March 10, 2019. As of March 31, 2014, there were no borrowings and no letters of credit issued under Cerro Verde’s credit facility. Cerro Verde operates an open-pit copper, molybdenum and silver mining complex located some 30km southwest of Arequipa, Peru, equipped with a concentrator and SX/EW leaching facilities. Its mining expansion project involves increasing the concentrator plant capacity to 360,000t/d of ore from 120,000t/d, making it the world's largest concentrating facility. Project implementation commenced in September 2015. The expanded mine is expected to increase annual production to approximately 600Mlb of copper and 15Mlb of molybdenum. The Cerro Verde mining site faces significant environmental risks, primarily stemming from dust emissions during its production processes. These emissions affect nearby communities in the districts of Socabaya, Uchumayo, Tiabaya, Hunter, and Yarabamba. Monitoring by Peru’s Environmental Assessment and Enforcement Agency (OEFA) revealed that fine particulate matter (PM10 and PM2.5) frequently exceeded permissible limits under Peruvian law, with daily violations recorded between June and October 2023. These levels are associated with adverse health impacts, including respiratory illnesses such as asthma and cardiovascular conditions. The long-term exposure of local residents has led to increasing cases of acute respiratory infections (ARIs), with dramatic rises noted since 2014, coinciding with the mine's expansion. Residents, like those in Uchumayo, have repeatedly raised concerns over the pervasive dust settling in homes and the associated health impacts. Despite requests for health screenings and studies, responses from authorities have been delayed, leaving residents without necessary interventions. Independent studies, such as those by the National University of San Agustín, have corroborated excessive pollution levels, further underscoring the persistent risk. In regards to social risk, workers at Peru's largest copper mine, Cerro Verde, have postponed planned strikes over grievances including extended working hours, insufficient rest days, and inadequate provision of uniforms. They report that the 12-hour shifts, starting at 6:30 AM, require waking at 4:00 AM, adding to the strain of working in a high-altitude, demanding environment. The Cerro Verde mining operation has implemented comprehensive environmental risk mitigation measures to minimize its ecological footprint and ensure compliance with international and national environmental standards. Key measures include the operation of advanced water management systems, such as the construction of facilities for wastewater treatment to ensure that water used in the mining process is appropriately treated and reused, reducing freshwater consumption. This effort resulted in a significant percentage of water being recycled within their operations. Additionally, Cerro Verde has conducted participatory environmental monitoring programs, engaging local communities and stakeholders in the monitoring of air, surface water, and groundwater quality. These programs build trust and transparency while ensuring that environmental standards are upheld. Biodiversity preservation initiatives include the restoration of affected habitats and careful monitoring of ecological impacts.