China Eximbank provides supplementary $419 million overseas investment loan for capital expenditures related to the Toromocho Copper Mine Project (Linked to Project ID#36064)

Between June and August 2007, Aluminum Corporation of China (Chinalco) acquired 100% of the shares in the Toromocho Copper Mine Project for CAD 840 million ($789 million) . Canada-based Peru Copper Inc. originally owned 91% of shares and the remaining 9% were owned by unspecified firms. Shortly thereafter, all of the mining concessions in Toromocho were transferred to Chinalco's wholly-owned subsidiary, Minera Chinalco Peru S.A. (Chinalco Peru). Then, on December 1, 2010, China Eximbank and Minera Chinalco Perú S.A. ('Chinalco Peru') — a special purpose vehicle and wholly owned subsidiary of Aluminum Corporation of China Limited (Chinalco) — signed a $2 billion overseas investment loan to finance capital expenditures related to the Toromocho Copper Mine Project (captured via Project #36064). The loan carried an interest rate 6-month LIBOR plus 185 basis points. However, its other borrowing terms are unknown. The parent company Chinalco entered into a guarantee agreement with China Eximbank for the entire outstanding amount, accrued interest, penalties and other expenses arising from the loan from China Eximbank. Chinalco was also required to pay a 1% commission for each drawdown. This overseas investment loan facility is secured by (i.e. collateralized against) all property, plant and equipment pertaining to the Toromocho Project if Chinalco’s credibility or financial status deteriorates. In March 2013, China Eximbank and Chinalco Peru signed a supplementary overseas investment loan (facility) agreement worth $419 million for additional capital expenditures related to the Toromocho Copper Mine Project (captured via Project #56098). The loan carried an interest rate of 6-month LIBOR plus 350 basis points. The other borrowing terms are unknown. Chinalco Peru was required to pay a 1% commission fee for each drawdown and this second facility was also guaranteed by the parent company of Chinalco. The supplementary loan agreement was also collateralized against all property, plant and equipment pertaining to the Toromocho Mining Project if Chinalco’s credibility or financial status deteriorates. As of 2016, the entirety of this loan facility was drawn down. The Toromocho Project is located in central Peru in the core of the Morococha mining district. It is one of the largest copper mines in the world, and the first greenfield copper mine developed by a Chinese corporation abroad. Upon completion, the project was expected to boost overall copper exports from Peru by 25%. CCCC Del Peru SAC (subsidiary of China Communications Construction Company, Ltd.) was the contractor responsible for project implementation. The Environmental Impact Assessment of the Toromocho Copper Mine Project was approved by the Peruvian government in December 2010. Chinalco Peru obtained the construction permit and began work in July 2011. The mines were officially commissioned on December 10, 2013. However, three months after its inauguration, the operation of the mine was suspended by Peru’s Environment Assessment and Enforcement Agency (OEFA) after it discovered illegal discharge of acid effluents in two nearby lakes. Chinalco quickly resolved this matter by building improved drainage and explained the incident as a result of unusually heavy rainfall which caused unexpected acid runoffs. The Toromocho Copper Mine Project began commercial production on June 17, 2015.

Additional details

1. AidData has estimated the all-in interest rate as follows: 0.448% (average 6-month LIBOR in March 2013) + 3.5% (350 basis points) = 3.948%

Number of official sources

7

Number of total sources

7