China Eximbank provides $560 million loan for Ramu Nickel-Cobalt Project (Linked to Record ID#64653)

Project narrative

In 2004, China Metallurgical Group Co. Ltd. signed a development framework agreement with the Papua New Guinea government and foreign partner companies, Highlands Pacific Company Co Ltd and PNG stakeholders Mineral Resources Development Company (MRDC), for the development of the Ramu Nickel-Cobalt Project. In 2005, China Metallurgical Group and its partners signed a 'Master Agreement' and an 'Association Agreement' to establish a framework for financing the Ramu Nickel-Cobalt Project. Then, on July 23, 2008, MCC Ramu NiCo Ltd. — a special purpose vehicle and wholly owned subsidiary of MCC-JJJ Mining Development Co. — finalized a $1.4 billion financing package necessary to complete the Ramu Nickel-Cobalt Mine Project. The project was financed according to a debt-to-equity ratio of 70:30. 40% of the total project cost was financed through a China Eximbank loan worth $560 million (captured via Record ID#64520) and 30% of the total project cost was financed through a 10-year, $473 million syndicated shareholder loan from MCC-JJJ Mining Development Company Ltd. The loans were to be repaid by 2017 (8 years from the commissioning date of the mine). The interest rate of the USD-denominated loan was set to LIBOR (3.119%) plus a 1.6% margin and the interest rate of the RMB-denominated loan was approximately 4.7%. The remaining project costs were financed via shareholder equity contributions. The Ramu Nickel-Cobalt Project is located in Madang Province on the north coast of Papua New Guinea. The project comprises the Kurumbukari (“KBK”) mine and a beneficiation plant (designed to treat around 4.6 million tons of ore per annum), located on the Kurumbukari plateau, in the foothills of the Bismarck Ranges, 600-800 meters above sea level and 75 kilometers (“km”) to the southwest of the provincial capital of Madang, and the Basamuk processing plant located on the coast, approximately 55 km southeast of Madang. The KBK mine is at latitude 5° 34´ S and longitude 145° 13´ E and the Basamuk refinery is at latitude 5° 32´ S and longitude 145° 8´E. Beneficiated ore is pumped from the mine as a slurry to the plant via a 135km pipeline. The Basamuk plant is designed to produce a mixed nickel-cobalt hydroxide product containing around 32,600 tonnes nickel and 3,300 tonnes cobalt on an annual basis. China Metallurgical Group Co Ltd was the EPC contractor responsible for implementation. On November 3, 2006, a foundation laying ceremony took place. However, the implementation of the project was delayed for two years due to legal appeals over environmental issues. Also, in January 2008, local landowners staged a protest against the project Managers from China Metallurgical Group Co Ltd and four local chiefs held crisis talks in Madang town over a range of grievances. The landowners demanded that China Metallurgical Group Co Ltd stop operations until the dispute was settled. The landowners presented 18 points, complaining about their lack of participation in spin-off business, the employment of heavily armed Chinese security guards, discrimination at the work site and language barriers. One month earlier, a former PNG health minister, Sir Peter Barter, called for an independent environmental impact assessment (EIA) of the project after discrediting the existing EIA. PNG's Lutheran head bishop, Doctor Wesley Kigasung, also warned that pollution from the mine could cause up to 80,000 sea-dependent locals to lose their livelihoods. The project was ultimately completed and handed over on December 6, 2012. In 2014, local rioting broke out against Chinese workers at the KBK mine. Then, in February 2020, a coalition of more than 5,000 villagers and a provincial government in Papua New Guinea sued MCC Ramu NiCo Ltd., demanding not only that its Chinese owners pay restitution totaling 18 billion kina ($5.2 billion), but also that it stop dumping mine waste into the ocean and remediate the allegedly contaminated waters. Half a million people rely on the local fisheries in the Coral Triangle biodiversity hot spot, and the plaintiffs argue that their lives and food supply are at stake. The lawsuit appears to seek the highest environmental damages in the country’s history, and it relies on some of the biggest studies on the ocean dumping of mine waste ever conducted. The tipping point for the lawsuit was an August 2019 slurry spill that caught the eye of the international press as photos of crimson-red ocean waters circulated. Dead fish and a poisoned baby dolphin washed up on shore, and a man died from a “cocktail of heavy metals,” the lawsuit alleges. Madang Governor Peter Yama, who has opposed the Ramu project for years, reportedly called the spill “the worst environmental disaster in Papua New Guinea history." The CEPA administers the Environment Act, the primary legislative instrument governing all aspects of the environment in relation to resource development activities. The Ramu project is operated under the Environment Act 2000. The Kurumbukari mine and beneficiation plant and the Basamuk processing plant are operated by MCC Ramu under Environment Permits WD-L3(115) and WE-L3(85) issued by the Independent State of Papua New Guinea under Section 65 of the Environment Act 2000. The key Environmental Approval for the project is the Environmental Plan Approval issued under the Environmental Planning Act 1978 in March 2000 by the Minister for Environment and Conservation and Operational Environmental Monitoring Plan (“OEMP”). The operations permits are WD-L3(115) which covers all works within SML 8, all LMPs, MEs and ML 149. Permit WE-L3(85) covers the extraction and use of water resources within SML 8, all LMPs, MEs and ML 149. Both of these permits were issued on 1 January 2004 for a term of 50 years, and various amendments have been made to the initial permits issued. Permit WD-L3(115) also approves the discharge of waste streams into the environment from the various premises, including air emissions and tailings discharge via the Deep Sea Tailings Pipeline (DSTP). Both the mine and processing plant are operated under various environment protection management sub-plans which are consolidated in the Environmental Management Plan, including air emissions, noise, water, chemical spill and control, dust control, erosion and sediment control, water resources, and progressive rehabilitation. Other socio-economic management plans include cultural, historical and archaeological heritage, and social and economic management.