China Eximbank provides $2.0299 billion loan for Phase 1 and Phase 2 of Sicomines Copper and Cobalt Mining Project (Linked to Project ID#450, #73204, #91875, and #91873)

On September 17, 2007, a consortium consisting of China Eximbank, China Railways Construction Company (CREC), and Sinohydro and the Government of the Democratic Republic of Congo signed a “protocol d’accord” (or “项目换资源协议”). According to the terms of the agreement, CREC and Sinohydro would be granted a 68 percent stake in a new joint venture (JV) named the Sino–Congolais des Mines (Sicomines SARL), and a Congolese parastatal called Générale des Carrières et des Mine SARL (Gécamines SARL) would own the other 32 percent. In exchange, the CREC and Sinohydro would provide the Government of the DRC with turnkey public infrastructure projects (worth $6.56 billion) financed by China Eximbank. The terms of lending were not identified in the “protocol d’accord”. Then, on April 22, 2008, a “convention de collaboration” (Chinese name: 关于刚果民主共和国矿业开发和基础设施建设的合作协议) was signed by the Government of the DRC and Sinohydro (on behalf of Sicomines). It specified that two tranches of infrastructure financing—reportedly worth $3 billion each—would be disbursed and that subsidiary loans approved under the first tranche and second tranche would carry the following terms: a 25-year maturity and an interest rate of 6-month LIBOR plus 100 basis points (or 3.839% at the time of the agreement). Principal repayments were not scheduled to commence until 2018, which implies a grace period of 10 years. The proceeds from these loans would be disbursed to the Chinese contractors responsible for individual infrastructure projects. The April 2008 agreement specified that ownership of the Sicomines joint venture was allocated such that CREC holds 43% ownership of the joint venture, Sinohydro holds 25%, Gécamines holds 20%, and a Mr. Gilbert Kalam Babanika (who was eventually appointed as deputy head of Sicomines) holds 12%. On June 28, 2008, an amendment to the agreement was signed, which change the ownership allocation to CREC: 28%, Sinohydro: 20%, China Metallurgical Group Corporation: 20%, Gécamines: 20%, Mr. Gilbert Kalam Babanika: 12%. On September 11, 2008, a second amendment was signed, which further changed the ownership allocation to CREC: 33%, Sinohydro: 30%, Zhejiang Huayou Cobalt: 5%, Gécamines: 20%, Mr. Gilbert Kalam Babanika: 12%. Project ID#450 provides a list of the infrastructure projects and subsidiary loans that have been approved to date. Additionally, as part of the April 22, 2008 “convention de collaboration,” it was reported that the Chinese company consortium were to provide $2.9 billion in loans to cover (1) a $32 million loan to Gécamines to cover its initial capital injection to Sicomines (the total registered capital of Sicomines in 2008 was $100 million); (2) $50 million loan to Gécamines to procure supplies; and (3) to provide a shareholder loan for the development of the copper and cobalt mine at Kolwezi. The $2.9 billion was ultimately provided through a $870.1 million, interest-free shareholder loan (prêt d’actionnaire) from China Railway Engineering Corporation (CREC), Sinohydro Corporation and Zhejiang Huayou Cobalt, and a $2.0299 billion loan from China Eximbank with a fixed interest rate of 6.1% and a 25-year maturity, a $50 million loan from Sicomines SARL to Gécamines, and a $32 million loan from Sicomines SARL to Gécamines. Project ID#73204 captures the interest-free shareholder loan from China Railway Engineering Corporation (CREC), Sinohydro Corporation and Zhejiang Huayou Cobalt. Project ID#73145 captures the loan from China Eximbank. The $50 million loan from Sicomines SARL to Gécamines is captured via Project ID#91873. The $32 million loan from Sicomines SARL to Gécamines is captured via Project ID#91875. At the end of Fiscal Year 2013, Sino–Congolais des Mines (Sicomines SARL) disclosed that it had received loan disbursements worth $423,889,454. However, it did not disclose if these disbursements came from the China Eximbank loan, the interest-free shareholder loan (prêt d’actionnaire) from China Railway Engineering Corporation (CREC) and Sinohydro Corporation, both loans, or other loans/sources. The Congolese government agreed to provide a sovereign guarantee for both the ‘infrastructure loan’ and the ‘mining loan’ from China Eximbank. Another unique feature of the April 22, 2008 agreement was the inclusion of a $350 million signing bonus from the consortium of Chinese firms. However, following pressure from the IMF and civil society, an amendment (Avenant No. 3 à la Convention de Collaboration Relative au Developpement d’un Projet Minier et d’un Projet d’Infrastructures en République Démocratique du Congo du 22 Avril 2008) was made to the “convention de collaboration” in October 2009. It reduced size of the infrastructure loan from $6 billion to $3,003,830,000 and removed the sovereign guarantee for the copper and cobalt mining loan from China Eximbank (captured via Project ID#73145). The sovereign guarantee for the infrastructure loan was left in place. China Eximbank was not a party to this amended agreement, which specified that if the floating (market) interest rate on the infrastructure loan (LIBOR plus 100 basis points) rose higher than the rate (4.4%) referenced in the April 22, 2008 “convention de collaboration”, an expanded consortium of Chinese firms (CREC, Sinohydro, and Zhejiang Huayou Cobalt Company Ltd) would assume responsibility for the additional interest payments. The profits from the investment by SICOMINES SARL in the copper and cobalt mine at Kolwezi would be used to repay the loans that finance the costs of developing the copper and cobalt mine and the unrelated infrastructure projects. However, nearly four years after the October 2009 amendment was signed, the Congolese parliament had still not ratified it and China Eximbank became concerned about the risk of non-repayment. In order to limit its risk exposure, China Eximbank suggested that it take over Gécamines’ 32 percent ownership stake and that the Chinese consortium’s 68 percent ownership stake be mortgaged until the infrastructure and mining loans were repaid. The Congolese government rejected these proposed changes, and China Eximbank responded by rescinding its funding in early 2012. Then, the Chinese firms began negotiating with two alternative financiers: China Development Bank and the Bank of China. In July 2013, China Eximbank reversed its decision to halt funding for development of a copper and cobalt mine in Kolwezi. Construction of the copper and cobalt mine in Kolwezi began in April 2013, and on November 6, 2015 the first phase of the mining project was completed. The first phase of the mining project achieved full-capacity production and became profitable in April 2016. The second phase commenced at some point between August 2019 and May 21, 2020. Upon completion of the project’s second phase, the mine’s annual copper output is expected to reach 250,000 metric tons (if it runs at full capacity). According to the Sino-Congolese Program Coordination and Monitoring Office (BCPSC), by the end of 2020, the $2.0299 billion China Eximbank mining loan had achieved a 102.8% disbursement rate ($2,088,350,000 out of $2,029,900,000). In total, the loan disbursed $175 million in 2009, $265.3 million in 2010, $7.93 million in 2011, $190.65 million in 2012, $208.91 million in 2013, $526.2 million in 2014, $154.68 million in 2015, $18.74 million in 2016, $11.26 million in 2017, $6.8 million in 2018, $45.76 million in 2019, and $477.11 million in 2020. According to BCPSC, Sicomines SARL made debt service payments (worth $550.14 million) on the $2.0299 billion China Eximbank mining loan between 2009 and 2020: $8.28 million in 2009, $19.997 million in 2010, $20.49 million in 2011, $7.22 million in 2012, $25.31 million in 2013, $54.31 million in 2014, $68.96 million in 2015, $72.28 million in 2016, $69.61 million in 2017, $66.11 million in 2018, $62.7 million in 2019, and $74.4 million in 2020. BCPSC also reported in 2020 that Sicomines SARL was scheduled to make the following debt service payments on the China Eximbank mining loan between 2021 and 2025: $106.8 million in 2021, $106.8 million in 2022, $106.8 million in 2023, $106.8 million in 2024, and $82.8 million in 2025. According to EITI, as of 2020, the total estimated amount outstanding under the $2.0299 billion China Eximbank mining loan was $1,702,814,509. By the end of 2020, BCPSC reported that the $3,003,830,000 China Eximbank infrastructure loan had achieved an 27.4% disbursement rate. In total, the loan disbursed $825,126,455.22 out of $3,003,830,000 in support of 43 infrastructure projects between 2009 and 2020. According to BCPSC, Sicomines SARL made debt service payments (worth $441.1 million) on the $3,003,830,000 China Eximbank infrastructure loan between 2009 and 2020: $3.6 million in 2009, $4.8 million in 2010, $5.8 million in 2011, $7.9 million in 2012, $6.9 million in 2013, $6.4 million in 2014, $7.8 million in 2015, $12.1 million in 2016, $16.8 million in 2017, $102 million in 2018, $102 million in 2019, and $165 million in 2020, BCPSC also reports that Sicomines is scheduled to make the following debt service payments to China Eximbank between 2021 and 2025: $160.2 million in 2021, $160.2 million in 2022, $160.2 million in 2023, $124.2 million in 2024, and $0 in 2025. As of 2020, the total estimated amount outstanding under the $3,003,830,000 China Eximbank infrastructure loan was $1,179,507,661.83.

Additional details

1. The September 17, 2007 protocol d’accord can be accessed in its entirety via https://www.documentcloud.org/documents/20488161-drc_2008_464_5_of_7. The April 22, 2008 convention de collaboration on the infrastructure project can be accessed in its entirety via https://www.documentcloud.org/documents/20488160-drc_2008_464_4_of_7. A separate (January 2008) convention de collaboration on the mining project can be accessed in its entirety via https://www.documentcloud.org/documents/20488159-drc_2008_464_3_of_7. The joint venture agreement that created Sicomines can be accessed in its entirety via https://www.documentcloud.org/documents/20488162-drc_2008_464_6_of_7. 2. This project is also known as the Sicomines Copper Project. The Chinese project title is 华刚矿业项 or 华刚矿业项目 or 以“项目换资源”模式投资开发铜钴矿资源项目及建设刚果（金）基础设施项目. The French project title is Projet Minier en République Démocratique du Congo (Sicomines). 3. BCPSC data on disbursements and repayments under the China Eximbank loan for Phase 1 and Phase 2 of Sicomines Copper and Cobalt Mining Project can be found in Table 28 of this EITI report (https://www.dropbox.com/s/0d9b4o35y5p9k4z/RAPPORT%20D%27EVALUATION_PROJET%20SICOMINES_Version%20Finale.pdf?dl=0). 4. Principal repayments on the $2.0299 billion China Eximbank mining loan do not appear to have commenced until 2014, which implies a grace period of 6 years.

Number of official sources

20

Number of total sources

39