Bank of China contributes to $875 million syndicated loan for Los Pelambres Copper Mine Complementary Infrastructure Project

In April 2019, Minera Los Pelambres — a special purpose vehicle and wholly-owned subsidiary of Antofagasta Minerals, which is itself a joint venture of Antofagasta PLC (60% ownership stake), JX Nippon Mining & Metals (15.79% ownership stake), Marubeni Corporation (9.21% ownership stake), Mitsubishi Materials Corporation (10% ownership stake), and Mitsubishi Corporation (5% ownership stake) — signed a $1.3 billion loan agreement for the Los Pelambres Copper Mine Complementary Infrastructure Project. The loan had two tranches: a $425 million tranche (with a 10-year maturity) from Japan Bank for International Cooperation (JBIC) and an $875 million tranche (with a 7-year maturity and an interest rate of LIBOR plus 120 basis points) supported by Mizuho Bank, Export Development Canada, Scotiabank, Sumitomo Mitsui Banking Corporation (SMBC), the Chile Branch of Bank of China, and the Grand Cayman Branch of Bank of China. The Los Pelambres copper mine in Coquimbo region of Chile is currently being expanded in two phases. The mine has been operating since 2000 and currently produces copper concentrates containing gold and silver and a separate molybdenum concentrate. The $1.8bn expansion project, approved in November 2018, is expected to add an average of 60,000t of copper a year to the mine’s production over the first 15 years of operation. Environment impact assessment (EIA) for the expansion project was approved in February 2018. Construction is expected to start in early-2019, while production from the first phase is anticipated to start in the second half of 2021. Copper production from the second phase is anticipated to start in 2022. Minera Los Pelambres, a contractual mining company owned and managed by Antofagasta Minerals, is the project developer. Antofagasta holds 60% interest in the project through Antofagasta Minerals, while the remaining stake is held by a Japanese consortium comprising JX Nippon and Mitsubishi Materials, Marubeni, Mitsubishi Corp, and Mitsui & Co. Los Pelambres is located approximately 45km east from the city of Salamanca and 200km north of Santiago, Coquimbo, Chile. The two-phased expansion project will include the addition of a new semi-autogenous (SAG) mill, ball mill, and corresponding flotation circuit with 24 additional cells. The first phase, referred to as complementary infrastructure project (INCO), is focused on optimizing the production and eliminating the risks arising from the current operating and environmental permits. A new grinding line and a new flotation line will be installed at the existing Piuquenes plant to increase the ore processing capacity from 175,000 tpd to 190,000 tpd. The new additions are expected to increase the company’s fine copper production by 60,000 tpa from the second half of 2021. A reverse osmosis (RO) desalination plant, with a processing capacity of up to 400 liters per second of industrial water, is also proposed to be constructed adjacent to the Punta Chungo port in Los Vilos. The desalinated water will be transported to the existing water recirculation facilities near the El Mauro tailings dam through a 61km-long buried pipeline. The first phase is estimated to involve a capital expenditure of approximately $1.3 billion, of which $600m is allocated for strengthening the milling and flotation. The remaining amount is allocated for the desalination plant and the water impulsion system. The second phase of expansion is expected to increase copper production from the mine by 35,000t a year. A new environmental impact assessment (EIA) will also be undertaken to increase the capacity of El Mauro tailings storage facility and create new mine waste dumps. Estimated to cost approximately $500m, the second phase will include additional mining equipment for increasing the crushing and grinding capacity, and flotation cells. Ferrocarril de Antofagasta a Bolivia (FCAB) is providing rail and truck services at the copper mine, while Antofagasta Terminal Internacional (ATI) is responsible for the port operations. HighService Engineering and Construction (HSIC) is conducting industrial assembly work, mainly mechanics and structure, at the project. Bechtel built the original copper concentrator at the Los Pelambres mine, which was followed by installation of a $40m pebble crusher in 2001 and additional conveying, grinding, and flotation equipment. It also participated in the Repower II expansion project, which increased the concentrator's capacity by 20% from 132,000 to 159,000 metric tons a day. Bechtel subcontracted CiDRA Minerals Processing for the supply of SONARtrac® process monitoring systems to Minera Los Pelambres.

Additional details

1. A portion of the financing for the project was evaluated by Standard and Poor’s (hereinafter, “S&P”) as a Green Loan, marking the first time in the world that S&P has certified a Green Loan in the mining industry. 2. The precise contributions of the Chile Branch of Bank of China and the Grand Cayman Branch of Bank of China to the lending syndicate are unknown. For the time being, AidData assumes equal contributions ($43.44 million) across the 6 lenders that contributed to the $875 million loan tranche. Therefore, AidData’s estimate of the total size of the Bank of China contribution is $291.66 million. 3. AidData has estimated the all-in interest rate by adding 1.2% to the average 6-month LIBOR rate in April 2019 (2.633%).

Number of official sources

4

Number of total sources

14