China Development Bank contributes $225 million USD to a $550 million USD syndicated term loan for the Dugald River Project (Linked to Record ID#94885)

Project narrative

On March 27, 2013, China Development Bank Corporation (CDB) issued an indicative non-binding commitment to MMG Limited for the arrangement and underwriting of a 13-year $1 billion USD loan for the development and construction of the Dugald River Project. Then, on June 27, 2013, CDB and the Sydney Branch of Bank of China (BOC) entered into a $1.0 billion USD term debt facility with MMG Dugald River Pty Ltd — a special purpose vehicle (SPV) wholly owned by MMG Limited — for the Dugald River Project. This loan carried a maturity period of 13 years and a final maturity period of June 26, 2026; the first three years of the facility only required interest payments, after which the borrower would make half-yearly amortization payments until the maturity date. This loan carried an all-in costs in the range of U.S.D. 6-Month LIBOR plus a margin from 3.5% to 3.9%, inclusive of aggregate upfront costs for entering the facility equating to approximately 1.3% of the total facility amount. The loan was available for draw down until June 27, 2016 with no commitment fee applicable. BOC and CDB each committed $500 million USD to the facility. Record ID#94885 captures BOC's contribution. Record ID#94886 captures CDB's contribution. MMG Limited provided a guarantee for this loan, and other subsidiaries would provide security (collateral) to the lenders in the form of charges over each of their shares and asset security in respect of assets owned by certain subsidiaries related to the Dugald River Project. After the commissioning of the project and some agreed conditions, financing would be limited recourse to the assets and shares of MMG Dugald River Pty Ltd.. Specifically, this loan was secured by (i.e. collateralized against) a first-ranking equitable mortgage over each of the entire share capital of Album Investment Private Limited; a 100% of the share capital of certain wholly owned subsidiaries of Album Investment including MMG Laos Holdings Limited; a share charge over 70% of the share capital of certain wholly owned subsidiaries of Album Investment including MMG Laos Holdings Limited; a share charge over all shares in MMG Dugald River; a real property mortgage over all interests in land of MMG Dugald River; a general security agreement in respect of all assets of MMG Dugald River; and specific security over certain assets owned by MMG Australia Limited relating to the Dugald River Project and a featherweight charge over all of MMG Australia Limited’s other assets (this security was planned to be released once MMG Australia Limited completed the transfer of the Dugald River Project assets to MMG Dugald River). In the event that China Minmetals Non-Ferrous Metals Company Limited (CMN) ceased to be hold at least 51% of MMG Limited or lost the power to cast or control the casting of more than one half of the maximum number of votes at a general meeting of MMG, to appoint and remove the majority of directors of MMG, or dictate policies of MMG Limited, the lenders had the right to declare all outstanding loans under the facility due and payable. As of December 31, 2013, $250 million USD was drawn down under this facility. Then, on June 27, 2016, CDB and the Sydney Branch of BOC entered into an amended facility agreement with MMG Dugald River in which the lenders down-sized the $1.0 billion USD facility to $550 million USD. This loan had a final maturity date of June 28, 2026; the first two years of the facility (until June 2018) only required interest payments, after which the borrower would make half-yearly amortization payments until the maturity date. This loan carried an all-in costs in the range of U.S.D. 6-Month LIBOR plus a margin from 3.5% to 3.9%, inclusive of aggregate upfront costs for entering the facility equating to approximately 1.3% of the total facility amount (which was paid when the $1.0 billion USD was entered into in 2013). This loan would remain available for drawn down until June 27, 2018, with no commitment fee applicable. MMG Limited provided a guarantee for this loan, and other subsidiaries would provide security (collateral) to the lenders in the form of charges over each of their shares and asset security in respect of assets owned by certain subsidiaries related to the Dugald River Project (remaining the same as in the original 2013 facility); specifically, the loan was secured by a first-ranking equitable mortgage over each of the entire share capital of Album Investment; 100% of the share capital of certain wholly owned subsidiaries of Album Investment including MMG Laos Holdings Limited; a share charge over 70% of the share capital of certain wholly owned subsidiaries of Album Investment including MMG Laos Holdings Limited; a share charge over all shares in MMG Dugald River; a real property mortgage over all interests in land of MMG Dugald River; a general security agreement in respect of all assets of MMG Dugald River; and specific security over certain assets owned by MMG Australia Limited relating to the Dugald River Project and a featherweight charge over all of MMG Australia Limited’s other assets (which security could now be released as MMG Australia Limited had transferred the Dugald River Project assets to MMG Dugald River). In the event that China Minmetals Non-Ferrous Metals Company Limited (CMN) ceased to be hold at least 51% of MMG Limited or lost the power to cast or control the casting of more than one half of the maximum number of votes at a general meeting of MMG, to appoint and remove the majority of directors of MMG, or dictate policies of MMG Limited, the lenders had the right to declare all outstanding loans under the facility due and payable. In 2016, $80 million USD was drawn down under the $550 million USD facility. As of December 31, 2017, $470.0 million USD had been drawn down under the facility. Then, on January 9, 2018, CDB and the Sydney Branch of BOC entered into an amendment agreement with MMG Dugald River that amended the loan to reduce the security arrangements and relax covenant compliance requirements, namely releasing all guarantors other than CMC and making amendments to reflect this, with the security over the shares in and assets of MMG Dugald River Project was the only substantive remaining security in relation to the facility. Then, on June 21, 2021, the outstanding amount of $297.2 million USD under the facility was repaid in full and the facility was terminated thereafter. The Dugald River Project is a zinc-lead-silver deposit located in northwest Queensland, 65 kilometers northwest of Cloncurry and approximately 235 kilometers southeast of MMG’s Century zinc-lead-silver mine in Queensland; it is considered to be one of the world's largest high-grade zinc-lead-silver deposits. On July 28, 2015, MMG Limited approved a revised project plan for the Dugald River Project; under this plan, the Dugald River Project sought to construct a zinc-lead-silver mine and a 1.7 million ton per annum nameplate plant with an annual production of about 170,000 tons of zinc in zinc concentrate plus by-products, in addition to the mine with a 25-year life. Construction also included offices, access roads, an accommodation villages with 766 rooms, a substation, transmission lines, concentrate storage facilities, a tailings storage facility, raw water supply pipelines, and sewage facilities. Barminco Ltd was responsible, via a $100 million USD underground development contract, for the development of two exploration declines for accessing and developing the orebody at the min. Forge Group Minerals and Resources was originally the engineering, procurement and construction (EPC) contractor for the processing plant, but the contract was cancelled in September 2013. Then, in May 2016, RCR Tomlinson won a $73 million USD contract to construct the processing plant. Sandvik AB was contracted for equipment supply contractor. Australasian Resource Consultants Pty Ltd served as the geo-technical consultant. Whittens Civil & Concrete Construction won a June 9, 2016 contract for the provision of bulk and detailed earthworks and structural concrete construction. The first zinc concentrate production on the site was expected to occur in the first half of 2018. The first production of finished zinc concentrate left Dugald River on November 8, 2017. On December 16, 2017, the first shipment of approximately 10,500 wet metric tons of zinc concentrate produced departed the Port of Townsville Huangpu, China. Then, on May 1, 2018, the Dugald River Project reached commercial operations; the project was said to been completed ahead of schedule and under budget.