Narrative
Full Description
Project narrative
In August 2014, Bank of China (BOC) and China Development Bank (CDB) entered into a $400 million USD syndicated fixed term loan facility agreement with Karara Mining Limited (KML or 卡拉拉矿业公司 or 卡拉拉矿业有限公司) — a special purpose vehicle (SPV) and joint venture of Australian mining company Gindalbie Metals Limited (47.84% equity stake) and Angang Group Investment (Australia) Pty Ltd (a wholly owned subsidiary of Chinese state-owned steel-maker and iron ore miner Anshan Iron & Steel Group Corporation (Ansteel)) (52.16% equity stake) — to provide additional working capital. This loan carried a maturity period of three years and a maturity date of August 2017. This loan carried an interest rate of 6-month LIBOR plus a margin of 2.5% and had semi-annual repayments. Gindalbie Metals provided a shareholder guarantee to Ansteel for this term loan; however, it did not provide an unlimited recourse guarantee for the facility. The proceeds of this facility were to be used by the borrower for its working capital requirements. BOC and CDB each contributed $200 million USD to the loan. Record ID#96990 captures BOC's contribution. Record ID#96991 captures CDB's contribution. The borrower drew down $100 million USD from the facility on August 28, 2014. In August 2017, CDB and BOC entered into an agreement with KML to extend the maturity period of the loan by 12 months (one year) and the maturity date to August 2018 (a new maturity period of four years). Gindalbie did not consent to extend its shareholder guarantee over the extended period and retracted its shareholder guarantee to Ansteel. Projects ID#96992 and #110873 captures this extension. In or around August 2018, CDB and BOC entered into another agreement with KML to extend the maturity period of the loan again by 12 months (one year) and the maturity date to August 2019 (a new maturity period of five years) (see STAFF_NOTE 4). Projects ID#97031 and #110874 capture this extension. On or around August 29, 2019, CDB and BOC entered into another agreement with KML to extend the maturity period of the loan again by 12 months (one year) and the maturity date to August 29, 2020 (a new maturity period of six years). Projects ID#97032 and #110875 capture this extension. As of December 31, 2018, funds under this facility were still outstanding for KML. The Karara Iron Ore Project (KIOP), which sought to construct and operate a magnetite mining and processing operation located in the Mid-West region of Western Australia, located approximately 225 kilometers east-southeast of Geraldton and 320 kilometers north-northeast of Perth. It consisted of an open cut mining pit, a beneficiation processing plant, a waste rock dump (WRD), tailings storage facilities (TSF), rail loading facilities, accommodation facilities, an airstrip, and a Linear Infrastructure Corridor (LIC) containing a water pipeline and access road. Stage 1 of KIOP sought was to be construct infrastructure to produce 3 million tons per annum of hematite and 8 millions tons per annum of magnetite concentrate, to be sold by Ansteel for its 6.5 million tons per annum Bayuquan steel mill in China. The Karara mine contained approximately 1.4 billion metric tons of recoverable reserves and over two billion tons of estimated reserves, with an estimated 60-year lifespan at an initial production rate of 8 million tons per annum. In addition to the mine, the KIOP consisted of the following supporting infrastructure: a 80-kilometer Karara rail spur, connecting KIOP to the common-user rail system at Tilley Siding, near Morawa; a 180-kilometer long 330 kV powerline from Eneabba to Karara, connecting the project site to Western Australia's South West power grid; a 145-kilometer water pipeline, supplying process water from a bore field near Mingenew to Karara; and the Karara Export Terminal (KET) at the Port of Geraldton, with a capacity of 16 million tons per annum of magnetite concentrate or hematite direct shipping, consisting of a dedicated fourth railway line inside the port, a twin-car rotary dumper (train unloader), a 297-meter long storage facility with a 255,000 tons capacity, a dedicated berth, Berth 7, capable of accommodating Panamax vessels; and a 5,000 ton-per-hour ship-loader. The ground-breaking ceremony and the start of construction began on November 2009. The Karara Export Terminal officially opened on September 18, 2012. The project first produced magnetite concentrate in November 2012. The project was officially opened in April 2013. The project first produced 68% Fe concentrate were later in August 2013.
Staff comments
1. The average 6-month LIBOR for August 2014 was 0.330%. Therefore, the interest rate has been coded as 0.330% plus 2.5%, or 2.830%. 2. In March 2014, Ansteel converted two shareholder loans into shares in KML, leading to a new breakdown in the ownership of KML as follows: Gindalbie (47.84% equity stake) and Ansteel (52.16% equity stake) (see pg.6 of "Gindalbie Metals Limited Annual Report 2014"). Then, in 2019, Ansteel Group acquired Gindalbie Metals Limited for $39 million. It thereby gained a 100% ownership stake in KML (see "Norton Rose Fulbright advises Ansteel Group on $39m acquisition of Gindalbie Metals Limited"). 3. Angang Group Hong Kong (Holdings) Limited, a subsidiary of Ansteel, was one of the substantial shareholders of Gindalbie Metals Limited, holding a 35.887% stake by June 30, 2012 (see pg.24 of "Gindalbie Metals Limited Annual Report 2012"). 4. AidData has assessed the extension of a maturity extension(s) totaling one year and being committed in or around August 2018 because the loan was extended by one year again in August 2019; previously, the loan had a maturity period to August 2018, so logically the loan must have been still extended beyond the August 2018 maturity date in order for it to be extended in August 2019. While it is likely it was a single one-year extension, it is possible it was smaller extensions, i.e. two six-month extensions. This issue merits further investigation.