Narrative
Full Description
Project narrative
In September 2013, the Perth Branch of the Bank of China (BOC) entered into a $130 million USD ($180 million AUD) 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 (50% equity stake) and Chinese state-owned steel-maker and iron ore miner Anshan Iron & Steel Group Corporation (Ansteel) (50% equity stake) — for the Karara Iron Ore Project's working capital needs. Specifically, the proceeds of this facility were to be used by KML to meet additional working capital requirements for Karara amidst delays in the ramp-up of production. This loan carried a maturity period of one year and a maturity date in September 2014. This loan carried an interest rate of 3-month LIBOR plus a margin of 2.1% and was payable quarterly. Ansteel issued a corporate guarantee for this loan. Gindalbie provided a corporate cross-guarantee to Ansteel for a percentage of this loan facility, proportionate to Gindalbie's equity stake in KML. Record ID#96980 captures this loan. Ansteel had arranged a total of $230 million USD in additional short-term funding to KML in September 2013, including the $100 million USD in prepaid sales agreements for delivery of magnetite concentrate and a $130 million USD Bank of China term loan facility. One of the conditions of this arrangement was that Ansteel had the option to have KML's obligations under the prepaid sales agreement and the $130 million USD facility be repaid using proceeds received by KML or through the issue of new KML equity share capital to Ansteel at $3.02 AUD per share, If exercised, KML could issue 80,848,132 new shares, giving Ansteel another 9.6% equity stake in KML and decreasing Gindalbie's equity stake by the same amount. Then, between July and September 2014, BOC entered into an agreement with KML to extend the maturity date of this loan by 12 months to September 2015 (a new maturity period of two years) on similar terms and conditions. Record ID#96981 captures this extension. Then, by September 2015, BOC entered into another agreement with KML to extend the maturity date of this loan by 23 months (1.91667 years) to August 2017 (a new maturity period of 3.916 years). Record ID#97009 captures this extension. Then, by August 2017, BOC extended into another agreement to extend the maturity period of this loan by 34 months (2.833 years) to June 2020 (a new maturity period of 6.749 years). As of December 31, 2018, funds under this facility were still outstanding for repayment. Record ID#97010 captures this extension. In 2020, BOC entered into another agreement with KML to extend the maturity period of this loan by 12 months to June 2021 (a new maturity period of 7.749 years). Record ID#97011 captures this extension. The Karara Iron Ore Project (KIOP) 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. At the time of the $130 million USD loan, Karara had been experiencing delays in ramping up production, with issues with its tailings management systems creating a bottleneck and necessitating engineering solutions.
Staff comments
1. 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"). 2. 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"). 3. AidData acknowledges that there is an information gap between the life of this loan between September 2015 and August 2017 and between August 2017 and June 2020. After the one-year extension in 2014 that pushed the maturity date to September 2015, the next indication that this loan was still active came in 2017's "Karara iron ore mine directors again cast doubt over embattled project's future", which stated that the maturity date was August 2017. Therefore, the loan must have had its maturity extended to August 2017. However, it is unclear which the specific commitment date of the maturity extension(s) and the length of each extension(s) that shifted this loan's maturity date from September 2015 to August 2017 is unknown; i.e. BOC may have extended the loan three times, with the extensions totaling 3.916 years. In the absence of specific information, AidData has coded as if there had been one large extension; it has selected September 2015 as the commitment date and marked the commitment_date_estimated? field as True, as this month hosted the last known maturity date prior to August 2017 (meaning that an extension beyond September 2015 would have, logically, occurred by September 2015). Similarly, after August 2017, the next indication that this loan was still active came in 2020's "China’s Ansteel is still bleeding cash at $4.7bn Karara magnetite mine", which notes that the maturity date was June 2020 (and was extended in 2020 by one year, to June 2021). Like the other case, it is unclear which the specific commitment date of the maturity extension(s) and the length of each extension(s) that shifted this loan's maturity date from August 2017 to June 2020 is unknown. In the absence of specific information, AidData has coded as if there had been one large extension from August 2017 to June 2020. While it unlikely the assumed extensions were each large, multi-year extensions, the new extensions themselves, even the summation of several extensions, accurately reflect the overall growth of the maturity period of this loan. Nonetheless, this issue merits further investigation.