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BASIS POINT-Rio Tinto firms up $2.5 bln Oyu Tolgoi loan
May 3, 2013 / 7:11 AM / 4 years ago

BASIS POINT-Rio Tinto firms up $2.5 bln Oyu Tolgoi loan

SYDNEY, May 3 (Reuters) - Global miner Rio Tinto Ltd has attracted strong interest for a $2.5 billion loan to expand its Oyu Tolgoi copper and gold mine in Mongolia, in one of the largest resource financings in Asia this year, banking sources said.

The financing is key for Rio Tinto to go ahead with the construction of an estimated $5.1 billion underground mine at Oyu Tolgoi, following the start of commercial sales mid-year from an open-cut mine.

The project loan and the start of commercial sales both hinge on Rio Tinto resolving a dispute with the Mongolian government over management of the mine, spiralling costs, and taxes. Both sides have said talks were progressing.

Lenders were scaled back due to strong demand, with 14 lenders submitting credit-approved commitments ranging from $50 million to $250 million. Those who submitted commitments of $300 million were scaled back by $50-$100 million.

Initial mandated lead arrangers BNP Paribas and Standard Chartered Bank were allocated $250 million each.

Australia and New Zealand Banking Group, Credit Agricole CIB, HSBC, ING Bank, Natixis, Societe Generale and Sumitomo Mitsui Banking Corp were allocated $200 million each.

Three other banks have been allocated $150 million, and Germany’s export credit agency KfW IPEX and Dutch development bank FMO are also lending.

The project financing has been split in two tranches, with 60 percent in a B-loan tranche with International Finance Corp and the European Bank for Reconstruction and Development, and 40 percent through a Multilateral Investment Guarantee Agency (MIGA)-guaranteed tranche.

The margin for the B-loan tranche is 340 basis points over Libor, and 265 bp over Libor for the MIGA tranche. Lenders will also earn a flat 250 bp upfront fee.

Lenders are waiting for Rio and financial adviser Rothschild to finalise the split.

The project is also heavily backed by $1.95 billion in direct loans from Australian, European, U.S. and Canadian export credit agencies.

Due to the high level of equity investment, Rio will have the option to raise more debt at a later stage and re-gear the project.

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