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Ivanhoe Mines Advances Financing for Oyu Tolgoi Copper-Gold Project in Discussions with Leading International Financial Institutions

Friday, May 21st, 2010

Robert Friedland, Executive Chairman of Ivanhoe Mines, and John Macken, President and Chief Executive Officer, announced today that Ivanhoe Mines has signed a joint mandate letter with the European Bank for Reconstruction and Development and the International Finance Corporation for evaluation of a major financing package for the construction of the planned Oyu Tolgoi mining complex in southern Mongolia.
Under terms of the letter, the European Bank for Reconstruction and Development (EBRD) and the World Bank Group’s International Finance Corporation (IFC) will consider providing a two-part package consisting of:
• up to US$300 million each from the EBRD and IFC, as part of a group of primary lenders, in limited-recourse project financing; and
• mobilization of a further US$1.2 billion from commercial lenders under a “B loan” structure.
Ivanhoe Mines also has received expressions of interest from export credit agencies to provide up to US$500 million in direct project debt financing.
“Oyu Tolgoi will be one of the largest and highest-grade copper-gold mines in the world and this indication of interest in participation by some of the world’s leading financial institutions starts a process that will help to ensure that we meet our objective of commercial production in 2013,” Mr. Friedland said.
“Securing the proposed financing package – and combining it with possible additional subscriptions of more than US$1 billion through our existing agreements with Rio Tinto and the funds from our cash position that are earmarked for project development expenditures – would advance Ivanhoe a long way toward completion of the construction of the Oyu Tolgoi mine.”
The recently released 2010 Oyu Tolgoi Integrated Development Plan (IDP-10) estimated that the initial capital cost required to achieve first production from the open-pit mine on the Southern Oyu deposits is US$4.6 billion. This amount includes US$1.1 billion to be spent advancing underground development at the Hugo North Deposit in preparation for the start of block-cave mining following the start of production from the open pit. Options to finance the remainder of the estimated capital cost include, but are not limited to, additional potential debt, equity offerings, a credit facility, the sale of subsidiaries, equity investments, project financing and/or various corporate transactions.
Mr. Macken said that Ivanhoe Mines, with the assistance of Hatch Corporate Finance, Ivanhoe’s project financing adviser, is continuing discussions with major commercial banks and export credit agencies about the arrangement of the required limited-recourse financing package. He added that a total of 13 banks have submitted expressions of interest in providing amounts totalling more than US$2 billion.
“The keen interest that has been expressed by all of the potential lenders that we have consulted gives us confidence that our financing plans are achievable without imposing undue burden or dilution upon our balance sheet, our shareholders and our project partners,” Mr. Macken said.
Hatch is helping Ivanhoe Mines with the selection of two major commercial banks to join EBRD and IFC in a group of lead arranging banks. The group of institutions would jointly structure the debt financing package, with completion targeted for the first quarter of 2011.
The IFC and EBRD financings are subject to detailed due diligence, including a review of the extensive environmental and social studies conducted by the Oyu Tolgoi Project, and approval of their respective managements and boards. The arrangements also are subject to agreement of the Ivanhoe Mines board and other related approval processes.

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