Global demand for copper, a critical metal for decarbonization, has rebounded sharply as the energy transition gathers pace worldwide. That’s been welcome news for many – including Chilean mining firm Antofagasta.
To meet the surge in demand, the company embarked on a $4.5 billion expansion of one of its flagship copper mines, Minera Centinela – an effort that, in turn, called for a $2.5 billion project financing which closed in March following a two-year effort.
The complex transaction, one of the largest multisource financings in Latin America in recent years and winner of Mining Financing of the Year, is notable not only for its innovative structure; it also stood out for its environmental implications, drawing exclusively on renewable energy sources for its needs.
Mauricio Ortiz, CFO of Antofogasta Minerals, describes the deal as a door-to-door project financing with a maturity of 12 years that will ultimately be complemented by the construction of separate a seawater pipeline as well as by equity inputs from its partners. Antofogasta owns 70% of the mine, and Japanese conglomerate Marubeni, 30%.
“Those three elements allowed us to obtain long-term financing at competitive rates,” he says. “We also obtained a 4.5 years’ grace period that will cover the estimated construction time and the beginning of operations.”
With the increase in copper production capacity by 170,000 tons per year, Centinela will rank among the world’s top 15 copper mines by production and will become one of the leading gold producers in Chile.
In Ortiz’s view, the fact that the deal was structured as a brownfield project – the expansion builds on Centinela’s existing facilities – made it easier for the company to tap the market. He also highlights the importance of seawater provision, which was achieved by selling Centinela’s seawater facility to a third party, which then structured its own separate brownfield project financing to refurbish it.
Another important aspect of the deal was the scope of the financing arrangement: Minera Centinela entered into five financing agreements with a total of nine lenders, including export credit agencies and commercial banks.
The project financing was structured around senior secured facilities provided by Japan’s JBIC ($950 million), South Korea’s Kexim ($300 million), Canada’s EDC ($500 million) and Germany’s Euler Hermes ($750 million). SMBC was mandated lead arranger and collateral agent, while Crédit Agricole, Natixis and Société Générale also played key roles.
Ultimately, Ortiz says, the deal required a lot of conversation between the numerous parties and the ability to react quickly to market changes.
“Even though copper prices retained their solid trajectory during the more than two years of negotiations, there are always short-term movements that create complexities,” he notes.
The long-lasting negotiations also had to take into account a shifting regulatory environment, as Chile’s tax regime for the sector was revised during the course of the financing.
“By working with experienced lenders that understand commodities markets, we managed to focus conversations on the medium to long-term perspectives for the copper market, as well as on Centinela’s life expectancy, which is guaranteed for more than 40 years,” Ortiz says.
Minera Centinela Second Concentrator Financing
Sponsors: Antofagasta Plc (70%), Marubeni Corporation (30%)
Mandated Lead Arrangers: Crédit Agricole Corporate and Investment Bank , Export Development Canada, Export-Import Bank of Korea, Japan Bank for International Cooperation, KfW IPEX-Bank, Natixis Corporate & Investment Banking, Societe Generale and Sumitomo Mitsui Banking Corporation
Borrower’s Financial Advisor: Rothschild & Co
Borrower’s legal counsel: Sullivan & Cromwell
Lender’s Counsel: Milbank
All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email awards@latinfinance.com