EBRD arranges US$ 1.2 billion syndicated loan for Oyu Tolgoi mine

By Svitlana  Pyrkalo
@pyrkalo

Workers at Oyu Tolgoi, Mongolia - EBRD

IFIs, ECAs, development and commercial banks lend US$ 4.4 billion for project expected to boost Mongolia’s growth

The European Bank for Reconstruction and Development (EBRD) has arranged a syndicated loan of US$ 1.221 billion to Oyu Tolgoi LLC, a company established to develop the world’s largest undeveloped copper and gold deposit in the South Gobi region of Mongolia.

Oyu Tolgoi is already producing copper from an open pit mine, but more than 80 per cent of its value lies in the proposed underground mine.

The EBRD has arranged a syndicated loan of US$ 1.221 billion to Oyu Tolgoi LLC, a company established to develop the world’s largest undeveloped copper and gold deposit in the South Gobi region of Mongolia.

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Once fully operational, the underground mine is expected to provide for up to a third of Mongolia’s GDP and contribute to rising standards of living in the country.

The EBRD financing is part of a US$ 4.4 billion package put together by international financial institutions, export credit agencies, development banks and commercial banks.

Oyu Tolgoi LLC, the borrower, belongs to Turquoise Hill, a subsidiary of Rio Tinto, and Erdenes Oyu Tolgoi which is owned by the state of Mongolia.

Riccardo Puliti, EBRD Managing Director for Energy and Natural Resources, said: “The financial closing we achieved today is key for fostering economic growth in Mongolia.

"The sheer size of the project puts Mongolia on the mining map as a main host country for large and globally relevant natural resources projects, opening the way for other similar projects to move forward.

"The EBRD is pleased to see the successful completion of the financing and the adoption of best practices in all aspects of the development of this project”.

The EBRD is providing US$ 400 million on its own account (A-loan) and the remainder is provided by a syndicate of 15 commercial and development banks (B-loan). It is the largest ever syndicated loan for the EBRD.

In parallel, the International Finance Corporation (IFC) has arranged an equivalent amount of US$ 1.221 billion under the same A/B structure.

The rest of the package comes from lending by export credit agencies, development banks and a tranche by commercial banks covered by the World Bank’s Multilateral Investment Guarantee Agency.

EDC, EBRD, IFC and BNP Paribas acted as Initial Mandate Lead Arrangers and Standard Chartered as Initial Lead Arranger.

BNP Paribas was the sole bookrunner of the $2.34 billion facilities funded by the commercial banks, together with EBRD and IFC on their respective B-loans.

The EBRD has been investing in Mongolia since 2006, and to date has committed over US$ 1 billion to the country’s economy. The majority of EBRD projects in Mongolia by number are dedicated to diversification and support private companies in the non-resource sector, particularly in manufacturing and agribusiness.

According to the EBRD’s current strategy for Mongolia, one of the main challenges for the country is fair, efficient and transparent management of the wealth generated by natural resources and a sustainable development model.