A major hurdle has been cleared in the endeavor to develop the Chilean copper project known as El Abra.
Cyprus Amax Minerals (NYSE), which owns 51% of the gigantic project, reports that financing of US$750 million is now in place.
The Englewood-based company will shell out an additional US$300 million in subordinated debt for the project, raising total funds to beyond the US$1-billion mark.
Chilean-based Codelco, the world’s leading producer of the red metal, owns the remaining 49% interest.
Financing for El Abra consists of three parts.
The first part includes a 12-year loan of US$500 million provided by Mitsubishi Corp., Marubeni of Japan, and Kreditanstalt fur Wiederaufbau of Germany.
A second consortium of commercial banks, from the Netherlands, Canada, the U.S. and Japan, is syndicating another US$250 million for a 10-year term.
The third component, already provided, is a loan by Cyprus Amax.
Once the project is operational, the U.S. Export Import Bank will provide US$150 million, which could be used to prepay a portion of the other loans, at the option of El Abra’s management.
The deal is significant in that the lenders will carry the political risk. “The term of the commercial bank component of the financing is the longest yet attained by any project in Chile without the benefit of third-party political risk coverage,” explains Milton Ward, chairman of Cyprus Amax. It also demonstrates the financial community’s favorable view of Chilean operations.
All money raised for El Abra will be used to buy equipment and build the mine, leach pads and solvent extraction-electrowinning facilities (which will be the largest in the world). More than 2,500 workers are on site for the construction phase.
A low stripping ratio means that only seven trucks are required for the mining operation, making El Abra one of the lowest-cost copper producers in the world.
The deposit contains 880 million tons of proven oxide reserves, and annual production is projected at 500 million lb. copper. Construction is on schedule for a June, 1997, startup date.
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