Bloomberg News

Rio Tinto Oyu Tolgoi Mine Gets at Least $3 Billion Bank Pledges

March 15, 2013

Rio Tinto Group (RIO)’s $4 billion project financing to fund the Oyu Tolgoi mine in Mongolia has received pledges of at least $3 billion from banks, according to three people familiar with the matter.

The world’s second-largest miner has attracted about 10 banks to commit at least $300 million each, the people said. In Rio Tinto’s request for proposals, lenders were invited to join with pledges of $150 million to $300 million, the people said, asking not to be identified because the details are private.

Rio Tinto is seeking about $2 billion of 12-year loans from banks and a further $2 billion from export credit agencies and international development lenders. The boards of International Finance Corp. and the European Bank for Reconstruction and Development granted approval to join the $4 billion project finance deal last month.

The commercial bank debt may be marketed to a wider group of lenders after the deal’s financial close, which is expected in April, the people said today. The banks that have already committed to the deal include Australia & New Zealand Banking Group Ltd., BNP Paribas SA, Bank of Tokyo-Mitsubishi UFJ Ltd., Commonwealth Bank of Australia, Credit Agricole SA, ING Groep NV, Sumitomo Mitsui Banking Corp., Societe Generale SA and Standard Chartered Plc, they said.

David Luff, a Melbourne-based spokesman for Rio Tinto, declined to comment on the financing.

Control Tussle

The bank commitments come amid a tussle for control of the $6.6 billion copper and gold project, landlocked Mongolia’s single biggest investment. At full capacity the mine, which is suffering from cost blowouts, will account for almost a third of the economy. Production is due by end-June.

The Oyu Tolgoi facility, in the South Gobi desert 80 kilometers (50 miles) from Mongolia’s border with China, is controlled by Rio Tinto through its 51 percent stake in Turquoise Hill Resources Ltd. (TRQ) which holds a 66 percent stake in the project. The Mongolian government owns the remaining 34 percent stake.

President Tsakhia Elbegdorj said Feb. 1 Mongolia should have more control of the mine. London-based Rio Tinto is said to be considering a temporary halt to work as the government demands a greater profit share.

Benchmark Rates

Turquoise Hill predecessor Ivanhoe Mines selected BNP Paribas and Standard Chartered to arrange the financing in July 2010, along with the EBRD, the World Bank’s IFC and Export Development Canada. Export-Import Bank of the U.S., Australia’s Export Finance & Insurance Corp. and the World Bank’s MIGA unit also subsequently joined the deal, according to the IFC’s website.

About half the bank debt will pay an interest rate 2 to 3 percentage points points more than benchmark rates and be insured against political risks by the World Bank’s Multilateral Investment Guarantee Agency, people familiar with the matter said last month.

To contact the reporters on this story: Foster Wong in Hong Kong at fwong94@bloomberg.net; Stephen Morris in London at smorris39@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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