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Project Finance for the Sierra Gorda Copper Mine Project in Chile
Supporting Japanese Firms for Overseas Large-Scale Copper Mine Development

  • Region: Latin America and the Caribbean
  • Energy and Natural Resources
  • Overseas Investment Loans
  • Project Finance
NR/2011-74
March 9, 2012
  1. The Japan Bank for International Cooperation (JBIC; President & CEO: Hiroshi Watanabe)*1 signed on March 8 a loan agreement totaling up to 700 million U.S. dollars (JBIC portion) with Sierra Gorda SCM (SG-SCM), a company incorporated in the Republic of Chile. The loan, provided in project financing,*2  is cofinanced with a consortium of private financial institutions: Mizuho Corporate Bank, Ltd.,  Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and The Sumitomo Trust and Banking Co., Ltd. The total financing amouts to 1 billion U.S. dollars, of which the cofinanced portion is covered by the Investment and Loan Insurance for Natural Resources and Energy provided by Nippon Export and Investment Insurance (NEXI). 
     
  2. The loan will finance the Sierra Gorda Copper Mine Project, jointly undertaken by Sumitomo Metal Mining Co., Ltd., Sumitomo Corporation (both in Japan) and Quadra FNX Mining Ltd. in Canada.
     
  3. Copper is used extensively for various products, including electric cables, electrical and electronic equipment, transport vehicles and construction materials. Thus it is an indispensable metal for the Japanese industry. Its demand is expected to rise on the global level with growing demand in infrastructure among emerging economies, especially in China and India, and with increasing sales of hybrid and electric vehicles.*3  Since Japan relies solely on imports for copper concentrates from Chile and other countries, it is an urgent challenge to secure a long-term, stable supply of copper resources through acquisition of equity interests in copper mining companies by Japanese firms. 
     
  4. Of the 730,000 tons of copper concentrate (220,000 tons in terms of metal content*4) produced per year in this Project, one half - or 110,000 tons in terms of metal content - will be delivered to Sumitomo Metal Mining Co., Ltd. and supplied to its domestic smelter. This Project is expected to meet about 8.5% of Japan’s annual demand for copper concentrate (equivalent to 1.3 million tons of copper metal). This Project is highly significant in the sense that it secures a long-term, stable supply of strategically important resources to Japan, and also enables Japanese firms to accumulate experience in overseas copper mine development and provides training for mining experts in Japanese firms.
     
  5. JBIC will continue to support the development and acquisition of interests in natural resources that are strategically important for Japan by drawing on its various financial facilities and schemes for structuring a project, and performing its risk-assuming function. 
Note
  1. *1 JBIC is the international wing of the Japan Finance Corporation (JFC; Governor: Shosaku Yasui).
  2. *2 Project finance is a financing scheme in which repayments are made solely from cash flows generated by the project and secured only on the project assets.
  3. *3 Hybrid and electric vehicles are said to require two to three times more copper than conventional vehicles.
  4. *4 The amount of copper contained in copper concentrate. Raw copper ore usually contains 0.2-2% of copper. The product from the process in which chemicals and water are used to separate and increase copper content up to 20-40% is called copper concentrate.

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