- Region: Oceania
- Energy and Natural Resources
- Overseas Investment Loans
- Project Finance
March 24, 2014
The Japan Bank for International Cooperation (JBIC; Governor: Hiroshi Watanabe) signed on March 20, a loan agreement amounting up to USD900 million (JBIC portion) in project financing*1 with Roy Hill Holdings Pty Ltd. (RHH). The loan is cofinanced with the Export-Import Bank of Korea (KEXIM), the Export-Import Bank of the United States (USEXIM) and private financial institutions such as Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Sumitomo Mitsui Trust Bank, Limited, bringing the overall cofinancing amount to USD7.2 billion, with the cofinanced portion by private financial institutions insured by Nippon Export and Investment Insurance (NEXI), Korea Trade Insurance Corporation (KSURE) and KEXIM.
The loan is intended to finance new development and operation of Roy Hill Iron Ore Mine and related infrastructure, in the Pilbara region of Western Australia, by RHH which is jointly invested by Marubeni Corporation, Hancock Prospecting Pty Ltd., an Australian company, POSCO, a Korean company, and China Steel Corporation, a Taiwanese company. Marubeni, through this development, will off-take an equivalent of 21% (about 11.55 Mtpa) of 55 Mtpa iron ore produced annually at full production from the project and supply mainly to Japanese steel mills for 17 years. JBIC signed a loan agreement for the project in March 2013 with Marubeni's Australian subsidiary (Marubeni Iron Ore Australia Pty. Ltd.).*2
Since steel is used extensively for various products, including automobiles and construction materials, it is one of the fundamental metal resources for Japanese industries. Since demand is expected to rise on a global level with growing demand among emerging economies such as China, and Japan depends entirely on the import from overseas including Australia, in recent years, it has become an important challenge to secure stable medium- and long-term supply of high grade iron ore. The high grade iron ore from Roy Hill is suitable as steel raw material, and there is strong expectation of Japanese steel mills to this project that will lead to securing a stable supply of high grade iron ore.
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 projects, and performing its risk-assuming function.
- *1 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.
- *2 See Press Release on March 28, 2013.