In one of the most significant mining project financings of recent years, S&C advised Minera Centinela, which operates a major copper mine in Chile, on the $2.5 billion project financing that will be used to fund a portion of the costs of its $4.5 billion expansion project.
The project involves the construction of a new concentrator plant and associated infrastructure at the Centinela mine site that is expected to add an equivalent of 170,000 tons of copper per year of production capacity, placing Centinela into the top 15 copper mines in the world by output. The expansion also involves the construction of a new seawater pipeline to provide the additional water required for mining operations once the expansion is completed (one of Minera Centinela’s significant features is that it uses only seawater and not ground water in its mining activities, significantly reducing the environmental impact of the mine, particularly when combined with its use of 100% renewable energy for its power requirements). To optimize risk mitigation, Centinela opted to engage a third party consortium to construct and operate that new pipeline, as well as operate its existing seawater pipeline, with the third party consortium expected to raise its own separate project financing, requiring some innovative financing techniques to ensure the two financings interface appropriately.
The multi-source project financing is one of the largest of its kind in Latin America in recent years and is being provided or guaranteed by a group of government-affiliated lenders that comprises Export Development Canada, Japan Bank for International Cooperation, the Export Import Bank of Korea and Euler Hermes AG, as well as a group of five commercial banks. Financing linked offtake will be sold pursuant to long-term contracts to Japan-based Sumitomo Metal Mining, Furukawa Metals and Resources, Pan Pacific Copper and Mitsubishi Materials; South Korean copper refiner LS MnM; and German smelter Aurubis.
In addition to the innovations required as a result of the separate water financing, integrating the project financing into Centinela’s existing operations also required some novel structuring, including significant covenant flexibility to minimize disruption as well as the use of a springing security package alongside more traditional completion guarantees from Centinela’s shareholders.
Minera Centinela is 70% owned and controlled by longstanding S&C client Antofagasta plc and 30% owned by Marubeni Corporation. S&C has advised Antofagasta and its subsidiaries on multiple major financing transactions, including the 2009 project financing for the original development of what has become the Centinela mine, as well as numerous other project and corporate financings.
The S&C team advising Centinela and Antofagasta was led by Sergio Galvis and Benjamin Kent, and included Nick Baker, Emilie Klovning, Andrew Brod and Siddhant Iyer, with Virginia Cueva advising on matters relating to the seawater pipelines. Jeff Hochberg, Saul Brander and Tristan Hood advised on tax matters. Craig Jones and Anna McLaughlin advised on English law matters.