EBRD Mining Investments Invest Mongolia London, June Eric Rasmussen Director Natural Resources

Transcription

1 EBRD Mining Investments Invest Mongolia London, June 2018 Eric Rasmussen Director Natural Resources

2 Mining sector importance for the economies of EBRD Countries of Operations (COOs) Countries with high risk reliance on mining Countries with long-term mining business potential Countries with low to medium mining business potential Countries with leading international mining companies 11 key mining countries: Greece, Kazakhstan, Mongolia, Morocco, Russia, Poland, Serbia, Tajikistan, Turkey, Ukraine, Uzbekistan. 6 COOs have high reliance on mining and an uncertain future in mining: Albania, Armenia, Bulgaria, Georgia, Kyrgyzstan and Montenegro. 9 COOs have limited mineral endowments: Azerbaijan, Bosnia and Herzegovina, Egypt, Croatia, Hungary, FYR Macedonia, Romania, Slovak Republic, Tunisia. 10 COOs host little mining activity due to insignificant endowment: Belarus, Cyprus, Estonia, Jordan, Kosovo, Latvia, Lithuania, Republic of Moldova, Slovenia, Turkmenistan 22 of the top 150 international mining companies operate in 15 COOs. 2

3 EUR millions [No. of operations] EUR million EBRD Natural Resources Track Record A key investor in the mining sector Track record: o 56 mining transactions o EUR 1.9bn invested o EUR 1.3bn portfolio Strong team: 30+ bankers distributed across the EBRD region: o A permanent presence in Russia, Kazakhstan, Mongolia, Ukraine, Egypt and Turkey o In-house mining engineer involved in project appraisal, due diligence and monitoring o Access to additional expertise (consultants) Key mining sectors: o Precious Metals o Base Metals o Industrial materials o Mining Services Mining investment volume Mining portfolio by instrument Debt, 92% Equity, 8% Mining portfolio by commodity* Mining portfolio by Region, YE [11] Copper & Gold concentrate 392 [10] Gold & Silver 146 [1] 78 [1] 44 [3] * as of YE [2] Zinc Chrome Coal Iron Ore South Eastern Europe 6% Turkey 7% Eastern Europe and Caucasus 5% Mongolia 35% SEMED 4% Russia 1% Central Asia 42% 3

4 EBRD Natural Resources Track Record Financing across the mining value chain Flexible financing solutions: Project finance loan, trade finance, convertible debt and early equity are some examples of the Bank s product range. Exploration / Early Stages Development / Growth Mature / Expansion Support to all stages of development. The EBRD works with strong sponsors in predevelopment stage financing, mine/field development, project expansion and remediation. The Bank also works with services providers. Equity / Convertible Debt Promotion of international revenue transparency standards and HS&E standards. Senior Debt 4

5 Common challenges for mining sector investors: Institutional Framework Ruling elite s attitude to governance Legal and institutional framework Some typical investor issues Do the political elite follow the rule of law? How is the dialogue with investors and NGOs conducted? Predictability of the legal and institutional framework: - Treatment and protection of investors? - Expropriation and nationalization? - International arbitration and dispute resolution? - Lack of access to resource tenders - Poor efficiency and transparency of permit procedures - Invasive tax procedures and inspections - Lack of local service markets - Bad behavior of competitors - Barriers to transfer of technology and payments - Protection of intellectual property rights 5

6 EBRD finance promote use of best practices and enhance capacity to adapt Japanese proverb: 悪妻は百年の不作 A bad partner is one hundred years of bad harvest. 6 6

7 EBRD s Operational Approach Beyond Commercial Financing Policy dialogue Dialogue Honest broker role Sharing experience and best practice Cooperation with other IFIs Initiatives on good governance, anti-corruptions, local currency markets, green economy transition Technical cooperation Assistance to overcome barriers Advice on pre-privatisation, PPPs regulatory frameworks, adherence to international standards (e.g. EITI) Concessional co-finance Energy and Resource Audits Investment Commercial finance Corporate loans (senior, subordinated, convertible) Project finance (up to 15 years or more) Equity (up to 35%) Mezzanine Fixed/floating rates Choice of currencies 1 million 150 million 7

8 Benefits of working with EBRD Reliable long-term partner Capital mobilisation Label of quality, representing high standards of corporate governance and environmental compliance, providing a catalyst to access additional equity, debt and trade finance. EBRD works with other providers of capital to fill market gaps. Long term partner Long tenor / investment horizon of EBRD s financing. Local presence Extensive knowledge of the local economy, business environment and practices. Close relationship with governments and shareholders. Risk mitigation A business partner who shares risks, including political, supported by EBRD s unique mandate and shareholder structure. Deep capital base AAA credit rating, with EUR 30bn capital base and preferred creditor status. Flexible financing solutions Mandated to support projects through equity, debt, project, structured or mezzanine 8

9 EBRD Transaction: Oyu Tolgoi, Mongolia Large-scale copper-gold mine expansion Project Summary Signed in 2015 EBRD Finance USD 1.2bn 15-year syndicated project financing, of which USD400m are for the account of the Bank and USD 821m for the account of 15 commercial lenders. This is part of a larger USD 4.4bn financing package that involves the IFC, MIGA and the ECAs of Canada, the US and Australia. The Borrower is Oyu Tolgoi LLC (OT), owned 66% by Turquoise Hill (the project manager, majority owned by Rio Tinto) and 34% by the State. Project OT is one of the world s largest copper-gold deposits, with JORC resources of 40bn lbs of copper and 20 Moz of gold. The project involves the development, construction and operation of an open pit and underground facility in the southern Gobi. Environmental Impact A very comprehensive environmental and social appraisal has been carried out by the lenders including EBRD and IFC. The detailed ESIA is published online. Transition Impact (1) Support to the private sector; (2) transfer of skills; (3) high standards of transparency, EH&S and governance. Link to Project Summary Document / Press Release 9

10 EBRD Transaction: Kincora Copper, Mongolia Copper exploration Project Summary Signed in 2017 EBRD Finance CAD 1.0 million equity financing (6%) to Kincora Copper Limited, an exploration and development company listed on the Toronto Stock Exchange. Kincora owns exploration assets in Mongolia. Project The company is conducting exploration on a number of licences in the Ömnögovi region in Southern Mongolia, which contains important gold and copper resources including the underexplored Devonian copper belt. These resources include the Oyu Tolgoi deposit and the Tsagaan Suvarga deposit. Impact By investing in Kincora, the Bank is promoting modern copper porphyry drill testing and a district scale reconnaissance exploration programme in the Devonian copper belt, alongside high environmental and social management standards and practices. Link to News Release 10

11 A few tips for the initial meetings with EBRD Check-list for initial meetings Overview of proposed investment (teaser) Commitment to cooperation clarify role of EBRD mandate to initiate transaction mutual understanding of corporate integrity issues Due diligence outline How to undertake market analysis, financial analysis, risks assessments, etc. Initial meetings with EBRD Due Diligence Energy Audit Term Sheet KYC Approval Documentation Signing and disbursement Technical EBRD Due Diligence Process Legal & Contracts Feasibility study Completion risk Production capacity Reserves report Management Environ. & Social Market Security Charter / Incorporation Ownership and title Licenses, permits Legal agreements Insurance Air / water pollution Discharge Health & Safety Communities Management systems ESAP / Gap Analysis Financial Supply-demand Competitors Price projections FX exposure Historical financials Projections Financial Model Credit Ratios 11

12 Thank you! Eric Rasmussen Director Natural Resources European Bank for Reconstruction and Development One Exchange Square London EC2A 2JN Tel: