The $750 million loan has a tenor of 12 to 14 years and was extended by development finance institutions, export credit agencies and international commercial banks. The loan represents the first time multilateral institutions and international commercial banks have participated together in a project financing for a greenfield mining project in Guinea.
GAC’s success in securing this ground-breaking project financing raises the profile of Guinea in international financial markets and sets a new benchmark for how Guinean projects can be financed, potentially improving Guinea’s access to international capital and boosting the national economy.
The financing supports the development of a bauxite mine as well as related transport infrastructure, including an upgrade to an existing multi-user rail system and the development of a port, in the first phase of GAC’s investment in the country. The mine has some of the world’s best quality resources of bauxite – the primary input in the production of alumina, the feedstock for aluminium smelters. Aluminium is used in industries including aerospace, packaging and transportation.
The approximately $1.4 billion project is one of the largest greenfield investments in Guinea in the last 40 years and is an integral part of EGA’s strategy to integrate upstream in the aluminium value chain.
A later phase of the project envisages the construction of an alumina refinery.
Abdulla Kalban, Managing Director and Chief Executive Officer of EGA and Chairman of GAC, said: “The partnership we have formed with GAC’s lenders secures the long-term success of our Guinea project and for EGA this project financing is in line with our capital allocation strategy. We are committed to completing and then operating the GAC project to high standards, contributing to improving sustainability performance in Guinea whilst helping to grow the economy.”
The International Finance Corporation (IFC) has committed total financing of $330 million including syndicated debt from commercial banks. The African Development Bank (AfDB) and Export Development Canada (EDC) have committed $100 million and $150 million respectively.
The remaining funds have been extended by two European development finance institutions including PIDG Ltd’s company The Emerging Africa Infrastructure Fund Limited, and commercial banks covered from political risk.
The commercial banks participating include Societe Generale, ING Bank, Natixis, First Abu Dhabi Bank, Emirates NBD and Mashreq Bank.
Societe Generale acted as Financial Adviser to GAC and ING led due diligence on the project on behalf of the commercial banks.
The Multilateral Investment Guarantee Agency (MIGA) extended up to $129 million of political risk insurance cover to commercial banks participating in the loan.
Shearman & Sterling, S.D. Avocats, Akin & Gump Strauss Hauer & Feld LLP and Walkers acted as legal counsel for GAC. Allen & Overy, Bao & Fils and Maples & Calder acted as legal counsel for the lenders. DLA Piper and Sylla & Partners acted as legal counsel for the Government of Guinea.
Approval for the project financing followed extensive due diligence on GAC’s technical, commercial, environmental and social commitments and performance, and a public consultation process. Under the terms of the project financing, GAC is required to continue to comply with IFC’s performance standards which are the global benchmark for managing environmental and social risks.
Sérgio Pimenta, IFC’s Vice-President for the Middle-East and Africa, said “We are happy to support this project as it will help Guinea increase its exports and bolster local economic growth, including through the procurement of goods and services from the domestic market and significant improvements to rail and port infrastructure.”
Guinea is the world’s largest bauxite mineral resource holder and GAC’s production will contribute further to the country’s position as a global bauxite supplier. Production from the GAC project is expected to begin during the second half of 2019 and is expected to be 12 million tonnes of bauxite per year once steady state operations are achieved. The construction of the GAC project is more than 90 per cent complete.
Over 4,600 people were employed in the construction of the GAC project at peak, more than 85 per cent Guineans. During the operations phase, the project is expected to directly employ some 1,000 people.
GAC also invests to support the communities near its operations including in health, infrastructure, education and training.
Development finance institutions provide and mobilise financing for private-sector development in developing countries to support economic growth and reduce poverty. They only support projects that are developmentally sound and meet high social and environmental performance standards.
IFC is the largest global development institution focused on the private sector in emerging markets. MIGA encourages foreign direct investment in developing countries by providing political risk insurance guarantees to private sector investors and lenders. IFC and MIGA are members of the World Bank Group.
EGA is the world’s largest ‘premium aluminium’ producer and operates aluminium smelters in Abu Dhabi and Dubai. EGA recently started production at the UAE’s first alumina refinery, near its Al Taweelah aluminium smelter.