Environmental Engineering Reference
In-Depth Information
mind that most of the heavy equipment used in mining operations is manufactured in
developed countries it is understandable that the involvement of ECAs from those coun-
tries can be quite substantial (
Case 3.4
). ECAs are the 'quiet giants' of mining i nance (to
quote Zemek 2002). Their aggregated lending is probably much higher than all the com-
mercial banks and multilateral institutions combined.
Up to the year 2000, ECAs had a poor environmental record. In 1999 the French
COFACE, the Japanese JBIC, and the Canadian EDC, involved in two of the most
controversial mining projects to date - the Ok Tedi copper project in PNG, and the
Omai gold mine in Guyana, published environmental guidelines for the i rst time. The
Environmental Guidelines for JBIC International Financial Operations, a comprehen-
i nance
.
ECAs are the 'quiet giants' of
mining fi nance .
Insurers
The following discussion of insurers as stakeholders draws heavily on text from Zemek
2002. In the discussion of insurers as stakeholders there is the need to differentiate between
insurance of the project and insurance of the investment. While, as a rule, a project is
insured by its owners, the equity and debt provided are usually not insured, except for
Political Risk Insurance in some cases. The rationale behind not insuring bank investment
is that, for project i nance, banks either have recourse to the sponsors (before completion)
or to the project (after completion).
In reality, banks avoid taking possession of troublesome assets. If the project defaults
(i.e. there is something wrong with it) most banks would rather extend extra funding to
it to 'get things right' than rush into taking it over. In some cases, the lenders may decide
to write-off the debt rather than become administrators of a project. This was the case at
Baia Mare, Romania (Case 18.3), where banks did not wish to be associated with one of the
worst environmental disasters in Europe in the last decade.
For base metals and coal, banks also require the project to be 'insured' against price var-
iation through long-term off-take contracts. For precious metals, hedging is often required
and may become part of the structured i nance package offered by the bank.
Banks avoid taking possession of
troublesome assets.
Financial
Institutions
30%
(23 Banks)
CASE 3.4
Financing scheme for the Antamina Zinc and Copper
Mine in Peru
Equity
40%
For example, 51 per cent of fi nance required for the
largest mining project ever - the Antamina zinc and
copper mine, in Peru (US$ 2.3 billion) was provided
by ECAs (Mining Finance Magazine 1999). They also
played a signifi cant part in the insurance cover for
the remaining part. Japan's JEXIM (predecessor of
JBIC) alone provided US$ 245 million (18 per cent of
the total fi nance) followed by the German KfW's US$
200 million and Canada's EDC's US$ 135 million. For
comparison, the largest commitment from any of the
participating commercial banks was less than US$ 50
million.
Export Credit
Agencies
30%
(4 Agencies)
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