Export Finance and Insurance Corporation (EFIC) , Australia’s export credit agency led an international syndicate to provide a substantial political risk insurance package to support Australian involvement in the development and operation of what will become one of Africa’s large open-pit copper mines.
EFIC’s support for the Lumwana mine project is contributing to the growth of Equinox Minerals, an Australian and Canadian-listed mining company (ASX/TSX: EQN).The company’s subsidiary, Lumwana Mining Company Limited, is developing the US$715 million mine.
“EFIC has played a pivotal role in providing a significant political risk insurance package, as well as debt finance, which will help bring this major mining development to a reality,” said Equinox president and CEO, Craig Williams.
EFIC is collaborating with the private sector by leading an international syndicate of private insurers to provide political risk insurance in support of the debt finance required for the mine development.
The insurance policies provide cover to a syndicate of commercial lenders backing the Lumwana project, as well as to a bank providing hedge facilities to protect the project revenue against any adverse movements in the copper price.
This groundbreaking insurance cover comes in EFIC’s fiftieth anniversary year, and reflects EFIC’s mission to help Australian businesses grow internationally.
“This is the first time an export credit agency has provided political risk insurance cover that includes commodity hedging,” said Peter Field, executive director of business origination and portfolio management at EFIC. “It follows EFIC’s commitment of US$43 million to the US$584 million project financing facility signed last December.”
“This transaction demonstrates the ability of Australia’s smaller cap mining companies, which often have limited access to capital, to reach their full potential when finance and insurance is available,” said Jan Fuchter, EFIC’s mining specialist.
“EFIC support has complemented the commercial market’s appetite to take on debt and equity risk in Zambia, resulting in an appropriate financing structure for this project and a platform for future growth for the company,” said Mr Fuchter.
The finance and insurance facilities are also indirectly supporting Australian exports by underpinning the participation of Ausenco Limited (ASX: AAX) in the Lumwana project. Ausenco, together with its joint venture partner Bateman Minerals and Metals, has been awarded the US$407.6 million engineering, procurement and construction contract for the project.
As a leading assessor of country risk, EFIC closely tracks worldwide economic and political developments. EFIC chief economist, Roger Donnelly, said that Zambia was a functioning, multi-party democracy with no history of political violence. “Zambia is characterised by a high, but declining, risk of debt default for external creditors and low to moderate political risk for direct investors,” he said.