An Expanded Role for EBRD in Mining Finance: Exploration Stage Equity Kevin Bortz CERBA...
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Transcript of An Expanded Role for EBRD in Mining Finance: Exploration Stage Equity Kevin Bortz CERBA...
An Expanded Role for EBRD in Mining Finance: Exploration Stage Equity
Kevin BortzKevin BortzCERBA International Mining ConferenceCERBA International Mining Conference
Toronto – 4 March 2008Toronto – 4 March 2008
Agenda
Introduction to the EBRD
EBRD in the Natural Resources Sector
EBRD and Health, Safety and the Environment
EBRD in the Mining Sector
EBRD Equity Investments
Case Studies
Agenda
Introduction to the EBRD
EBRD in the Natural Resources Sector
EBRD and Health, Safety and the Environment
EBRD in the Mining Sector
EBRD Equity Investments
Case Studies
What is the EBRD?
0
4
8
12
16
20
24
28
32
36
'99 '00 '01 '02 '03 '04 '05 '06 '07
International financial institution, promotes transition to market economies in 29 countries from central Europe to central Asia
Owned by 61 countries and two inter-governmental institutions
Capital base of €20 billionCumulative commitments
€35 billion
Unaudited September 2007
What are the EBRD’s objectives?
To promote transition to market economies by investing mainly in the private sector
To mobilise significant foreign direct investment
To support privatisation, restructuring and better municipal services to improve people’s lives
To encourage environmentally sound and sustainable development
Foundations of EBRD operations
1 Apply sound banking principles to every project
2 Support but not replace private investors
3 Advance the transition to a full market economy
Sound banking principles
Each project requires:
careful assessment of risk / rewards for all parties
commercial viability
good prospect of returns
Complementary to the private sector
Innovative and flexible financial structures
Extending boundaries / breaking new ground (maturity, equity, political risks)
Opportunity for commercial partners
IFI with investment banking skills
Specialised knowledge of central and eastern Europe and the CIS
Multi-national staff from our member countries
In-depth legal know-how
Dedicated teams with expertise in a variety of sectors
Agenda
Introduction to the EBRD
EBRD in the Natural Resources Sector
EBRD and Health, Safety and the Environment
EBRD in the Mining Sector
EBRD Equity Investments
Case Studies
EBRD, a major natural resources player
As of today €2.3 billion have been lent to projects worth €14.3 billion of investment
Oil and gas extraction 52%
Metal ore mining 11%Petroleum
refineries 14%
Pipeline transportation
20%
Gasoline stations 1%
Natural Resource sector objectives
Increase private sector participation and promote direct foreign investment
Reduce bottlenecks and ensure competitive market access
Improve regulatory and institutional frameworks
Set high standards of business conduct, transparency, corporate governance and environmental protection
Some EBRD resource partners
Agenda
Introduction to the EBRD
EBRD in the Natural Resources Sector
EBRD and Health, Safety and the Environment
EBRD in the Mining Sector
EBRD Equity Investments
Case Studies
Environmental mandate
Every project is screened for environmental impact
Around 17% of total commitments are designed to make environmental improvements
EBRD takes account of theenvironment in all its operations
Environmental standards for EBRD projects
Local, national, EU and World Bank standards and regulations
Where standards cannot be met initially, project will include programme for achieving compliance
Environmental Action Plan
EBRD environmental policy and procedures
Ensure environmental soundness of all EBRD operations
Invest in projects with specific environmental and energy efficiency benefits
Disclosure of environmental information
Environmental appraisal
Helps the Bank decide if an activity should be financed and how to address environmental issues
Helps identify ways in which operations can be designed to provide environmental benefits
Environmental, Health & Safety Loans(EHS) Purpose: protect the environment, cut emissions and prevent accidents by
investing in:
– Pollution clean-up
– Pipeline replacement
– Gas flaring and emission safety measures
– Energy efficiency
But NOT production related investments that do not have an overriding environmental benefit
Attractive Credit Profile: A loans from €3 million to €450 million with long tenors available (10 years+)
Client-driven programme with straightforward funding procedure and simple monitoring
Projects totalling €530 million signed to date
–Mittal Steel Temirtau
–LUKOIL
–CGI
–MOL
–Rosneft SMNG
0
100
200
300
400
500
600
2001 2003 2007
EHS Loans track record
€33 m
€52 m
Loans in € millions
€223 m
€75 m
€150 m
€75 m
Agenda
Introduction to the EBRD
EBRD in the Natural Resources Sector
EBRD and Health, Safety and the Environment
EBRD in the Mining Sector
EBRD Equity Investments
Case Studies
Mining Sector Investments
Gold
CoalOther
Bauxite
Iron Ore
241,311Total
7,300Other
24,234Iron Ore
10,125Bauxite
30,375Coal
169,277Gold
EBRD Mining Investments
(EUR, 000)
• Total EBRD debt and equity investment of EUR 240 million in support of EUR 1.2 billion in mining capital investments.
Mining Sector Equity Investments
Mining
Non-mining
Total Natural Resource Equity Portfolio of EUR 194.7 Million;
Mining Equity Investments of EUR 44.8 million (23%);
Five equity investments with an average size of just under EUR 10 million;
Four out of five equity investments have been in the precious metals sector;
Pipeline of more than a dozen equity investments in the mining sector.
Agenda
Introduction to the EBRD
EBRD in the Natural Resources Sector
EBRD and Health, Safety and the Environment
EBRD in the Mining Sector
EBRD Equity Investments
Case Studies
Equity Investments - Previously
Prospecting Exploration Development Operation Mine Closure
EBRD Appetite
• Maximum 20% stake
• USD 5 million – USD 20 million
• Board Representation
• Proven Reserves
• Bankable Development Plan
Equity Investments - Today
Prospecting Exploration Development Operation Mine Closure
EBRD Appetite
• Maximum 20% stake
• USD 1 million – USD 20 million
• Board Representation
• Positive Exploration Results
• Reasonable Exploration Program
Early Stage Equity Criteria
Experienced sponsor with proven track record and financial capacity, or in parallel with a seasoned sector investor;
Typical 4 – 6 year investment period, with exit strategies identified up-front (put option, IPO, sale to strategic investor, etc.);
Positive mineralogy / metallurgy– confirmed by our own consulting geologist;
Very rigorous analytical methodology.
Agenda
Introduction to the EBRD
EBRD in the Natural Resources Sector
EBRD and Health, Safety and the Environment
EBRD in the Mining Sector
EBRD Equity Investments
Case Studies
Case Studies
Bulgaria – Chelopech EADS
Kyrgyzstan – Kumtor Gold Company
Armenia – Deno Gold Mining Company
Chelopech EADS (Bulgaria/2006)
Signed in April 2006
USD 10 million direct loan, guaranteed by Dundee Precious Metals
Mine produces copper/gold concentrate which is processed off-shore
Financing of environmental remediation, resource definition and ore mining and concentrate production capacity
Kumtor Gold CompanyKyrgyzstan
Kumtor Gold Company is 100% owned by Centerra Gold
EBRD and IFC made debt and quasi-equity investments into Kumtor Gold in 1995
EBRD and IFC converted some of their investments into equity investments in Centerra
EBRD continues to be an investor in Centerra
Deno Gold Mining Company Armenia
Loan of USD 4.5 million signed December 2005
DGMC acquired by Dundee Precious Metals in August, 2006
DGMC produces copper, gold, silver and zinc concentrate
Original financing of equipment purchases for expansion and environmental improvements
Currently considering USD 25 million for further expansion and delineation drilling program.
Contacts
Kevin BortzDirector, Natural Resources Tel: +44 20 7338 7119Email: [email protected]
Raymond Conway Senior Banker, Natural Resources Tel: +44 20 7338 7675 Email: [email protected]
European Bank for Reconstruction and DevelopmentOne Exchange Square, London EC2A 2JNFax: +44 20 7338 6101