Emirates Global Aluminium secures Dh2.8m loan for Guinea bauxite mining project

Commercial lenders include First Abu Dhabi Bank, Emirates NBD and Mashreq Bank

EGA’s GAC secures A $750 million loan, Guinea’s largest greenfield mining project financing ever and a step forward for the country’s economy

Emirates Global Aluminium (EGA), through a wholly-owned subsidiary, secured a $750 million (Dh2.8m) loan to finance its bauxite mining project in the Republic of Guinea from local and international lenders.

Guinea Alumina Corporation (GAC) obtained the $750m, which has a tenor of 12 to 14 years, from development finance institutions, export credit agencies and international commercial banks, EGA said in a statement on Tuesday. Commercial lenders include First Abu Dhabi Bank, Emirates NBD, Mashreq Bank, Societe Generale, ING Bank and Natixis.

“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," Abdulla Kalban, managing director and chief executive of EGA and chairman of GAC, said.

EGA, the UAE’s biggest industrial company outside the oil and gas sector, invested $1.4bn in the bauxite mining project in Guinea in line with a strategy to control all parts of the value chain, reduce costs and secure raw materials for its aluminium production. The first bauxite exports from the mine are expected to start during the second half of this year. Bauxite is the raw material refined into alumina, which is then used to manufacture aluminium, and the UAE currently imports all of its alumina requirements.

The International Finance Corporation (IFC) committed $330m including syndicated debt from commercial banks. The African Development Bank (AfDB) and Export Development Canada (EDC) committed $100m and $150m respectively.

Two European development finance institutions extended the remaining funding while commercial banks covered political risk.

Societe Generale acted as financial adviser to GAC while ING led due diligence on the project on behalf of the commercial banks.

The Multilateral Investment Guarantee Agency (MIGA) extended up to $129m of political risk insurance cover to commercial banks participating in the loan.

The loan will finance the development of a bauxite mine, related transport infrastructure--including an upgrade to an existing rail system-- and the development of a port in the first phase of GAC’s investment in the country, EGA said. A later phase of the project includes the construction of an alumina refinery.

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 Guinean government.

The project 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," Sérgio Pimenta, IFC’s Vice-President for the Middle-East and Africa, said.

Production from the GAC project is expected to begin during the second half of 2019 and rise to 12 million tonnes of bauxite per year once full ramp-up is achieved. The construction of the GAC project is more than 90 per cent complete, according to EGA.

EGA expects the bauxite mine in Guinea will help reduce raw material costs, which led to lower profitability in 2018.

Profit slid 64 per cent to Dh1.2 billion in 2018 due to higher raw material costs despite record production and a 14 per cent uptick in revenue to Dh23.5bn, which was mostly driven by higher sales volumes and higher benchmark prices, EGA said in March.