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By D Macdougall, J Otto

The financing of large mining projects in developing countries is often achieved, at least in part, by limited-recourse financing methods. Financing agreements are affected by the basic accord that is struck between the host government and the sponsors of the project. It is concluded that governments and project sponsors should take into account the requirements of lenders when structuring such mineral development agreements to maximise the potential for attracting project financing. Lenders are likely to be most interested in aspects such as fiscal arrangements, calculation of taxable income and general accounting rules, royalties, transferability of payments/dividends overseas, corporate structure and control, staged development, financing, loan support and state guarantees/approvals, political risk, provisions for default, product marketing, settlement of disputes and environmental issues

Aug 1, 1994

By Wi11iam I. Rau

In the recent past, there have been numerous projections of the capital requirements for additional mine and processing capacities required to meet projected non-Communist World demand for minerals during the next 15 years. A consensus judgment would place this currently at $14 billion per year, with the largest expenditures required for increases in aluminum and copper production. Until the early 1960's, internally-generated funds were used to finance nearly all of the large mining companies' capital requirements. Since that time, however, the enormous rise in capital costs per ton of capacity, accompanied by a relative stagnation in the financial condition of many of the major mining companies, have caused the industry to begin to rely on external sources for financing expansion, most notably, project financing from commercial banks and institutional lenders. Seven years ago, it was estimated that, in the five-year period 1972-1976,75% of the total capital requirements of $10 billion per year would come from internally-generated funds, with the balance to be provided by external sources. l There is little doubt that, in the coming decade, the percentage provided by external sources will increase. There should be little difficulty in attracting the necessary investment within the U.S., particularly in view of the expected continuation of companies in diverse industries seeking mineral investment opportunities. The more serious question lies in the availability of internal and external sources of funds for the expansion of mine and smelting capacity in the developing countries. Recently, R. F. Mikesell projected an average annual investment of $4.7 billion (in 1977 prices) over the 1977-1990 period would be required from foreign sources to expand metal producing capacity in developing countries. Mikesell concluded that external financing of mining projects in the developing world has averaged less than $1 billion per year over the past five years, thereby requiring more than a quadru1ling of this financing over the next decade.

Jan 1, 1978

By William I. Rau

This presentation will examine the role commercial banks will be expected to assume in financing international minerals projects, including a discussion of various financing techniques such as project loans, production loans, and production payments. A discussion of the necessity for completion guarantees, finalized sales contracts, reserve evaluations, management contracts, and marketing undertakings in conjunction with financing availability are also included.

Jan 1, 1981

Offshore petroleum development involves massive capital expenditure and financing demands, with the main participants being large international oil companies and State owned enterprises. Types of project oriented financing include take-or-pay contracts, throughput agreements, and production payment financing. The main project finance credit aspects are revenues, investment budgets and cost over- runs, reservoir, political and other risks and special problems such as weather and corrosion in the North Sea. A variety of documents is required and a mix of equity, export credit and Euro-market financing will typically be included in the financing.

Jan 1, 1983

By B. Morris

This presentation will describe the process by which the Quebrada Blanca (QB) copper project in northern Chile was financed. It will also show how a relatively junior mining company addressed the problems created by its inability to provide its share of the equity funding and the guarantees required by the project lenders. QB is located in the semi-arid Andean highlands of northern Chile, 170 kilometres southeast of the port of Iquique and 30 kilometres west of the border with Bolivia, at an altitude of about 4,300 metres (14,000 feet). Figure 1 depicts the project's location. The QB orebody is a secondarily enriched porphyry copper deposit containing reserves of 85 million metric tons grading 1.3 percent copper. Underlying the enriched zone is a significant primary ore zone containing several hundred million metric tons grading about 0.5 percent copper. In the late seventies and early eighties Falconbridge and its affiliates spent $20-30 million dollars exploring the deposit and conducting feasibility studies. For a variety of reasons they decided not to develop the property which was returned to its owners, Empresa Nacional de Mineria (ENAMI), which is a Chilean state mining corporation. In 1988 ENAMI announced its intention to privatize the property through a public bidding procedure.

Jan 1, 1993

The classic description of Project Finance as "the reliance by lenders on the cashflow of a project, supported by the assets of the project with no recourse to the project sponsor's corporate balance sheet" has, like most other terms in the finance industry, evolved through recent usage. The area now under most scrutiny is the sharing of risks between parties either most able to take them or prepared to accept payment for them. Creativity in, and flexibility of financing structures have enabled project lending to continue under a dramatically different economic outlook. The diminishing competitiveness of the Australian producers in a global market place of uncertain commodity prices has discouraged the advancement of many large scale resource projects. The majority of new project financings has been designed to assist the relatively small company promote and develop its first projects. New trends- are emerging in four areas: sources of capital; borrowing structure; financing instruments (securitisation); and risk underpinning. As project financing becomes more widely used, the range of interested financiers grows. New initiatives contribute to its development and evolution with a view to increase effectiveness to the sponsor of any new venture.

Jan 1, 1987

By Grover R. Castle

INTRODUCTION "Project Financing" or "Project Loans" have become increasingly popular in recent years, and commercial banks are being asked to consider more and more of such financing. However, the analysis of this type of loan is quite different from the analysis of a loan to a financially sound corporation based on the company's balance sheet. For this reason Chemical Bank did a study of project loans in an attempt to be more sophisticated in our approach to them. As part of this study, we examined 29 project financings for which information was available. In this article I shall describe project loans and set forth the guidelines we developed, as an aid to credit officers who might have occasion to analyse this type of financing. DEFINITION OF "PROJECT FINANCING" OR "PROJECT LOAN" The terms "project financing" and "project loan" commonly describe the various methods that banks and institutional lenders use to finance the construction of new projects on a basis whereby payout is anticipated from the revenue stream generated by the project. A project financing often involves a loan to a new entity formed specifically to own the project. The analysis of a project loan proposal is quite different from the analysis of other term-loan proposals since it involves a credit decision based on the review of a projection or forecast rather than of historical earnings and/or it involves the reliance on contractual obligations of third parties. Lenders are asked to assume the added risks associated with project loans because: 1. Project financing may permit a company to obtain additional leverage. It is possible for companies to arrange financing on a project basis that could not be arranged as a direct borrowing. For example, a company may not be permitted to borrow more money directly, due to a limitation in a bond indenture. However, a project financing can sometimes be negotiated on a basis not prohibited by the indenture. 2. Often the sponsors of, or the stockholders in, the project are seeking an off-balance-sheet financing. For example, 11 of the 29 projects in our study were arranged on an off-balance-sheet basis and one showed on the balance sheet as a deferred income item. An off-balance-sheet financing, for the purpose of this article, is a financing which does not show as a direct liability on the balance sheet of the sponsors of or stockholders in a project. 3. Projects are often located in a foreign country. The financing is arranged so that the lenders assume the political risk on the loan because many companies rightly believe that this arrangement affords a degree of insulation from political risk not otherwise obtainable. 4. Many projects are jointly owned by several sponsors. This form of financing lends itself well to a situation where a new entity is formed to own a project and do the borrowing. Project loans can be used to finance a variety of activities including development of iron-ore deposits and associated pelletizing plants; development of coal reserves; construction of pipelines, alumina plants, fertilizer plants and refineries; etc. The specific areas of analysis can be quite different, depending upon the type of project being financed. It is important, therefore, to classify the proposal according to the type of project, and also by the nature of the financing - nonrecourse financing, financing covered by a guarantee of completion and financing supported by an undertaking lasting for the life of the financing. I will discuss each of these types in more detail later, but first, I should like to make some

Jan 1, 1985

By Juan C. Sotomayor Álvarez

The Huantajalla mine is seated on Uchucchacua 's Mixing District that is the fourth producer of Silver in the world. Huantajalla Mine is a new mine that nowadays is being explored and recently it has began to operate. The project for 4-A vein exploitation in Huantajalla Mine using Longhole drillings as a new method of mixing is developed by Planning Department of Uchucchacua Mine in coordination with Geology Department of this mine, started in June 2004. This project is funded by Company of Mines Buenaventura S.A.A In July 2002, Geology Department started the exploration on the area of Huantajalla Mine, discovering the 4-A vein. The reconnaissance and definition of the vein finished June 2003, finding 79,080 Ton of mineral of Silver with a grade of 40.0 Oz Ag/ton and a thickness of 1.85 meters (6 feet ). Using the longhole method on the vein exploitation will replace the cut and fill and shrinkage methods, and it will keep a dilution of 15%.

Oct 1, 2004

By Gregory A. Hahn

Explorationists and engineers rarely speak the same language. Explorationists are not cognizant of the information that engineers require to make the appropriate choices and decisions. Engineers can- not "translate"geo1ogic parlance and data into information relevant to proper decision making. This often creates a physical and intellectual "rift" between engineers and geologists that inhibits a smooth transition to development. A transition team leader who is grounded in both disciplines can best facilitate integration and communications between the explorationists, who understand the intrinsic attributes of a given deposit, and the engineers, who have to design for extraction and beneficiation of an orebody.

Jan 1, 2001

By T Ireland

The Project Hobson tunnel excavation was the first use in New Zealand of an earth pressure balance (EPB) tunnel boring machine (TBM). The tunnelling on the project was very successful and break-through was achieved three weeks ahead of program, demonstrating that tunnelling can be undertaken in Auckland with a high degree of cost certainty.Project Hobson involved the replacement of an existing 90 year old above ground sewer that crosses Hobson Bay in Auckland, New Zealand, and which had reached the end of its economic life, with a 3 km long, 3.7 m internal diameter segmentally lined bored tunnel. The NZD$ 118 M project has provided several environmental benefi ts to the Owner, Watercare Services Ltd and the local community:· provide capacity to meet projected growth in the region,· virtually eliminate wastewater overflows into Hobson Bay and the Waitemata Harbour, and· remove an obtrusive visual feature and open up the bay for recreational purposes.Auckland’s bedrock is a weak sandstone/siltstone (East Coast Bays Formation), subject to infilled paleovalleys. The geology in the region has been significantly influenced by volcanic activity; 49 volcanoes are present within 20 km of the city centre.The paper describes the design and construction challenges for the projects, including TBM performance, ‘sticky spoil’ management, and risks associated with basalt lava flows and two paleovalleys. The paper also highlights the reasons for the success of the project, including a rigorous approach to risk management during design, and effective planning during construction. Other useful data such as the effect on the watertable caused by closed face tunnelling, and ‘faceloss’ estimates derived from settlement arrays are included in the paper.Project Hobson also saw the successful implementation of a Geotechnical Baseline Report – one of the first uses of this type of document in Australasia.

Mar 8, 2011

By Randy McMeekin, Chris Twigge-Molecey, J. Peter Blake

The project implementation phase, FEL4, is generally a complex undertaking. The project has been approved for construction and the capital has been allocated. At this point the project team comes under significant pressure to meet the safety, schedule, cost, and start-up committments. For the design team the principal tasks are to finalize detailed design, complete procurement, and issue construction contracts. Design activities must be closely coordinated with equipment and material procurement. A clear engineering plan should be based on well-defined work packages to meet construction, commissioning, and startup requirements. A range of review processes by discipline, area, and third parties assure quality. Constructability, safety, and hazard reviews are performed throughout the design process. Three-dimensional models that incorporate extensive databases help to maximize efficiency and minimize errors. Well-managed projects have a clearly accountable design team, rigorous change control processes, and well-defined workflows. Key individuals from the design team participate in commissioning, operator training, and startup.

Jan 1, 2015

By Eugene Guccione

For at least 10 years, various industry people had warned about the alarming decline in the nation's oil and gas reserves. Then, in October 1973, the Organization of Petroleum Exporting Countries launched an oil embargo and sharply increased crude oil prices. Suddenly, everybody discovered the "energy crisis." In November 1973, former President Nixon advocated a Project Independence program so that ". . . by 1980 we shall be able to meet America's energy needs from America's own energy resources."

Jan 5, 1975

By W. R. Hibbard

Emerging from discussions of U.S. energy policy: from the Project Independence Blueprint; from President Ford's statements to Congress; and from several independent appraisals of the situation; there is a clear objective to achieve an appropriate balance of supply and demand in the near term future (1) by developing more efficient ways of using energy and (2) by extending domestic sources of energy. More specifically, the strategy for achieving this goal has three parts (1) Conservation of energy through greater efficiencies in automobiles, appliances, lighting, heating, and industrial processes. (2) Increased domestic production of oil and gas through new sources such as the outer continental shelf and new efficiencies such as tertiary recovery. (3) Substitution of coal and uranium for oil and gas in utility power plants and industrial heating. The goal of energy research and development is to help achieve these goals and to help minimize the economic, environmental and social impact of our shift from imported energy to domestic sources. The focus of this paper is the implications of the expanded use of coal, and the research and development which may help achieve the above goals in so far as coal is concerned.

Jan 1, 1975

Mining and metals projects have tended to increase in both scope and cost to a point where many projects are Droperly designated as superprojects. Specialist engineer- constructors have developed organisations and systems to provide project management services during the design and construct phase of large projects. However, the engineer-constructor is also required to provide a wide spectrum of services during the evolution of large projects prior to the construction phase. Some common phases of pre-construction evolution are identified together with the associated types of specialised services which may be required. A project management team approach is described which has been developed for the design and construct phase. It is suggested that a modified matrix organisation could be adapted to the provision of special- ised services as well as to project management for ore-construction phases of the project.

Jan 1, 1980

By O C. Aitken

Mining project developers are committed to taking on all the challenges and obligations of financial risk management. It is interesting that our current models of project finance have not changed markedly in principle for some 700 years, yet the rules which prepare the way for effective project assessment and subsequent loan management still do not seem to be well understood by project or corporate developers. Probability and gravity fill the opposing trays of the golden balance of financial risk. Understanding the relationship between these opposing, but intimately related elements is critically important for successful risk management. It is important to move beyond the qualitative approach and use quantitative methodologies to measure the financial impact of the occurrence of each major risk. We live in a world where the only constant is change and thus it is not surprising that a bankerÆs life is still governed by assessing, measuring and pricing risk. Banks are attracted to funding well managed companies with strong cash flow projects. But we are more risk averse compared with the credit appetites of late last century. This attitudinal shift has resulted in tougher term sheets for the early 21st century, encompassing more conditions, warranties, undertakings and stronger cash sweep provisions. Banks require well balanced portfolios to achieve an acceptable spread of risk, thus there is a more restricted market for small company lending than that available to large multi-project corporate entities with less concentrated risk profiles. Because of this focus, junior company debt finance remains comparatively expensive and especially so for more challenging geographical and political environments.

Jan 1, 2004

By R. J. Hickson

From 1993 through 1999 Cyprus Amax Minerals Company successfully completed eight major construction projects around the world. Six greenfield mines were brought into production, an ongoing operation was completely modernized, and an environmental issue was appropriately remediated. The projects stretched over three continents, from arctic Russia to the Atacama Desert, from 16,000feet to sea level, from city suburbs to remote wilderness, from a low of $130 million to over $1 billion. Open pit and underground; mill and leach; gold, copper, molybdenum, and coal were all encompassed. The breadth of diversity experience from these projects inspired Cyprus Amax to create a “best practices” project management protocol, to steer corporate expansion into the next millenium. This paper summarizes those best practices, while high-lighting project management pitfalls to avoid.

Jan 1, 2000

By R. J. Hickson

From 1993 through 1999, Cyprus Amax Minerals successfully completed eight major construction projects around the world. Six greenfield mines were brought into production, an ongoing operation was completely modernized and an environmental issue was appropriately remediated. The projects stretched over three continents: from arctic Russia to the Atacama Desert, from sea level to an elevation of 4,900 m (16,00Oft), from city suburbs to remote wilderness and from a low of US$130 million to more than US$ 1billion. The operations included open-pit and underground mines, mill and leach facilities and involved gold, copper, molybdenum and coal. The diversity of these projects inspired Cyprus Amax to create a "best-practices” project-management protocol to steer corporate expansion in the new millennium. This paper summarizes these best practices, while highlighting the project-management pirfalls to avoid.

Jan 1, 2000

By C Johnstone

Project management is not a task to be undertaken lightly. Mining projects generally present even more challenges due to ChinaÆs remoteness and complexity. Having experiences in project management in the West is certainly an asset, but China can present the uninitiated with any number of headaches. To undertake a project there can have many problems that are unique to China. For the last 15 years, China has seen an increasing number of foreign capital investment projects in the mining industry. Practices involved in mining project development have experienced/are experiencing an evolution. Since 1996, Sino Gold Mining Ltd has delivered three mines in China, ie Jianchaling Gold Mine, Jinfeng Gold Mine and White Mountain Gold Mine. Through the work, Sino Gold has established a solid knowledge base and a capable and skilful workforce in effectively undertaking mining projects in China. This paper is concerned with the experiences accumulated so far by Sino Gold in project management in China. An overall review is conducted regarding the reform of the mining project development in China. Opportunities and challenges are highlighted within the political, economic and culture context. Brief summaries of the development of the three gold mines are presented.

Jan 1, 2009

By P. Tanaskovic

This is presentation of a model which simplifies application of project management in control of the construction procedure of industrial units (mines, power stations etc). The model is made for further referrence of investors. The most demanding problem in large units is to find the best way of locating all activities within a network. The model uses term "line" (which refers to a construction unit) for a serie of activities which are to be sequentially executed (up to 1000 lines, each with 10-20 activities). The lines are coded in advance. Each line is described by a competent expert. Team of experts provide liason between lines on the basis of computer drawings. The method proved to be extremely effective. In order to provide smooth monitoring at all management levels, graphic documentation is given at 4 levels. The initial level is the third one, made based on input data (more than lo listings per one drawing). By condensation of activities along one line, another level is obtainable. Grouping of lines gives the first level (1-2 listing) for the highest management level. More detailed information is given for a limited (shorter) period at the forth level for the purposes of operational management. Each activity has three phases: prior to contracting, post contracting and accomplishment. All phases are presented at all levels, which enables investor to be continually well informed about construction advancement. Model is written in FORTRAN language. Programs comprise: maintenance of data base, calculation of time and costs and elaboration of graphic and other documentation.

Jan 1, 1986

By G. C. Thompson

A total system for the simultaneous management of various projects is presented. The objectives of the present organizational structure of the Coal Division in respect of projects are listed, as are the requirements for effective functioning of this organization. The processes involved in strategic planning and in the identification. evaluation, and development of projects are described. The monitoring and control of capital as well as project construction and production management. are discussed. Finally, the important role of project work in the development of management is stated, and the necessity for the continual assessment of the effectiveness of the project organization is stressed.

Jan 1, 1981