africa Banking Bauxite commodities Mining Natural Resources

Loan opens door for Guinean bauxite production

A multinational loan will provide a Dubai-owned company the means to begin development and production at a lucrative bauxite mine in north west Guinea, providing the raw material needed for aluminium production.

An international finance consortium has provided USD 750 million in loans for the development of a USD 1.4 billion bauxite mine, rail and port infrastructure in north west Guinea.

The mine is being developed in the Boké Province by Guinea Alumina Corporation (GAC), a subsidiary of Emirates Global Aluminium (EGA), which is owned by Dubai’s sovereign wealth funds Mubadala Development Company and Investment Corporation of Dubai.

Bauxite is used in aluminium production and the mine is due to produce 12 million tonnes a year for 20 years, providing 1000 jobs and 4000 more for construction, resulting in USD 50 million a year for the state. The development of the mine site includes improvements to the rail network and construction of a port. GAC has said it will also invest in local community work.

The country holds the world’s largest reserves of bauxite and its production is very important to the economy. The site in Boké is due to come online later in 2019. Africa Finance Corporation is among those to have previously investedin bauxite mines in Guinea. Other countries, including Ghana, are seeking to get into the market as a way to diversify their own economies.

Guinea’s attempts to exploit its iron ore reserves have been more complicated, due in part to the lengthy, and recently resolved, legal battle over the Simandou site.

The Participants

The consortium, whose involvement came in the form of two loans for a period of 12 to 14 years, is made up of a range of banks and development finance institutions (DFIs): the World Bank’s International Finance Corporationprovided 300 million, African Development Bank (AfDB) provided USD 100 million, state-owned credit agency Export Development Canada USD 150 million, as well as Germany’s Deutsche Investitions- und Entwicklungsgesellschaft (DEG), Société Générale – also a financial adviser to GAC, ING Bank – which also provided due diligence, BNP Paribas, French corporate bank Natixis, Emirates NBD, Mashreq Bank and the Emerging Africa Infrastructure Fund which is owned by DFI PIDG.

World Bank Group member the Multilateral Investment Guarantee Agency (MIGA) provided USD 129 million of political risk insurance to the banks in the deal.

Abdulla Kalban, managing director and chief executive of EGA and chairman of GAC, said the deal with the lenders “secures the long-term success of our Guinea project and for EGA this project financing is in line with our capital allocation strategy. We are committed to completing and then operating the GAC project to high standards, contributing to improving sustainability performance in Guinea whilst helping to grow the economy”.

IFC vice-president for the Middle East and Africa, Sérgio Pimenta, added that 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”.

GAC was represented by United States law firms Shearman & Sterling and Akin Gump Strauss Hauer & Feld, as well as offshore firm Walkers and Guinean firm SD Avocats.

The Guinean government was represented by DLA Piper and local firm Sylla & Partners.

The consortium was advised by Guinea’s Bao & Fils, offshore firm Maples & Calder and a team from London-headquartered Magic Circle law firm Allen & Overy (A&O), led by London-based projects partner Tim Scales and including partners Ian Ingram-Johnson in Dubai, Perth-based commercial partner Meredith Campion. New York-based trade partner Ken Rivlin, London-based head of international trade Matthew Townsend and sanctions specialist Maura Rezendes in Washington, DC.

Scales, head of the Africa group, described the deal as an “ambitious and complex project financing” and said: “We were able to draw on expertise covering financing, mining, infrastructure, construction, shipping, environment and social, regulatory, insurance and other specialist areas from across the A&O network.”

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