Standard Bank Group has been appointed as financial adviser and mandated lead debt arranger by Sundance Resources in a USD3.5-billion project to build port and rail infrastructures for the Mbalam-Nabeba Iron Ore Project in Central Africa.
Leading international engineering and construction company Mota-Engil Africa was appointed as the contractor to build the port and rail link in Cameroon and Congo-Brazzaville. Mota-Engil Africa has extensive experience in sub-Saharan Africa, including on-going construction of a bulk commodity railway in Malawi operated by Brazilian mining group Vale.
Rob Bessinger, Head of International Client Coverage, at Standard Bank Group, says: “Standard Bank Group believes the Mbalam-Nabeba Iron Ore Project is a tier one asset that will generate significant revenue once in production. However infrastructure is key to unlocking its potential.
“We have worked with Mota-Engil Africa on projects in the past, and we firmly believe they have the experience, credibility and capacity to put together a consortium that will succeed in building this project within the timeframe and budget outlined in their tender. Moreover, we are confident in our ability to raise funds for the construction phase of the project.”
Project equity discussions are well advanced with a wide variety of potential funding. Partners, export credit agencies, development funds and commercial banks have already expressed interest in providing debt funding for the project, which is projected to achieve financial close by mid-2015 with construction expected to take a further 3.5 years.
Given the low cash costs and capital intensity of the Mbalam-Nabeba Project, Sundance anticipates a debt to equity ratio for the project of better than 70:30 with interest margins, amortisation schedules and other terms consistent with normal industry practice for African resource project finance situations. Standard Bank Group has already held discussions with a wide variety of potential funding partners and has received several expressions of interest from Export export cCredit aAgencies and dDevelopment fFinance iInstitutions. Insurance agencies have also expressed interest in providing protection for the commercial banking tranche.
There is considerable support for the Mbalam-Nabeba Project from these institutions, including Western and Chinese providers of project equity and debt capital. Sundance has commenced work with Standard Bank Group and Mota-Engil Africa to convert the indicative term sheets to credit-approved term sheets by the end of this calendar year.
In order to secure agreed terms for the EPC contract and indicative terms for debt funding, Sundance, with the assistance of Standard Bank and other equity arrangers, will proceed with delivering the project equity funding strategy. This will involve parties who have previously expressed interest in the project, subject to confirmation of an EPC price and debt solution.
Sundance, Standard Bank Group and Mota-Engil Africa are also advancing plans for an alternative funding strategy based on an Own Operate and Transfer model for the port and rail infrastructure. Discussions on this strategy are underway with specialist infrastructure operators and financiers. The successful completion of these discussions would see a greatly reduced equity requirement from Sundance and its partners.