Raising Funds for Coal, Mineral Industry

Vietnam state mining group Vinacomin has recently signed a US$300 million government-guaranteed loan with a consortium of foreign banks led by Citi Vietnam to fund the nation's first alumina refinery.

 

The loan is for a 13-year period and has been guaranteed by the Finance Ministry. A term-loan of US$300 million to finance the construction of a bauxite mining and alumina project in the Central Highlands province of Lam Dong. A consortium of foreign banks, including the Mizuho Corporate Bank Ltd, Sumitomo Mitsui Trust Bank Ltd and the Bank of Tokyo-Mitsubishi UFJ Ltd, will provide the loan.

 

The Tan Rai alumina plant in the Central Highland province of Lam Dong has faced a series of delays. Production was initially slated to start in the last quarter of 2011, but behind-schedule construction and incomplete administrative procedures slowed the funding process. The US$460-million alumina plant has a full capacity of 630,000 tonnes a year.

 

Vinacomin and China's Yunnan Metallurgical Group (YMG) have a 30-year deal for the Vietnamese firm to sell 600,000 to 900,000 tonnes of alumina to Yunnan Metallurgical each year, while state media have also reported that Vinacomin has been in talks with Marubeni about alumina sales.

 

Vinacomin has been developing the Nhan Co alumina project in the neighbouring province of Dak Nong with projected initial output of 300,000 tonnes in 2014, which could be raised to 650,000 tonnes by 2016.

 

This is the first bauxite and alumina project ever undertaken in Vietnam, and the development of these resources in the country is critical for sales to domestic and export markets, and for the socio-economic development of the Central Highland region. The financing deal marks the first time that NEXI has provided untied loan insurance for a bauxite and alumina project.

 

Mr Le Minh Chuan, President and CEO of Vinacomin said: "The US$300 million loan agreement is the largest agreement ever for Vinacomin. This financing is particularly meaningful as it will be used to finance Vinacomin & Lam Dong Bauxite – Alumina Complex Project, an important national development with direction and support from the Government. The loan will have a significant impact on the success and effectiveness of the project.

 

Vinacomin and HDBank recently signed a cooperation agreement at the headquarters of the Vinacomin Group. With the objective of promoting the growth of business operations of the Group in particular, and contribute to the growth of the US economy in general, Vinacomin needs a large amount of capital, about US$1 billion per year, for investment and development projects in the fields of coal, bauxite, electricity, minerals mining and minerals processing industry. Therefore, Vinacomin needs the cooperation and support from banks and credit institutions.

 

Mr Le Minh Chuan stressed that 2012 has been a year of many difficulties and challenges for the Vietnam economy, like the instability of the financial markets and real estate market, and bank liquidity issues. Vinacomin has also been affected somewhat by the decline in coal consumption demand both domestically and externally, along with changes in the cost of capital and cost of production. Overall, Vinacomin continued to maintain steady growth and make profits.

 

Currently, the partnership between Vinacomin and HDBank temporarily stopped at short-term credit transactions. Signing the cooperation agreement will create more opportunities for the long - term. According to Mr Le Duong Quang, Deputy Minister of Industry and Trade, Vinacomin and HDBank chose the right partners to cooperate. The signing ceremony of cooperation between the two partners starts a sustainable cooperation for the future.

 

Vinacomin has sold 17 percent of the VND3 trillion worth of bonds launched on the local market due to a lower coupon than expected. By the end of the bond purchase registration in June 29, four investors had registered to buy a combined amount of VND500 billion with a coupon of 14.5 percent for the first year.

 

Vinacomin last year had a plan to issue 3,000 bonds worth VND1 billion each with terms of 5-7 years in 2012. Vinacomin bonds are sold under the form of book entry, with floating coupons paid annually. The dong bond sale in 2012 aimed to raise funds for the projects to be executed in 2012-2015. It is also part of the coal-mineral industry development plan approved by the government.

 

However, financial market analysts predicted the dong bond market would not prosper from now to the year’s end. In the stock market, foreign investors have reduced net buying and switched to net selling since the second quarter, under the impact of the euro zone debt crisis and the Vinalines graft scandal.

 

The conversion price of the bonds is VND88,000 each. The bonds offered this time will combine with previously issued ones to form a unique lot worth as much as US$300 million.