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SYDNEY, May 3 (Reuters) - Global miner Rio Tinto Ltd has attracted strong interest for a $2.5 billionloan to expand its Oyu Tolgoi copper and gold mine in Mongolia,in one of the largest resource financings in Asia this year,banking sources said.
The financing is key for Rio Tinto to go ahead with theconstruction of an estimated $5.1 billion underground mine atOyu Tolgoi, following the start of commercial sales mid-yearfrom an open-cut mine.
The project loan and the start of commercial sales bothhinge on Rio Tinto resolving a dispute with the Mongoliangovernment over management of the mine, spiralling costs, andtaxes. Both sides have said talks were progressing.
Lenders were scaled back due to strong demand, with 14lenders submitting credit-approved commitments ranging from $50million to $250 million. Those who submitted commitments of $300million were scaled back by $50-$100 million.
Initial mandated lead arrangers BNP Paribas andStandard Chartered Bank were allocated $250 millioneach.
Australia and New Zealand Banking Group, CreditAgricole CIB, HSBC, ING Bank, Natixis, Societe Generale and Sumitomo Mitsui Banking Corp wereallocated $200 million each.
Three other banks have been allocated $150 million, andGermany's export credit agency KfW IPEX and Dutch developmentbank FMO are also lending.
The project financing has been split in two tranches, with60 percent in a B-loan tranche with International Finance Corpand the European Bank for Reconstruction and Development, and 40percent through a Multilateral Investment Guarantee Agency(MIGA)-guaranteed tranche.
The margin for the B-loan tranche is 340 basis points overLibor, and 265 bp over Libor for the MIGA tranche. Lenders willalso earn a flat 250 bp upfront fee.
Lenders are waiting for Rio and financial adviser Rothschildto finalise the split.
The project is also heavily backed by $1.95 billion indirect loans from Australian, European, U.S. and Canadian exportcredit agencies.
Due to the high level of equity investment, Rio will havethe option to raise more debt at a later stage and re-gear theproject.
