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Chile's Esperanza Copper Mine Development Project

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The Project's Possible Effects on the Local Community and Ecosystems Are Assessed

The Republic of Chile in South America is abundant in mineral resources. In particular, Chile's copper ore output is No. 1 in the world, accounting for more than one-third of the global output.

Together with other international financial institutions, Mizuho Corporate Bank (MHCB) provided a syndicated loan for a large-scale copper mine development project that is under way in northern Chile. Before the financing, we visited the project site to assess the project's possible effects on the local community and ecosystems.

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Project Site Visit

The Copper Mine Project Yields Significant Benefits to the Japanese Economy

The Republic of Chile is the world's largest copper-producing nation. The amount of mineral resources in the Sierra Gorda District in northern Chile alone is estimated to exceed 5.6 billion tons. As the supply-and-demand conditions for copper are increasingly tight due to a sharp demand increase in the emerging nations, securing an interest in copper mines in this district is important for Japan, which relies 100% on imports to source copper concentrate, a material of copper metal.

Against this background, Marubeni Corporation entered into a joint contract with Antofagasta PLC, a world-leading copper producing company, to invest in the Esperanza copper mine development project in April 2008. From the fall of 2010, 43% of this mine's copper output, or about 300,000 tons of copper concentrate corresponding to 7% of Japan's total annual imports of copper concentrate, will be imported to Japan annually.

For this project, MHCB provided a syndicated loan, together with other international financial institutions.

As an Equator Principles Financial Institution, We Assessed the Environmental Impact of the Project

In May 2009, a financing agreement totaling USD 1,050 million was concluded for the Esperanza copper project. This project finance consisted of syndicated loans from Japan Bank for International Cooperation (JBIC), Canada's Export Development Corporation (EDC), Germany's Kreditanstalt fur Wiederaufbau (KfW) and a syndicate of private banks in various nations, in which MHCB participated.

To finance the cost for acquiring an interest when investing in the copper project, Marubeni's 100%-owned subsidiary in the Netherlands signed a loan contract totaling USD 650 million with a syndicate of banks in August 2009. MHCB not only participated in this syndicated loan but also provided support for arranging the syndication as a financial advisor.

Preceding this project finance, MHCB, as an Equator Bank, carried out an onsite inspection in February 2009 to confirm whether the project's effects on the local environment and community would be managed appropriately.

We Confirm that the Projects We Finance Have Negligible Impact on the Local Community and Ecosystems

The Sierra Gorda District in northern Chile is in an arid zone with low rainfall. Located at an altitude of 2,300 meters, the area does not provide habitats for most plants and animals. For these reasons, this project's impact on the natural environment had been considered to be very low, which was actually confirmed by the onsite inspection by Mizuho Corporate Bank. The inspection revealed the existence of two rare species of plant, although their numbers were small. However, it was also confirmed that sufficient action to control the impact, such as transplanting these species, had already been taken.

Meanwhile, a concern came up over the mine dust that might affect the surrounding areas, because there were some residential areas to the northeast of the mining area. Therefore, it was necessary to confirm how the mine dust would affect the residents in the town before concluding the project finance contract. By referring to past statistics and verifying the area's geographical features and wind direction onsite, we found that the wind direction is mostly south-southwest and in that direction there are no residential areas. We also confirmed that the mine dust would be contained through frequent watering from sprinkler trucks and that a water supply station for the trucks would be built at the open-pit copper mining site.

In this way, the Equator Principles now function as common standards for environmental risk management in the international project finance market. The increasingly popular Equator Principles encouraged financial institutions—as an interested party in the project—to pay greater attention to environmental issues. Lately, as with this project, an onsite inspection to assess the environmental impact is increasingly favored by financial institutions.

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