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CVRD deal heralds mining finance bonanza

CVRD’s massive financing programme for its takeover of Inco is the most prominent example of a boom in capital markets activity by Latin American minerals producers. Leticia Lozano reports.

Lima acts as the source of mining capital


THE EAGERNESS OF global financiers to fund Brazilian mining company Companhia Vale do Rio Doce in its $18 billion takeover of Canadian nickel producer Inco is a sign of the times. A commodity boom sparked by China’s rapid economic growth is fuelling the development of new mines and mining acquisitions in Latin America and, in turn, the bank loans and capital markets deals to finance them.

Last month, Brazilian iron ore producer CVRD issued the biggest-ever global bond by a Latin American entity. The company sold $3.75 billion worth of 10 and 30-year paper. Investor demand totalled $13 billion. The bond will help refinance part of the record-breaking $18 billion loan CVRD took on to pay for its take over of Inco. When CVRD announced that loan it was flooded with short-term funding offers totalling $34 billion for its deal, far more than it needs, as international banks try to get in on a surge of mergers and acquisitions in mining this year. “As we say in the mining industry, banks always want to loan you money when you don’t need it, and when you do need it, they’re not interested in lending,” says Carlos Galvez, chief financial officer of New York-listed Peruvian metals company Buenaventura, which jointly owns Latin America’s biggest gold mine, Yanacocha, with Newmont Mining of the US.

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