Toronto-based Aber Diamond secured a $230 million loan to fund capital commitments for the Diavik Diamonds Project, the largest ever dedicated project finance facility for a diamond project. Aber tapped Bank of Montreal, CIBC, Deutsche Bank, Export Development Canada and Royal Bank of Canada, said Caroline Glasbey, director for investor relations. Bank of Tokyo-Mitsubishi subsequently joined the lead bank group underwriting the loan, which syndicated the facility to another eight players.
Glasbey said the company chose bank debt over equity financing to avoid dilution of ownership. The sell-off of its stake in the Snap Lake Project to rival De Beers in late 2000 helped provide Aber with increased capital and leverage in raising the financing, she added. Pricing on the loan is LIBOR plus 3%, while Aber is able to hedge on a fixed interest basis or on a Canadian dollar base. The first drawdown is in the first quarter of 2002, with a scheduled amortization over eight semi-annual installments following project completion. The loan will be fully paid off in 2005.
N M Rothschild & Sons acted as the financial adviser and Aber knew some of the banks through previous transactions, noted Glasbey, commenting on the banks leading the project financing. A bid was issued and the banks selected demonstrated the most interest in the business, she added, declining to name the other bidders.
Aber has so far financed its 40% share of the $1.3 billion costs out of its own equity fund. The loan will fund the remaining financial requirements through to commencement of project operations next year, as construction is 65% complete.