Saudi Arabian Mining Company (Maaden) is planning to launch the financing for the second phase of its $10.8bn aluminium project in the next few weeks, according to sources in the kingdom.

An information package is due to be sent to banks in the first week of May detailing the plans to raise about $3.6bn in total.

Maaden aluminium phase 2
FINANCING BREAKDOWN ($m)
Total project cost 3,600
Equity 1,440
Debt 2,160
DEBT CONTRIBUTIONS  
Commercial banks 1,000
Public Investment Fund 1,000
Saudi Industrial Development Fund 160
Source: MEED

The funding will be split 60:40 between debt and equity, with the $2.16bn debt package made up of $1bn each from commercial banks and Saudi Arabia’s Public Investment Fund (PIF), and $160m, provided in a Saudi riyal-denominated loan from the Saudi Industrial Development fund (SIDF).

The debt will have a tenor of 16 years. Maaden is expected to ask banks to give commitments by 22 June. A meeting between the project sponsors and their advisers and potential lenders was held in Riyadh on 25 April.

The project is sponsored by Maaden with the US’ Alcoa. The second phase will development of a bauxite mine and an alumina refinery.

In 2010, the two sponsors raised $7.5bn for phase one of the aluminium project, which included the construction of an aluminium smelter and rolling mill.

“The last deal had an over subscription of over $1bn so there should still be quite a lot of appetite for this deal in the market,” says one banker in Saudi Arabia.

The last deal was done predominately by Saudi Arabian banks and was financed in a mix of riyal loans and dollar loans. The dollar tranche was priced at 205 basis points above the London interbank offered rate (Libor), while the riyal tranche was priced at 165 basis points above the Saudi interbank offered rate (Sibor). The new financing is expected to approach the same banks that funded the last deal, as well as rely more heavily on cheaper riyal funding than more expensive dollar loans from international banks.

The local Riyad Bank and the UK’s Standard Chartered are acting as advisers to Maaden on the project, while France’s BNP Paribas advised Alcoa on phase one of the project, but is not advising them on the second phase.