distributions to shareholders ) need to go through the Skouries accounts waterfall .
• Contracting and completion support – An EPCM contracting strategy , whereby an external and experienced contract manager is appointed to help procure multiple contracts for the construction of a project , is reasonably common in the mining sector . Notwithstanding this , in mining project financings and especially with non-recourse project financing that does not include a completion guarantee or a debt service undertaking , lenders may request a single-point lump-sum EPC contract or a small number of lump-sum EPC contracts for the construction of the project . These types of arrangements are traditionally considered to reduce the risk of delays and cost overruns – although in practice that is not always the case .
Construction of the Skouries project started in 2013 and it has been in care and maintenance since 2017 . In this context , getting a contractor to assume responsibility for the site and existing works is very difficult and , to the extent possible , prohibitively expensive . Given this and given EPCM strategies are generally common in the mining sector , Hellas Gold was intent on a EPCM contracting strategy and on entering into the contracts during the construction period – rather than up-front , which would likely have a material cost-implication – while maintaining the nonrecourse nature of the financing and for sponsor support to be limited to the agreed equity contribution .
This required significant education of the lender group , including presentations with the procurement team and a deep-dive into the incentive structure of the EPCM contract . Through collaboration and an understanding of the flexibility required by Hellas Gold and the controls required by the lender group , a detailed contracting strategy was included in the financing documents . Different levels of control are applied by the lenders depending on whether a contract satisfies the contracting strategy – including remaining consistent with certain pre-agreed templates – and the value of the contract .
This strategy supplemented modelling of potential cost overrun scenarios and , to increase the amount of contingent funding available , a contingent facility was provided by the lenders . In addition , the financing documents includes a built-in mechanism to extend the availability period , and to delay the start of repayments by six months .
Conclusion The Skouries project financing represents the culmination of many years of planning to finally bring a world-class , leading gold and copper mine to northern Greece . The mine will use dry tailings , will fully comply with the EBRD performance requirements , will be one of the most sustainable mines in the EU , and contribute to net-zero ambitions . The Skouries project financing demonstrates the flexibility of project financing as a medium to adapt to different situations and resulted in a package that includes elements of several types of financing approaches , an original contracting strategy and a template for future innovations in the Greek market and beyond . It also demonstrates the importance of the different parties , stakeholders and advisers coming together to develop solutions and enable projects , rather than find reasons to say no . Endless cookies from The Cookie Spot bakery in Athens also help . •
Olympias mine
72 Project Finance International October 4 2023