Announcement of Twenty-Five Million US Dollars Loan in Dominican Republic on December 24, 1969

INTERNATIONAL BANI{ FOR • RECONSTRUCTION AND DEVELOPMENT 1818 H STREE.T, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 69/75 Subject: $25 million loan in For Publicatio~ AM Newspapers Dominican Republic December 24, 1969 A World Bank loan equivalent to $25 million will support the largest and most important industrial project yet undertaken in the Dominican Republic -- the construction and operation of facilities needed for the mining and metal- lurgical processing of lateritic ore for the production of ferronickel. The entire project will cost the equivalent of $195 million. The Bank loan will be applied to the cost of the required electric power and related facilities. The Republic will benefit from the project in many ways. Over a period ~ of 22 years, net foreign exchange earnings are expected to amount to $325 mil- lion, and funds accruing to the Government from tax receipts and dividends are expected to total the equivalent of ab1'.>Ut $185 million. It will stimulate economic development in the area, and will diversify a predominantly agricul- . tural economy by developing a rich source off/mineral wealth which, because of the technical comp:lexity of the processes inV'1t,lved and the cost of the plant, requires both expertise and capital (rom abroad, This will be the Bank's first loan in the Dominican Republic. It will be made to Falconbridge Dominicana, c. por A. (Falcondo), a company sponsored by Falconbridge Nickel Mines Limited of Toronto, Canada and Armco Steel Corpora- tion of Ohio; an agency of the Dominican Goverument is also a shareholder. The loan will be for a term of 15 years, including 3\ years of grace, and will h·ear • interest of 7%. ·the loan will be guaranteed by the Dominican Republic which will receive a fee of<:Jl\% annually from Falcondo. /more Bank ~ess Release No. 69/75 - 2 - While the main element is the mining and metallurgical processing of lateritic nickel ore to produce annually approximately 63 million pounds of nickel in the form of ferronickel, the project also comprises extensive supporting facilities, • including power generation, a fuel pipeline, storage facilities, roads, water supply and housing. ·The Bank loan will help to finance a 198-megawatt thermal electric generating station, a 44-mile pipeline for the transport of crude oil from the Port of Haina to the plant site, an associated· installation at the .site and water treatment facilities. The project focuses on one of the basic economic problems of the Dominican Republic -- the need to develop its natural resources and increase exports. Re- serves proven by Falcondo should provide for approximately 25 years at the pro~ posed level of extraction. Exploration work is continuing. Falcondo is entering into management and sales agreements with Falconbridge of Canada. The latter will purchase all Falcondo's output of ferronickel for sale in international markets. ~ The market for ferronickel has been growing steadily and the demand is strong in relation to the prospective supply. Of the total cost of the proJect, $49 million will be financed by the sponsors with equity and subordinated debt; $80 million by three United States insurance companies on a long-term basts; $41 million by two coDlllercial banks, one United States and one Canadian, on a medium-term basis; and $25 million by the World Bank loan. Interim finanding will also be provided by the conmercial banks to estab- lish revolving credits up to $55 million. The loans, other than the World Bank loan, will be protected by a guarantee from the United States Agency for Inter- national Development against the specific risks of war, revolution, expropriation and inconvertibility. - 0 - •