World Bank backs $1.4B for Chile’s copper giant

The World Bank Group is holding up a financing structure used by Chile’s state-owned Codelco as a model for mineral-rich countries seeking to attract long-term private capital while reducing mining’s environmental footprint.

The approach uses guarantees from the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) to protect commercial lenders if Codelco fails to meet certain financial obligations, allowing banks to extend longer-term financing without MIGA lending directly to the mining company.

Together, two 15-year financings total nearly $1.4 billion. The latest is a $600-million loan from Santander and HSBC backed by an $859.1-million MIGA guarantee, following an earlier $762-million financing supported by MIGA.

The financing illustrates a central theme of the World Bank’s Made Possible by Minerals, published Sept. 30: mineral wealth can underpin jobs, infrastructure and industrial development when governments pair extraction with investment, sound regulation and efforts to build domestic economic capacity.

Guarantee structure

MIGA’s role is essentially to absorb a defined layer of credit risk rather than finance mining operations directly. Its non-honouring of financial obligations coverage protects participating lenders if Codelco fails to meet covered obligations, making it easier for banks to provide financing over longer periods.

The earlier MIGA guarantee covers a $532-million, 15-year loan from Crédit Agricole CIB that became effective in July 2024. That transaction marked MIGA’s first such guarantee for a state-owned enterprise in Chile and its first for a state-owned mining company globally.

Together, the two transactions support Codelco’s payments under five long-term renewable-energy contracts. The first loan covered payments between 2023 and 2025, while the second is expected to cover payments from 2025 through 2027.

Importantly, the financing doesn’t pay for new mines or expansions. MIGA says the loans support Codelco’s electricity-purchase obligations, with power supplied through Chile’s national grid by third-party producers.

That distinction matters because the structure shows how development institutions can mobilize commercial capital around mining without taking on the geological and construction risks associated with developing deposits.

Codelco, Chile’s largest electricity consumer, has been replacing coal and other fossil-fuel power contracts as it works toward obtaining 100% renewable electricity by 2030. It had secured contracts capable of supplying 85% of its electricity needs from renewable sources by 2026, MIGA said.

The transition is also intended to give the copper producer greater cost predictability by reducing its exposure to volatile coal and natural gas prices and potential emissions-related costs.

Beyond extraction

The Chile example fits a wider World Bank effort to encourage mineral-producing countries to capture more economic value from growing metals demand rather than relying mainly on exports of raw materials.

Zambia is working with the World Bank on an energy transition roadmap as the country targets a near-quadrupling of annual copper output from about 800,000 tonnes to 3 million tonnes by 2031.

The strategy looks beyond mine production to the electricity, transport, regulation and workforce skills needed to support a larger domestic mining economy.

The same development model is emerging elsewhere. In Argentina, Rio Tinto’s (ASX, LSE: RIO) Rincon lithium project is expected to create jobs and opportunities for local businesses as the company invests $2.5 billion to expand annual battery-grade lithium carbonate capacity to 60,000 tonnes.

Oyu Tolgoi

Mongolia’s Oyu Tolgoi copper-gold mine, two-thirds held by Rio Tinto, illustrates how a large mineral operation can support employment and domestic suppliers alongside export revenue.

Together, the examples underscore the World Bank’s argument that the economic prize extends beyond producing more tonnes. Reliable infrastructure can support processing and manufacturing, technical training can move workers into higher-skilled positions, and local procurement can channel more mining spending into domestic businesses.

Chile shows another part of that equation: using the financial strength of development institutions to make long-duration investments around existing mineral production easier for private lenders to finance.

The model doesn’t eliminate mining’s environmental, financial or social risks, nor does a guarantee ensure that mineral wealth produces wider prosperity. Its significance is that it gives governments and development institutions another way to draw private capital into the infrastructure and energy systems needed to support mineral production.