The World Bank Group is pointing to Chile’s state-owned copper giant Codelco as a model for how financial guarantees can help mineral-rich countries attract long-term capital while cutting the environmental footprint of mines critical to the global energy transition.
The approach uses the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) to protect commercial lenders against the risk that Codelco fails to honour certain financial obligations.
A second 15-year MIGA guarantee of almost $860 million became effective in December, covering a $600-million loan from Santander and HSBC that supports payments under five renewable-energy power purchase agreements.
“Supporting Codelco’s shift to low-cost renewable power helps ensure that the copper needed for grids, renewables, and electric mobility is produced in a financially efficient and sustainable way,” MIGA managing director Tsutomu Yamamoto said in January.
The financing illustrates a central theme of the World Bank’s World Bank’s Made Possible by Minerals: What it Takes to Power Modern Life, released this week: 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 lend directly to the mining operation. Its Non-Honoring of Financial Obligations by a State-Owned Enterprise coverage protects participating lenders if Codelco fails to meet covered obligations, helping banks provide financing over longer periods.
The latest guarantee follows a $765-million MIGA guarantee that became effective in July 2024 and covered a $532-million, 15-year loan from Crédit Agricole CIB. 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 second loan is expected to cover PPA payments through 2027, extending the climate-financing program established under the first transaction.
Importantly, the financing does not pay for new mines or expansions. MIGA says the money supports Codelco’s electricity-purchase obligations, with power supplied through Chile’s national grid by third-party producers. The original project framework contemplated guarantees supporting as much as $1.2 billion in commercial loans.
That distinction matters because the structure demonstrates how development institutions can mobilize commercial capital around mining without assuming the direct 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 part of a plan to obtain 100% of its electricity from renewable sources by 2030. MIGA says the transition also gives the miner 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 push to encourage mineral-producing countries to capture more economic value from growing demand for metals rather than relying mainly on exports of raw materials.
Zambia, Africa’s second-biggest copper producer, is partnering with the World Bank on a Mining Compact and Energy Transition Minerals Roadmap as the country targets a tripling of annual production to 3 million tonnes of the metal by 2031. The strategy couples higher mine output with improvements to power, transport, regulation and workforce skills intended to support a broader domestic mining economy.
The same development model is emerging elsewhere. In Argentina, Rio Tinto’s (ASX, LON: RIO) Rincon lithium project is being linked with efforts to create local employment and build workforce skills around a growing lithium industry. Mongolia’s Oyu Tolgoi copper-gold mine, meanwhile, illustrates how a large mineral project can generate jobs and opportunities for domestic suppliers alongside export revenue.
Together, the projects 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 does not eliminate mining’s environmental, financial or social risks, nor does a guarantee ensure that mineral wealth produces wider prosperity. Its significance is in changing how some of the infrastructure surrounding mining can be financed, while the experiences of Zambia, Argentina and Mongolia show how governments can pursue jobs and economic development around mineral production itself.
