The Anatomy of a $100M Commodity Trade Finance Deal
A step-by-step breakdown of how a $100 million commodity trade finance facility is structured, documented, priced, and syndicated — illustrated through a hypothetical but realistic copper concentrate transaction.
Understanding how large commodity trade finance deals are structured requires walking through a specific transaction in detail. The following case study, based on a composite of real transactions anonymised for confidentiality, illustrates the key elements of a $100 million copper concentrate pre-export financing facility.
THE TRANSACTION
A copper mining company in Chile, producing 180,000 tonnes of copper concentrate annually, seeks pre-export financing to fund its operating costs and capital expenditure programme. The company has a committed offtake agreement with a major European copper smelter for 100% of production over three years at market prices linked to the LME copper price.
THE FINANCING STRUCTURE
The transaction is structured as a pre-export finance (PEF) facility — a lending structure in which the lender advances funds to the producer against the future cash flows from the committed offtake agreement. This is one of the most common structures in commodity trade finance because it provides direct access to the commodity cash flows without requiring the lender to take a security interest in the physical mine assets.
Key structural elements:
BORROWER: The mining company's operating subsidiary incorporated in Chile.
AMOUNT: $100 million, drawn in tranches over six months as working capital requirements arise.
TENOR: 36 months, matching the remaining term of the offtake agreement.
INTEREST RATE: SOFR + 280 basis points per annum, reflecting the credit quality of the borrower, the security structure, and market conditions for similar transactions.
SECURITY PACKAGE: Assignment of rights under the offtake agreement (giving lenders direct claim on payments from the smelter); pledge of the company's bank accounts into which offtake proceeds are received; pledge of shares in the borrowing subsidiary; and corporate guarantee from the mining group's parent entity.
REPAYMENT: Mandatory repayment of principal from offtake proceeds, structured as a percentage sweep of all amounts received from the smelter. Approximately 35% of each offtake payment is applied to facility repayment, with the balance available to the borrower for operating costs.
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