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Liquidity Management

A Leading Metals and Mining Company

J.P. Morgan helps global mining giant lower costs and gain visibility over accounts worldwide


About

One of the largest metals and mining giants in the world, this company has a presence on many continents. It is faced with complex operational challenges, including unpredictable prices for its products and varying and evolving tax policies and regulations in the locations in which it does business.

At a Glance

  • Global expansion led to a need to centralize and automate dollar accounts and dollar funding in a single location where possible
  • J.P. Morgan was able to provide a solution that replaced non-U.S. based USD accounts with USD accounts based in the United States
  • Benefits include better visibility and enhanced control over funds, easier access to consolidated cash to pay down debt or invest, and operational risk mitigation through e2e automation on payment initiation

The Challenge

The company needed a global banking solution that would reduce the total number of U.S. dollar accounts, enabling it to lower banking costs, gain visibility over cash worldwide, and improve liquidity management.

A large, global player that is rapidly expanding into new markets, it has hundreds of banking relationships around the world. The client, like many companies in the mining sector, conducts business primarily in U.S. dollars and wished to centralize and automate its global dollar position – and the management of dollar funding – in a single location wherever possible.

The J.P. Morgan Solution

After an extensive process, the company selected J.P. Morgan’s solution. The two firms have worked together since 1995, with J.P. Morgan providing the client a wide range of products and services from our Corporate & Investment Bank.

The client replaced its entities’ local-country U.S. dollar accounts with dollar accounts based in the United States. All eligible, unrestricted accounts group their billing with a master account. This master account has a U.S. group ECR (earnings credit rate) relationship and maintains balances to offset all grouped fees. As a result, operations can take place without being subject to billing charges.

Non-ECR funds are invested in an overnight London Sweep and DDA (demand deposit account) with interest. The company uses J.P. Morgan ACCESS®, a web-based platform, to track its balances across multiple entities.

Leveraging our global expertise and consultative team approach, in addition to best-in-class products and IT, we were delighted to deepen our client relationship further with an integrated solution to support the company in gaining visibility over its U.S. dollar accounts worldwide.

Alejandro Guevara, Head of Latin America Corporate and Investment Banking Coverage

The Impact

With its U.S. dollar accounts now centralized, the company has better visibility into the use of its funds and has gained more control over them. The company can fund local accounts and meet local requirements quickly and more accurately, as well as access its consolidated cash to pay down debt or invest centrally.

The solution gives our client scale benefits and the ability to negotiate better terms. It also mitigates risk in several ways – for example, the U.S. provides a safe haven for funds. Centralization, together with automated investments and payments makes cash management safer, far more efficient and cost-effective.

Consolidating dollars in the U.S. also provides benefits, including faster payments to suppliers receiving USD currency. Leveraging J.P. Morgan’s wide correspondent network, the company settles 61% of its payments instantly via book transfer. Managing cut-off times for payments and investment in the local time zone is more efficient. Finally, it gains easy access to low-value, high-volume payment systems, which are less costly than cross-border payments.

 

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Details of FAIS Ombud
Office of the FAIS Ombudsman
Name: The Ombud for Financial Services Providers
Postal Address: PO Box 74571, Lynnwood Ridge, 0400
Telephone number: 012 762 5000 / 012 470 9080
Facsimile number: 012 348 3447
Email Address: info@faisombud.co.za
Website: www.faisombud.co.za

For Brazil: Ombudsman J.P. Morgan: 0800-7700847 / ouvidoria.jp.morgan@jpmorgan.com