Rising resource prices open up more options for financing

The availability and types of funding for new mining projects is increasing as resource prices have improved, according to speakers at a panel discussion on alternative forms of investment at the Mining Indaba.

During the commodities downturn, smaller greenfields mining projects became impossible to finance because of banks’ unwillingness to invest and plummeting share prices.

Julian Treger, a veteran activist investor and CEO of Anglo Pacific, said because of the recovery in prices in Anglo Pacific’s core portfolio, it was generating more cash and looking at new opportunities.

The group extends funding in return for a percentage of revenue (royalties) or limited share of output (streaming).

Rather than focusing only on near-production projects, it was committing some capital to large-scale, world-class projects that might not come into production for eight to 10 years.

Treger said streaming had become more popular, in particular for precious metals.

More protection clauses were coming into effect for streaming transactions, allowing sellers to buy back their product at a pre-agreed price if the price of that commodity had risen sharply, he said.

Peter Major, mining consultant at Cadiz Corporate Solutions, said projects had become riskier and more politicised and took longer to bring into production. Although government regulation had become a hurdle in SA, government agencies such as the Public Investment Corporation and the Industrial Development Corporation were willing to co-invest, which reduced the risks for other investors.

David Twist, a well-known private equity investor in SA and partner at African Minerals Exploration & Development, said the firm’s favourite destination in Africa was Botswana because it had an exemplary mining code and corruption was not tolerated. Countries where it would refuse, or be very reluctant, to invest included Somalia, Zimbabwe and North Sudan.