A number of alternative sources of finance, such as strategic investments, joint ventures and equity-based fundraisings, are available to mining companies, but what do miners need to know before they take the plunge?
GlobalData’s mining writer, Yoana Cholteeva, spoke to Alexander Keepin, corporate finance partner at international law firm Bryan Cave Leighton Paisner, to find out more about these options and which ones are currently popular.
“Mining companies tend to use a few finance sources,” says Keepin. “There’s commodity based finance such as royalty finance metal streams offtakes pre-payments. They use sort of traditional debt finance, which can range from straightforward bank debt and project finance to equipment, leases, operating leases, together with any sort of corporate or convertible bonds.”
Also available, says Keepin, are equity finance, typically through the equity capital markets or private capital, or capital from private equity funds.
“Another method is strategic investments and joint ventures. We’re actually seeing an uptick in the number of joint ventures at the moment, particularly joint ventures to fund early-stage development.
“We’re seeing that, more often, companies are reaching out to more greenfield projects and entering into joint ventures, just to fund their development.”
He says mining companies are increasingly looking at where they can raise capital protection, particularly through the more traditional routes of depth and equity.
“We’ve seen a number of Australian and Canadian companies looking to lift in London to access European investors, as they seek to raise their equity finance.
“I think, when raising finanace, the key is to bear in mind what your future capital requirements are likely to be and how this finance will impact your ability to raise funding in the future.
“It’s very important for companies with short-term finance needs to consider the impact that this funding will have on future fundraising – for construction finance, for example.”