FINANCE & LEGAL
NAVIGATING PROJECT FINANCING IN THE NEW NORMAL
T
he past year has been anything but uneventful for the global economy in the context of the “new normal” that we have all gradually adjusted to since last March. Like all other major drivers of economic growth and development, the African mining sector has had its fair share of dealing with the pandemic, though it has shown remarkable resilience even in these unprecedented times. Performance among some of the majors was buoyed by stronger commodity prices, particularly in the platinum and gold sectors where investors flocked to mitigate the negative impacts of the pandemic. This boded well for various African commodity markets including Cameroon, Ghana, South Africa and Zimbabwe in propping up struggling economies. However though positive in the short term, the overall sentiment held by investors regarding financing new project initiatives in the longer term has been one of muteness and caution.
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Depending on how the pandemic progresses into 2021, various considerations will be taken into account by prospective investors looking at mining opportunities in Africa. Among others will be the possibility of new operations being shut down if the incidence of COVID-19 infections rises, which in turn will affect construction and production targets and the ability to meet financial obligations and covenants. Additionally, it will strain the ability to visit project sites should there be travel restrictions imposed, which will have a further knock-on negative impact on the broader mining sector value chain, from logistics and transportation through to materials availability and equipment supply. In crafting viable financing strategies going forward it will be important to develop the right foundation for rebuilding lost growth.
EXPLORING IFI FUNDING AVENUES
The historical view of the African mining space has been one of exploitation of local
Looking for asset financing will prove more cost-effective than leasing, for operators with long-term projects in the pipeline. – Williams © ISTOCK – AltoClassic
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SA MINING
JANUARY / FEBRUARY 2021
www.samining.co.za
© ISTOCK – monsitj
© ISTOCK – James
By Ogi Williams – Associate Director, In On Africa
labour and environmental degradation to the benefit of international companies and foreign investors. In recent years, however, a lot more emphasis has been placed on the way major mining companies are contributing in meaningful ways to development initiatives, and in particular their environmental, social and governance initiatives (ESG). Though many have stepped up to fight, the current challenges posed by COVID-19 with donations of personal protective equipment, the longer-term strategies that a number have put in place concerning community development, and resilience, are being brought to the forefront. Given the precarious investment climate > yet pressing need to bring back economic
