4 minute read
FLAGGING FUNDING OPPORTUNITIES
FUNDING OPTIONS
WHERE ARE THE OPPORTUNITIES?
By Nelendhre Moodley
Access to project finance remains a key challenge for most miners. Industry Snapshot recently caught up with PwC Africa Energy Utilities and Resources leader Andries Rossouw to chat about the funding options available to miners.
What will 2021 look like in terms of project finance for mining companies?
On the back of higher rand commodity prices for precious metals, a number of mining companies are settling debt instead of incurring new debt. Balance sheets are certainly strong in most cases and due to the conservative gearing position will support future development needs and ability to obtain funding for new projects.
Unfortunately capital expenditure in SA is still at 15-year lows in real terms and there seemingly isn’t much need for project funding. Existing projects such as De Beers’ Venetia diamond mine project are generally being funded from group resources and not on a project-specific basis. It will be interesting to see what funding will be used for projects such as Orion Minerals’ new Prieska project that recently completed a bankable feasibility study.
Where should miners look for funding to develop/expand projects?
We know that private equity has significant funds available for investment. Their ventures into mining in the past have generally been limited to supporting transactions on existing mining operations as opposed new project developments. The long-term nature of mining project developments generally doesn’t fit into their mandates for returns in a shorter time frame. However, good performance by the mining industry since the lows of 2016 might entice interest.
In 2020 Royal Bafokeng Platinum entered into a $145-million streaming transaction on gold, a by-product to its primary PGM production. Streamers that have traditionally operated in the precious metals space have performed very well on the back of high precious metals prices. They could potentially play a key role in the South African context where higher prices could incentivise future project development.
As the world is facing an even faster energy transition and developed economies have identified this transition as an opportunity for infrastructure development to drag their economies from the COVID recessions, there might also be opportunities for funding of essential minerals from these available funds to support the transition.
The opportunity to create a tax flowthrough scheme for SA mining companies can support additional equity investment into the sector. With various industry players supporting the initiative, we believe it could bring a significant positive economic.
Where are areas of opportunity/green shoots for African and South African miners?
In South Africa, the under-exploration and demand for minerals to support the energy transition provides opportunities
Private equity has signifi cant funds available for investment. – ROSSOUW
for mining growth in the Northern Cape and further potential in the Bushveld Complex.
Recent years of high exploration in the Democratic Republic of the Congo have now come to fruition with the development and ramp-up of a number of mines. Declining copper grades in the rest of the world provide further impetus to development in the copper belt. Resolving energy needs and improving mine-to-market infrastructure could support significant growth in this area.
The high gold price has again highlighted the lack of new large-scale gold projects. West Africa stands to gain from development in this area. As countries have realised their dependence on mine production during the COVID pandemic we hope that investor-friendly regulations will support future growth.
“New” mining territories such as Nigeria that realise the need to diversify from their oil-dependent economy could provide interesting mining opportunities for the future.
How important is mining to economic recovery?
Mining is likely to be the backbone of the
$145-million Value of a streaming transaction that Royal Bafokeng Platinum entered into
economic recovery post the COVID economic woes. We believe if governments create enabling environments for private sector mining it will go a long way to support a recovery. ■
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