Financing mining projects; Realities and Prospects

Mining and processing of minerals throughout the globe has helped and remained the channel for economic growth. Recently, history has that the largest mining companies in the world asset is worth more 1.1 trillion dollars, and their total operating expenses reach half a trillion dollars. Financing a mining projects have paved ways for many investors and successful businessmen to venture into the industry. Mining and mineral processing is a capital intensive industry that requires US$ BILLIONS of investment to function.

Havelet Finance Limited with a sound track records in the financial industry are ready to provide the best financing schemes for large projects in the field of mining and processing of minerals.

The baseline for financing a mining project

In recent times, the economic downturn affected most mining companies especially during the pandemic era, since key markets and commodity prices remained unstable. For this reason, companies have significantly reduced their expenses, refusing geological exploration and postponing expansion plans.

Despite the boom in mineral prices, due to the geopolitical situation, the prospects for the global economy remain uncertain, and the market is weak. A great importance for the future of this industry will have the right choice of a source of financing of mining projects.

Any mining project consists of such stages as geological exploration and prospecting for mineral deposits, development of a deposit, operation and closure. Each of these stages requires significant financial resources, especially exploration. Moreover, initiators cannot guarantee investors adequate returns at an early stage, which means a certain level of risk. At an early stage, it is critically important to choose the right structure and instruments for project financing. In this sense, the forecast of profit that can be obtained from the exploitation of the field is decisive, since it will determine the financial needs of the project and the financing structure.

Popular sources of financing for Mining and Mineral Projects

To fund a proposed Mining projects, it required a lot of financial resources that borders on, loans, issuance of bonds, leasing, etc. The popular sources of funding for mining and processing plants include the following:

• Buyers of minerals, etc.
• Private investment funds.
• Insurance companies and pension funds.
• Banks and other lending institutions.
• International Finance Corporation and other specialized development agencies.
• Free capital market (issue of bonds and other securities).

Alternative Financing Options

Capital: equity financing. This type of finding is relatively less important. The role in the sector, as capital-intensive mining projects usually require significant borrowing in the early stages.

Stream financing of mining projects. This particular type of financing consists of the obligation of the mining company to sell resources in exchange for an upfront payment. This instrument entitles the buyer to purchase all or part of the minerals produced by the mine.

Debt: debt financing. This type of financing opens up unlimited opportunities for companies to use the so-called financial leverage. This includes corporate lending based on the company’s balance sheet and solvency. In recent years, project finance has played an important role, which involves long-term project financing with limited recourse (debt repayment is guaranteed by project assets and future cash flows).

Bridge funding. This refers to the provision of available funds for a short period, which is used by the owner of a mining project to get out of a difficult financial situation until long-term financing is obtained.

Financing a Mining and Mineral Plant Project

If you required or searching for the way to finance a mining and mineral processing plant projects, Havelet Finance Limited is ready to offer your company with a long-term loan and lending for your projects. We also provide comprehensive financial services for large businesses, including guarantees, financial modeling, investment engineering and consulting.

Making a decision on financing mining project

Each mining project is unique in its essence, goals and structure. For this reason, it is impossible to specify a single correct approach to making a funding decision.

While making decisions on financing a Mining Projects, the following should be considered:

• Investment risk: financial, political, social, environmental and other types of risk.
• Estimated cost of developing the project and schedule of financing.
• Financing model chosen taking into account various external and internal factors.
• Assets, resources and technologies owned by project participants.
• Type of mining company: size, capital, specialization, market and other parameters.
• Expected profit of the future exploitation of the field. Funding decisions are made solely by project owners or sponsors. In most scenario, project finance scheme is always needed.

The Application of multiple financial instruments in the mining industry

Using debt financing for a mining projects is carried out by concluding a loan or credit agreement. The loan can be bilateral or syndicated (when several financial institutions join forces to minimize risks). The latter is the case when it comes to large mining projects or significant resources are required.

A syndicated loan is the most complex, as consortium develops a multifaceted contractual structure and bind themselves to the same terms. The problem may lie in the shares of financing, the distribution of risks and profits. From the point of view of each lender, the main goal is to ensure that the principal loan with interest is repaid on time.

Alternative financing options for mining projects

A focal point of alternative financing tools for mining projects are explained hereunder; These instruments can be used in combination with traditional corporate finance schemes or partially replace them in long-term capital-intensive projects.

Financing mining using royalty agreements: Royalty agreements are not regulated by law in all countries of the world, so its content largely depend on the parties. There are several examples of such agreements in the Anglo-Saxon legal system, so the terms are generally standard and well known to the contracting parties. The royalty agreement has a long tradition in the mining industry, especially in Anglo-Saxon countries, where it is considered standard throughout the industry.

Private investment funds: These are investment funds with private capital or from angel investors national or foreign, formed for the purpose of investing their capital in certain industries or projects (for example, mines, quarries or mining and processing plants). These are specialized funds led by industry experts who are looking for specific projects / investment opportunities where they can achieve the maximum economic effect.

Private placements Programs: Private placements refer to financing mining projects through the purchase of shares of the companies developing the project. In this case, the person who provide the financing is not a creditor, but becomes a partner of the company that develops the project. This mechanism is similar to traditional project financing, but certain alternatives have appeared.

If need funding or a long term loans for a large projects, we are ready to fund the entire projects at affordable 2% interest rate annually.

Havelet Finance Limited offers the following;
• Long-term investment loans.
• Project finance (PF) scheme.
• Credit guarantees.
• Investment engineering.
• Investment consulting.
• Financial modeling.
• Project management. etc.

We are also currently structuring a convertible debt and loan financing and other project financing and international loans at of 2% interest repayable annually with no early prepayment penalties.

Website: https://www.havelet-finance.com
Email: credit@havelet-finance.com