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Alternative financing models for mining – report

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As capital markets interest in mining starts to revive at the end of a sluggish few years, European law firm Fieldfisher has published the third edition of its alternative financing for mining guide.

The report, Alternative financing for mining: New horizons, looks at the mining finance landscape based on the mining and metals team’s experience of working with borrowers and lenders in what continue to be challenging but rapidly changing times for junior exploration and early stage mining companies.

Since it last published this report in 2018, Fieldfisher’s mining and metals team has advised on more than $2 billion-worth of mining and metals sector deals, including complex production-based financing deals and ‘green’ financings, in line with lenders’ growing interest in environmental and social governance (ESG).

The capital markets, which have proved difficult environments for small mining and metals companies to raise cash over the past five years, showed signs of life in 2020, while opportunities to experiment with new ways of funding projects continue to yield inventive deals across the global mining sector.

The capital markets, which have proved difficult environments for small mining and metals companies to raise cash over the past five years, showed signs of life in 2020

The arrival of covid-19, which sent shockwaves through the mining industry and its downstream markets, has refocused attention on the security of mining supply chains and the sustainability of projects, reviving interest in technology metals, and safe haven gold mining investments.

Fieldfisher’s 2020 report includes commentary on ESG – the growth of green loans and sustainability linked loans in the resources sector; Nordic bonds – attracting increasing interest from the mining community; SPACs – Vehicles offer a possible alternative to traditional IPOs; RTOs – favoured by mining companies looking for ways to expand or change direction; Dual listings – the pros and cons of taking an equity story to new markets and Crowd funding – an update on this nascent but promising form of early stage finance.

The report also looks at innovations in established forms of mining finance, such as streaming and royalty deals and provides analysis of the advantages and potential pitfalls of private, equity and debt financing.

“Two major trends have dictated the pattern of mining finance deals over the past two years: ESG and covid-19,” Fieldfisher’s Head of Mining and Metals Jonathan Brooks said.

“ESG has been gaining pace in the mining sector for a number of years, but recently its role has shifted from mere compliance burden to financing opportunity, as a raft of ‘green’ finance products have become available to mining companies that can demonstrate strong ESG credentials.”

Brooks noted that despite capital market volatility and supply chain disruption, the global mining industry suffered fewer negative effects from the pandemic than some sectors.

“Many large and mid-tier mining companies were sufficiently capitalised to weather the covid-19 storm and banks have largely been prepared to keep lending to companies with strong balance sheets and suitably de-risked projects,” he said.

(Read the full report here)

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