FINANCE
In most cases, the appeal of these alternative debt offerings is
enhanced by the fact that the providers are willing and able
to take more risk and, therefore, can often advance more debt
funding than their commercial bank counterparts would be
able to, needless to mention the severe risks associated with
over-gearing mining projects. When commodity prices remain
buoyant, risks associated with over gearing dissipates. However,
when prices fall, the depth of experience of your funding
partner becomes extremely relevant.
In many cases, these alternative finance solutions are
significantly more expensive. But that's a trade-off that many
mining companies are prepared to make, given the need
to move quickly and to not miss out on the African mining
opportunities they have identified.
The right funding partner
However, what many of these mining
companies overlook in their haste to access
funding, is the long-term importance of
having a funding partner that fully
understands the African landscape,
and has the experience,
capabilities, reach and value
proposition to stay the course
when the typical challenges
and risks associated with
doing business on the
continent inevitably rear
their heads. So, while
paying more for funding in exchange for expediency may be
acceptable for some mining organisations, choosing speed and
ease of finance at the expense of a reliable partnership with a
highly experienced, well-capitalised debt funder that has an
established presence and verifiable track record in Africa, can
end up being a very costly decision.
That's especially true if that mining company’s operations face
risks as a result of unrest or geopolitical instability down the
line. At such times, the value of having the backing and support
of a funding partner that fully understands such risks, knows
how to navigate them, and that has the financial strength and
diversification to ensure they don't threaten its own survival as a
financier, cannot be over-emphasised.
Ultimately, wherever in the world a mine intends operating,
it will benefit enormously from the partnership of a financier
that can provide proven, sustainable funding. But
when that mine is in Africa, the importance
of having such a funding partner is
massively intensified. And there is
no substitute for the long-term
value that can be unlocked by
conservative, enduring, well-
informed funding, delivered
by an experienced finance
provider who has a presence
in Africa, understands its
diverse challenges, and
can help to fully unlock its
opportunities.
"The positive knock-on effect
of this inflow of equity is a
significant increase in demand
for debt finance.
Big projects in Africa need the right funding partner.
www. africanmining.co.za
African Mining Publication
African Mining
African Mining March 2020
31