Innovation in the Mining Sector
The mining sector in Africa plays a pivotal role in the global mining industry, presenting significant opportunities and challenges for the project finance market. The sector is increasingly adopting renewable energy solutions through innovative offtake agreements with Independent Power Producers( IPPs).
Hybrid systems— combining solar, wind, and battery storage— are gaining significant traction as mining companies strive to establish reliable green energy supplies that align with their ESG objectives.
However, challenges persist, particularly with local legislation that often favours national utility monopolies, creating barriers to independent energy development. Navigating these regulatory hurdles requires careful assessment and strategic planning during the early stages of project development.
Despite the challenges, the potential for growth in the mining sector remains strong, particularly in Africa which is rich in mineral resources, meaning that the region will play a strategic role in the global energy transition due to its reserves of critical minerals like lithium, cobalt, and graphite which are all key components in renewable energy technologies.
We continue to see activity in traditional project financings of mines, as well as royalty and streaming agreements which are potentially easier pools of capital to access for junior mining companies. Environmental, social and governance considerations remain central to any financing arrangements. Integrating renewable energy into mining operations potentially opens the door ESG focused debt, such as green loans.
Recent Notable Matters
• Hellas Gold Single Member, S. A.— € 680 million project financing facility for a subsidiary of Eldorado Gold Corporation for the development of the Skouries gold and copper mine in Northern Greece
• Ecora Resources— acquisition of 0.85 percent gross revenue royalty over the Phalaborwa Rare Earths Project in South Africa and the acquisition of shares in Rainbow Rare Earths Ltd, the majority owner of the Project
• ASCOM Precious Metals Mining— advising on the sale of its interests in the Kurmuk gold mine in Ethiopia to Allied Gold ET 2 Corp, a wholly-owned subsidiary of Allied Gold Corporation for a combination of shares, cash and deferred consideration
• Ecora Resources— $ 50.25 million acquisition of a 1.525 percent net smelter return royalty from Mantos Copper in relation to the Mantos Blancos copper mine in Chile
• Ecora Resources— $ 20 million royalty and financing arrangement with Incoa Performance Minerals LLC in relation to the development of its calcium carbonate mine in the Dominican Republic and processing plant in Alabama
• Ecora Resources— equity investment in Brazilian Nickel, together with its $ 70 million gross revenue royalty and intercreditor arrangements with potential project finance lenders, in respect of the Piaui nickel project in Brazil
The Year Ahead
As the demand for sustainable operations increases and regulatory frameworks evolve, we anticipate significant opportunities for IPPs and mining companies to collaborate and shape the future of energy in Africa. bracewell. com