Alternative financing for mining: New horizons

As capital markets interest in mining starts to revive at the end of a sluggish five years and debt providers wake up to the opportunities of green financing, Fieldfisher is pleased to launch the third edition of its flagship alternative financing for mining guide.

 
The report, Alternative financing for mining: New horizons, takes a fresh look 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.

In the two years since it last published this report in 2018, Fieldfisher's mining and metals team has advised on more than US$2 billion-worth of mining and metals sector deals, including a number of 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 places 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 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, on the one hand, and safe haven gold mining investments on the other.

Download a copy of the report here.

What's new?

As well as recapping the main forms of traditional and alternative financing covered in our last guide, our 2020 report includes thought-leading commentary on:
 

• ESG – the growth of green loans and sustainability linked loans in the resources sector.
• Nordic bonds – which are attracting increasing interest from the mining community.
• SPACs – popular in the US, these 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.
• 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 deep analysis of the advantages and potential pitfalls of private capital, equity and debt financing.

Commenting on the new report, Fieldfisher's Head of Mining and Metals, Jonathan Brooks, said:

"Two major trends have dictated the pattern of mining finance deals over the past two years: ESG and COVID-19.

"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.

"COVID-19 arrived suddenly in 2020, but 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.

"Deal activity was curtailed however, partly due to practical logistical barriers to execution during national lockdowns and partly due to understandable caution in the face of near-term economic uncertainty.

"While it remains challenging for the junior mining sector to secure funding for early stage, higher-risk projects, it has become the norm for these companies to use a variety of funding sources – including a mixture of alternative financing providers."

Notes to editors
 

• Alternative financing for mining: New horizons is the third edition of Fieldfisher's report focusing on alternative financing for mining and metals companies, first published In 2016. It is based on a combination of proprietary and third party (credited) research as well as the team's own experience of advising on mining sector deals, including several transactions with some of the world's largest commodity trading houses.
• Fieldfisher's mining and metals team has advised on over US$2 billion worth of mining deals in the two years since it last published this report, including US$1.1 billion worth of deals in 2019.
• Prior to the temporary lull in the equity capital markets caused by the COVID-19 pandemic, the UK mining team advised on the admission to AIM of Gemfields on 14 February, the first admission to AIM of a mining company in 12 months. London Stock Exchange figures show that seven mining companies were admitted to trading on the London Stock Exchange’s Main Market and AIM in the 11 months to the end of November 2020, up from just two in the whole of the previous year. Of these, two mining companies undertook an IPO in the first 11 months of 2020, raising a total of £43 million (£42.5 million of which was raised by AEX Gold in July), and three were reverse takeovers, raising a combined total of £9.08 million. Further issues raised £292 million in 2020 in the year to November, up from £194 million in all of 2019.

About Fieldfisher

Fieldfisher is a European law firm with market leading practices in many of the world's most dynamic sectors. We are an exciting, forward-thinking organisation with a particular focus on energy & natural resources, technology, finance & financial services, life sciences and media.

Our international mining and metals team includes experts in commercial, M&A, finance, restructuring, construction, tax and dispute resolution matters. Our knowledge and practical experience of the sector enables us to assist clients in a variety of complex transactions. Our specialists advise on issues including licensing and permitting; concession arrangements and mine development agreements; joint ventures; acquisitions, disposals, mergers and takeovers; tax and structuring.

We also advise on equity financing, debt, project and structured financing, as well as alternative financing; supplier, contractor, construction and engineering agreements; and dispute resolution including international arbitration and treaty disputes.

Our network has more than 1,550 people working across 25 offices providing highly commercial advice based on an in-depth understanding of our clients' needs.

We operate across our offices in Amsterdam, Barcelona, Beijing, Belfast, Birmingham, Bologna, Brussels, Dublin, Düsseldorf, Frankfurt, Guangzhou, Hamburg, London, Luxembourg, Madrid, Manchester, Milan, Munich, Paris, Rome, Shanghai, Turin, Venice and Silicon Valley.