Wednesday, April 16, 2014

Is Mining Financing in the Gutter?


“Citi is forecasting that 2009 will be a year of two halves. In the near-term, investment returns are likely to be driven by ongoing trends of economic contraction, policy easing and de-leveraging, leaving equity and credit products volatile. But, at some point in the year, the extreme valuations seen currently in equity and credit markets should provide attractive opportunities, as downside risks to economic growth dissipate and de-leveraging pressures ease.”  That is today’s Finance Asia

Of course a lot of mining companies - in view of the worsening global financial climate - have over the past several months been making adjustments to their operations in order to conserve cash. This year for the mining sector is going to be tough – South African SUMMIT TV reminds today

At the same time the companies continue to evaluate opportunities for the advancement of running projects. Many of them have scrapped research and prospecting efforts. However, the latest news bring a lot regarding fundraising. I have talked to some US bankers and brokers (do not laugh – the brokers still exist, despite the crisis). Turns out – there is money, and there are investors that are mulling investments in mining. However, The Times They Are A Changin' – and the requirements had changed. A lot of people expressed their feeling on this – a very good ideas are spelled by Jason Hamlin in Seeking Alfa

  1. Already producing or moving toward production in the next 1-2 years
  2. Quality properties in politically-stable areas with necessary road access
  3. Proven and probable resources that justify a higher market cap
  4. Seasoned management that has a track record of bringing projects to production
  5. Healthy balance sheet with cash on hand and/or the ability to raise capital easily

However, all this right now calls for increased due diligence and very viable story. The time of promises has gone – everyone wants to look at some workable business that shall bring profits at least in some projected future. And it seems that the winners now are gold mining companies. Just look at today’s news feed:

  • Adamus Resources Limited is a Perth-based mineral exploration company in Q4 2008 secured a $5 million convertible loan facility from Macquarie Bank Limited.
  • Century Mining to raise up to $66m in gold-based financing
  • Mining firm Real Gold plans $132 mln HK IPO

And this only few of them

I think that the stories about the death of mining financing are not exactly true

 Interesting coincidence – this morning I put the post on the Web, and in the evening:
 Australia's Newcrest raises more than market anticipated
 The Australian share market was today shown just what value is now being placed on Australasian gold projects when Newcrest Mining Ltd - the only large domestically-owned miner - raised $A750 million ($US476 M) - 50% more than initially proposed.

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