TORONTO (miningweekly.com) – The International Finance Corporation (IFC) is looking to take more equity positions in the early stages of mining companies and projects, officials said at a mining investment seminar this week in Toronto.

“We like to come in after project discovery. And then we can come in and start working on the various issues, make sure that the company adheres to the performance standards and understands how to manage their social and environmental issues early on,” senior investment officer Louis Vos said in a presentation on Thursday.

The IFC generally comes in with investments of between $5-million and $20-million, taking a stake of around 5% to 10% in exploration projects or companies, he said.

“We don't want to be the biggest investor in any of these cases.”

The IFC has typically helped finance mining projects with a combination of debt and equity, although Vos added that the equity “was much more of an afterthought”.

“Now, I think we are going the other route – the equity comes first, with a view to later on assist with finance when the project goes into production,” he said.

Of course, the group still provides financing options across the full spectrum, including mezzanine or quasi equity finance and senior debt, said senior investment officer Christian Mulamula, who, like Vos, works with the IFC's mining group.

But coming in on a project from the beginning means that the group can lend its expertise to help companies reduce risk in the areas of community relations and environmental management.

“That's not to say we can't come in later, but if things go wrong in that early drilling stage its very difficult to reverse out of that,” Vos commented.

When the IFC invests in companies and projects, it has a list of performance standards that it requires companies to work towards, including on issues like labour and working conditions, environmental management and community health and safety.

The benefits are mutual, as the IFC is able to carry out its mandate as a development organisation, while the companies can access the group's expertise to de-risk their operations.

“I like to say that you are buying some insurance against your project being disrupted,” Vos commented.

“There are a lot of bad examples around the world of projects that get held up for years and sometimes cancelled over community issues.”

PORTFOLIO

At the end of August, the IFC's mining portfolio stood at $495-million in held loans and equity, $335,82-million of which was in Africa.

When evaluating potential investments, the focus is on supporting projects in poorer or 'frontier' regions and countries, and situations where the group can add value in environmental and social management and community development, Vos said.

Another vital element is a strong, experienced management team.

“That's one of the first things we look at really,” Vos said.

“These are difficult countries, but if the management is good you can almost always make a go of it.”

Resources must have the potential for good returns, and the expectation of a mine life of seven years at the very least.

Minerals exploration companies in which the IFC has invested in recently include Greystar Resources, which has a gold project in Colombia, Gryphon Minerals, which is exploring in Burkina Faso, and Kiwara Resources, which has prospects in Zambia.

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