Among those affected by the depressed commodity prices over the past two years, junior mining companies have suffered disproportionately more, says State-owned financial services provider Export Credit Insurance Corporation (ECIC) of South Africa, which has assisted several junior miners during this period, enabling them to continue developing their greenfield and brownfield projects.

ECIC COO Mandisi Nkuhlu explains that the organisation has assisted junior miners operating in other African countries by working with various banks to extend their debt profiles and secure the continued financing of their projects amid the depressed mining climate.

Owing to the fall in commodity prices over the last year, he says “revenues have decreased, and juniors, in particular, have struggled to raise additional capital in the equity markets to fund their projects”. Mining majors typically generate enough revenue or can raise additional funding from their existing sponsors to finance their expansion and exploration projects, Nkuhlu adds.

The ECIC underwrites bank loans to finance the export of South African capital goods and services. Mining projects constitute about 36% of its portfolio, with the corporation involved in copper mining in Zambia, diamond mining in Lesotho, and gold mining in Liberia, Tanzania and Zimbabwe, besides others.

Through its insurance products and collaboration with financiers and exporters, the ECIC facilitates export trade from South Africa to the rest of the world. It also supports cross-border investments, with a strong focus on transactions taking place on the African continent. The company’s end goal is to assist businesses in expanding into markets outside South Africa.

Nkuhlu notes that one of the major developments at the ECIC in the past four months has been the addition of insurance cover for non-South African-registered banks and financial institutions, as well as foreign-registered or -domiciled companies that are willing to support South African exports or are able to meet the ECIC’s minimum South African content requirements of 50% of the supported loan value. This initiative will also prove beneficial to juniors, as it enables them to access alternative sources of funding, without cancelling their access to export credit insurance.

“This will ultimately enable us to assist with mining and other projects throughout Africa that South African financial institutions may be unwilling to finance – as long as the projects meet the South African content requirements,” Nkuhlu states.

This access to alternative funding sources now afforded to South African suppliers will benefit the continued growth and development of these companies and, therefore, the development of the South African economy.

Another long-term project that the ECIC is exploring is the possibility of providing direct lending facilities. Nkuhlu notes that the corporation is assessing the feasibility of becoming a direct lender as part of its strategic efforts to pursue an expanded and diversified export basket for South Africa. He stresses that this is an ongoing process that is subject to an extensive review and public consultation process, stressing that he is confident that significant progress will be made in the next 12 months.

To assess the market and inform stakeholders of its continued support of African mining, Nkuhlu tells Mining Weekly that an ECIC contingent will attend the 2017 Investing in African Mining Indaba, which is considered the continent’s premier mining event.

Apart from directly assisting mining companies and mining projects, the ECIC supports suppliers, construction companies and infrastructure-related activities that have a positive net effect on African mining industries, he notes.

Nkuhlu cites the moderate improvement in investor confidence and the slight recovery in commodity prices in the latter half of 2016 as signs that the market is turning, citing renewed enquiries from mining companies looking to fund gold projects in, for example, Mali and Ethiopia, as evidence. Therefore, he believes that this year’s event is an apt time to remind companies of the ECIC’s offering.

He adds that the corporation looks forward to attending the various presentations by the African Ministries to determine their policy directions and appraise possible opportunities.

However, Nkuhlu stresses that, while the slight improvement in market conditions is likely an indication of things to come, the ECIC will still employ its strict criteria for assessing project feasibility, which entails the project’s “access to infrastructure, the market demand for the commodity in question, the existence of offtake agreements and the level of political risk presented by the host country”.