PERTH (miningweekly.com) – The financing of African resource projects should be approached holistically, with equity and other forms of financing to be raised concurrently, financier Nedbank Capital said.
Addressing the first day of the Paydirt Africa Downunder conference, in Perth, Nedbank head of resources Mark Tyler said that funding African resources projects was not very different from other parts of the world.
However, he pointed out that it was a region that presented slightly tougher conditions in raising equity.
“Project funding [in Africa] needs to be viewed as a mixture of private equity, public equity, structured debt and bank debt – a holistic approach,” Tyler said.
“This combination is optimal to lock in total project funding.”
Tyler pointed out that Africa had its issues in political risk, operational problems and lack of infrastructure. However, it also has many positives attributes, including being substantially under-explored, an inexpensive but mining-experienced labour force and support from world institutions.
“However, debt finance is more readily available through Australian, European and African commercial banks, multilateral and bilateral financing institutions and export finance agencies.”
The Nedbank executive pointed to the current equity environment, suggesting that while markets may be tougher than the “golden years”, that environment may now be the “new normal”.
On capital raising, Tyler said while there had been a great deal of money raised in recent years for African mining projects, much of this was by large multinational entities – but in the past 12 months, the transactional values had tailed off for all sectors.
Total global debt mining markets had collapsed from 2011 highs to substantially lower in 2014.
“When times are good, amounts raised for Africa rise rapidly but conversely, drop much faster than the averages when the downturns hit – particularly since 2010.”