By Richard Lloyd, CEO, MINEXIA Ltd.

It’s hardly surprising that the cobalt blue skies and impressive geological backdrop of the Western Cape serves as the perfect venue for the annual congregation of mining professionals to travel from around the globe to attend a number of focused natural resource events. Now into its 26th year, the Mining INDABA continues to re-invent itself after coming under the management of Investment INDABA in 2019. Also gaining more and more prominence are the investor and company (primarily invite only) Arlington and 121 Mining Series. Whatever your interest, these events now serve a broad spectrum of investors, mining companies and service providers. Over a four-day period place thoughts are shared, deals progressed and the challenges facing the industry today considered and, importantly, debated on how best to resolve them.

The mood was certainly more upbeat this year as explorers, developers and producers are seeing the tentative green shoots of investment returning. That being said, not all markets are as optimistic as many of the Canadian companies and brokers would attest to. Competition is high for the limited capital, but the trend seems to indicate that sophisticated ‘High-Net-Worth’s’ and Family Offices are looking more to direct investments, guided by in-house advisers, rather than through-managed funds.

Financing projects as always was top of the agenda. The equity financing market for junior mining, project development and exploration is mostly controlled by investment banking and brokerage firms which typically target a limited (and ever shrinking!) pool of capital in the form of private equity groups. Mining companies raising via the public markets are also competing for capital with thousands of companies across dozens of industry sectors as well as their own huge sector where there has always been a significant proportion of sub-standard (or “lifestyle”) companies or projects. There are in excess of 90 AIM listed mining stocks, 700+ ASX, 212 TSX and 935 TSX-V – quite a selection and all the harder to sort the wheat from the chaff!

The pervasive and worrying reduction in access to capital pools is however generating the need for more innovative and original financing techniques. These are, year on year, steadily contributing in higher percentages to project financing for both exploration and development. One example of this trend is the €100m Veragold 3-year gold linked bond, financing the Santa-Rosa project in Panama. Indeed, this maybe the first successful ‘project bond’ on the market and to data has generated keen interest. MINEXIA’s own initiative, the NR Private Market platform, has also received positive responses from both investors and issuers and is well poised for an upswing in investor sentiment. The fifth deal has now been launched by a private Scottish gold project owned by GreenOre Gold and the platform’s “Investor Lounge” is now live, providing vetted companies with the ability to elevate their market profiles without the pressure of an equity raise.

Finally, here are our thoughts on some of the key themes coming from this year’s events in the Cape:

• We are continuing to see a squeeze on corporate cashflows with low commodity prices compounding upon increasing requirements from Governments and CSR responsibilities. As ever, the “cashflow pie” is only so big and the investors are continually looking for the best returns.
• Geopolitical risk changes every year: Brexit; Iran; US/China trade; Trump; and now the Coronavirus are never far from a supply/demand debate – all of the above are linked with copper and iron ore demand especially as the Chinese economy is once again thought to be slowing, although Real GDP  is still at 6.0% YoY growth  which adds trillions to the global economy each year. The IMF have reduced 2020 projected global economic growth to 3.3% from 3.4% as the economic headwinds continue. The bellwether commodity “Dr Copper” for example has recently been trading at USD2.6/lb from Q2 2019 highs touching USD3.00/lb – the forward curves do not see much of a recovery.
• M&A activity continues to increase and there is a consensus that this will spill over into the mid-cap space, potentially creating individual asset opportunities as some of the Majors divest non-core deals from major corporate acquisitions. There were still calls for a consolidation in the Junior West African mining arena.

Next up on the mining diary is the PDAC. A very different climate, both figuratively and literally. It’ll be important to read the pulse of the Canadian markets in early March. Hope to see you there!