Modern Mining October 2024

MINING FINANCE

Funding the future: Mining companies get creative to finance their projects

Net profits earned by the world’s 40 biggest mining companies sunk by 44% in 2023 compared with 2022. With financing hard to come by, junior explorers have sought new avenues for capital.

S urging interest rates and a lack of investment from a market that is sceptical of the sector has resulted in difficulties in raising capital for mining projects, many of which will be required to meet the demand for green transition minerals. Research from McKinsey & Company forecasts that, by 2030, there is likely to be supply shortfalls of 20 to 50 per cent across some of the metals and minerals that are vital for renewable energy, power grids and electric vehicle batteries. In recent cycles, according to McKinsey, “investors have favoured other sectors such as technology and healthcare”. Therefore, with traditional investment proving challenging, some mining companies have been forced to get creative in order to raise funds. Phoenix Copper In May 2024, Phoenix Copper, the UK-based, but US-operating

emerging producer and explorer, secured an investment that could be crucial in helping it to complete construction of its flagship operation, the Empire copper, gold and silver mine in Idaho. The significance of this investment is exacerbated by the looming deficit in copper supply, with the metal being used heavily in the fast-developing electric vehicle and renewable energy industries. According to the International Copper Association, global copper demand is forecast to grow from 28.3 million tonnes in 2020 to 40.9 million tonnes in 2040. The deal is structured as a subscription agreement with NIU Invest SE, a European private equity investment firm. NIU subscribed for $80 million worth of copper bonds from Phoenix, which will be drawn down in tranches. In drawing up the bond agreement, Phoenix took a couple of innovative measures. For one, the bonds issued were not convertible, providing protection against large-scale

8  MODERN MINING  www.modernminingmagazine.co.za | October 2024