Higher Finance In Mining

By Tshepo Magagane

Cap-floor-mechanisms – why did lenders stop requiring hedging as part of the CP for Project Finance?

Hedging makes money for the provider, not the producer – see the hedge unwind costs that normally go through the P&L of miners…

…well over 2 decades including the last super-cycle – have never seen it payoff on balance – have never seen it!

The structurers and sales people make fantastic bonuses but…

A lot of talk around Critical Minerals reminds me of the talk around Crypto – as Matt Levine put it best “they are learning finance 101 after their product launches”!

As an investor in mining – you have to select projects in the right geology, left of the cost curve, and look at through-the-cycle cashflow generation – that is the secret sauce in mining – that simple…

…why Africa is so important as it is simply blessed with great geology – as they say about the “geology gods”, they dont care what you think of a region – De Beers kept 20c out of every dollar generated but that translated into USD1bn of EBITDA; Royal Bafokeng managed to turn simple royalty entitlements into a Diversified Holding Company away from mining.