Strategic Equities in Mining
By Tshepo Magagane
They are no longer there but remember that they unlocked every project you see out there producing across different commodities.
Without them the world of Mine Finance is excessively challenging.
NB: remember these stats – our team had a book of USD10bn (I am excluding PF, DL, SL, TF here) to support these project to get to the debt stage – spot AuM in PE firms is USD17bn with c70% of that already deployed – THIS IS A VAST CHALLENGE – Sisyphean gordian-knot that needs to be untangled…even on the Alternatives side, you could go to Mayfair and raise USD100m for a project or a sponsor would go to multiple miners and raise USD150m at USD30m each – all of that is no longer there – especially for Africa, there are no dedicated funds and zero for pre-PFS projects!
I used to love these bridge-financing products.
Remember that when you have a book/AuM that can support projects – it is not just about providing equity (forget loans – they come in at the very end) – it is about providing a mix of bespoke/bilateral/esoteric deals that can “hand-hold” a project all the way through various stages.
In this I would go:
1. I need my money back in 12mths
2. You are going to give me that equity at this discount – so I want more share cover
3. I am going to insist on a “drag-along”
4. If you cant pay back, you have these “step-down” valuations every month
They can be super lucrative for capital to juice up your returns.
And here I can already see a problem with this being attached to a Strategic – on the balance of probability, Taurus is going to take up those shares – launching an SEP concurrently with a bridge just puts your back against the wall – even if I am interested as a strategic, I will drag my feet to roast yours against the fire🤷🏿
Why are crucial capital pools no longer there – these teams sat in Merchant Banks which were part of Commercial Banks – which were subject to B III – so due to liquidity, provisioning, capital management, if I held a USD50m position in a project, I needed to hold USD50m of capital – why the teams were shut down (as I have said further, even PF is going to come under pressure re: tenors). People who are the most vociferous about Critical Minerals have no clue what they are talking about…”I just learned this basic thing about mining, we are going to write about it and discuss it ad nauseum at conferences”!
