JOHANNESBURG (miningweekly.com) – Strategic partnerships with midtiers or majors was one of the more realistic and beneficial means for junior miners to secure funding for initial exploration, a panel of speakers at the Junior Indaba said on Wednesday.
Moderated by Botswana Diamonds MD James Campbell, the panel focused on the comparative lack of exploration funding for South African exploration, compared with the global exploration space.
Campbell focussed on raising funds for exploration and pre-development activities, because he noted that, “once you’ve got a bankable feasibility study, it becomes relatively easy”.
MX Mining Capital Advisors director Dr Mike Seeger said there was “a lot of money in that pot”, referring to the potential of juniors teaming up with midtier companies.
Simba Mogodi Fund (SMF) CEO Olebogeng Sentsho echoed that sentiment, adding that, aside from providing capital, such partnerships also enabled the transfer of intuitional knowledge and historical data.
Seeger also cited other funding avenues such as vendor and battering finance. “There are contractors around who have cash and who are looking for work and are willing to take up a risk position in mining projects such as funding the boxcut, or funding the shaft in lieu of getting paid operating costs at a later stage.”
Additionally, he explained that battering finance was, “basically selling mineral commodities at a discount for cash now so that a junior doesn’t have to incur huge upfront capital”.
However he stressed that “the money is in the business case – if you have a good business case, there’s money available”.
Sentsho added that SMF was considering methods of “democratising capital” – essentially finding ways to develop a project that traditional financiers would not touch. “[We] have looked into blockchain applications, and into crowdfunding – which has been very successful for us.”
She noted that the level of risk capital was “inappropriate” given the South African mineralisation. Further, she noted that the funding solution had to start well before the feasibility stage and that it had to include some measure of government intervention.
She added that government should reconsider the policy framework and adjust the Section 12J model, because while it was meant to mirror the Canadian model it did not.
Sentsho added that South Africa needed a model that offered additional incentives to investors that invest in initial stage exploration.
Seeger recommended that South African companies, “get Millennials into mining because they’re the future fund managers.”
Qinsele Resources partner Robert Philpot agreed, noting that juniors also needed to make their proposition more attractive. “Build your story well before you need to raise the money, engage with investors at least a year before you actually need the funding.”
He added that the juniors that have attracted funding were the ones that had been the most honest about what they have.
He noted that, during the last commodities supercycle, a lot of juniors “overpromised and underdelivered”. He added that juniors that had been successful were the ones that “have all their boxes ticked and have made sure that their value chains are locked down”.
Campbell concluded the panel by noting that, to establish belief in the project, miners had to be willing to invest their own money into their projects.