Alternative Finance 2.0: The next phase of mining funding
European law firm Fieldfisher has published an updated overview of finance solutions for mining companies, focusing on alternative sources of funding and their further adoption by the sector over the last two years.
The firm’s latest paper on this topic examines emerging and established sources of finance – from cryptocurrencies to debt – available to companies looking to develop mining projects and analyses the pros and cons of each funding source.
The public equity markets remain tough places for mining businesses, particularly exploration companies, to raise money, while lenders are still reluctant to provide finance for long-term capital intensive projects, due to a perceived lack of returns, high risk profile and competition from other investment opportunities.
Consequently, financing structures such as offtake and prepay agreements, royalties, streams and private equity have become entrenched forms of funding for mining companies.
Since Fieldfisher’s last overview of the sector in 2016, a new class of crypto assets and funding platforms have emerged and their application to mining finance is currently being tested.
The paper provides examples of mining finance deals in practice and offers guidance for companies considering embarking upon non-traditional fundraising rounds.
Jonathan Brooks, Head of Mining and Metals at Fieldfisher and co-author, commented:
"Since we published our perspective on mine finance two years ago, the different forms of alternative finance have continued to evolve to meet the changing needs of mining companies and investors.
"The public equity markets still offer opportunities for certain projects to raise funds, but mining businesses now have much greater choice of financing options to choose from.
"Technology has the potential to offer increasingly agile ways of raising cash more rapidly and less expensively than some traditional forms of funding. While these novel financing solutions are still very much in an experimental phase, it will be exciting to see how they develop as the concept of crypto assets gains acceptance among investors.
"Looking ahead, we expect to see further developments in the more established forms of alternative financing, as dealmakers craft increasingly bespoke deals aimed at achieving positive outcomes for both sides."
To download the updated paper, please click here.
Fieldfisher is a European law firm with market leading practices in many of the world's most dynamic sectors. We are an exciting, forward-thinking organisation with a particular focus on energy & natural resources, technology, finance & financial services, life sciences and media.
Fieldfisher's dedicated mining team advises companies, metals traders, banks and investment funds on alternative financing arrangements in the mining sector, including prepay and offtake funding agreements and is one of the leading firms in this niche area of the market.
The firm is also the fourth largest adviser to companies listed on London's AIM market, many of which are in the mining and energy sectors.
Our network has more than 1,450 people working across 24 offices providing highly commercial advice based on an in-depth understanding of our clients' needs.
We operate across our offices in Amsterdam, Barcelona, Beijing, Belfast, Birmingham, Bologna, Brussels, Düsseldorf, Frankfurt, Guangzhou, Hamburg, London, Luxembourg, Madrid, Manchester, Milan, Munich, Paris, Rome, Shanghai, Turin, Venice and Silicon Valley.
Fieldfisher is currently Law Firm of the Year - Legal Business Awards 2018 and British Legal Awards 2017.