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Financing mining projects in Africa continues to be difficult – but after years of decline it is slowly starting to evolve.
Addressing today the second day of the three day Paydirt 2016 Africa Down Under mining conference in Perth Speaking on day two, Northcott Capital Managing Director, Mr Nick Martin, said to be successful in obtaining finance a company must adhere to three crucial platforms.
Companies must:
“It’s no secret it’s a tough finance market at the moment – but there is light at the end of the tunnel and the shift is slowly and surely evolving,” Sydney-based Mr Martin told conference delegates.
“Commodity prices are subdued, there exists a distressed asset overhang, investor sentiment is ‘selective’ at best and many commercial banks are ‘risk adverse’,” he said.
“That said – good projects will still obtain finance.
“The money is there – but it needs convincing to go to Africa.”
Mr Martin’s comments come at a crucial time for the African resources sector with many potential projects now seeking funding to go to the next stage of development but struggling in the current economic climate.
He’s well versed to speak on the topic with Northcott Capital working exclusively with the metals and mining industry to provide bespoke financial solutions for companies.
Over the past 15 years the Northcott team has raised about $15 billion, with 55 global transactions closed operating in 37 countries.
Mr Martin said where companies normally go wrong with their funding needs is by starting the process too late or “mismatches” in their funding models including delayed finance, financing too negatively weighted and/or a fragile capital structure.
“Project finance in Africa – today more than ever – demands more than ‘good projects and good management,” he said.
“No doubt, we can all think of projects that got financing when they probably shouldn’t have.
“That in itself forms part of today’s problem – and as a result, the finance market is demanding more credibility from potential projects and is increasingly nervous about failure.
“There is no silver bullet or one solution that fits all.
“Where companies predominantly go wrong is that they just start too late
“They don’t get all their rings together like the Olympic symbol.”
“The market is changing and my advice to companies seeking funding is – start the process early….as early as possible.”
