Adequate financing is crucial for companies, especially for those working in such a capital-intensive industry as mining. Very few companies working in the Mining & Metals sector, even those with producing assets, can finance their operating, capital, exploration, development, and other expenses with cash-flow generated by commodity sales and other revenue-generating activities.
A majority of mining and exploration companies have to rely on external funding. Various types of financing are available in the form of debt, equity or a combination of both. Alternative sources of funding in the forms of royalty, option, earn-in, off-take, streaming, joint venture, partnership, M&A and other agreements, have become greatly important in the mining industry, too.
Despite the variety of financing types existing on the market, not all of them are equally available to the companies. Most of the debt funding is available almost exclusively to companies with near term, or current cash-flow from operations, who are developing highest quality assets in safe geopolitical jurisdictions and leading with strong and experienced management.
The only external funding option equally available to nearly all publicly-traded mining and exploration companies is capital raised through equity offerings. This is the predominant method to finance early-stage exploration, development, construction, mining, investment, debt reduction and general administrative purposes.
The strength of equity markets is a barometer of investors’ confidence. The amount of capital raised through equity placement directly reflects sentiment in the mining industry.
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