CAPE TOWN (Reuters) – As global investors shift away from heavy industry in favor of cleaner sectors, mining companies are losing billions in financing, raising the cost of capital and jeopardizing projects.
Making the mining industry more sustainable by running mines on renewable energy, for example, will be a key focus at the annual Investing in African Mining Indaba conference in Cape Town this week, as companies hunt for new sources of capital including private equity, debt, offtake finance and royalty finance.
Environmental, social & governance (ESG) concerns have driven money into specialized ESG funds which often exclude mining stocks among other ‘dirty’ assets. “You talk to anyone at the moment, they say there’s no money,” said Boris Kamstra, executive director of Alphamin Resources, which manages the Bisie tin project in Democratic Republic of Congo.
The capital squeeze that started about two years ago has worsened recently, said Julian Treger, CEO of Anglo Pacific Group (APF.L), a mining royalty and streaming company. The average cost of capital for early-stage mining projects rose by two percentage points over the past two years, he estimates.
“Even for companies that have good projects it’s very difficult for them to raise any money in these markets,” said Caroline Donally, managing director at private equity firm Denham Capital, in Houston.
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