- Funding junior mining projects in Australia
A recent roundtable discussion with mining directors and executives in South Australia, explored industry experience in attracting capital and bringing projects to market.
While overall market sentiment appears to be improving, it was clear that this improvement was not being experienced at all levels. As a result, it was interesting to discuss the underlying and continued struggles in attracting capital and bringing development and early stage exploration projects to market.
These difficulties continue to contribute to the shift in the market's expectations and pricing of exploration equity capital – with significant discounts still being expected when undertaking placements and share purchase plans. It may also be because, although the Junior Minerals Exploration Incentive (JMEI) scheme has generally been seen as a positive introduction for the industry, the benefits have not translated into the investment community and often ignored.
Directors also feel like Australia is going through a ‘risk off’ period in respect to early stage exploration projects. This is being felt in both the equity and debt markets, with a general opinion that Australian lenders currently have a low appetite for financing small to medium sized resource projects. In recent experiences this has meant by the time a project has been de-risked and developed to an acceptable level to secure project financing, the broader market has shifted.
So what tips emerged for junior mining companies looking for funding?
Here we explore what we can do now to help turn the tides and generate more interest and opportunity
Consider and embrace disruptive fundraising techniques
While roadblocks remain for traditional funding options, consider the opportunity to explore alternative funding options. Examples including streaming, ‘at the market offering’ arrangements and funding from offtake partners.
Work with investors to realise the value of the JMEI
The JMEI provides a unique opportunity to act as an incentive and an alternative to an equity discount.
Proactively market the benefits of the scheme to the investment community to capture the benefit and the value attributed to the incentive.
Looking outside Australia for project funding
Capital markets run in cycles and these do not always align globally, so looking outside Australia can unlock a wider pool of potential capital.
Regularly monitoring and developing strong relationships in foreign markets enables companies to position themselves to take advantage of upswings in appetite for Australian resources being experienced offshore even when appetite from local investors is limited. This might also mean considering alternative venues for a listing, or exploring a dual listing offshore – for example on London’s AIM Market.