Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Miners face funding squeeze as green investing surges

Stock Markets Feb 02, 2020 03:13AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
BLK
-1.52%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
APF
-5.07%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
FSRJ
-1.70%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NEDJ
-1.85%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Helen Reid and Tanisha Heiberg

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 (L:APF), 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.

"Previous investors who would provide equity appear to have withdrawn. A number of specialist funds have shut up shop, and generalists aren't investing in commodities anymore," said Donally, who will be attending Mining Indaba, the world's biggest mining investment conference, which takes place Feb. 3-6.

Cannabis stocks and cryptocurrencies are among alternative assets that are luring retail investors away from miners. Mining-specific private equity funds raised $0.3 billion in 2019, a fifth of the amount raised in 2009, and just barely more than the $0.2 billion raised in 2014 during a global commodity crash, data from Preqin shows.

(Graphic: Private equity fundraising for mining - https://tmsnrt.rs/2S2fSD3)

COAL PROJECTS FLOUNDER

Coal miners - especially those extracting thermal coal, burnt to produce electricity - are bearing the brunt of the sustainable investing trend.

Norway's sovereign wealth fund divested from all fossil fuel last year, and the world's biggest asset manager Blackrock (N:BLK) said on Jan. 14 it would sell active holdings in companies generating more than 25% of revenues from thermal coal.

"If you’re a small coal explorer, I don’t think you stand much of a chance of raising any money at all," said Fred White, associate director at Medea Capital Partners in London.

"There’s still a huge market and huge demand [for coal], but it's not getting financed by Western banks," he added. Local trading houses and lenders are stepping in instead.

Thermal coal accounts for nearly 40% of the world's electricity generation and more than 40% of energy-related carbon dioxide emissions, according to the International Energy Agency.

In Africa, where access to electricity is still a problem, coal-to-power projects could previously rely on support from development finance institutions.

But even they are withdrawing under pressure.

In November, the African Development Bank (AfDB) decided against funding a Kenya coal project that was halted by a local environmental tribunal in June.

The continent's biggest coal producer, South Africa, is also seeing funding dry up. South Africa's Nedbank (J:NEDJ) has stopped funding coal-related projects, while FirstRand (J:FSRJ) cut greenfield thermal coal projects to less than 0.5% of its lending.

Miners face funding squeeze as green investing surges
 

Related Articles

Grab sees no big layoffs despite weak market
Grab sees no big layoffs despite weak market By Reuters - Sep 25, 2022 7

By Anshuman Daga and Xinghui Kok SINGAPORE (Reuters) -Grab, Southeast Asia's biggest ride-hailing and food delivery firm, does not envisage having to undertake mass layoffs as...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
robin desbois
robin desbois Feb 02, 2020 4:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
"Cannabis stocks and cryptocurrencies are among alternative assets" this article is not serious.
Egbor Victor
Egbor Victor Feb 02, 2020 4:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
In your own opinion, what would you say are the alternative assets.
Tubsy SkinntFinger
TubsSkinnyFinger Feb 02, 2020 4:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Exactly, this article is nonsense. Since when were Crypto miners environmentally friendly??!
Tubsy SkinntFinger
TubsSkinnyFinger Feb 02, 2020 4:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
To add, once gold goes above 2000, finance guys will be falling over each other to invest in PM's miners
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email