Financing for Mining & Extraction Projects

Mining

Clients often approach Capital Corp Merchant Banking wanting to start a mining or resource extraction development or grow their already existing operations. In our capacity as a merchant banking group, we have helped our clients grow and evolve over our nearly 40 years of existence.

The Mining Industry

What is mainly referred to as the mining industry is actually two sectors, one specializing in exploration for new resources, the other specializing in the extraction or mining of those resources. The exploration sector is typically made up of individuals and small mineral resource companies dependent on venture capital. The exploration, extraction, and mining sectors are typically large and multi-national companies sustained by mineral production from their extraction and mining operations. In addition to these sectors, various other industries such as equipment manufacturing, environmental testing and metallurgy analysis also rely on and support the exploration, extraction, and mining industries throughout the world.

We have secured multi-million-dollar personalized financing packages for numerous types of exploration, mining and extraction projects worldwide over our 40 years in the private financing sector:

  • Oil exploration & drilling

  • Natural gas extraction

  • Natural gas processing plants

  • Gas power plants

  • Oil & Gas pipelines

  • LNG plants

  • LNG liquefaction developments

  • Hydraulic fracturing operations

  • Fracking equipment funding

  • Coal mining

  • Natural resource extraction

  • Metal ore mining

  • Nonmetallic mineral mining

  • Quarries

  • Drilling and mining equipment manufacturing 

  • Auxiliary and support operations for mining & extraction fields

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Mineral Rights

Leasing Mineral Rights

A mineral owner may develop his or her own mineral deposit. However, this is seldom feasible due to the high cost of exploration and development. More commonly, a mineral owner leases his or her mineral rights to a mineral development company. By executing a lease, the mineral owner (the lessor) grants the person or company who receives the lease (the lessee) the right to develop and produce minerals in the leased parcel.

 

A lease is a private contract between the two parties and can take a variety of forms. However, leases usually have certain common elements. The mineral owner is paid an amount of money (called a bonus) when the lease is signed. The lease generally provides for payment of a royalty to the mineral owner on any minerals produced from the parcel, and the manner in which royalty payments are to be made. It also generally contains a specific term or duration.

The Value of Mineral Rights

When determining the proper approach to put a value to mineral rights, one should first discern as to whether or not there is any active mining or production development occurring on the property.

 

In cases where there is no active development on the property, the value of the mineral right can be estimated to be the present value of the lease payments. It is important to determine whether or not there is active development on the land surrounding the subject property since the future potential of development could indicate a value higher than simply the present value of the lease payments.

On the other hand, should there be active development on the property, mineral rights are generally valued using the present value of the future cash flow approach. When using the present value of future cash flow approach, it is important to consider the current and future production of the property and the current and forecasted price of the mineral being extracted.

Given that the value of mineral rights can be a complicated process, it’s important to get the advice of an experienced professional valuator which will minimize the possible consequences of using the wrong value.

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Funding Mining Projects

 

A great feature in funding resource exploration, drilling/extraction, and mining projects is the fact that:

 

1)  Traditional funding instruments can and often are used,

     and

2)  NO special accommodations or arrangements need to be

     added on to a funding arrangement involving mining

     development or exploration. 

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The Funding Process

 

On the business end of a mining development or exploration project, the promoter/ project owner is required to produce essentially the same basic information and documents as he/she would in any other type of project:

 

  •  Business Plan

  •  Feasibility Study (if you have it)

  • Any and all information and documents connected with the technology to be used

In addition to this, the Promoter must also provide the Funder with any and all information and documents connected with the technology to be used for the project, should it be relevant; hence it is indeed important to include in the Presentation report or Business Plan the technology to be used.  Also, it is needful for us to see the geological surveys of the terrain(s) in question.

There are many traditional and alternative financing tools that we use in exploration, extraction, and mining development transactions in order to create the best-fitting financing structure, such as:

  • Debt financing

  • Equity investment

  • Strategic partnership

  • Asset-linked

  • Government programs

  • Combination of the above

  • ... and more

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45 Years of Experience in the International Banking Industry

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Experienced Project Financing

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Are you a consultant looking for new funding sources for your clients?

We always appreciate the interest garnered by the high-caliber service we have been providing for 40 years. While we do not have agents representing us in any countries of the world, we still get most of our business from banking consultants, introducers, and brokers worldwide.

If you are a broker, banking consultant, or professional introducer, we welcome the opportunity to do business with you; and in that respect, if you are interested to submit any hotel or resort projects that require funding, we invite you to fill out the contact form below.

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