Mining companies must learn to adapt to changing conditions

William Gleason

April 30, 2013

NEW YORK — The world has seen unprecedented economic changes in recent years and the mining industry, like many others, must find ways to adapt to the changing and sometimes volatile conditions.

During the first day of the SME's first annual "Current trends in mining finance" conference in New York City the challenges facing the mining industry and those who invest in it where discussed at length. Among the common themes were the challenges for the junior companies to find financing and the need to seek new investment and financing options and partnerships.

Some of the alternative sources of financing discussed include export credit agency funding, industrial development banks, asset base finance, private placements, commodity and trade finance, and vendor and equipment finance.

Among the presenters was Citibank managing and technical director Michael Cramer who said all of the options should be explored for companies to secure financing.

Non-traditional financing options such as institutional or financial investors, sovereign wealth funds, resource and hedge funds, and product financing involving offtake agreements have become popular alternatives, Cramer said.

While a great deal of the conference focused on how companies can secure financing for future projects, there was also a significant emphasis on some of the "soft" topics effecting the mining industry, particularly earning a social license to operate.

Roy Hinkamper, managing director, KPMG said that earning the social license to operate is very important for every company looking to begin a new mining operation.

Another issue discussed at length was the impact of regulatory and compliance issues on mining finance and investment.

Ian Douglas, group executive value assurance, Newmont Mining Corp., spoke about resource and reserve reporting within the United States. This reporting has been a challenge as the United States is not aligned with other major international reporting codes. The U.S. Securities and Exchange Commission (SEC) Industry Guide 7 is more than 30 years old and has not kept up with developments in reserve and resource reporting standards, guidelines and codes. This lack of alignment has created challenges for U.S.-based mining companies to disclose on an equal playing field with foreign counterparts. Foreign companies that list on the U.S. exchanges must re-state reserve and resource estimates to be compliant with Industry Guide 7, under the current system.

Douglas explained that SME has been in discussions with the SEC and has filed a Petition for a Rule Change to the SEC on Oct. 2, 2012.

One of the problems facing the industry, said Douglas, is that the SEC is bogged down with other issues that have come from the Dodd-Frank Act and the fact the mining is a shrinking industry in the United States and therefore not earning as much attention.


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