China, the US and Canada accounted for half of all capital raised, with the remaining proceeds evenly distributed across the world. The UK emerged as a preferred destination, with companies seeking a London listing to gain access to potential investors. Conversely, miners are struggling to raise capital on African exchanges.
Equity markets remain difficult for mining businesses, particularly exploration companies. In addition, lenders are still reluctant to finance long-term projects due to the inherent risk of exploration in mining and metals and the perceived lack of returns in the sector. Mining companies are therefore increasingly using alternative financing options, such as commodity traders, royalty deals and customer offtake agreements, to gain access to capital. Other sources of capital include sovereign funds, investment from original equipment manufacturers and downstream industries.
While we have seen many players opting for debt to fund projects, mining and metals companies are also looking to balance risk by opting for JV agreements with strategic players and resource funds, reducing the financing risk and diversifying capital across a greater number of investments. Increasingly, these JV partners will come from a greater pool of participants and will most likely include technology manufacturers. For example, Bolivia is looking to partner with firms to seek more investment to develop its lithium reserves.
LTO is increasingly impacting the ability to raise capital, as investors see it as a key risk factor. Risks associated with environmental policies and safety, as well as decarbonization, will play a greater role in the diligence undertaken around capital investment decisions. For example, BlackRock announced a number of initiatives to focus on sustainability in their investment approach such as exiting investments that present a high sustainability-related risk, such as thermal coal producers and launching new investment products that screen fossil fuels.