De-risking Asset as a Source of Better Financing
Presentation- De-Risk your Assets and Secure Better Capital
After a decade or more of slack metal markets, mining is in a world of new demand cycles, new rules, scarce capital and new players, with the capital being more risk-averse and fragmented. As Greenfield projects find themselves increasingly in “frontier” situations, the complex political and infrastructure needs only compound these issues. This requires a flexible strategy from the mining company for raising equity and debt capital, starting with a de-risking process on it assets and a focus on its own Free Cash Flow capacity. The raising of new capital now includes asset sales, joint-ventures and stand-alone development on both existing assets and/or new assets which requires constant de-risking; some recent examples will be provided. The data room becomes a crucial on-going “window” for the prospective investor/lender to validate the de-risking process and the strategies available.
The focus of the presentation will be on some asset de-risking measures that are often overlooked, and on the data room requirements, with an emphasis on achieving a better “bankable” feasibility study, among other third-party validations. The role for the data room is to cast the broadest “net” into the market possible, especially for small to mid-size mining companies, who must now search both new capital and projects overseas. While constant de-risking measures appear daunting if not costly, the cost of a higher discount rate on a share price because of a perceived higher risk or securing the wrong investor or lender is all the more daunting, if not deadly. The de-risking process is an investment as it reduces the discount rate, the due diligence required, it increases the access to the right markets and builds credibility for future endeavours.
Data Room Management, Six-Cell Risk Matrix, De-risk Assets, Fatal Flaw Analysis, Feasibility Study, Free Cash Flow