De-risking Asset as a Source of Better Financing

CIM Montreal 2011
Abstract 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.

Keywords: Data Room Management, Six-Cell Risk Matrix, De-risk Assets, Fatal Flaw Analysis, Feasibility Study, Free Cash Flow
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