Show us the money: Where is mining capital coming from, and why?

Demand for resources, especially critical minerals, is surging as governments worldwide race to secure supply chains. Meeting that demand requires more exploration and more operating mines. Who is securing the capital needed, and what is their secret?

Legendary global investor Rick Rule and Chief Executive Officer of Traxys Mark Kristoff addressed the International Mining and Resources Conference (IMARC) on where mining capital is heading, and what separates projects that secure funding from those that do not. They both agreed capital is available, but investors are increasingly discerning about which projects and management teams deserve it.

Rick Rule says it all comes down to the right people telling the right story at the right time, and a lot of responsibility falls on the shoulders of what Rick calls "The Chief Ego Officer", who must have a specific track record in what they are tasked to do "here and now".

"The dominant ego in the company, be it the CEO or the backer behind the scenes needs to have been serially successful. But equally importantly, the success must be germane to the task at hand," he said.

He said decades of experience had taught him that a commodity narrative is not a project.

"The reddest flag... is when I come up to an exploration junior and the first thing they talk to me about is the zinc market, or the copper market, or the gold market, when I realise that they don't have any zinc, or copper, or gold. The idea that the price of something going up is relevant. If you don't have any of that, it is problematic."

Traxys' Mark Kristoff said capital was always available for the right project, but it has to pass some increasingly rigorous analysis.

"The capital is there, but to find financing you need a couple of attributes. For example, you must have good ore grade, you must have metallurgy that's well proven. You've got to have a processed flow sheet that's de-risked in terms of technology, and you need to be in a market where there's true demand for your product.
"It really starts, with the question, Does the project make sense? Can it be competitive through the cycle and on the production cost curve? And what is the risk of getting from idea to execution? You have to have a balance sheet to attract the right debt providers. With bad projects, the debt people are going to figure it out, and you're not going to get your finance."

Mr Rule says prospects will be judged by their ability to address the "unanswered questions" and to not just talk about the market or the opportunity but "what it is they are actually going to do".

"I need a really good story, and I need a really good storyteller.... As an investment prospect, what's the single most important unanswered question that you can answer right now? What do you see as the probability of success? ... What is your budget and do you have enough money to get there? If you don't, where, specifically, are you going to get it?
"In the earlier-stage stories, the most important thing to know, after the key thesis, is: what is the most immediately important unanswered question? What can either increase the value of the deposit or increase the market certainty with regards to the outcome?"

He advises companies to test their optimism against the resources available, because that is what an increasingly sophisticated market will do.

"I've found that successful entrepreneurs are pathologically optimistic. They believe that they can get it done with the means available to them, which often isn't the case."

When it comes to Government intervention, Mr Kristoff says one of the biggest impediments to mine development is permitting and all levels of governments should focus on integrating processes that accelerate the permitting process, "because you can't deploy capital if you don't have a permit".

"Governments can also intercede in ensuring there's the right infrastructure, be it power, water and roads.
"Government providing debt instruments is also a very important component but it does get tricky when you start to pick national champions and put underlying price support for products.
"At the end of the day, a project has to make economic sense through the cycle, and it needs the right characteristics in terms of grade, metallurgy, and production."

For further information or interviews with speakers contact the IMARC Media Team at [email protected]