Mining project finance is used to develop the exploitation of natural resources such as copper, iron ore, or gold mining operations in coun tries as diverse as chile, ghana and australia. Financing and risk management of investments in mining sector. Public finance for years, many governments, including the south african government, funded projects by. It is a debt that can be exchanged for a specified number of common shares at a predetermined price, at the option of the holder. Flexible and negotiable subject to clients preferences. When you value things you typically have three methods. Usually, a project financing structure involves a number of equity investors, known as sponsors, and a syndicate of banks or other lending institutions that provide loans to the operation. Sustainable infrastructure is critical for addressing developmental challenges in emerging markets. Project appraisal is the due diligence conducted on sponsors, technical, market, environmental, financial, legal, and risk aspects, among others, of the proposed project. Learn about ore, grade, recovery, tonnage, unit costs, metal prices, payability, production, cash costs, cash flow, npv, nav, pnav. Security agreements project finance is premised on the basis that the lenders will be able to take control of and transfer all material project assets in the event of a problem with the project financing. Pdf financing and risk management of investments in mining.
Dcf present value of estimated future earnings from the project 2. The issuance of units comprising nonconvertible unsecured notes by mining companies is increasing but not yet common. Security agreements project finance is premised on the basis that the lenders will be able to take control of and transfer all material project assets in the event of a. Comprehensive coverage of project finance news and analysis project finance mining journal the funding and investment initiatives across the mining sector page 2. However, project financing is a specialised funding structure that relies on the future cash flow of a project as primary source of repayment, and holds the projects assets, rights and interests as collateral. Typically, a costbenefit analysis is used to determine if the economic benefits of a project are larger than the economic costs. Financial modelling of stockpiles in a mining project. As undeveloped mineral resources are mostly located in the jurisdictions with high levels of risk, project finance is often the preferred financing strategy in the mining investments. Temporary free access to in order to avoid any service disruptions due to the covid19 outbreak and ensure you are able to stay up to date with pfis coverage of the global project finance markets, refinitiv is providing free access to our online platform for all pfi magazine subscribers over the next two months. The engineer, procure, construct epc model is an increasingly popular approach to oil, gas and infrastructure. The government of png has a legal right to acquire up to 30% equity in the project.
In 1995, bhappu and guzman surveyed 20 mining companies located in. These debt securities are issued by way of private placement or public offerings. Many traditional traditional mining funders are, for all intents and purposes, out of the business right now. Project finance is the longterm financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. I hope an ebook will be published asap because this handbook is a powerful tool in the daily project management business not. Mining schedule in inputs sheet foundation for stockpile calculations. Jan 18, 2018 financial modeling of mining projects. Concession agreement a contract between a publicsector body and a project company, which allows the project company to carry out the project e.
For a discussion of the documents typically entered into in a project finance transaction, see practice note, project finance. How to build a financial model to value a mining project. The keys to project financial management the keys to project financial management michael mclin maxim consulting group this session is eligible for 2 continuing education and 2 contact hours. The book project management for mining is an excellent handbook for the wide range of mining projects. The char ts belo w demonstr ate the dif ference between public, corporate and project funding, using an example of a water treatment project. Worldwide, extractive industries account for 36% of the total project finance market, almost half the share of. Project finance structures p roject funding can be obtained from v arious sources. A tool for optimizing the financial benefits of the mining sector. Convertible debt is usually unsecured and senior lenders regard it as near equity. I hope an ebook will be published asap because this handbook is a powerful tool in the daily project management business not only for me. Project finance the term project finance is often interpreted incorrectly as the generic financing of a project.
How to build a financial model to value a mining project quora. The availability of finance for mining projects is generally dependent on the economic robustness of a project, the requirements of the sponsor and the overall risk profile of the individual project or corporate entity. Comprehensive coverage of project finance news and analysis mining journal an insight into the funding and investment initiatives occurring across the. The wharton school project finance teaching note 3 there is no singular definition of project finance. Mining projects require a unique type of financial modeling what is financial modeling financial modeling is performed in excel to forecast a companys financial performance. The financial model of a project is one of the most important documents a mining company will submit as part of a package of documents to get a mining license in most mineralrich countries. Financial modelling for mining projects corality academy. Mine project evaluation methods of cash inflows and the present value of cash 2. Apr 22, 2019 project finance is the financing of longterm infrastructure, industrial projects and public services based upon a nonrecourse or limited recourse financial structure, in which project debt and. What follows are the typical phases of a proposed mining project. Project finance is often more complicated than alternative financing methods. Any mining project asset with a study is a perfect dcf candidate early stage is much harder to value mining assets are essentially one big npv analysis provide a very detailed plan last years are negative cash flow mining valuation npv.
There are different phases of a mining project, beginning with mineral ore exploration and ending with the postclosure period. Traditionally, project financing has been most commonly used in the extractive, transportation, telecommunications, and power industries, as well as for sports and entertainment venues. Without exception, the first look that prospective project lenders get at the project is the presentation of project documents. In junior sponsor transactions, the completion guarantee is of relatively limited value, and lenders will therefore look to the contractors and contingent funding to cover the completion. Financial modeling for mining projects corporate finance. Financial modelling for mining projects corality financial. We want good projects even in these challenging times. Definition of project finance the term project finance is used loosely by academics, bankers and journalists to describe a range of financing arrangements.
Npv analysis is sensitive to the one of the most common methods to evaluate a mining project is the dcf method. Project finance is the financial analysis of the complete lifecycle of a project. Whether your project is exploring an emerging market or investing in an established one, were built to deliver the solutions you needanywhere in the world. Mining projects require a unique type of financial modelingwhat is financial modelingfinancial modeling is performed in excel to forecast a companys financial performance. This mining project falls under category b2 project or activity 1a as per eia notifications 2006, 2009, 2011 and 20. Have your badge scanned at the door attend 90% of this presentation. Nautilus, a canadian company with headquarters in toronto, is jointly owned by several of the largest mining companies in the world barrick gold corporation, angloamerican, teck cominco, and epion holdings. Ive actually been through a few of these and agree with the majority of the answers listed here but for one fact. Project finance a primer on the project finance industry. For these hours to appear on your certificate, you must. Equity capital is also harder to source but it can still be done if the project is exceptional.
Because of this, the current high levels of interest from the global mining community in sources of alternative funding is no surprise, but what are. Often bandied about in trade journals and industry conferences as a new financing technique, project finance is actually a. Each phase of mining is associated with different sets of environmental impacts. Overall, while wellwritten, wellpresented project documents ensure that lenders will have a generally favorable impression of your project, offtake agreements are. Overview of the lifecycle of the model for a mining project, from pfs and bfs to financial close and operations. Project financing is always tied to the economic outcome of a project and often is not guaranteed to any appreciable extent by the developers. Finally, the course describes how to both detect and prevent errors from occurring. Project finance is the financing of longterm infrastructure, industrial projects and public services based upon a nonrecourse or limited recourse financial structure, in which project debt and. Get the skills to develop robust financial models that can stand up to the scrutiny of any audience, from internal operations to bankers and jv partners.
Mining project finance is used to develop the exploitation of natural resources such as copper, iron ore, or gold mining operations in countries as diverse as chile, ghana and australia. Financial modelling for mining projects training course will assist you to progress your skills to efficiently develop, modify and analyse financial models for mining projects. The finance will be classified either as a corporate loan, project finance or venture capital. If you have a good project and are willing to follow the rules you can get funded. The example used is an iron ore project however the same financial modelling principles can be applied to any mining project model. Project finance documents critical project documents. Risk identification and allocation is a key component of project finance. Pwc to assist project financing for gold mining at buckreef. Project finance continues to be the primary mechanism for procuring and developing assets in industries like mining, power generation, power transmission, telecommunications, pipelines, transport and other infrastructure. You have to make sure that the project will be completed in time and that you will not fall short when it comes to the budget allotted for the project.
It is the assessment of the viability of proposed long. Mining project finance structures vary greatly depending on the underlying project, the sponsor behind the project, and the motivations behind the financing. Worldwide, extractive industries account for 36% of the total project finance market, almost half the share of africa. Globix through its resources structures unique credit facilities for refineries that produce nonferrous metals. Investopedia defines offtake agreements as contracts between the producers of a resource, in the case of project financing the producer is the project company, and a buyer of the resource, who is known as the offtaker, to sell and purchase all or substantially all of the future production from the project. In finance, bankruptcy prediction has the vast majority among datamining implementations, but to the best of the authors knowledge such an implementation does.
The wharton school project finance teaching note 2 i. Stephen mullowney, pwccfs managing director of corporate finance commented, we are pleased to be working with tanzanian gold to arrange project mining financing of two gold mining operations. Offtake agreements may only be one document in a package of dozens of critically important project finance documents offtake agreements may be the most critical in terms of securing project loan approval. Dec 03, 20 ive actually been through a few of these and agree with the majority of the answers listed here but for one fact. This practice note provides an introduction to project finance and covers 1 due diligence and bankability, 2 sources of finance for projects, 3 project risk and allocation, 4 types of project, 5 the main project parties, 6 the finance parties, 7 key finance documents, 8 key finance terms, 9 key project documents, 10 security. The keys to project financial management michael mclin maxim consulting group this session is eligible for 2 continuing education and 2 contact hours. Project finance structuring nam theun 2 1 the views expressed here are those of the presenter and do not necessarily reflect the views or policies of the asian development bank adb, or its board of directors, or the governments they represent. Offtake agreements offtake agreements in project finance. Financial modelling of stockpiles is a common challenge in any mining project, and this tutorial is inspired by the contents of our training course in financial modelling for mining projects.
Project finance mining journal the funding and investment. It is the assessment of the viability of proposed longterm investments in terms of shareholder. The term project financing describes the various means that lenders use to finance a new project on a basis where repayment is expected only from the cash flow generated by the project. Financing mining projects funding for mining projects. A case study of a real asset feasibility study, assumptions, forecast, and dcf model. Types of project finance in the mining industry contd. You are currently viewing dentons global capabilities in project finance. Project finance documents created early in the deal lifecycle are part of the pitch to arrange project financing and must support our efforts to place project finance loans. Comprehensive coverage of project finance news and analysis mining journal an insight into the funding and investment initiatives occurring across the mining sector which are financing the mines. Our mining finance solutions provide new and used equipment financing. Without exception, the first look that prospective project lenders get at. Learn the skills required to build an integrated financial model for a mining project in this handon training course from essential excel functionality to powerful commercial scenario analysis. Global mining leader projects kpmg in australia few mining companies possess either the engineering strength or the will to build a mine completely independently.
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