Long-term financing and loans for Mining and processing plant viola-funding June 30, 2023

Long-term financing and loans for Mining and processing plant

Mining and processing plants
Mining and processing plants loans and long-term financing

Companies financial requirements that balls down to the construction of mining and processing plants are growing as mineral resources are depleted, technologies become more sophisticated and environmental standards tighten. This dynamic sector, vulnerable to fluctuations in world prices, has faced serious challenges in recent years. Mining and processing plants loans and project finance through the establishment of SPV / SPE is one of the promising approaches to new mining projects.

Viola Funding limited, is ready to develop a investment model for your project and schemes for mining and processing plants loans in Europe and beyond.

Financial needs of mining and processing plants projects

To secure an appropriate cost of construction a large mining and processing plant. it is identified that such projects currently estimated at billions of euros. This is a long term investment that should not be made blindfold. Extensive research and development of an optimal financial model lay the foundation for future commercial success.

Initial investment costs: The scale of the project can be judged by the cost of the technical documentation of the mining and processing plant, which, taking into account all the components, can exceed 50-60% of the annual production volume.

Geological exploration cost

It is obvious that the existing investment needs of mining projects are steadily increasing. Ignoring such items of expenses as technology and exploration leads to a decrease in competitiveness and a decrease in the volume of mineral production after a short period of operation of the enterprise.

Sources of funds for the construction of mining and processing plants

Financial resources for the implementation of large-scale projects in the field of mining and processing of minerals traditionally come from three main sources. Debt financing for the construction of mining and processing plants today requires extreme caution, so commercial banks and other financial institutions have an extensive list of requirements for such projects. The volume and nature of loan guarantees is a fundamental criterion for debt financing.

Long-term bank loans for mining and processing plant

Given the lack of domestic resources for mining and the surplus of financial resources in the banks, the latter seek to more actively place investments in the mining industry. Since the 1990s, this has led to a situation where the share of loans in large mining projects reaches 50% and even more.

In this context, mining companies are at an extremely disadvantageous position. Most banks today are wary of new mining projects, reluctant to adjust debt maturities, set grace periods or make other concessions that borrowers need in the face of market uncertainty.

If you are interested in a long-term loan for the construction of a mining and processing plant, modernization or expansion of a mining facility (quarry, plant), please contact Viola Funding Limited. Our company offers attractive business loans with a maturity of up to 20 years.

Leasing in the mining industry

In general, leasing has shown the fastest growth among other debt financial tools in the second half of the twentieth century. It was born in the United States in 1941, which began leasing ships and military equipment to the United Kingdom and the Allies.

Financial leasing in the mining industry has grown exponentially in recent years, affecting major projects.

Financing for mining  through the capital market

Another recorded way of financing large projects, although limited in mining practice, is through the issuance of securities.

These securities can be converted into preferred shares, potentially providing investors with a high fixed income if the ore mining and processing plant achieves positive financial results.

Also worth mentioning are promissory notes that are suitable for large and reputable companies. Basically, this financial tool provides medium-term financing with a high cost of capital.

Venture capital for mining industry

To avoid the danger of bankruptcy before compensating gains are achieved, venture capital must play on a sufficient number of projects. In fact, this means that the participation of venture funds in each of the projects is relatively small. Venture financing for the construction of mining and processing plants is distinguished by the attitude of investors to business.

The security of investments in general is of paramount importance for any venture fund, but not the profitability of each specific project.

The advantages of venture capital financing are as follows:

• Lack of collateral and other types of debt repayment guarantees.
• Attraction of resources for the implementation of high-risk projects.
• Possibility of allocating large funds in a short time.

Venture capital accepts some vulnerability in an individual project because of the general belief in the benefits of working on an entire portfolio of projects.

Government funding for Mining industry

A third way of government funding for the mining industry is tax incentives. This tool can be applied by the state temporarily, taking into account the real need for a specific project.

In some countries, tax incentives are granted to mining facilities for periods of exploration, that is, in order to support the growth and diversification of mineral production. There are also incentives for the environmental modernization of mining and processing plants,

Benefits of loans for mining and processing plants

Depending on this, loans for mining and processing plants can be carried out according to a non-recourse or limited recourse scheme. This means that lenders (banks) and equity investors are not allowed to require special guarantees from sponsors, unlike traditional financing methods.

In turn, the limited recourse clause means that lenders (banks) have an advantage in obtaining support outside the project.

If the mining project fails, they can claim the assets of the project company.

The loan agreement contains the requirements for the efficiency of the project and the conditions for the proper repayment of the loan. In this way, creditors and shareholders guarantee the safety of their funds. The multilateral contractual structure of the PF is a kind of guarantee for the completion of the project, formed at the planning stage. In practice, most projects have a complex financing structure that distributes risks among the project participants in the most rational way.

Cost of project finance for mining and processing plants

As capital intensive, technically complex and high-risk projects by their nature, mining facilities are considered ideal for PF. This is especially true for projects with a high initial investment, where the interests of many parties, including governments, converge.

Project finance for mining and processing plants can be more expensive than traditional debt financing.

The cost of building a medium-sized mining and processing plant is in the hundreds of millions of euros, but many large projects involve multi-billion dollar investment costs in the first years, including exploration, construction and installation of equipment.

The benefits of project finance to the borrower must be high in order to choose this type of financing for a mining and processing plant project.

Are you looking for funding for major projects in the mining industry? please contact us

eMAIL:[email protected]


Write a comment
Your email address will not be published. Required fields are marked *