Mining companies, which are extremely cautious about adopting new technologies, are throwing themselves into innovative funding mechanisms to bring assets into production as traditional sources of finances have either dried up or become too expensive.

Mike Seeger, a director at MX Mining, and Gregory Nott, the head of law firm Norton Rose Fulbright SA, spoke last week of the collaboration between resource investment companies and the increasingly changing environment for law firms as the basis for their relationship that has secured a $500m pipeline of projects stretching from coal to precious metals in SA and further afield.

"Look at the mining landscape now, there are mothballed mines across the country, gold, chrome, coal," Seeger said.

"There are mining projects that have mining rights and are fully permitted, but they can’t get finance. SA is littered with projects going nowhere.

"The gap we’ve seen is that these mines and projects cannot be financed through traditional means because of low commodity prices and traditional investors pulling back at a time of political and regulatory uncertainty," he said.

Among the innovative funding options that had come to the fore were offtake financing agreements, when engineering contractors extend their involvement beyond just bringing a project to readiness, but mining it as well, he said.

Insurers partnering with banks to insure debt financing, money coming from equipment suppliers and repaid from mining revenues and streaming deals, which entail upfront payments from a third party in exchange for guaranteed commodity deliveries over the life of the mine were also among the options, he said.

"When it comes to getting projects financed, mining companies are very open-minded because they know if there’s no money there’s no project. It’s the lifeblood they can’t do without, so they’re open to extremely innovative solutions."

Norton Rose, with its global presence, was able to bring experience and contacts to entrepreneurial companies such as MX Mining, which looked for stalled projects or companies in the resources sector, said Nott. He pointed out that it was not just mining companies that needed to adapt to fresh ways of thinking to secure funds, but traditional law firms too.

MX Mining looked for projects that were unable to attract finance and then work backwards from the funds it could secure to adjust the size of the project to fit the financing, said Seeger. One such project was a coal venture in Botswana to ultimately produce liquid fuel.

While SA’s Sasol was best known for this type of conversion of coal to liquid fuel, there was US technology available to replicate this process on a much small and cheaper scale, he said. The swing in sentiment against coal as a source of electricity generation because of pollution concerns indicated this would be an important alternative for coal miners, he said.

To build a plant that would generate 40-million litres of diesel a year would cost up to $300m, making it a strategic option for landlocked countries to reduce the cost of fuel imports. The technology makes gas from coal and then liquid fuel from gas.

Another project in which MX Mining was involved was a titanium and vanadium prospect near Tzaneen in Limpopo that had started as an iron-ore exploration project.

It was an example of tailoring a project to what funds could be secured and keeping the production at a level that would not disrupt the titanium market, Seeger said.

• [Editor:Wang Linyan]