Financing the
Modern Mine Development Project
Project finance is not one of the areas in which I have a lot of experience or in-depth knowledge. In fact, my financing needs were managed by playing my father off against my mother for gas money and later by pleading with my wife for lunch money. It has been a fairly basic existence so far.
There are generally three sources of money in the world not counting friends and family - and believe me they don’t want to be counted. You know how you bristle when the brother-in-law comes with his hand out. The three major types of financing will be discussed in later chapters but for now there are some ethical issues to point out; namely that if you take money from someone there is a moral contract that it will be treated with respect, not spent frivolously and will be paid back. The banks make you sign that moral contract with your blood and the same pain should be involved in spending money given from unseen shareholders. I point this out because all too often shareholder’s money is treated in a very cavalier fashion. Yes the company employees have to live but let’s strive for a more realistic definition of “live”. Anyway, that is all I have to say about that.
It is a truism that the hardest money to find is the money to start something and often it is easier to get $10 million than it is to get $1 million. There is always a price exacted for the money and like any purchase the cost of the money must be weighed against the benefit of getting the money. Money can be paid for in terms of participation in the project or company (stock in shares) or in terms of interest paid until it is returned. Always the cost of the money is in direct relation to the risk of the project which is normal and understandable.
The question becomes, then, where do I turn to finance my alluvial gold plant or my mother-lode gold vein or my 5 million ounce open pit, heap leaching operation. The steps to arrive at financing decisions are pretty much the same regardless of the size of project. There are a bunch of questions that need to be answered;
- Do I want to stay a private company or do I want access to public finance markets?
- Am I happy to give up control of the project or company if need be?
- Do I want a bony fingered bank manager calling around for his money?
- Should I get a bit more money just in case?
- How much of my own money am I willing to invest?
I trust reading the next chapters will help in your decision-making.
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