Miners face funding squeeze as green investing surges

Environmental activists from ‘Extinction Rebellion’ stage a demonstration outside the venue hosting the Southern African Coal Conference in Cape Town. (Reuters)
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Updated 02 February 2020

Miners face funding squeeze as green investing surges

  • Global investors shift away from heavy industry in favor of cleaner sectors

CAPE TOWN: As global investors shift away from heavy industry in favor of cleaner sectors, mining companies are losing billions in financing, raising the cost of capital and jeopardizing projects. 

Making the mining industry more sustainable by running mines on renewable energy, for example, will be a key focus at the annual Investing in African Mining Indaba conference in Cape Town this week, as companies hunt for new sources of capital including private equity, debt, offtake finance and royalty finance. 

Environmental, social and governance (ESG) concerns have driven money into specialized ESG funds which often exclude mining stocks among other “dirty” assets. 

“You talk to anyone at the moment, they say there’s no money,” said Boris Kamstra, executive director of Alphamin Resources, which manages the Bisie tin project in Democratic Republic of Congo.  The capital squeeze that started about two years ago has worsened recently, said Julian Treger, CEO of Anglo Pacific Group, a mining royalty and streaming company. 

The average cost of capital for early-stage mining projects rose by two percentage points over the past two years, he estimates. 

“Even for companies that have good projects it’s very difficult for them to raise any money in these markets,” said Caroline Donally, managing director at private equity firm Denham Capital, in Houston. 

“Previous investors who would provide equity appear to have withdrawn. A number of specialist funds have shut up shop, and generalists aren’t investing in commodities anymore,” said Donally, who will be attending Mining Indaba, the world’s biggest mining investment conference, which takes place from Monday to Thursday. 

Cryptocurrencies are among alternative assets that are luring retail investors away from miners. 

Mining-specific private equity funds raised $0.3 billion in 2019, a fifth of the amount raised in 2009, and just barely more than the $0.2 billion raised in 2014 during a global commodity crash, data from Preqin shows. 

Coal miners — especially those extracting thermal coal, burnt to produce electricity — are bearing the brunt of the sustainable investing trend. Norway’s sovereign wealth fund divested from all fossil fuel last year, and the world’s biggest asset manager Blackrock said on Jan. 14 it would sell active holdings in companies generating more than 25 percent of revenues from thermal coal. 

“If you’re a small coal explorer, I don’t think you stand much of a chance of raising any money at all,” said Fred White, associate director at Medea Capital Partners in London.  “There’s still a huge market and huge demand (for coal), but it’s not getting financed by Western banks,” he added. 

Local trading houses and lenders are stepping in instead. Thermal coal accounts for nearly 40 percent of the world’s electricity generation and more than 40 percent of energy-related carbon dioxide emissions, according to the International Energy Agency. 

In Africa, coal-to-power projects could previously rely on support from development finance institutions. 

But even they are withdrawing under pressure. In November, the African Development Bank (AfDB) decided against funding a Kenya coal project that was halted by a local environmental tribunal in June. 

The continent’s biggest coal producer, South Africa, is also seeing funding dry up. 

South Africa’s Nedbank has stopped funding coal-related projects, while FirstRand cut greenfield thermal coal projects to less than 0.5 percent of its lending.


UAE dives into Lake Manzala project

Updated 21 September 2020

UAE dives into Lake Manzala project

  • Egyptian campaign aims to return the lake to its previous state and revive local fishing industry

CAIRO: The UAE National Marine Dredging Company (NMDC) has announced that it won the rights to the expansion project of Lake Manzala in Egypt, valued at 600 million UAE dirhams ($163 million).

The company’s announcement of the new project came following a disclosure published on the Abu Dhabi Securities Exchange website. It ensures compliance with the principle of disclosure and transparency in force in the UAE.

Lake Manzala is one of Egypt’s largest natural lakes. It is known for its potential fishing opportunities, as it has the basis for high fish stocks due to natural nutrients and a moderate climate throughout the year. It produces about half of the natural fish production in lakes.

The lake has witnessed neglect in recent years, losing much of its importance and wealth. In May 2017 Egyptian President Abdel Fattah El-Sisi launched a national project to develop Egyptian lakes, with a key focus on Lake Manzala.

NMDC said in a statement that winning the project came through its partnership with the Egyptian-Emirati Challenge Company. It said that it will take about two years to implement the project.

NMDC is one of the leading companies in the field of dredging, land reclamation and civil and marine construction in the Middle East. The Lake Manzala development project aims to improve the quality of water to restore free fishing and return the lake to its previous state, which will boost the local market and export output.

President El-Sisi said that Lake Manzala will contribute to enhancing Egypt’s fishing industry, and export operations will be activated after its full development. He directed the border governorates, in coordination with the Ministry of Interior and the Armed Forces, to remove all encroachments and criminal outposts on the lake.

Several days ago, Dakahlia governorate completed a difficult operation to remove encroachments on the lake. A large campaign that used Armed Forces Engineering Authority equipment removed 301 houses in the Abdo El-Salhy area in El-Matareya city, known as the “fishermen’s land,” which was built on areas that were filled in from the lake. The operation occurred after local fishermen were persuaded to obtain compensation for vacating their houses.

Magdy Zaher, executive director of Manzala Lake, said that the engineering authority used 320 excavators and 20 imported suction dredgers to work in the lake.

The authority dredged the upper islands isolated from the water with the help of an Emirati bulldozing company to increase the efficiency and purification of Lake Manzala.

Zaher said the lake project will require several steps.

The most important is the removal of encroachments on the water surface and doubling its area to 250,000 feddans, he said. Dredging and deepening the lake, opening the gates and extending the radial channels to allow Mediterranean waters to enter the lake will follow, he added.

A safety belt will come in the form of a road 80 km long and 30 meters wide, which will surround the lake and prevent future encroachments. It will also divert the course of the Bahr El-Baqar water treatment plant, which pours 12 million cubic meters of sanitary, industrial and agricultural drainage into the lake, Zaher said.