Globally, the mining finance environment has seen significant change in the last 12-24 months. As traditional sources of capital have become harder to secure, models more conducive to risk mitigation, like streaming, have grown in popularity.
But in the context of China, and particularly Chinese investment into foreign mining projects, are we beginning to see a similar shift in the types of mining finance structures being used? Furthermore, as the profile of the Chinese resource investor changes, is this influencing the adoption of non-traditional structures?
As Jamon Alexander Rahn from Emerging Asia Capital asserts in the video above (sign in or create a free account to view), models such as streaming could play a key role in the future for Chinese outbound investors.
“Streaming is definitely the way going forward” says Rahn, “[it] is definitely one of the brighter spots in mining finance at the moment, I think most of the people in the room would agree.”
Rahn explains how his company Emerging Asia Capital is launching a streaming product in China, aiming to follow the success of companies like Nolan Watson’s Sandstorm Gold on the TSX.
“We’re pioneering a new streaming platform in mainland China so [streaming] is something we’ve taken a very bullish outlook on.”
“We saw Sandstorm Gold and its performance in Toronto and this actually got a lot of interest from Chinese private equity firms that were traditionally investing in pre-IPO opportunities mainly in mainland China.”
Rahn defines the ideal markets for streaming as financial investors and “smaller, more manageable projects”.
“We’ve seen a lot of interest – not from the typical strategics because they’re not used to the non-traditional ways of financing.”
“We’re looking at more financial investors that are willing to think a little bit outside the box.”
However outside of these groups, Rahn anticipates traditional deal structures will remain the favoured option for Chinese investors.
“[Streaming isn’t] going to be the only way to finance projects using Chinese capital” says Rahn. As he still believes the majority of investors will continue to pursue joint venture structures and 100% take-overs.
Speaking to minesandmoney.com ahead of his appearance at Mines and Money Beijing in June, Erik Bethel from Sino Latin Capital wasn’t as enthusiastic about the immediate uptake of alternative financing models, but didn’t rule it out for the future.
“At this stage, the optimal structure for a Chinese investor is still majority control. Things may evolve over time, but today this is what the vast majority of Chinese investors want.”
Chen Biao from Jinjiang Mining Fund (also speaking at Mines and Money Beijing) supported this position, claiming the Chinese market isn’t quite ready for these new models.
“I think it will take some time before most Chinese investors learn how to ultilise western financial tools. Investment for streaming or royalty may not be most Chinese investors’ cup of tea.”
Have you had experience in structuring mining deals in China? Have you seen any development in the take-up of alternative mine finance structures? Leave a comment below or in the Mines and Money LinkedIn Group.
For more in-depth analysis on Chinese outbound investment in foreign mining projects and to explore capital raising options in the region, take part in Mines and Money Beijing in June.
You’ll hear perspectives and investment strategies from Li Zhilin from Zijin Mining Group, Jionghui Wang from China Minmetals Corp, Tong Junhu from China National Gold Corporation, Bill Weng from Bank of China International, and a selection of leading resource investment funds like Chen Biao from Jinjiang Mining Fund, Dr Zhang Yan from Qinglan Blue Ocean Mining Investment Fund and many more.
Read our blogs on Chinese Outbound Investment Trends and the Changing Profile of the Chinese Investor or download analysis from the Bank of China International for more information on this topic.
To attend Mines and Money Beijing, download the agenda or register online.
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