2015 Q1: Mining financing breakdown by region
The past several years have unquestionably been particularly challenging for the mining industry. Nevertheless, in spite of hardships, the mining industry continues to attract new funding. Evaluating financings by the destinations of capital raised shows that the regional distribution is hardly static and that some clear trends can be identified in the geographical distribution of funds from January 2013 through early 2015. While the 2013-2014 periods have been relatively consistent in total funds raised for mining and exploration, 2015 has so far been off to a troubled start.
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During the past nine quarters (January 2013-March 2015), SNL Metals & Mining tracked US$82.92 billion in financing for mining and exploration operations worldwide. SNL also identified the intended global destinations of those financings, either definitively for projects mentioned in company releases, or estimated with help from SNL's 2013 and 2014 Corporate Exploration Strategies studies. The analysis includes financings for all metals and minable commodities (precious and base metals, iron ore, uranium, coal, potash/phosphates and specialty metals such as rare earth elements, graphite and lithium). Except where application to a specific mining project was mentioned by the company raising funds, SNL excluded senior debt in excess of US$500 million, as it usually represents the shuffling of accounts and not direct project financing.
The Asia/Middle East region received the most funding during the period at 20 percent (US$16.92 billion), followed by Latin America with 17 percent (US$14.10 billion) and Australia with 15 percent (US$12.83 billion); the remainder was rounded out by Canada (14 percent), the U.S. (12 percent), Europe — including Russia and central Asia — (10 percent), Africa (eight percent) and Pacific/Southeast Asia (three percent).
Of the almost US$17 billion destined for Asia/Middle East targets, almost two-thirds of the funding came from Asian/Middle Eastern companies (primarily headquartered in China). Although Canadian companies raised the most during the period at US$22.16 billion, less than one-third was allocated domestically. Despite the tough times, Canadian miners continue to focus on assets outside their home turf. By contrast, African and Latin American companies spent 82 percent and 96 percent of their funds, respectively, within their home regions. Of Africa's US$6.69 billion total, only 12 percent was targeted domestically by African companies; in Latin America, 28 percent of the region's US$14.10 billion came from Latin American companies.
The US$39.89 billion raised in 2014 was a slight increase (four percent) over the US$38.23 billion raised in 2013. The year-on-year changes varied regionally. While Australia and Pacific/Southeast Asia held relatively steady in both years, Asia/Middle East increased 19 percent, from US$7.43 billion in 2013 to US$8.87 billion in 2014. Canada experienced the most dramatic shift — more than doubling from US$3.21 billion in 2013 to US$6.59 billion in 2014. These two regions are important for also being the domestic markets for the majority of the world's miners and explorers with listings on the ASX, TSX, Hong Kong and Shanghai exchanges. Financings targeted at Latin America declined 13 percent year on year, from US$6.85 billion in 2013 to US$6.00 billion in 2014, and Africa as a target fell by almost a quarter, from US$3.65 billion in 2013 to US$2.80 billion in 2014.
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An analysis of fundraising by regional headquarters shows a clear increase in domestic spending year on year. Canadian companies raised US$8.04 billion in 2013 and planned to spend 19 percent of the total domestically. In 2014, Canadian companies raised US$11.59 billion and planned to spend 35 percent of the total in Canada — almost doubling the domestic share of spending. Australian companies followed a similar trend, raising US$3.77 billion and allocating 53 percent of it domestically in 2013, and raising US$6.00 billion in 2014 and targeting 73 percent of it domestically.
Evaluating by company type, it is unsurprising that the majors raised most (43 percent) of the US$82.92 billion funding secured between January 2013 and March 2015. Latin America and Asia/Middle East were the top two target regions for the majors — fully 55 percent of the total funding intended for Latin America came from the majors and 44 percent of the total targeted at Asia. Although Europe accounted for only 12 percent of majors' financings, the majors were responsible for 52 percent of the region's total allocations. However, the majors did not dominate in all regions: they were third in Pacific/Southeast Asia with 21 percent (behind the intermediates' 29 percent and the juniors' 27 percent); and in Africa, 46 percent of the total came from the juniors, compared with 31 percent from the majors. The U.S. and Asia/Middle East regions had the smallest shares of the juniors' targeted spending, with 17 percent and 11 percent, respectively.
Among financings allocated by specific commodity (as reported by the companies and captured by SNL Capital Offerings), primary gold projects received the largest share of the total raised during the period. Unlike many other targets, gold financings were relatively evenly divided among the target regions, with similar totals raised for gold projects in Latin America, Canada and Europe. Base metals and silver projects together had the second-largest share, with Latin America in top place, distantly followed by Canada. Copper was the primary commodity targeted by this group. Coal also received a considerable amount of funding, with more than half of coal's allocations going to fund projects in Australia, followed by projects in Europe and Asia. PGM financings were predominantly targeted at South Africa, with smaller amounts for a few Canadian operations. Potash and phosphates received almost as much direct capital as PGM, with most of the funding going to operations in Canada and the U.S. More than half of the funding for diamonds was directed to Canada, followed by Africa and Australia.
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Financings got off to a poor start in 2015. January was abysmal: With less than US$500 million raised (not including senior debt over US$1 billion), it was by far the worst month in the period for capital-raising. No other month between January 2013 and March 2015 had financings totaling less than US$1 billion. February and March returned to somewhat healthier totals, however, with well over US$1 billion raised in each month.
First-quarter trends in 2015 are somewhat different from those in 2013-2014. Canada-focused financing has moved ahead to take up a third of all funds raised in the year so far, followed by Latin America (26 percent) and Asia/Middle East (13 percent). Things appear most dire in Australia, which attracted 15 percent of total financings in 2013-2014 but has fallen to only five percent of 2015 financings to date. However, although mining-associated fundraising has been largely stagnant in the first quarter, there may be more movement as the year unfolds. A few notable offerings by majors that should make 2015 a more robust year than it has looked so far include First Quantum Minerals Ltd.'s recently closed C$1.44 billion offering to be applied across its portfolio of operations; Zijin Mining Group Co. Ltd.'s recent US$412 million investment in Ivanhoe Mines Ltd.'s Kamoa project in Democratic Republic of Congo; and Rio Tinto's planned US$6 billion campaign to fund underground development at Oyu Tolgoi in Mongolia.
Coal India Secures First-Of-Its-Kind Digital Deal
Coal India Limited (CIL) has appointed Accenture Solutions to digitally transform seven of its open-cast mines as the company strives to improve performance and increase coal production. Accenture is due to lay down digitalisation groundwork until March 2022.
The deal aims to increase coal production by 100 million tonnes (MT) by the end of FY’23. Once the minimum quantity has been surpassed, an agreed sum will be paid to the consultant for every additional sum of coal produced. This success fee will only be paid on the procurement of the minimum assured quantity.
The move will see heavy earth moving machinery (HEMM) fitted with digital sensors to monitor performance efficiency at all levels. Additionally, modern data analytic techniques aim to increase mine productivity and project monitoring through functional system management and effective observation.
An Exciting Venture For Global Mining
CIL, which aims to provide energy security in an environmentally and socially sustainable manner, hopes the move will help transform the entire business of mining operations and ensure higher volumes of coal are acquired at a lower cost.
“This is a first of its kind initiative by the company utilising digitalisation to ramp up coal output,” CIL has said.
A Digital Step Towards Enhanced Performance
Digitalisation is expected to take place at open-cast mines in Kusmunda, Gevra, Dipka of Southern Eastern Coalfields (SECL), Migahi, Jayant, Dudhichua, and Khadia of Northern Coalfields (NCL). Nearly 32% (188 MT) of CIL’s 596 MT output in FY’21 was accounted for by the seven selected mines. However, this new deal is set to see a large increase following the subsequent digital changes due to be made.
“Learning from the outcome and success of this model, we may replicate it in our other large mines,” says CIL, optimistic about the future following the modernisation of their mining.
It is expected that the move will help address roadblocks and guarantee corrective measures are put into place, ensuring the company is able to move forward with its aim of increasing output whilst remaining sustainable and eco-friendly.