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Battery Minerals confident of debt amid rising institutional money into Africa

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

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Battery Minerals confident of debt amid rising institutional money into Africa

AfrAsia Bank Ltd. CEO Sanjiv Bhasin says more institutional money is flowing into Africa, with Battery Minerals Ltd. having received indicative terms from some financial backers for its Montepuez graphite project in Mozambique amid financiers' concerns about graphite hopefuls' ability to secure debt funding.

Mauritius-based Bhasin, whose bank facilitates deals for institutional debt and equity for African projects, told S&P Global Market Intelligence that the "frequency and quantum" of such money into the continent is increasing, and said he did not detect at the Aug. 29 to Aug. 31 Africa Down Under conference in Perth, Australia, any expressions of concern for miners' ability to raise debt.

He said the bank is witnessing a "high degree of interest" of investment from institutionals in various African economies, which he attributed to "almost all African economies indicating a positive trend line [with] which people believe that the GDP growth is likely to last for the medium term."

"Alongside the traditional providers of capital which originated from Europe and the U.S. in the olden days, there is capital which has also started to flow in from Asia and capital which is also trying to become available from some of the more advanced and technologically superior African economies," Bhasin said, while also noting increasing interest levels from China, India and Singapore.

Concerns for debt availability for graphite projects came after Battery Minerals' shares plunged 35% when private equity firm Resource Capital Fund VII LP cancelled its US$30 million debt and equity funding agreement, which had been signed following an approach by the fund while the junior was in the middle of an equity raising.

Battery Minerals Managing Director David Flanagan, however, said it was worth the effort.

"If someone offers you something which is good for your balance sheet and to dilution then you owe it to yourself to give it a crack, and look very closely at it," he told S&P Global Market Intelligence.

Debt financing available

While RCF cited the graphite market as no longer meeting its investment criteria, Flanagan said that there was "absolutely" debt money available in the graphite space, as evidenced not only by RCF's unsolicited approach in the first place, but the fact that he has already seen indicative terms come through from other groups since then.

Flanagan said Sydney firm Origin Capital Group Pty. Ltd. has now appointed a technical auditor for Battery Minerals made up of geologists, geophysicists and environmental scientists, among other things, acting on behalf of a prospective lender group, to form a view of value, risk and opportunity and to look for any "fatal flaws," then compile a project package which will then fit roughly within a group of metrics which are precedents in the market.

He said that "well in excess" of 10 groups will be consulted as part of that process, and up to 30 will be given an opportunity to bid into a syndicate, including strategic funds, customers, engineering firms or other mining companies, and banking institutions that participated in listed debt, debt that's convertible into equity, or debt that has attached equity.

"With that parcel, there won't be any more risk around the draw-down other than things like accessing our equity and achieving a certain level of construction on the ground," he said.

"What makes a difference is the inherent risk that's left in your project," he said. "In our case we'll have off-take agreements, a port allocation, we are fully permitted, we have a granted mining license, we will have spent A$26 million in the field, we've installed a crusher, our plant site is set up, we will have built a tailings dam and a 100-man permanent camp. We've established a full network within the local community; we'll have employed 85 people."

At the end of 2018, Battery Minerals will need US$38 million to finish construction at Montepuez, plus more for overheads and working capital when it ramps up.