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Eurasian miners seek alternative routes amid limited funding access

Amid a shortage of financing on the global market for mining projects, the European Bank of Reconstruction and Development is seeing more and more mining companies in the Eurasia region move toward nontraditional forms of finance.

Ulmas Musaliev, the principal banker in the European Bank of Reconstruction and Development, or EBRD's, natural resources team, explained to S&P Global Market Intelligence that mining companies in the EBRD's remit were increasingly resorting to streaming companies for their financing needs.

"The trend that we have seen over the last few years is ... companies trying to get more nontraditional financing over more traditional forms and banks limiting their financing in terms of equities and debt," he said in a Jan. 24 interview.

As an example, Musaliev noted that the EBRD provided an equity financing to Lydian International Ltd. to support its Amulsar gold project in Armenia.

"We made an equity investment in Lydian in Armenia and we had Orion Mining Finance and RCF coming along as co-investors. They provided financing at every level. Traditional debt equity and ready streaming. Those streaming companies are trying to get involved widely in our region," he said.

Canada's Lydian raised C$18.4 million in November 2017 to channel into the ongoing construction of the Amulsar project in southeastern Armenia. The company has dubbed the project Armenia's largest gold mine, with estimated mineral resources in the measured and indicated categories containing 3.5 million ounces and 1.3 million gold ounces in the inferred category.

Lydian expects to bring the mine online before the end of 2018, targeting average annual gold output of 225,000 ounces over an initial 10-year mine life.

On the subject of investor appetite for mining assets in Eurasia, Musaliev said legislative reform on its own is not sufficient to encourage project financing. He stressed the need for implementing laws and encouraging industry players to adopt best practices.

Apart from a more amicable legislative environment, the implementation of digital mining in the region to boost operational efficiency was also interesting for potential investors, Musaliev noted.

He said that Dundee Precious Metals Inc. had made significant progress in the field at its Chelopech operation in Bulgaria.

"They have introduced Wi-Fi underground at their mine in Bulgaria. They have connected both people and trucks to the system so they can monitor production. They are collecting a lot of data now so that, in future, they can make the mine more efficient," he said, adding that a number of industry players like Anglo American Plc had visited the site to observe how the company had been implementing its digital transformation.