IFC sees scarcity in funding for mining projects

Financing for mining projects in the country will likely be more scarce this year as investors and lenders tighten up on credit and capital buildup due to the global economic downturn, the International Finance Corp. said.

“Financing for the mining sector this year would be hard to come by, particularly for junior mining companies which are still in the exploratory or non-producing stage,” said Karsten Fuelster, IFC’s senior investment officer for Southeast Asia Business Development.

In a speech yesterday at the Mining Financing Forum hosted by the Chamber of Mines at the Hotel Intercontinental Manila, Fuelster, however, qualified that for projects with high quality assets, financing would still be forthcoming but maybe not in the traditional form of equity infusion and borrowings.

Instead, financing may likely be in the form of joint ventures, off-take agreements and even possible mergers and acquisitions, the IFC official said.

Fuelster cited countries such as China, India and Brazil which keen on offering off-take agreements for future resources which they would still need for their growing economies.

As such mining companies could secure funding from off-take agreements to fund their operations.

Mergers and acquisitions, Fuelster said, “will be the theme of 2009, ” pointing out that companies with good assets may choose to team up with other companies that have a good management team or those that may have the equipment and technical expertise.

In attracting much needed financing, though, Fuelster stressed, projects which have strong political support and good quality assets are more likely to get funding.

In fact, Fuelster warned, that “many will not survive” unless they are able to find funding.

Chamber of Mines president Philip Romualdez, on the other hand, said he is still optimistic on the prospects for the junior mining firms which, he pointed out, “are good at living on shoe string budgets.”

 “They will manage to survive,” he said.