An international team of our mining lawyers attended the Mining Indaba conference in Cape Town last week. It was a pleasure to spend time with clients both old and new, and to share thoughts on the current outlook in the mining sector.  

Here are some of our reflections on the week’s interactions.

Funding new developments 

There is undoubtedly a supply of viable projects, but securing funding for development remains challenging. Traditional sources of funding, such as public equity markets and project finance from commercial lenders continue to pose difficulties, meaning that the debt and equity funding stack has become more dispersed and more complex. 

This is leading to more layers of funding, including multiple tranches of senior secured debt, mezzanine funding, royalties or streams, and pre-paid offtakes, together with strategic equity with various enhancements.  

All of this requires careful balancing of interests in agreeing investor rights and inter-creditor principles. Our recent experience advising on Montage Gold’s financing of its Koné project, involving a US$825 million combination of gold stream and debt from Wheaton Precious Metals and Zijin Mining is a notable success story.

Ownership changes through M&A

The same funding challenges are present on M&A deals. There are some promising assets for sale, often from distressed sellers suffering liquidity constraints arising from increased construction costs, contractor disputes or host government pressure.  

However, the buyer universe is limited by challenges in raising the necessary funding. Non-traditional investors, such as industrial manufacturers and sovereign funds, have been vocal in their appetite for investments but have completed relatively fewer deals. 

We continue to see mining-focussed financial sponsors, strategics, and Chinese SOEs as mainstays on the buy-side, such as Baiyin Nonferrous which has agreed to acquire the Serrote copper mine in Brazil from our long-standing client Appian. 

Pro-active government engagement

The Indaba conference saw a strong representation of Ministers from across the African continent, and mining jurisdictions are alert to the need for positive engagement with mining partners who can offer stable investment, construction and operating expertise, and the opportunity for infrastructure development.  

Guinea is particularly active at the moment, with a number of projects coming on stream and the successful progression of the Simandou rail and port project, on which we acted for one of the industrial partners.    

Governments which recognize the need for stable, predictable regulation are attracting exploration and development dollars, whilst jurisdictions taking a different approach are becoming uninvestable.

Localising the supply chain  

Host governments are increasing the regulatory pressure on operators to retain more of the supply chain value in country – such as the requirement to locate processing and refinery facilities domestically. 

Equally, operators are seeking comfort from governments that power supply can be secured on a reliable, cost-effective and sustainable basis, which is critical both for mine operations and refineries. Naturally, these will all add to the overall financing demand.

This has brought a new pipeline of deals involving captive power and interconnectors, and we expect this area to be particularly active in the year ahead. 

Resource security  

Resource security in an increasingly multipolar world remains a driving factor for transactions, as well as exploration and development activity, with more government intervention and continued engagement from Western development banks and other DFIs.  

This seems set to continue despite the unpredictable political environment in US, and we are seeing a greater engagement from European players.  

Looking forward into 2025 and beyond, we would expect to see more government-backed investment in critical minerals from a wider range of state actors.

Geopolitical landscape  

Africa has been a focus for exploration and development activity and that looks set to continue as mining majors diversify their asset base, and see value opportunities in jurisdictions where they are able to manage sovereign risk. 

Given the balance between quality of assets and stability, the way in which investors view risk is also under constant review, with lots of players reviewing their position on the DRC.

There are also more opportunities in European assets, reflecting resource security concerns, although investors are conscious that mining operations in Europe provide their own set of challenges. 

Environmental, social and governance (ESG) issues remain a factor, but may increasingly be seen as risks to manage rather than an impediment to development.

Deal flow for 2025

We expect the momentum in the mining sector to remain in 2025, as a result of the above factors. Commodity prices are likely to drive more deal-making in copper and gold assets, whilst the market assesses the long-term outlook for battery metals commodities.  

We have seen some significant consolidation in the mining sector already, such as AngloGold Ashanti’s acquisition of Centamin. However, there have also been a number of false starts on wider sector consolidation. We expect this to continue as the direction of travel as majors seek to rebalance their asset portfolios. 

We are optimistic that funding from non-traditional sources continues to flow and that an increasing number of projects will be funded through to construction.

We remain excited about the opportunities in the sector, and our multi-disciplinary team looks forward to helping clients to meet the funding challenges and to navigate the changing regulatory landscape.