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New mine finance options emerge to fill gap: Citibank

Keywords: Tags  Citibank, financing, debt markets, Michael Cramer, Andrea Hotter

NEW YORK — New sources of investment, financing options and partnerships have surfaced to help fill the capital liquidity gap, a Citibank executive said.

All these new options need to be explored if companies are to successfully secure financing, Michael Cramer, the bank’s managing and technical director of global metals and mining, told the Society for Mining, Metallurgy and Exploration’s mining finance conference in New York April 29.

Debt capital markets have been a "positive story" as access to the bond markets has increased, he said.

"The unprecedented and prevailing low-yield environment has supported financing migration," Cramer said, noting that just five years ago debt capital markets represented around 10 percent of financing; this has since increased to around 70 percent.

But project finance, equity capital markets and syndicated loans as a source of financing have been on the decline for several reasons, including lower commodity prices and increased capital adequacy requirements, he added.

"The period from 2005 to 2011 was, aside from 2009, a golden period for mergers and acquisitions," Cramer said. "But 2012 ushered in a more subdued deal environment."

Alternative sources of financing include export credit agency funding, industrial development banks, asset base finance, private placements, commodity and trade finance, and vendor and equipment finance, he said.

Non-traditional financing options such as institutional or financial investors, sovereign wealth funds, resource and hedge funds, and product financing involving offtake agreements have become popular alternatives, Cramer said.

"All these financing options are here and will continue to be here," he said. "Metals and mining finance is event driven, such as due to mergers and acquisitions, but uncertainty and price volatility has increased and could continue through 2013."

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