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Miners must decrease costs to increase ability to borrow

Keywords: Tags  mining finance, cut costs, James Verraster, Auramet Trading, gold, Society for Mining, Metallurgy and Exploration, Andrea Hotter

NEW YORK — Mining firms need to cut costs in order to increase their ability to borrow money, James Verraster, chief executive officer of Auramet Trading LLC, said.

"The cost of production has in many instances risen so dramatically and the price decline has been so rapid that no one can borrow money," he said, referring in large part to gold miners. "Companies need to figure out how to access financing again, and to do this they need to cut costs."

But the financing markets are experiencing issues of their own.

Some lenders who left the financing space during the 2008 crisis haven’t yet returned, Verraster said April 30 at the Society for Mining, Metallurgy and Exploration’s mining finance conference in New York.

At the same time, the traditional mining banks are in most cases not lending with the same enthusiasm as in 2005-11, he said.

"The equity markets are currently unable to fully accommodate the capital needs of small mining companies," Verraster said. "Non-traditional financing has been possible for some companies, including metal streams, royalty financing and asset-denominated instruments."

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