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Emma McPherson

The rock behind

project funding

opper is red hot and Rock Financial building a project and handling the com- papers from a banker’s perspective, so
CAdvisory Pty Ltd is firmly entrenched plete debt process all at the same time,” we know what they want to see and what
in deals involving the base metal. McPherson said. they don’t,” McPherson said.
Decarbonisation has triggered more “The debt process can include ex- “When raising funds for clients the
interest in copper and is fast becoming tensive due diligence requests by the first thing we do is write a short ‘Screen-
widely recognised as the metal most lender [from technical to market to risk ing Paper’ [maximum 15 pages] for the
important to a sustainable green, clean to insurance etc], as well as writing the banker, based on all materials the client
energy future. formal credit application and creating a has provided. That is enough to explain
“The large infrastructure push by the typical project finance cash flow model, the project at a high-level and also in-
US Biden Government will also push de- and then working with lawyers to docu- clude a short table showing financials,
mand for copper, thus our copper clients ment the loan. That’s where an adviser as well as a risk matrix and mitigants,
are busier than ever – and so are we,” can be of best service – we come in and and basic SWOT analysis.”
Rock Financial Advisory director Emma execute the complete process – thus let- Rock Financial has expanded its ca-
McPherson said. ting the client get on with the project.” pabilities beyond debt providing services
“Demand is increasing for copper and McPherson said it was often the case to raising funds for clients from a wider
COVID has triggered interest in copper, that proponents became so ingrained in capital of pool, such as hybrid equity,
as well as it being seen as a green metal. their project that elements of the wider streaming and royalties.
And, against increasing demand we see funding picture were overlooked. “In 2020/2021 we had to utilise this
potential undersupply from the world’s pool of capital for clients whose projects
top copper producing regions.” did not suit traditional commercial debt.
A shortfall in global copper supply has Common mistakes made when In terms of actual services, our core one
been building for some time and it is accessing project financing will remain fundraising, and then corpo-
nearing crisis point at a time the broader rate and transaction support and finan-
metals market is booming. 1. The borrower supplying cial modelling,” McPherson said, adding
Low interest rates sparked by COV- inappropriate or low-quality that companies needed to be aware of
ID-19 factors has afforded the explora- material to the banker, and with the broader field of products available for
tion sector and project developers alike errors project financing.
to attract funding more freely recently. “There are definitely new options/
However, investors remain prudent in 2. Borrowers underestimating the avenues to fund mining projects, com-
selecting commodities and jurisdictions large amount of work involved in pared to traditional bank debt and we
when backing projects, particularly at a debt financing, and trying to do are in touch with funds which will lend
development stage when serious capital it themselves while trying to to the riskier end of the mining market,”
is required to start the life of an asset. build the project McPherson said.
While blue-chip houses boast bal- “Conversely, bank debt has closed to
ance sheets to underwrite new project 3. Borrowers not knowing all the commodities not meeting ESG criteria.
developments, at the other end of town funding options available, thus However, if you do go the traditional bank
as inspiring as it is for a junior to initiate not “shopping around” to get debt route, the metrics they use for debt
a discovery then take it down the chain the best deal sizing, such as maximum debt percent-
to production, the process can often age and minimum debt service coverage
overwhelm a company operating on tight For the best project financing ratios and then ongoing loan monitoring
budgets and boutique teams. advice contact are generally the same.”
Nevertheless, a small company can emcpherson@rockfinancial.net
still achieve its dreams of graduating
from explorer to producer if they can
avoid falling into common pitfalls such “By giving your material to an ad-
as taking on too much. viser we’ll approach it with a new set
“Rio Tinto Ltd or BHP Ltd can do it of eyes, and at Rock Financial, we are
all, however if you’re small company all ex-bankers and have near 50 years
with a small finance team; it’s a lot to be combined experience reviewing these

aUSTRaLIa’S PaYDIRT JUNe 2021 Page 57