CAPE TOWN (miningweekly.com) – Junior mining companies have been urged to seek new ways of raising exploration and project development finance, after the financial crisis has limited the sector’s access to debt financing.

Nedbank joint head of mining and resources, Mark Tyler, said on Tuesday that before the financial bubble burst last year, 50% of mining project finance was in the form of debt.

However, owing to the strain on the global financial institutions, the reduced borrowing capacity of the banks and the volatility of the markets, raising finance by means of debt mechanisms was proving extremely difficult for junior miners.

Coupled with this, was the fact that Nedbank believed that the recession would be long and tough and many of the measures that had been put in place, in terms of stimulus packages, would take a long time to have an impact.

As a result, Tyler stated that junior miners would have to seek new ways of raising exploration and project development finance.

One of the methods that juniors could use to raise such finance would be to borrow from the major mining companies, suggested Tyler.

“The major mining companies, even in the current financial crisis, have large pools of liquid capital, which could be accessed by junior miners,” said Tyler.

He added that the major mining companies had larger pools of liquid capital than some of the banks.

The advantages of providing financing to juniors would be good returns on cash, the ability to acquire metal at low cost, the ability to leverage “evaluation” skills, and there would not be a need to get involved in management.

The advantage for juniors of raising finance through the majors was the fact that they would be able to acquire capital from a company that understood the business of mining.