The mining industry is facing significant challenges due to underinvestment, which threatens to stall the global energy transition. Despite favourable commodity prices, exploration budgets have remained subdued, reflecting wider economic challenges. Companies can explore various financing options, including equity, debt, and alternative financing, to support their operations. However, capital availability remains a pressing risk, particularly for junior mining companies.

The report highlights:

• Underinvestment Concerns: The mining industry has faced a decade of underinvestment, which threatens to stall the global energy transition. Despite favourable commodity prices, exploration budgets remain subdued, impacting future resource availability.
• Critical Mineral Demand: Demand for critical minerals is expected to more than double by 2030, requiring substantial new mining investments. The industry needs $2.1 trillion in new investments by 2050 to meet Net Zero emissions targets.
• Financing Challenges: Junior mining companies face difficulties in securing funding due to monetary tightening and conservative investor sentiment. Capital raised by these companies has dropped significantly, highlighting the need for innovative financing models.
• Alternative Financing Options: Mining companies can explore various financing solutions, including equity, debt, and alternative financing like royalties and streaming agreements. These options offer tailored solutions that align with the cash flow profiles and risk characteristics of mining projects.
• Accounting Complexities: Each financing structure comes with its own accounting challenges, such as valuation of reserves, impairment testing, and revenue recognition. Companies must carefully manage these complexities to ensure accurate financial reporting.

 

These points highlight the pressing need for strategic investment and innovative financing solutions to support the mining industry's role in the global energy transition.

In these times of economic turbulence and policy uncertainty, BDO is here to help you navigate the challenging demands on your business. We can assist you in establishing or improving your strategic investment and financing solutions to support the mining industry's role in the global energy transition.

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