Pitfalls and Pipelines - Philippine Indigenous Peoples Links

50 Pitfalls and Pipelines: Indigenous Peoples and Extractive Industries
Ernst & Young’s February 2010 report represented perhaps
the best attempt at the time to put an optimistic spin
on how the mining industry could “rescue” itself and garner
future profits.
According to Ernst & Young 23 :
“[T]he changes in available capital will continue to increase
the complexity and variety of deal structures, with joint ventures,
partial sales and de-mergers becoming common, along
with alternative financing arrangements, such as partial
equity sales and asset swaps.
“Following the decline of the project finance model, we could
see a return to individual mines being floated, with the
proceeds used for development, and investors sharing in the
profits when the mine goes into production. Off-take customers
could also emerge as key sources of funding to develop
mines, as is already occurring in the junior mining space.”
Thus, asserted Ernst & Young: “Eventually, borrowing will
return to historic averages, but from new lenders and more
diversified pools of resources. These will include multilateral
development agencies, and Middle Eastern and Asian banks.”
There is not much evidence that these significant new
lenders, or more diversified resources’ pools, have been
forthcoming. Although Chinese banks appear still to be in
the market for further strategic mining investments, we are
unlikely to see such transactions brokered at the rate, or to the
extent, they were in 2007-2009. India’s State Bank (SBI) recently
set up a European financing arm in London; however,
its only major minerals-related outlay so far has been on the
Jharsuguda aluminium smelter, being constructed in Orissa
by Vedanta Resources plc.
Certainly some private investors did “respond...to the
[recent] crisis with a combination of equity issuance, corporate
bonds, assets disposals and inward equity investment from
strategic investors” (and this is partly borne out by the figures
provided above). While 2009 may have been “a record year for
follow-on equity issues and corporate bonds,” however, Ernst