Investors see opportunity as miners seek alternative finance

Thu Oct 31, 2013 6:01am EDT
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* Royalties, streaming attract large investors

* Audley Capital's Julian Treger takes CEO job at Anglo Pacific

* BlackRock sees potential for more royalty investment

By Karen Rebelo and Clara Ferreira-Marques

BANGALORE/LONDON, Oct 31 (Reuters) - From fund giant BlackRock to activist shareholder Julian Treger, mining investors seeking predictable returns and better cash flows are stepping into mine finance.

Mine developers often face funding gaps because of a shortage of bank finance and lacklustre public markets. This has left alternative sources of financing - royalty deals, stake sales or debt that converts into shares - accounting for an increasingly significant proportion.

Among the alternatives are mine royalty agreements - favoured by BlackRock and the focus of UK-listed Anglo Pacific , which Treger is now running. These deals offer cash in exchange for a share of future revenues.

"The scarcity of capital today... has created a huge opportunity for non-traditional sources of finance," said Catherine Raw, portfolio manager for the BlackRock World Mining Trust. "That is where we step in."

For investors, a royalty deal means regular future payments and the ability to benefit from a rise in commodity prices, an increase in reserves or better production capacity. All with arguably less risk than a share investment and no exposure to pitfalls like poor dividends, or cost inflation.   Continued...