What Bankers Look For In Project Loan Applications

INTRODUCTION At the point a company decides to begin mine development and wishes to convince lending institutions that the proposed operation will return their borrowed funds, plus interest, over the terms of the loan, communications between lender and borrower are crucial. The importance of the mine feasibility presentation should not be underplayed, especially as new projects continue to increase in size, complexity, and cost. While the content and emphasis of a report to the lender will vary according to the particular project and type of debt financing sought, there is a general base of information upon which all such studies are built. THE PROJECT'S TECHNICAL ASPECTS Here, the object is to satisfy the lender that he will not be unduly exposed to technical risks as a result of the physical scope of the project. Reserves The feasibility report submitted to financial institutions should include an adequate description of the geologic setting, mineralogy, ore types, and reserves broken down into such recognized categories as proven/probable/possible or measured/indicated/inferred. Rather than a bald statement of reserves, lenders prefer to have detailed information on: History of exploration Drilling, both percussion and core, with core recovery, drill hole spacing, analyses, and continuity of mineralization Bulk sampling, with core assay comparisons Overburden, with stripping ratios Specific methodology of reserve calculation, and Geologic reserves vs. mineable reserves. As a rule of thumb, a lender would prefer to see that reserves in the proven class alone are sufficient to support operations at the design rates until the borrowed funds are repaid. (See also Schreiber above in this Chapter.) Mining The rationale for adoption of a particular mining technique should be presented as well as descriptions and justifications for: Preproduction development Preliminary mine plan, with forecasts of grades and material movements Geotechnical test work which influenced decisions Mining recoveries and efficiencies Major equipment, with type, model, rating life, spares, replacement schedules, utilization, and productivity Manpower requirements and work schedules Design assumptions Ore stockpiling and blending Environmental requirements, and Waste disposal Processing If a new ore body is to be developed or a new process used, it is important to provide details of test work, scale up, and extrapolation factors. A basic process description with a summary of the studies which justify the intended processing route should be included with the following data: