Introduction
Did you know? There are significant investment opportunities in frontier markets such as Sub-Saharan Africa, which are still untapped. This is where investment banking advisory firms come in to help.
What Are Investment Banking Advisory Firms?
These are independent banking firms, which provide financial consultancy services and help individuals, corporate entities, and governments to raise capital. These investment banking advisory firms perform as agents between security issuers and investors and support new firms to go public. These firms can procure all the applicable company shares at a price estimated by their financial advisors and resell them to the public or sell shares on behalf of the issuer and take a commission on every share sold.
How Investment Banking Advisory Firms Enable Capital Raising for Infrastructure Projects
Infrastructure projects are highly capital intensive, they typically take longer to end, and tend to require high operation costs to facilitate them. Infrastructure projects in Sub-Saharan Africa, which need capital to enable their development, operation, and maintenance include roads, bridges, railway lines, airports, sewage and drainage systems, irrigation projects, telecommunication, generation, distribution, and transmission of electricity.
Investment banking advisory firms can easily help governments in Sub-Saharan Africa in capital raising for their infrastructure projects by partnering with investors from around the world to invest directly in the infrastructure development companies by becoming shareholders. Shareholders are partial owners of the infrastructure development companies and receive a portion of the profits, while the infrastructure development companies receive capital contributions that they don’t need to pay back.
Before advising their clients on matters regarding capital raising for infrastructure projects, investment banking advisory firms need to identify whether an entity would be attractive to investors and whether the loan, bond or equity terms will favour their operations since these investment banks make money by charging fees for their services.
Stages Of a Mining Project That Investors Should Understand Before They Can Provide Funding
When looking at a resource company to invest in, investors are advised to take note of what stage of development their projects are at. Every stage of development suggests a different level of risk, the necessary funding, and future action. There are 4 main stages of a mining project that investors should take note of as explained below;
• Exploration. This is the first stage of the project lifecycleand it’s typically referred to as a greenfield project. This term implies that the project has less previous work accomplished and doesn’t yet have an independently recognized resource according to the international and local reporting systems in that country such as the JORC.
This stage is usually considered the riskiest point of the mining project lifecycle as the availability of minerals is not yet established or it’s poorly defined. This stage can be rewarding especially if a commercial discovery is made and announced. The possibility of getting more investor support can easily increase.
At the exploration stage, the mineral exploring company may decide to apply several exploration methods to better understand their mining project. These techniques can include geological surveys, sampling, and drilling.
• The Development Stage. After a mining company has executed sufficient exploration and geological work, the company may decide to release a maiden resource in line with the country’s mineral exploration laws. When the maiden resource is declared, the mining project is considered to have entered the development stage.
The main catalysts for mining development projects are externally commissioned studies, which include the following;
Scoping study. This is an initial study utilized to define the possible metallurgical process of a mining project and the overview of required mining unit operations. The data used in this study is preliminary in nature and capital and operating costs are typically confined to anaccuracy range of approximately 40%.
Pre-feasibility study. This is a more detailed and informative study, which contains information like ore composition, detailed testwork, and advanced process designs. In most cases, capital and operating expenditures are bound to an accuracy range of approximately 30%.
Feasibility study. These can be definitive or bankable feasibility studies. They are advanced stage works and are based on completed process designs for the mining project. Most mining input constituents are defined with up to 30% of the engineering works completed. Capital and operating costs are bound to an accuracy range of approximately 15%.
Feasibility studies usually come before external funding, partnerships, and binding off-take agreements and this provides concerned parties with a detailed report of the project, a development strategy, flowsheet, chemistries, and the uncertainties involved. This is a central milestone in the mining project development lifecycle.
In addition to these studies, mining companies may as well decide to advance regulatory approvals like permits and licenses.
After all works and pre-requisites are available, the mining company will then make a Final Investment Decision (FID). At the FID, a mining company approves the future development of the mining project. If approved, the mining company will start engineering, procurement, and construction works, which may be accompanied by installation or commissioning based on the execution strategy.
Construction of mining sites involves building roads, processing facilities, environmental management systems, employee housing and other facilities.
• The Production Stage. At this stage, the project is constructed and ready to start producing. The most typical mining methods are underground and surface mining. The mining method is established mainly by the characteristics of the mineral deposit and the limits imposed by safety, environmental, technological, and economic concerns.
The first step in this stage is mineral recovery. This is the process of extracting the ore from rock using various tools and machinery.
The 2nd step is processing. Here, the redeemed minerals are processed through large crushers or mills to isolatecommercially critical minerals away from their respective ores.
After it’s processed, the ore is then transferred to smelting equipment.
The last step in the production stage is smelting. This procedure involves melting the concentrate in a furnaceto derive the metal from its ore. The ore is then poured into moulds, to produce bullion bars, which are then made ready for sale.
• The closure and reclamation stage. The final stage in mining operations is this one. Many mines may produce economically for many years. However, mining is still a temporary activity. Here, several mining companies must formulate their plan regarding closing their mining operations before they officially close with an event as governments require assurances that operators have a plan and the money required to close the mines before closure permits are issued.
The detailed environmental studies, which are carried out during the mining process form a big part of the plan on how the mining site will be closed and rehabilitated. A distinguished mine rehabilitation program has several clearly stated objectives, which may include the following;
Fostering public health and safety.
Lowering environmental effects.
Eliminating waste and hazardous material.
Preserving water quality.
Stabilizing land to safeguard it against erosion.
Creating new landforms and plant life.
Mine closure plans can aim to renovate the mining sites in different ways such as the following;
Remediation. This plan involves cleaning up the contaminated area including water.
Reclamation. Here, the previously dismantled terrain is stabilized, and topsoil and the landscape are replaced to make the land useful again.
Restoration. Here, any part of the ecosystem such as the flora and fauna that was disorganized because of the mining procedure is rebuilt.
Rehabilitation. The former mining site is rehabilitated to a stable and self-rejuvenating state either as it was before the mine was constructed or as a new equivalent ecosystem.
Nearly all activities involved in mining project development need adequate funding. This is where investors are so beneficial in providing the necessaryfinancial backing for the start and completion of different mining projects in Sub-Saharan Africa.
Raising Funding for Your Project as an Entrepreneur
Money can be raised for business start-ups and growth. If you hate raising capital, don’t become a CEO. Raising capital is any CEO’s most important and time-consuming task. Delivering a compelling and organic pitch to potential investors requires practice and finesse. It’s common for entrepreneurs to feel vulnerable when pitching their projects to unknown investors since most of the project details are personal and unheard of before.
If you have mega plans for the future of your project, you may need supplementary funding for business growth. The funds may be used to boost production or buy another company to smoothen business operations or improve cash flow. Regardless of your goals for raising funding, you need to have a strong business pitch that will increase your chances of getting investment capital.
Two Main Categories of Investment for Your Project
An investor may offer either or a combination of the two investment categories as explained below;
Equity investments. Equity investments are made in exchange for partial ownership or equity in the recipient company. Equity investors realize a return by way of dividends and selling their share of the company for more than their original investment in the company. Besides monetary benefits, the holders of equity shares also get voting rights in vital matters of the company.
A business issues shares primarily if it requires funds for growth and expansion. The business approaches the investors through an Initial Public Offering (IPO). The IPO is handled as a primary market wherein the equity shares of the business are offered to the general public for subscription for the first time. Afterwards, the shares are listed on a specific stock exchange and exchange ownership through perpetual trading.
For most retail investors, the two main equity investment options are equity shares and equity mutual funds. Other options include private equity, which includes venture capital. An equity fund is a type of mutual fund, which buys shares of companies on the stock market. The main goal of an equity fund is to invest in businesses that will grow, hence increasing the value of the fund over time.
Equity investments are regarded as of higher risk than debt investments. The higher the risk of investment, the greater return sought by your investors.
Debt investments. Debt investment is when an investor lends money to an individual or entity with the expectation that their borrower will indemnify the investment amount with interest.Debt can either be secured or unsecured. In case a borrower fails to pay back secured debt, they forfeit an underlying asset known as collateral. Unsecured debt doesn’t have collateral attached to it as it’s only backed by the borrower’s creditworthiness.
Types of Investors Who Should Fund Your Project
Investment banking advisory firms have access to different types of investors and can help individuals and companies to get funding from these investors.
Check out different types of investors and how each could benefit your project below;
• Angel investors. An angel investor is a high-net-worth individual who offers financial backing to small startupsor entrepreneurs usually in exchange for convertible debt or ownership equity. These investors are typically the first ones to invest in early-stage businesses, which helps the business to attract future investors as it grows.
Your projects should have a high growth potential to easily attract the interest of angel investors in them.
• Peer-to-peer lenders. These investors offer peer-to-peer lending services or crowdlending services. Their services are a direct alternative to bank loans with the difference that, instead of borrowing from one source, companies and individuals can directly borrow from multiple sources that are ready to lend.
Peer-to-peer lenders usually bid for loans by offering interest rates at which they would lend. Borrowers can accept loan offers at the lowest interest rate. Internet-based platforms are used to match lenders with borrowers. Peer-to-peer lending companies usually operate online and attempt to operate with lower overhead and provide their services at more affordable rates than most traditional financial institutions.
• Personal investors. These are people who invest their money in financial markets and aren’t doing so on behalf of a financial institution or operating as professional investors. Personal investors don’t need any credit or proven financial history like business lenders and bank financers do, which helps save time. Personal investors are generally concerned about the profits they will earn in the future of business and not how the business has performed in the past.
• Banks. When money is deposited in banks, these banks can invest that money in small businesses, solar farms, derivatives and securities that need the money at the moment. The lenders need to repay the borrowed funds at a higher interest rate than what’s paid to depositors.Banks can do this through a specific banking division called investment banking, which is related to the creation of capital for other individuals, companies, and governments.
Banks often provide capital market services for investors and corporations. The capital markets are a marketplace, which matches businesses that require capital to fund their growth or projects with investors having the capital and in need of a return on their capital.
• Venture capitalists. These are private equity investors who provide capital to companies with high growth guarantee in trade-off for an equity stake. This could be in the form of funding startup ventures or backing small-sized business ventures that wish to expand but lack entry to equities markets.
Conclusion
Invest in projects located in Sub Saharan Africa today!
There are significant investment opportunities in frontier markets like Sub-Saharan Africa.
Most of the assets in these markets are undervalued because their owners lack experience in raising funding through global capital markets.
This is why investment banking advisory firms like ours, work closely with governments and private companies in these markets to help them raise capital through LBO’s, Reverse Mergers, Bond Issues, Crypto projects, and more.
