To improve miners’ access to financing to procure mercury-free processing equipment, the project will support the improvement/development of financing mechanisms that can tailor to the ASGM sector. Leveraging of existing financial mechanisms and funding opportunities or developing new financial mechanisms requires awareness raising, training and capacity building among potential lenders, the mining service industry, and miners themselves.
The project will establish partnerships with banks and/or other funding institutions, and build their capacity and understanding through training and awareness raising to develop financial products that would tailor to the ASGM sector and for funders to be able to better assess loan applications from miners. In the immediate term, the project aims to educate and train banks and miners on how to use the kind of long-term records miners may already have (such as gold sales records, ore production records, etc.) and how to improve present production records, in an effort to prove the economic case for loans and leases. For instance, to what degree could a mining organization use land tenure (approved mineral concession licenses from the government) as a loan guarantee, because of the inherent value and potential for formality and stability that they represent.
In partnership with banks, government agencies, equipment manufacturers and distributors, and other mining service providers, the project also will train miners and mining cooperatives in record keeping and OECD compliant reporting (e.g. how to report on resource exploration and estimation, production tracking, economic modeling, and full life cycle mine planning) that can increase their potential access to conventional financing options as well as new financial mechanisms and can prove the economic case for loans and leases. Miners and mining cooperatives would also be trained by the project in developing loan/investment applications.
To build the confidence of banks in supporting change through investment (providing financing for upgrading processing plants and reducing mercury use), and at the same time provide miners with insights into the economic opportunities such upgrades can bring about, the project will develop (in partnership with BPPT and APRI) evidence based economic models of processing plant upgrades based on existing best practice mines and chemical-free pilot plants established as part of this project as well as previously established and functioning processing plants. The results will present strong economic arguments (including processing plant payback periods) to miners and bankers to encourage change through investment. The above-mentioned finance opportunities rely on formality thus throughout the project miners will be supported in their formalization processes (Component 3).
In addition, the project will also build the capacity of miners and cooperatives to leverage investments other than from banks. For example, Sharia banking finance presents interesting new possibilities. Sharia banks cannot charge interest, so they instead offer leasing programs, where the lender maintains ownership and borrowers pay down the capital cost of the investment plus a leasing fee. Once the principle is paid down, the borrower takes ownership of the asset (e.g. processing equipment). This model could support mercury free processing; the lender hedges risk by maintaining legal ownership of the asset.
Finally, the project will help miners, cooperatives, banks, and financers assess the value of tailings as a resource and find responsible processing facilities in the country or abroad that may purchase mine waste as it is produced, thereby reducing the landscape burden and risks of long term unmanaged tailings disposal.