European Equity Investors Go Small

Written by Daniel Terry on . Posted in Industry, News & Reports.

Despite the fact the economic outlook looks gloomy across the European Union, the low valuations of European small and mid-cap stocks have caught the eye of many an investor, as their relatively low valuation has ignited long-term interest. Whilst recent banking upheaval promoted thoughts of a credit crunch, and recent anxieties regarding an economic slowdown favoured “defensives over cyclicals” *, the smaller European companies have seen valuations sink.

*Defensive stocks are those companies that are recognised to have defensive earnings, that do not really equate to the economic cycle. Such companies usually supply necessities that consumers will not cut back in times of a downturn in the economy. These necessities are typically power, such as electricity and gas, healthcare and certain foodstuffs. 

 *Cyclical stocks are those companies that are recognised as being more exposed to the economic cycle. Thus, when economic conditions are on a downward cycle, these companies are likely to see a drop off in earnings, but if economic conditions are on an upward cycle, then conversely earnings will increase. Such companies are recognised as being in the travel, construction and luxury goods sector.

Many European focused investors suggest that while the current economic slowdown persists, the current price of SMIDs (Small-Mid Capitalisation), have already had much of the risk factored into their price. The thinking therefore is that should Europe enter into a prolonged recession, SMIDs will have less downside than the larger companies or stocks.

In the AI (Artificial Intelligence) sector, breakthroughs in generative AI (algorithms that can be used to create new content such as images, text, simulations, video and audio), have in recent months kept investors focused on mega-stocks. However, from an AI angle those SMIDs that have available resources to invest in AI will hold an advantage over those who lack the same resources.

Expert analysts suspect that European economic data will get worse over the next three months especially as data recently released shows the EuroZone suffering from a technical recession, where there has been negative growth in real GDP in two consecutive quarters. When the data shows an economic upswing across the EuroZone, the revival of small caps will begin, and the same analysts suggest that this will provide a rich hunting ground for those long-term focused investors.

Interest Rate Hike of 0.5% by the Bank of England 

Written by Daniel Terry on . Posted in Industry, News & Reports.

On Thursday 22nd June 2023, defying market predictions, the Bank of England put up interest rates by a full half percentage point, to 5%, the highest level since 2008. Both the Prime Minister Rishi Sunak and the Chancellor of the Exchequer Jeremy Hunt backed the Bank of England to the hilt, confirming Andrew Bailey’s (Governor of the BOE) uncompromising attack on inflation. 

Apparently recent data showed that there were stronger inflationary pressures on the UK economy, thus the Bank of England’s Monetary Policy Committee (MPC) voted seven to two to increase interest rates by 0.5%. The Bank of England is committed to their policy of reducing interest rates to 2% by raising interest rates 13 times since December 2021.

The Bank of England’s expectation that inflation would fall in May failed to materialise with inflation staying at 8.7% well beyond and above the intended target of 2%. Many experts and analysts are suggesting that the rate rises are doing more harm than good and figures confirm that inflation in the UK is the highest of any G7 country.

Such interest rate increases have pushed lenders to reprice their “Fixed Rate” mortgage deals pushing up prices whilst at the same time putting increased pressure on homeowners, which may result in a swathe of repossessions. The Chancellor, having already announced there will be no help for homeowners, did a u-turn on Friday and announced an agreement with lenders where homeowners struggling with repayments would be given a 12 month grace period before any repossessions take place. This agreement encompasses mortgage holders extending their current agreement or moving to an interest only plan.

Due to interest rate increases, the circa two million mortgage holders on tracker rates have seen their monthly outgoings rise every six weeks since December 2021. UK data shows that there are six million households tied to fixed rate mortgages with 800,000 due at the end of the year 2023. We can only hope the Government’s and the Bank of England’s monetary policies can finally start to eat away at inflation avoiding a mortgage time bomb at the end of 2024.

inflation

Inflation – a Problem or an Opportunity for Business?

Written by admin on . Posted in featured post, News & Reports.

Banks were faced with the prospect of deflation and falling prices in 2015, which can prove problematic for consumer-facing businesses. Deflation can encourage consumers to delay purchases, in the expectation that prices will fall. This can negatively impact or serve implications for the value of firms’ stock holdings – they run the risk of holding inventories that are going down in monetary value.

However, modest inflation can encourage buyers to buy now, rather than delay and mask price changes for a brand. If inflationary pressures force all brands/companies to adjust prices, a price adjustment may go unnoticed. These are considered attractive to consumer good companies.

In contrast, a spike in price inflation is a serious concern to businesses – planning and investment decisions become harder, and it may be associated with recessionary tendencies in an economy, leading to reduced consumer spending. Some firms may hold onto their stocks for longer in anticipation that they will achieve higher prices tomorrow.

Handling Inflation

To an extent businesses can shield their customers from the effects of cost-based inflation, however, this does vary and depends on the size and branding of the company.

  • Larger companies may have resources to smooth out prices and hedge the costs of key inputs.
  • Smaller companies without a financial buffer may struggle to smooth out pricing, especially if their main input cost is scarce. For example, construction firms that rely on labour – inflationary pay increases can’t be stockpiled by the business in advance.
  • Strong brands aim to maintain a constant base price for key products. This enables brands to position themselves in comparison to their competitors – if the product price varies, consumers may receive mixed messages about the brand, especially when the price indicates quality level.

Consumer good companies can use several methods to manipulate prices without changing the “list price”.

  • The regularity of special offers and discounts is reduced.
  • Suspension of formulation and/or sizes that are less profitable.
  • Reduction of supply to channels which achieve lower margins.
  • “Shrinkflation” – some consumer good companies reduce pack sizes, rather than raise prices.

How can IntaCapital Swiss assist businesses?

At IntaCapital Swiss, we offer financial services that facilitate funding for businesses and projects across the world, including the United Kingdom. We have a range of facilities available for those seeking loan values between £2m – £100m.

With our expert team of financiers, we can offer new projects and businesses immediate working capital across a wide variety of industries, subject to an adequate business plan and passing our due diligence.

To apply, complete our online application form – one of our Client Relationship Managers will review and get in touch to discuss your application. To find out more about IntaCapital Swiss SA facilities, please see here.

How is the Government preparing to help UK businesses?

Written by admin on . Posted in featured post, News & Reports.

Emergency support measures introduced by the UK government during the Covid 19 pandemic are being replaced by a £3bn-a-year loan guarantee scheme, backed by UK ministers. This new scheme will come with tighter conditions for those borrowing, unlike the easily accessible finances available during Covid – which resulted in billions of pounds lost in fraud. Businesses under the scheme will be expected to offer personal guarantees for loans administrated by the banks – meaning UK businesses will be liable for defaults on repayments ahead of triggering the government guarantee.

The Policy

Under current proposals, the guarantee is likely to be set at 70% of the value of the loan and will run for at least two years. The policy builds from the existing recovery loan scheme; however, the new guarantee is unlikely to be up and running before the recovery loan programme ends in June. In contrast to the pandemic “bounce back loan” scheme, this new policy will set an annual cap of £3bn on the amount banks are able to lend through the scheme. In addition, the rates will be offered at market rates, as opposed to the fixed low-interest rates seen during the pandemic bounce-back scheme.

Lenders are expected to offer loan guarantees of up to £2m to businesses under the scheme. Normal conditions are encouraged by Treasury officials to restore the business banking market – despite fears among groups that large lenders are becoming less active in the sector.

How can IntaCapital Swiss assist UK businesses?

At IntaCapital Swiss, we offer financial services that facilitate funding for businesses and projects across the United Kingdom. We have a range of facilities available for those seeking loan values between £2m – £100m.

With our expert team of financiers, we can offer new projects and businesses immediate working capital across a wide variety of industries, subject to an adequate business plan and passing our due diligence.

To apply, complete our online application form – one of our Client Relationship Managers will review and get in touch to discuss your application. To find out more about IntaCapital Swiss SA facilities, please see here.

The top 4 risks to UK businesses in 2022

Written by admin on . Posted in featured post, News & Reports.

2021 was a year that changed the future of businesses, not only in the United Kingdom but on a global scale. From many retail businesses and hospitality venues closing to large corporate companies changing their business models to allow their employees to work from home.

With such a turbulent year for industries in 2021, what are the 4 top risks to UK businesses in 2022?

Business Interruption

Over the last 24 months, businesses have had to acclimatise to both Brexit and the Covid- 19 pandemic, impacts include advanced import and import costs, cashflow challenges, and supply-chain disruption. The epidemic saw numerous businesses forced to close their doors either temporarily or permanently, those in the retail and hospitality especially.

Cyber Crime

The Covid-19 pandemic saw a large-scale move to remote working which numerous businesses are still embracing 24 months on. Moving workers offsite introduces new access points for vulnerability, and the geographical spread of staff translates to thousands of routers and networks, amplifying exposure across a company’s IT ecosystem. Cybercriminals have exploited these vulnerabilities, plus the increased reliance on videotape conferencing apps, for marketable gain through conditioning similar to social engineering styles and phishing emails.

Climate Change

Climate change was the biggest challenge in 2021, being a prominent issue in the minds of numerous business leaders. The COP26 conference in Q4 2021 brought ‘loss and damage’- the expression used to describe the destruction being wrought by the climate extremity- under the limelight and this will probably remain high on the agenda at the COP27. Away from the egregious environmental impact, climate change can impact many companies’ business models and pose a wide disruption to organisations.

Legislation Changes

Brexit related legislation and regulation for businesses continue to evolve, from importing and exporting, to transporting goods to the EU, swapping data, and reclamation of people from outside the UK. Organisations have naturally also demanded to keep up with changing Covid-19-related regulations and measures and understand their liabilities in keeping workers safe.

How can IntaCapital Swiss assist UK businesses?

At IntaCapital Swiss, we facilitate funding for business and projects across the United Kingdom. With our expert team of financiers, we can offer new projects immediate working capital, subject to passing our due diligence, whether they fall under commercial, residential, infrastructure or leisure.

Find out more about how IntaCapital Swiss SA can facilitate multiple different facilities here.

What are some key funding facility terms and what do they mean?

Written by admin on . Posted in featured post, News & Reports.

Financial facility terminology can be complex and difficult to understand, which is why we have explained some of our main facilities in more simple terms below:

Collateral Transfer

Collateral Transfer is the transfer of assets from one party to another, which is frequently accomplished through the use of a Bank Guarantee. The Provider agrees to issue the Bank Guarantee to the beneficiary in exchange for a rental or return, known as a Contract Fee. Continue reading…

Bank Guarantee

A bank guarantee is a type of financial protection provided by a lending institution. The bank guarantee means that the lender will ensure that a debtor’s liabilities are met. In other words, if a debtor does not pay his or her debt, the bank will cover it. A bank guarantee allows the customer (or debtor) to purchase goods, purchase equipment, or obtain a loan. Continue reading…

Bank Guarantee Examples

  • A payment guarantee ensures a seller that the purchase price will be paid on a specific date.
  • An advance payment guarantee serves as collateral for reimbursing the buyer’s advance payment if the seller fails to supply the specified goods per the contract.
  • A credit security bond serves as collateral for loan repayment.
  • A rental guarantee serves as collateral for rent payments under a rental agreement.
  • A confirmed payment order is an irrevocable obligation in which the bank pays the beneficiary a predetermined amount on the client’s behalf on a specific date.
  • A performance bond serves as collateral for the buyer’s costs if services or goods are not delivered on time.

What is a Line of Credit?

A line of credit (LOC) is a predetermined borrowing limit that can be accessed at any time. If a borrower has an open line of credit, he or she can borrow money whenever necessary until the limit has been reached, as the money is repaid, it can be borrowed again.

LOCs are agreements between financial institutions — usually banks — and customers which stipulate the maximum amount of loans the customer can take out. If the borrower does not exceed the maximum amount (or credit limit) set in the agreement, they can access funds from the line of credit at any time. Continue reading…

What is a Raised Line of Credit?

Under the Collateral Transfer facility, bank guarantees can be used by the recipient to obtain lines of credit from a bank. Normally, a bank will not object to offering credit against a Bank Guarantee obtained in this way. An amount as high as 100% of the face value may be lent, less the advance on interest and bank fees. It is presumed, however, that lending rates range from 80-90% of face value. Continue reading…

How can IntaCapital Swiss SA assist?

At IntaCapital Swiss, we facilitate funding for many projects across the globe. With our expert team of financiers, we can offer new projects immediate working capital, subject to passing our due diligence, whether they fall under commercial, residential, infrastructure or leisure.

Find out more about how IntaCapital Swiss SA can facilitate multiple different facilities via our website: https://intacapitalswiss.com/news/construction/construction-funding-via-collateral-transfer/

The rising cost of building materials and how it’s affecting the Construction industry

Written by admin on . Posted in News & Reports.

Why are the costs of building materials increasing?

The fact that global construction demand has been increasing at an unprecedented rate, combined with the pandemic and logistical issues, has led to unprecedented shortages, delays, and higher construction costs across the board. The cost of materials on construction sites has reached an all-time high as a result of three major factors that contribute to the price hikes.

There are several factors that are challenging the supply chain and resulting in an inflationary situation, starting with strong demand and limited distribution. Among the factors responsible for the strong demand for our products is the fact that countries around the globe are investing in the construction of infrastructure as a way to revive their economies. In response to the pandemic, governments are repairing and rebuilding in order to respond better to the crisis. This increases the demand for construction materials.

Secondly, the producers of these building products have been experiencing reduced productivity due to health protocols and government regulations, which has caused work stoppages in the past and continues to happen today.

A shortage of shipping containers is also a problem. Construction materials may take weeks to arrive on a boat, even if they are produced on time. Because of Covid, ports around the world had to shut down for weeks, including some of the largest in the world. What is the explanation for this? The ports are unable to process the cargo at the current rate of arrival. Cargo rates have risen rapidly, notably between Asia and North America, due to a stockpile of cargo containers mixed with global demand.

The following are some of the key factors that have contributed to such significant increases in construction costs over the last year:

  • HGV driver shortage and longer than usual lead times
  • High demand for materials in other parts of the world
  • Panic buying and stockpiling of materials by builders and contractors
  • Reduced supply levels due to Covid restrictions and robust demand for new homes, construction, materials, and labour

What do the rising costs of building materials mean for the construction industry?

The rise in construction costs puts additional strain on contractors and developers, as well as lenders, during the construction phase. Contingency budgets have already been maxed out in the relatively early stages of some developments simply to cover the cost of increased materials and labour.

Rising costs are especially concerning for contractors who signed fixed-price contracts prior to major construction cost increases. They are in pain because they are unable to apply for additional payments under the terms of a fixed-price contract.

There have been examples of developers and contractors modifying their contracts and developers making additional payments to ensure that their contractor remains solvent and able to complete their development.

Ultimately, it would usually be more cost-effective to pay an existing contractor more than it would to let them become insolvent and then attempt to tender the remainder of a part-built development in the current market.

What alternative funding facilities are available for the construction industry?

Typically, companies will obtain bank loans for their projects, and sometimes funding from private equity (PE), Venture Capital (VC) and in some cases, sovereign wealth funds. However, with increasing restrictions and criteria to be met by banks, companies are seeking funding from elsewhere. Those who have strong business plans could benefit from our financial facility, Collateral Transfer. This facility makes use of Bank Guarantees which are utilised as collateral or security to obtain loans and lines of credit from banks and non-traditional lenders. However, construction companies wishing to benefit themselves from the Collateral Transfer Facility will have to produce a viable business plan with a strong exit strategy. 

How can IntaCapital Swiss SA assist the construction industry?

At IntaCapital Swiss, we facilitate funding for many construction projects across the globe – ranging from supporting the purchase of materials, equipment, land acquisition to general construction costs. With our expert team of financiers, we can offer new projects immediate working capital, subject to passing our due diligence, whether they fall under commercial, residential, infrastructure or leisure.

Find out more about how IntaCapital Swiss SA can facilitate multiple different facilities via our website: https://intacapitalswiss.com/news/construction/construction-funding-via-collateral-transfer/

Beware of the Crypto Con

Written by Jenny Bowler on . Posted in News & Reports.

Remember Bernie Madoff? The financier from Wall Street who perpetrated the biggest Ponzi Scheme ever… He managed to defraud investors of USD17.5 billion and if you throw in the fictional interest, the total rises to USD65 billion. But conning the public and institutions is not just the purview of fiat currencies. Indeed, cryptocurrencies are beginning to have their fair share of Ponzi Schemes. 

A huge selling point for cryptocurrencies is that they are (not all) decentralised, which means there is no oversight or third-party involvement. It is a peer-to-peer transaction. This leaves clients/investors open to Ponzi schemes unless proper due diligence takes place. 

One Coin 

A native of Bulgaria Ruja Ignatova launched One Coin Ltd in late 2014. By 2017 they had over 3 million investors and had raised USD15 billion. Basically, One Coin was multi-level marketing or pyramid selling. They created a company called One Life, which all investors joined. The company was sold as “one big family”, and even had their own hand signals. 

The concept encouraged investors to buy educational packages that taught financial freedom. This was highly popular as Ignatova promoted her company on the back of the 2008 financial meltdown, blaming banks and governments for the global debacle. Investors were encouraged to introduce other investors to purchase educational packages and of course be paid accordingly. 

The cost of these packages was anything from USD100 to USD150,000. The money spent on these packages would be exchanged for One Coins which were guaranteed to increase in value. To exchange one coin for currency, there was an in-house One Coin Exchange, which never actually worked. There was also no blockchain, which is a fundamental part of any cryptocurrency. The in-house market had daily selling limits based on the packages that had been invested in or bought.   

Many countries’ financial authorities issued warnings on One Coin. These warnings came much too late despite the many complaints and newspaper articles decrying One Coin. Ruga Ignatova disappeared in 2017 and has not been seen since. One Coin has been exposed as a Ponzi scheme and many investors have lost their money. 

BitConnect 

Once again, a crypto Ponzi scheme has been revealed to the world, defrauding investors to the tune of USD2 billion. Glen Arcaro, BitConnect’s director and main board director, admitted to earning USD 24 million from the scheme, and faces up to 20 years in jail.   

BitConnect arrived on the market in 2016. The underlying concept was to allow users/traders to lend the BitConnect Coin for a specific period of time in return for an interest payment. BitConnect’s offer was linked to their trading platform which utilised a controversial trading bot to lock in profits. The returns averaged 1% daily, (360% p.a.), which screamed high yield and Ponzi scheme. Following its collapse in January 2018 the SEC on Wednesday 1st September 2021 charged the owners/directors with defrauding their clients of USD2 billion. 

Conclusion 

It is understandable that cryptocurrency users enjoy the benefits of peer-to-peer trading and the joys of a decentralised currency. However, as seen from the above this market is open to abuse such as Ponzi schemes and money laundering. The cryptocurrency market will have to improve on their self-regulation or face the distinct possibility of government regulation on a global scale. Indeed, the chair of the Financial Conduct Authority (FCA), recently said, “cryptocurrencies issuing digital tokens need to be brought firmly within our reach”. 

In decade after decade, it has been proven that Ponzi schemes attract many investors through their own greed and ignorance of the market. When a return is offered at 1% per day, that’s 360% per annum, investors should be exceptionally wary. If a cryptocurrency is operating without a blockchain, that screams fraud.  

It is up to the individual to do their fact-check and due diligence. Do not be blinded by profits. Keep a sharp look-out for anything you feel is not quite right. If you see anything that makes you uncomfortable do not invest or take you money out. History is littered with financial corpses that have not done their due diligence or ignored simple warnings. 

What is a Line of Credit and how does it work?

Written by Jenny Bowler on . Posted in Credit Lines & Monetisation, News & Reports.

A line of credit is a specific type of loan from a bank or other lending institutions and is offered to companies and corporations. It is a loan facility that is not often made available to individuals. 

We have been asked on a number of occasions what is a “Transfer Line of Credit”? Many think that one company’s line of credit can be used by another company. This is a complete fallacy. Any loan offered by a bank is subject to due diligence on the borrower. A company can only get a line of credit on their own merit. It is NOT transferable.

As a point of interest, a line of credit differs from a standard or straight loan. A standard loan like a line of credit will have an expiry date. A standard loan will have set dates for partial repayment of principal and interest, up to and including the expiry date. The difference to a line of credit is explained in paragraph 2 below.

How does a Line of Credit work?

There are two types of lines of credit, secured and unsecured. Unsecured indicates that the borrower has not put up and security or collateral. Whereas secure lines of credit show the borrower has put up security or collateral to obtain a line of credit.

A Line of Credit will have an credit limit and an expiry date. There will be set dates for partial repayments of principal and interest. Unlike a standard loan the borrower at any time can keep borrowing up to the credit limit.

A company will have to apply to their bankers or lenders for a line of credit. The company in question will have had to have an account with their bank for a number of years. As mentioned above the bank will have to carry out strict due diligence procedures.

Sometimes a company will apply for a straight loan to cover a certain aspect of their business. They may have a shortfall in cash flow and need a loan to cover day to day expenses such as salaries.

However, a more complex loan application will cover different aspects of the business model.

This is where a line of credit can prove extremely useful. The company may need loans for upgrading their factory. They may need loans for letters of credit, as their business relies on imports. 

The company is therefore able to use a line of credit to borrow for all aspects of their business. Importantly, the lender can keep track of each borrowing. The lender can ensure that their loans are being utilised in the correct areas.

How easy is it to get a Line of Credit?

It is a known fact that banks have been cutting their loan books for a number of years. Companies applying for lines of credit are being declined en masse. Some banks have not increased their lending for 13 years. The lack of credit facilities is endemic throughout the world. Please see the following article, you will be stunned,

Do Not Despair

If you are a company who have had their Line of Credit applications rejected do not despair. Here in Geneva, we are fortunate to be one of Europe’s leading experts in Collateral Transfer. Collateral Transfer utilises Demand Bank Guarantees to obtain loans and lines of credit.

IntaCapital Swiss SA, Geneva has been Europe’s leader in the Collateral Transfer market for over a decade, and our highly popular Collateral Transfer Facility has made loans and lines of credit available to numerous companies. To find out more, enquire today.

Finance for Mining

Written by Jenny Bowler on . Posted in Industry, Mining, News & Reports.

Investing in Sustainable Mining

The International Finance Corporation (IFC), aids mining operations across the globe via various finance methods, focusing on mitigating social and environmental risk. It is hoped that come 2023 – 2024 that the amount of debt (bonds) and equity investment will increase in the mining sector, especially from green financing as they reduce their carbon emissions and adopt new technologies.

Start-up mining is the high end of risk in the mining sector, followed closely by junior miners. Some venture capital firms are looking at start-ups and junior miners who are offering more sustainable and environmentally friendly mining opportunities. The use of new technology such as data analytics combined with new sensor technology help understand the many variables a start-up or junior miner is confronting.

Raising Capital in the Mining Sector via ICS

At IntaCaptial Swiss we have provided many financial services and advice to our impressive list of clientele – ranging from bond issues, mergers and acquisitions, structured finance, IPO’s and acquisitions, as well as raising capital through the means of Collateral Transfer.

We demonstrate the ability to provide access to loans and lines of credit utilising our financial model, the Collateral Transfer Facility. Collateral Transfer as the name suggests is the transfer of collateral from one company to another. In this instance, to provide access to credit facilities, the collateral is a Demand Bank Guarantee.

Collateral Transfer and Mining

Many mining companies, big, small or aspiring may not have heard of the term Collateral Transfer. This is probably because the term used in everyday life is Leased Bank Guarantee, which is technically incorrect but has become embedded in the everyday global “financial speak” when referring to Collateral Transfer.

For a company to obtain a Demand Bank Guarantee they must sign a contract referred to as a Collateral Transfer Agreement with a Provider. Providers tend to be sovereign wealth funds or hedge funds, who because of the return, are happy to lend part of their balance sheet into the Collateral Transfer market.

IntaCapital Swiss work hand in hand with many providers and are therefore able to offer companies who are unable to find credit facilities access to Demand Bank Guarantees.

Over the years, IntaCapital Swiss has facilitated corporate loans for many mining ventures across the globe. The funding has benefited many aspects of mining, ranging from the discovery of precious metals to raising capital to purchase machinery for extraction processes and the infrastructure involved. We welcome companies seeking capital to grow their projects, whether that be expansion to another country or increasing operation, to get in touch. Our financial advisors will explain the requirements and the processes involved to raise the capital your project needs.

The mining industry as a whole is involved in the extraction of various geological materials such as iron ore, copper, gold, silver, aluminium, platinum, palladium, chromite, lead-zinc, coal, bauxite and various precious stones such as diamonds and emeralds. The three most-mined minerals in order are coal, iron ore and bauxite.

Mining finance will differ from mine to mine as there are five different types of mining. These types of mining are classified as Mountain Removal, Highwall Mining, Dredging, Open Pit Mining, Strip Mining and underground mining. We will deal with each individual type of mining, followed by an overview of global mining finance.

The Monetisation Process

To explain the monetisation process in further detail… In the world of Demand Bank Guarantees, the format or verbiage contained therein dictates the end use of the instrument. For example, it could be a customs guarantee where the verbiage confirms that customs duties will be paid in the event the applicant, (the company requiring the goods from customs and deferring duty to a later date) will be paid.

Therefore, when a Demand Bank Guarantee needs to be monetised it will contain verbiage that’s is absolutely precise so that lenders know they are 100% covered in the event of default by a borrower. All Demand Bank Guarantees are payable on first demand, which means in the event of a non-repayment, the lender can claim from the issuing bank, by producing the requisite documentation showing the lender is in default.

Hence, a company with a Demand Bank Guarantee on their account, can request credit facilities from their bank, offering the Demand Bank Guarantee as security for a loan or line of credit. It has been known for banks to refuse a loan application where a Demand Bank Guarantee is being offered as security.

On the odd occasion when a loan or credit line is refused, IntaCapital Swiss can make available third-party lenders. These lenders are happy to take the place of the beneficiary’s bank and make available credit facilities using the Demand Bank Guarantee as security.

Mountain Removal Mining

Mountain removal mining (MTR), also known as mountaintop mining (MTM), can be found at either the summit or the summit ridge of a mountain. The overburden is removed in order to access the mineral, in this case mostly coal, below. The overburden is referred to as material, rock etc that lies above what is known as an area that can be economically exploited. If the overburden cannot be replaced, it is moved to neighbouring valleys, which are referred to as valley fills or holier fills

The main source of finance for mountain removal mining came from banks. Many well-known banks financed this form of mining, Barclays Bank, BNP Paribas, Wells Fargo and JP Morgan to name but a few. However, strong pressure from environmentalists and harsher regulation in the mining industry stopped this controversial mining sector in 2015 as banks pulled finance and mining companies withdrew from mountain removal mining.

Highwall Mining

Highwall mining is where underground mining and surface mining are linked together by extracting minerals in open-pit mines from the exposed horizontal seams. This form of mining is achieved through a mobile system which utilises a continuous miner controlled by an operator. A retractable conveyor system is utilised together with a vertical conveyor that readies and stacks the coal for onward transportation.

Dredging

Dredge mining or dredging is a process whereby placer deposits are excavated by utilising floating equipment. Placer deposits or placers are desirable and valuable minerals. They are usually formed during the sedimentary period from a source rock. Examples of dredging equipment that remove placer are the bucket-line or the bucket-ladder.

A bucket-ladder is the process of removing deposits from a riverbed or any waterbed by utilising a series of buckets that are mounted on an endless loop. They scoop up materials from the waterbed, which are accordingly deposited on a barge via a chute.

Open-pit Mining

Open-pit mining, also referred to as opencast mining, is recognised as a surface mining technique. It is the process whereby minerals are extracted from an open pit in the ground. This type of mining is utilised when commercially viable mineral deposits are found close to the surface. To identify where the deposits are located, probes holes are drilled into the ground then their locations transferred to a map.

A typical version of an open-pit mine that can be seen in everyday life is a quarry. Many of the deposits are used as aggregate for construction purposes. The largest open-pit mine in the world is the Bingham Canyon Mine located in Salt Lake City, Utah, USA. This produces copper, and is over 1.2km deep, and about 4km wide.

Strip Mining

Strip mining is the process whereby a thin strip of overburden located above a desirable deposit is moved and dumped behind the deposit. Once the deposit has been removed or mined, a similar second trip is created and that overburden is dumped into the first strip. This process continues until all the deposit has been mined.

Underground Mining

All the above definitions of mining are related to above-ground mining. Underground mining is utilised when desirable deposits, (such as coal), are far too deep for surface mining techniques. In order to extract or mine the deposit miners open shafts or portals that will intercept deposits such as coal seams. The deposits are removed and conveyed to the surface by conveyor belt. The entry to an underground mine from the surface is usually via a tunnel referred to as a decline, adit or shaft.

Currently the deepest mine in the world can be found south-west of Johannesburg in South Africa and is known as the AngloGold Ashanti’s Mponeng gold mine. Currently the depth at which this mine has reached is in excess of 4km. The second deepest mine is also located in South Africa in Gauteng Province. Referred to as the Driefontein Mine, this mine has reached depths of 3.42km.

Mining Finance

Mining finance is highly specialised and banks and other financial institutions dedicate whole departments or subsidiaries to financing this sector. Mining takes place all over the world from South America to Africa, to Canada, the USA and Australia. Therefore, approval committees for loans and investments into the mining industry will not only have to look at the borrower’s historicals, balance sheets and business plans, but for certain countries, they will analyse political risk and any other country factors that may impact the lending/investment process.

There are many investors and lenders in the mining industry. Such investors/lenders are banks, hedge funds, sovereign wealth funds, private equity funds, vulture funds and venture capital to mention but a few. Today, London remains the global centre for raising capital for investment in the mining industry, where there is easy access to both retail and institutional finance. The industry’s global representative body, the International Council on Mining and Metals (ICMM), is based in London, along with British firms Anglo American and Rio Tinto. Non-UK miners who also base themselves in London are the Swiss conglomerate Glencore, Polymetal (Russia), Antofagasta (Chile), and BHP (Australia).

These companies make up the biggest mining companies in the world and because of their size and balance sheets can raise capital direct from banks or bond issues in the capital markets. However, how do the smaller mining companies and start-ups obtain financing?

Financing Mining Start-ups and Junior Miners

Access to capital from banks by mining start-ups and junior miners is almost non-existent. Therefore, many of these miners have turned to those companies financing larger miners, hedge funds, sovereign wealth funds, state-owned agencies, export credit agencies and private equity. Also, since banks are not funding this sector, specialist mining funds have appeared, which like all funds have an internal hurdle that the client has to clear.

In order to clear this hurdle, the fund will offer debt and some alternative financing like royalty financing. Royalty financing is where the lender signs a contract with the miner, giving them in return for an up-front loan or payment, a percentage of the production or revenue stream. In essence it has replaced the debt/equity lending so favoured in the past.

There is a start-up fund in South Africa that is investing in local mining projects – The New African Mining Fund (NAMF), which is a closed fund with a 10-year life cycle. The first six years is the commitment period with returns being seen thereafter. The fund will accept up to USD 175 million. Once production has started, owners can look for expansion capital (if needed), from the above-mentioned sources.

Conclusion

For over a decade IntaCapital Swiss has been working hand in hand with providers so that companies who are being refused loans and lines of credit by their bankers and other financial institutions, can access credit facilities through the use of Demand Bank Guarantees

IntaCapital Swiss can proudly boast a high success rate with those companies that have passed due diligence. If you are a mining company that requires a capital injection or needs finance to start a new mine, and you have been refused credit facilities, contact us today. Remember, utilising Demand Bank Guarantees to access credit facilities does NOT dilute equity.

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