Why don banks apply the reserves-based lending techniques in the oil and gas sector to mining?
Balsdon: I’ve never really understood why reserve based lending can’t be applied to mining I can’t really see the difference. But it never has been and now no-one has the cash for new products. Street: Oil and gas people argue cashflows are more predictable than in mining because you don’t have variances in mine plans, grade, strip ratios etc. But those issues are not insurmountable I just don’t think anyone has got their head around it. A few years ago there were some North American mining deals where companies had one or two assets that they borrowed against almost like a borrowing base with a discounted NPV of future cash flows and a reserve tail. That was as close as it got. Plus, in a better bank market you’d often see a standard corporate deal for a producing company in any case. Tyler: Ore reserves are measured according to worldwide standards such as JORC, SAMREC, 43-101, etc. But compliance with these standards only give investors and banks a certain level of confidence in the
