Development Of Innovative Funding Mechanisms For Mining Start-Ups: A South African Case

Mining projects are capital-intensive and are also characterized by high technical and economic risks. These factors pose challenges to mining entrepreneurs when they seek to raise seed capital for mining start-ups. There are limited sources of mining investment funds in South Africa and each has shortcomings due to one reason or another. Another impediment is South Africa?s status as a developing economy, in which the standards of living ? which in turn influences the savings culture ? the limited GDPs and budget, the socio-political environment, and banking, mining, treasury and other regulations, determine the size of investments, particularly in mining ventures. The proposed funding mechanism was developed with the aim of filling the gaps identified in existing funding mechanisms that were developed by the government with the introduction of the Minerals and Petroleum Resources Development Act (MPRDA), 2002. The shortcomings identified were presented to the study participants as questions to obtain views that were used to define innovative ways of raising mining start-up capital. Most participants in the study supported the derived hypotheses and proposals, and these were used to refine the proposed mechanism for mining investment in South Africa. The proposed funding framework is aimed at encouraging interaction between mining entrepreneurs, government, and the investors to align goals and expectations when undertaking a mining investment.