Mining companies told to look for alternative sources of funding

MINING companies have been urged to look for alternative sources of funding instead of waiting for banks to give them money.

In an interview at Mine Entra on Thursday, BancABC senior executive Mr Prosper Gozho said mining companies had to find other ways of funding their activities if they were to remain viable.

"There is a lot of value derived from mining activities such that if they are to remain viable, they have to look for alternative ways of getting funding," he said.

Mr Gozho said with liquidity concerns growing in the country, it was essential for mining companies to secure other lines of credit and not wait for banks to give them money.

He said other forms of accessing funds included non-funded products whereby a bank guarantees a sum of money to a beneficiary and the money is paid only if the opposing party does not fulfil stipulated obligations.

This negated the need for cash.

Mr Gozho said this option was good since the rate of borrowing money was expensive and cash was limited.

Another form of accessing funds was through the letters of credit in which a bank takes the obligation to make payments once certain criteria were met.

"It is important for mining companies to adopt these options as we have been isolated from easily accessing international lines of credit," said Mr Gozho.

He urged small-scale mining companies to avoid heavily relying on overdrafts and term loans saying they should take up options suited to their operations.

"We realise the value small-scale mining companies bring to the economy and that is why we encourage them to take up funding options that are convenient with their operations," he said.

He said they were always available to enlighten mining companies as well as individuals on the importance of such facilities.