Besra Gold (ASX: BEZ) (OTCPK: BESAF) shares are up 18%. BEZ shares have jumped on the news that they've been able to solve the mine finance problem. Or at least, one stage of it. That problem being that in order to actually build a mine it's necessary to gain access to a large amount of capital. OK, a good mine project won't have problems with that - that's the definition of a good mine project, one that can get financed. But how to raise that capital without having to sell some portion of the mine itself? That's more difficult. This is the circle that Besra appears to have squared.
We talked before about Besra Gold: “That there's no certainty here has led to considerable volatility in the Besra share price: “The specific interest today driving Besra up another 40% is that it has passed another one of those roadblocks to success. Recently it announced that it had gained potential funding. As and when Besra meets certain targets then funding will be released. Today's statement is that the first tranche of that funding has arrived. This might all seem like small beer - $2 million at first, $3 million to follow - but the total agreement is for up to $300 million.” And before that about Besra: “The money is coming from a mining finance house - Quantum - which has two effects. Firstly, it's claimed at least that this is non-dilutive, which is good for current shareholders. The second is that it's a confirmation of the company's claims. No, it doesn't prove, in the legal sense, anything at all. But that an experienced investor in the sector is willing to advance money does provide and independent proof of sorts of the claims.”
Besra Gold share price from ASX
Now there's a certain technicality here. Which is that no such deal is truly non-dilutive. No one offers capital for no return. If we think about lithium for a moment, the concentrate processor advance pays to build the concentrate plant at the mine head. That's non-dilutive - except they also gain a preferential price for the concentrate produced. Which is a dilution of future revenues, even of not of the equity right now. So too with gold deals like this. Quantum is getting something in return for its $300 million. Might be interest, might be a discount on the gold produced, but something. Which will be dilutive of long run cash returns to shareholders, obviously. Even as there's no dilution of the equity right now.
One way of putting this is that there is no truly non-dilutive method of access to mining capital. Only the best method to be employed on a specific project.
