Before committing capital to the high-stakes world of mining, banks and investors undertake a rigorous due diligence process, weighing a multitude of factors that extend far beyond the mere presence of valuable minerals [1]. A project’s success hinges on a delicate balance of geological certainty, financial viability, political stability, and a commitment to sustainable practices.
Geological and technical viability: the foundation of confidence
At the heart of any mining proposal lies the ore body itself. Investors and lenders demand a high degree of confidence in the geological data presented. This is primarily achieved through comprehensive feasibility studies, which serve as the cornerstone of the evaluation process [1]. These studies provide an in-depth analysis of:
- Resource and reserve estimates: detailed assessments of the quantity and quality of the mineral deposit are crucial. A clear distinction between inferred, indicated, and proven reserves is necessary, with the latter providing the highest level of certainty.
- Mine Plan and production schedule: a credible and efficient plan for extracting and processing the ore is essential. This includes the chosen mining method, production rates, and the projected lifespan of the mine.
- Infrastructure and logistics: the feasibility study must also address the practicalities of getting the product to market. This includes assessing the adequacy of existing infrastructure, such as roads, ports, and power supply, or the cost and timeline for developing new infrastructure.
- Metallurgical testing: understanding the metallurgical properties of the ore is vital to determine the most effective and cost-efficient processing methods to extract the desired minerals.
Financial and economic projections: the bottom line
A robust financial model is non-negotiable. Banks and investors will meticulously scrutinize the project’s economic viability, focusing on key financial metrics to gauge its potential for profitability and ability to service debt [1]. Important considerations include:
- Capital and operating costs: detailed and realistic estimates for both the initial construction (CAPEX) and ongoing operational expenses (OPEX) are fundamental.
- Commodity price projections: the project’s revenue forecasts are heavily dependent on the volatile nature of commodity markets. Lenders will assess the reasonableness of the price assumptions used in the financial model, often running their own sensitivity analyses based on various price scenarios.
- Key financial ratios: several ratios are used to assess the financial health of the project, including: NPV, IRR and DSCR.
- The mining company’s financial health: the track record and financial standing of the company seeking funding are also critical [2]. A strong balance sheet and a history of successful project execution can significantly enhance investor confidence.
Political and regulatory landscape: navigating a complex web
Mining projects are often located in regions with evolving political and legal frameworks, making a thorough assessment of country risk a paramount concern [3]. Investors and lenders will carefully evaluate:
- Political stability: the risk of expropriation, civil unrest, or sudden changes in government policy can have a devastating impact on a mining operation.
- Regulatory certainty: a clear and stable legal and regulatory framework is essential. This includes transparent processes for obtaining licenses and permits, as well as predictable environmental and labor laws.
- Fiscal regime: the tax and royalty structure in place can significantly affect a project’s profitability. Investors will analyze the stability and competitiveness of the fiscal terms.
- Community relations: the “social license to operate” is increasingly important. A project’s success can be jeopardized by opposition from local communities. Investors will want to see a clear plan for community engagement and benefit-sharing.
Environmental, social, and governance (ESG): a new era of scrutiny
In recent years, Environmental, Social, and Governance (ESG) factors have moved from a secondary consideration to a central pillar of investment analysis in the mining sector [4]. Lenders and investors are increasingly aware of the reputational and financial risks associated with poor ESG performance. Key areas of focus include:
- Environmental impact: a thorough assessment of the project’s potential environmental footprint is required, including plans for waste and water management, biodiversity protection, and mine closure and reclamation [5].
- Social responsibility: this encompasses a company’s relationship with its employees and the communities in which it operates. Fair labor practices, health and safety protocols, and community development initiatives are all scrutinized [4].
- Corporate governance: strong corporate governance, including transparent reporting, anti-corruption measures, and a diverse and experienced management team, is seen as a key indicator of a well-run and responsible company.
Ultimately, securing funding for a mining project is a complex undertaking that requires a compelling and well-supported case across all these interconnected fronts. A project that can demonstrate a robust geological foundation, strong financial projections, a stable operating environment, and a firm commitment to sustainable practices is best positioned to attract the necessary capital to move from exploration to production.
Reference
[1] caprupert, “AFSIC – Investing in Africa,” AFSIC 2025 – Investing in Africa. Accessed: Oct. 02, 2025. [Online]. Available: https://www.afsic.net/securing-financial-backing-for-mining-ventures/
[2] matthew, “5 Key Factors Lenders and Investors Consider Before Funding Your Business | ACCO Financial | Accounting | Montreal | Quebec,” ACCO Financial. Accessed: Oct. 02, 2025. [Online]. Available: https://accoservices.com/accounting-news/5-key-factors-lenders-and-investors-consider-before-funding-your-business/
[3] “Navigating Geopolitical Risks in the Mining Industry: 2025 Analysis,” Discovery Alert. Accessed: Oct. 02, 2025. [Online]. Available: https://discoveryalert.com.au/news/geopolitical-risks-mining-2025-analysis/
[4] “Strategic Funding Approaches for Mine of the Future Projects,” Discovery Alert. Accessed: Oct. 02, 2025. [Online]. Available: https://discoveryalert.com.au/news/funding-mine-future-modern-mining-innovation-2025/
[5] sucofindo, “Mining Feasibility Study: Process and Benefits,” Sucofindo. Accessed: Oct. 02, 2025. [Online]. Available: https://www.sucofindo.co.id/en/articles/general/pengujian-dan-analisis-6-en/mining-feasibility-study-process-and-benefits/
