Energy & Infrastructure Insight - Issue 3

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Page 24 of 29

25 Key Takeaways ALTERNATIVE SOURCES OF CAPITAL FOR THE MINING SECTOR • The pandemic has proven to be a testing ground for some of the newer sources of capital, with the period of uncertainty confirming some expected benefits of these sources including: • For streams and royalty financings, there is indeed no "payment default" if there is no production/revenue generation—due to an imposed shutdown or otherwise—that said, the anticipated challenges of short-term commodity-linked lines can materialize; and • sector-focused sources are generally better equipped to deal with distress and are therefore more predictable and practical from the company's perspective. • Even with the introduction of competition in the form of alternative sources of capital for mining companies, traditional sources have remained relevant and important sources of capital to the mining industry. • ESG-linked sources of capital are becoming more prevalent for mining companies, especially given the impending modernization of mining operations to reduce their environmental impact. FOCUS ON ESG AND RESULTING IMPLICATIONS FOR RAISING CAPITAL BY THE MINING INDUSTRY • Mining companies, though not typically considered a "green" sector, may look to take advantage of green bonds as a financing tool, though may be subject to greater-than-normal scrutiny, can allow mining companies access to a broader group of investors. • The risks associated with potential tailings facility failures have been a topic for additional diligence and disclosure on capital markets transactions. MITIGATING ANTI-CORRUPTION COMPLIANCE RISKS FOR MINING COMPANIES • The mining industry consolidation that is taking place in response to the recent economic downturn, marked by an increase in business combinations and asset purchases, has led to heightened compliance risks and increased the need for mining companies to implement a well- functioning compliance framework to effectively mitigate these increased risks. • With the recent global pandemic and the ensuing strain on local economies, companies should ensure that they have the necessary compliance policies, procedures and internal controls in place to properly diligence community service programs to ensure their legitimacy and to monitor any payments made to charitable organizations to guarantee that such funds are not being improperly diverted to local government officials.

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