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Gold/Mining/Energy : International Panorama -- Ignore unavailable to you. Want to Upgrade?

To: Pete Mimmack who wrote (215)	5/29/1998 6:24:00 PM
From: John Antoniou	Read Replies (1) \| Respond to of 264

Well, here is what we have been saying is the stumbling block for this company. I hope this article is an indication that we have reached the bottom and that we are in for better days. ILP HAS TO GIVE US A SIGN AS TO WHAT IS HAPPENING WITH FINANCING. Thursday May 28, 5:45 pm Eastern Time Low metal price seen taking toll on mine financing NEW YORK, May 28 (Reuters) - Financing for mining projects is expected to decline sharply in the coming year as commodity prices endure considerable downturns in their respective markets, according to one of the world's top project financiers. Chase Manhattan Bank led the world in mine project financing in 1997 at $1.365 billion, Christopher Rocker, managing director of Chase's global commodity finance group, told a press briefing Thursday, but expects that amount to be trimmed in half as the industry consolidates and copper and gold prices decline. ''Financing will be available for the right projects,'' he said. ''But there will be a near-term scarcity of capital because of low commodity prices. Plus further industry consolidation is likely especially on large projects.'' He added, ''In many ways, this is an attractive time for financing because of low interest rates. But with lower cash flows, many projects are on hold.'' In the copper mining sector, for example, spot prices are hovering around 76 cents a lb, not far from their lowest level in four-and-a-half years. ''We would certainly expect copper prices be be well below 90 cents a lb over the next 12 to 24 months,'' he said, adding that future projects are likely to be sold off or postponed. Rocker said a company's future financing hinges on the unit operating costs of the project rather than the price of the commodity. ''The first thing we do is check the (cost) numbers,'' he said. ''If you look back, all of the financing deals we've been involved with have been in the lowest quartile of the cost curve.'' He continued, ''The second thing we look at is where the average price is expected to be over the life of the project. Take, for example, the copper market. If the cash flow break-even point is, for example, 80 cents, that doesn't look like such a great deal in today's market. But over the life of the project, it's not bad. He said, ''The point is that we can't bet the farm on price direction alone. We have to focus on cost.'' Rocker regarded Africa as ''the new frontier'' for mine financing, but cautioned it still has ''a long way to go'' in overcoming obstacles like fiscal stability, accounting structure and political and legal stability. But he noted, ''The African mining sector is in decay. It needs substantial investment to survive.'' Such investment is likely to come from South Africa, he added. The Democratic Republic of Congo, he said, ''has taken a couple of steps back in the last several months. There was a lot of euphoria when the government changed. But frankly, much of that has subsided and they still have a ways to go.'' He was more positive about Argentina and Peru, which he said had reduced political risk and an under-developed mining sector.