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Financing Nigeria’s Solid Mineral Development: A Consideration for Industry Participants


Globally, the mining sector is acknowledged to be capital-intensive and high-risk. Mining occurs in phases, including exploration and development, which require significant funding to execute. The Nigerian mining industry has however not attracted the much-needed investments to catalyse its full potential despite being rich in natural resources,[1] boasting over forty solid minerals in commercial quantities.[2] Recently, high-grade lithium was discovered in commercial quantities in the country.[3] It is expected that this discovery will potentially attract foreign investment given the era of the global energy transition.[4] Notwithstanding, it is critical that industry participants, especially junior mining companies, consider the various available financing options for the development of potential projects.

Recognising the benefits of the solid mineral sector on the economy as well as the opportunities available for industry participants, this article analyses certain financing options that may be adopted or considered in the industry. 

Financing Options for Solid Mineral Projects 

The financing options for solid mineral projects may be in the form of equity, debt, or a combination of both as well as special government initiatives, among others.  Determining a suitable financing option largely depends on factors such as the nature, size, and stage of the project, as well as the preference or appetite of available investors.

Equity Investment

This method of funding mining projects involves the exchange of ownership in the company or the project with funding from investors. It is more popular and suitable for early-stage exploration and development projects which debt financiers are often reluctant to finance due to the higher risk and the significant capital requirement. Hence, equity funding is a more suitable option for exploration-focused mining companies such that investors are willing to share the risks as well as the return on their investments.

Equity funding can be in any of the following ways: 

  • Public Offering: A mining company registered as a public company may issue its shares to the public through the capital market to raise funds for a project. In this case, investors become part owners of the company and share in the risks of the company, including the company projects. Public offers are regulated by the Securities and Exchange Commission of Nigeria (SEC) and in accordance with the procedures set out in the relevant SEC rules. It is interesting to note that there appears not to be significant activity by mining enterprises in the Nigerian capital market. This may be attributed to the high cost[5] of raising funds in the market and the assumption that investors are not well apprised of the mining sector and hence, likely lack appetite for such investments.
  • Private Placement- a mining company, either public or private, may sell its securities to a select group of investors such as institutional investors and high-net-worth individuals rather than offering such to the public. The benefits of this include a shorter completion time and minimal transaction costs that are typical of public offerings. Notably, private placements by private mining companies do not fall under the regulatory purview of SEC.
  • Venture Capital- involves a venture capital (VC) firm’s investment in mining projects with high growth potential in exchange for equity. VC firms often invest funds in addition to technical or managerial expertise for a stake in the project. It is more common among early-stage explorers in the technology-driven phase of mining which institutional investors are less willing to finance. While VC funding is still in its early innings in mining finance in Nigeria, there are quite a number of these firms supporting mining projects.
  • Joint Venture- this financing approach involves the coming together of mining companies, with their resources, to undertake a mining project for shared ownership, responsibilities, and profits. It also involves the sharing of risks - financial and operational. Junior mining companies may come together to finance a mining project or come together with a large mining company with more financing resources to fund the project. Either way, there is a common interest regulated by the joint venture agreement. Members may also decide to incorporate a joint venture with its separate legal personality.

Debt Financing

In loose language, debt financing involves the borrowing of money to raise funds. Mining companies can typically access debt financing by either taking out loans or selling debt instruments such as bonds, notes, and debentures to investors. Unlike equity financing where the financiers become part owners of the mining project, debt financiers are repaid the loan capital with interest.

To finance a mining project, a mining company may access long-term loans from banks and financial institutions or the issuance of bonds to investors through the capital market. This often requires some form of asset collateral and/or guaranty. Similarly, medium-term capital such as medium-term loans and debentures are options that may not necessarily require an asset collateral. However, this may not be a suitable financing option for early-phase mining projects which will typically span into years. Consequently, medium-term debt financing may be more appropriate for a mining project’s last phase- operation and closure. Nonetheless, the primary cost is the repayment of principal and interest over a specified period.

It remains important that mining companies adopt the appropriate structure of debt financing for mining projects. Hence, the raising of funding through debt may be structured traditionally or through a special purpose vehicle (SPV). Typical debt financing may either take the form of a ‘balance sheet’ corporate financing of a borrower/mining company or it may take the form of a project financing. These are discussed briefly below.

  • Corporate (balance sheet) Financing- In this case, the financing is provided to the borrower/mining company on the basis of its balance sheet and cashflows from its existing business. Thus, this is usually available to brownfield projects or companies with available existing cashflows and operations to serve as the source of repayment of the financing.  In other words, the debt is on the mining company’s balance sheet. Consequently, the debt financier has an unlimited recourse to the mining company as it bears full risk for the debt.
  • Project Finance - this, on the other hand, has gained attraction in capital-intensive projects such as mining given that it can be carried out as a non-recourse or limited recourse scheme. Here, a special purpose vehicle (SPV) is created for the execution of the project. As such, the debt financing is incurred by the SPV, creating an off-balance sheet debt for the mining company. Hence, the financial risks of the mining company and project sponsors are largely limited as repayment is primarily sourced from the project’s future cash flow. Although this may be significantly more costly than corporate financing, the higher leverage which is required for mining projects potentially reduces the overall cost of capital.

An important question is the availability of mining licence and mineral deposits as security for debt financing. This is an issue that will be discussed in detail in a subsequent article.

Alternative Financing Options for Mining Projects

Beyond the traditional debt and equity financing for mining projects, alternative financing options are increasingly gaining attention as traditional financing options have proven difficult to obtain. This is due to the long project timelines associated with the sector, its price volatility, political instability, Environmental, Social, & Governance risks, and current rising interest rates with the associated fears of a global economic downturn.

In addition, the conditions attached to securing traditional financing are often inaccessible for Artisanal and Small-Scale Miners (ASMs) as well as junior miners and some large-scale miners (LSMs). Some of these conditions include the provision of bankable data for exploration and the systematic understanding of the project’s potential, among others. Hence, alternative means are fast becoming an attractive and affordable option in the industry. These financing options can be combined with traditional financing options or in the interim, before securing long-term traditional finance. They include:

  • Earn-in Agreement- the financier commits to incur a minimum cost over an agreed period on a specific mining phase(s) to earn a pre-determined ownership of the mining company.[6] This agreement often includes the right or the obligation of the financier to incur further costs subject to achieving certain milestones. This is in essence a form of equity investment but tied to specific mining phases and corresponding funding.
  • Royalty Financing- this is an upfront financing of a project in return for future payment which is determined either by the percentage of the revenue or the value of the products. This structure may have an impact on the mining company’s liquidity in the future since a percentage of its revenue will go into settling repayments from its revenue or its product value. Notwithstanding, this may be more suitable than traditional financing particularly because in many instances the financier bears a significant risk where there is no available revenue or value, hence, the risk of default by the borrower is minimised.
  • Stream Financing- like royalty financing, the financier also makes an upfront payment to the mining project. However, here, the upfront payment is in exchange for a future payment which is the right of the financier to purchase all or a portion of the mining products at a pre-agreed price, often discounted.
  • Equipment Financing- this is a suitable financing option for junior mining companies that may be unable to acquire the requisite equipment for the mining process. Here, the financier owns the equipment and retains the title while the mining company is provided possession and use of the equipment for its mining project. The right of possession could be structured as a lease or hire purchase.
  • Crowdfunding- this has been recently promoted by the SEC to assist small businesses to get off the ground. Regulated by the SEC Rules on Crowdfunding 2021, private mining companies may offer ordinary shares, and plain vanilla bonds/debentures to pool together small amounts of money from the public. A mining company with a minimum of 2 years’ operating track record or that has a partner with such a minimum threshold is eligible to raise funds through a SEC approved crowdfunding intermediary’s platform. A medium-sized mining company can raise up to 100 million naira while a small and micro mining company may raise up to 70 million naira and 50 million naira respectively.
  • Co-operative Financing- the Nigerian Minerals and Mining Act, 2007 allows for ASMs to register as a co-operative. Hence, registered mining co-operatives may pool their resources together to secure funds from banks or financial institutions. It is expected that accessing funds as a co-operative will be easier with friendly terms than accessing funds an individual basis. Likewise, the Presidential Artisanal Gold Mining Initiative (PAGMI) highlights another benefit of co-operative miners given its primary objective is to aggregate, refine and sell gold sourced from ASMs at competitive market rates.[7]

Special Government Initiatives for Mining Financing In Nigeria 

The Nigerian government has been making efforts to boost its mining sector through various initiatives. Some of these are:

 Africa Finance Corporation (AFC) and Solid Minerals Development Fund of Nigeria (SMDF)- SMDF, Nigeria’s mining-focused development fund, recently entered a partnership with AFC to derisk Nigeria’s mining sector and scale up artisanal miners in the country to an industrial level of operation.[8] This strategic collaboration is set to address the dearth of expertise and provide funding for early-stage mining projects.[9] The project sponsors of mining projects may apply through AFC and SMDF projects submission portal.[10]

 Artisanal Miners Intervention Fund- this is a loan product of the Bank of Industry of Nigeria (BOI) to artisanal miners in Nigeria. The Fund is designed as an intervention loan with less stringent terms and conditions.[11]

 Nigerian Artisanal and Small-Scale Miners Financing Support Fund- the Ministry of Mines and Steel Development, BOI, and the SMDF established a 5 billion naira fund in support of ASMs.[12] An artisanal miner can access between 100 thousand naira and 10 million naira while a small scale miner can access between 10 million naira and 100 million naira.[13]


The financing landscape for Nigeria's solid mineral projects presents a spectrum of options catering to diverse project sizes, stages, and investor preferences. The alternative financing options provide flexibility, allowing junior mining companies to tailor their financing strategies to project-specific needs.

As Nigeria navigates the potential influx of investments in its solid mineral sector, industry participants must carefully evaluate and select financing options that align with their project’s risk profiles. This includes engaging industry experts such as legal and financial advisors. 

A strategic and diversified approach to financing will not only facilitate the development of mining projects but also contribute to the overall growth and sustainability of the Nigerian mining industry.

[1] Nigeria ranks as second in Africa.

[2] Nigeria’s Mineral Production Statistics.

[3] High-grade lithium discovered in Nigeria.

[4] World Bank’s Report on Mining.

[5] This also includes publicity, printing, and distribution expenses.

[6] Richard Jansen Van Vuuren, ‘mining finance: equity and debt financing remain key; alternative funding to grow’ Mining Review Africa (2017), available at (accessed on 8 November 2023).


[8] (accessed on 10 November 2023)

[9] Ibid.




[13] Ibid.