I loan, you mine: Metal streaming and off-take agreements as solutions to undercapitalisation facing small-scale miners?

Abstract

In sub-Saharan Africa, the last two decades of artisanal and small-scale mining (ASM) legislative reforms resulted in significant uptake of ASM licenses across ASM environments. Yet, despite marked improvements in security of tenure, informality persists in many of those same environments, prompting academics and practitioners to look beyond legal title as the key to unlocking ASM development. This paper proposes that insufficient financing instruments hold clues as to why informalisation persists. Whereas some financing alternatives, such as domestic formal banking sector loans or government managed grant and loan programs, can provide a leg-up to artisanal and some small-scale miners, these programs cannot meet the demand of more advanced small-scale operations seeking significant investments in mechanisation and technology. New sources of formal financing are required should ASM formalisation move beyond titling to meaningful site development. Lessons are drawn from the large-scale mining (LSM) industry where the last decade has witnessed new forms of project financing emerging alongside of traditional mine financing. Two new instruments are discussed in this paper: metal streaming and off-take agreements. This paper explores their use in funding LSM projects, and their more recent application to financing ASM projects in Rwanda.