BDO has released financing models for the future mining companies should explore to bridge the funding gap, as the world races toward a net zero future.
The 2025 Financing the Mining Transition report notes that the mining industry stands at a pivotal crossroads.
Authored by BDO’ Global Natural Resources & Energy Leader Sherif Andrawes, the report focuses on various financing options for mining companies including equity, debt, and alternative financing, to support their operations and ensure capital availability in a volatile climate.
“Demand for critical minerals, such as lithium, copper, nickel, and rare earth elements, is soaring, driven by the global shift to renewable energy, electric vehicles (EV), and battery storage,” Andrawes writes.
“Despite this surge, the mining sector faces a significant challenge – a persistent underinvestment that threatens to stall progress when it is needed most, with $2.1 trillion of new investments required by 2050 to meet global net zero emissions targets.
For Australia, a global powerhouse in mineral resources, this period of underinvestment presents both a challenge and an opportunity. The country is rich in the materials the world needs, but unlocking their potential requires innovative, flexible, and sustainable financing strategies.”
Global investment gap, local concern
BDO’s Explorer Quarterly Cash Updates shows that for ASX-listed explorers, there was a period of underinvestment between 2014 and 2020.
Since 2020, exploration expenditure has increased substantially, however BDO has seen a further decrease in recent times as a result of commodity prices and geopolitical uncertainties.
This has led to weakened supply chains and a slowdown in exploration. Despite a rebound in commodity prices in recent years, exploration budgets remain subdued.
Citing S&P Global, BDO’s report shows global mining capex was estimated to be $107.5 billion in 2024, a 1.6% decline from 2023, and short of the 2013 peak by around $38 billion. This was largely due to high inflation, elevated interest rates, as well as slower global economic growth.
Exploration spending has followed a similar trend. Andrawes says “despite a surge in commodity prices in 2021-2022, many reaching or nearing the record levels of the 2011-2013 mining super cycle, exploration budgets have remained subdued, falling for the second consecutive year in 2024, reflecting wider economic challenges and internal funding”.
“In Australia, exploration companies and those who are in the development stage are often at the forefront of critical mineral discoveries and are particularly vulnerable,” Andrawes reports.
These companies rely heavily on external funding, yet face increasing difficulty in accessing capital due to tighter monetary policy and rising interest rates; ESG-related investment constraints; and, investor preference for faster-return sectors.
“In Australia, exploration companies and those who are in the development stage are often at the forefront of critical mineral discoveries and are particularly vulnerable”
To bridge the funding gap, BDO suggests mining companies explore a broader range of financing options.
Project financing: Project finance is a well-established model in Australia, particularly for large-scale infrastructure and mining developments. It involves creating a special purpose vehicle (SPV) to isolate project risk, with repayment tied to the project’s cash flows. BDO’s Andrawes says this model can be ideal for large lithium or rare earth projects in Western Australia or the Northern Territory, where long-term offtake agreements can support cash flow projections.
Streaming and royalty agreements: These alternative financing models are popular in Australia. They often involve upfront payments in exchange for a share of future production or revenue. Andrawes adds that streaming and royalty agreements offer benefits including mitigating equity dilution, as well as flexibility and scalability.
Reserve-based lending: Traditionally used in oil and gas, Andrawes says this type of financing is emerging in mining. It allows companies to borrow against the projected cash flow from proven reserves. Reserve-based lending can be adapted for gold, copper, or base metal projects with “strong geological data, and requires independent reserve reports and robust IFRS-compliant accounting”.
Offtake agreements with strategic partners: Australian mining companies are increasingly securing funding through long-term offtake deals with EV manufacturers, battery producers, and even governments. In addition, Andrawes notes the Australian Government’s proposed $1.2 billion Critical Strategic Minerals Reserve could see the government enter into voluntary national offtake agreements, as well as selectively stockpiling strategically important minerals.
Andrawes says that by embracing a broader range of financing models and aligning with strategic partners, Australian mining companies can “lead the charge in powering a cleaner, more sustainable future”.
Write to Adam Orlando at Mining.com.au
Images: BDO & iStock
