Mobilizing Multi-Stakeholder Finance for Strategic Critical Mineral Development
Mobilizing Multi-Stakeholder Finance for Strategic Critical Mineral Development
Context
Developing large-scale critical mineral projects in emerging markets requires substantial capital, long lead times, and coordinated stakeholder engagement. Access to financing is often constrained by high perceived risks, market volatility, and infrastructure requirements, yet these projects are essential to meet the growing demand for minerals powering the global energy transition.
As part of the SMET analysis, which focuses on unlocking critical mineral value chains to support the energy transition, this is one example of how a consortium approach, combined with strategic offtake agreements, can unlock funding for high-impact projects. In Tanzania, the Mahenge Project, operated by Faru Graphite Corporation, a subsidiary of Australia’s Black Rock Mining, secured USD 179 million from a mix of development finance institutions (DFIs), commercial banks, and an international industrial partner, enabling both mine development and supporting infrastructure.[ii]
Challenge
Financing is a major challenge for the mining industry, particularly for supporting infrastructure projects, due to the heightened risk perception around them:
- High capital requirements: The Mahenge Graphite corporation had funding requirement of $222million in upfront capital and was challenging for Blackrock mining to arrange using traditional funding mechanisms[iii]
- Additional infrastructure investments: Investment in the project also required upgrading supporting infrastructure, including a 220 kV powerline from Ifakara to Mahenge. However, such infrastructure only delivers impact if there is sufficient generation capacity; securing a reliable power supply was essential to enabling both mining operations and broader electrification.[iv]
- Market volatility: Demand for graphite is uncertain and the graphite market is influenced by global supply-demand dynamics, which have typically been dominated by China’s production and pricing
- Rehabilitation bond requirement: The project had to deal with a strict financial security, in the form of a $26million rehabilitation bond for mine closure, which brought additional funding requirements[v]
Approach
Through jointly coordinated fund-raising efforts the project was able to raise the necessary funding, as well as public sector involvement and local value addition. This was made possible through a combination of innovative financing, strategic partnerships, and commercial offtake agreements:
- Financing structure: The total package of $179milliom on financing included a $113million construction term loan, $20million revolving credit for working capital, $20million cost overrun facility, and a $26million rehabilitation guarantee. The commitments by the lenders are as follows, $66million by CRDB bank, $59.6million by DBSA and $53.4million by IDC[vi]
- Offtake agreement: POSCO helped by investing $40million in equity and provided a $10million prepayment facility. They also secured offtake rights for Graphite mined from Mahenge Module 2 and ensured de-risking of the project by providing a clear demand stream for the Graphite produced[vii]
- Public sector involvement: By securing a free-carried interest and consolidating mining licenses into a Special Mining License, the Government of Tanzania aligned the project’s commercial objectives with national development priorities[viii]
- Local value addition: Involvement of local suppliers such as the Taifa Group into the project helped secure $37.9million for mining services contract, meet local requirements, and create regional economic opportunities[ix]
Conditions
Several factors underpinned the successful mobilization of funds:
- Graphite’s role in value chains: With rising demand driven by the energy transition and electric vehicles, Mahenge successfully positioned itself as a key graphite supplier in the global battery value chain.
- Development finance institutions in Africa: DBSA and IDC played a role in mobilizing financing, leveraging their infrastructure and industrial development expertise to support regional economic growth.
- CRDB Bank’s role: Tanzania’s largest commercial bank, CRDB, served as joint mandated arranger, facility agent, and onshore account bank, ensuring alignment with local regulatory and operational frameworks.
- Offtake agreements by POSCO: POSCO’s equity investment and offtake commitments provided market assurance and helped de-risk the project, boosting lender confidence and supporting financial close.
- Enabling policy support: The government’s investments in power and logistics infrastructure, including regulatory support for transmission development and streamlined licensing, signaled a strong commitment to facilitating inbound investment.
Observed Impact
The financing package is expected to deliver substantial benefits including:[x]:
- Graphite production: Tanzania is projected to become a major player in the global graphite market, contributing approximately 12% of global output by 2030[xi]
- Employment generation: The project is expected to generate around 500 direct and indirect jobs, while also expanding opportunities for local suppliers in the Mahenge and Ulanga districts[xii]
- Creation of enabling infrastructure: The construction of a 220 kV powerline not only supports mining operations but also enables electrification of nearby villages, creating broader community impact provided it is paired with sufficient energy generation for reliable supply.[xiii]
What’s Next for the Southern African Region
Success of this project and the steps taken by the Mahenge Graphite Corporation in arranging financing could help other countries and financial institutions devise their own strategies:
- Consortium structures: Resource pooling from multiple lenders could lower risks for all and generate additional funding for the project
- Strategic partnerships: Engaging global downstream players, such as POSCO, could secure long-term demand, provide market assurance, and lower risk for lenders.
- Local value addition: Prioritizing local suppliers and contractors enhances community benefits, supports industrialization, and meets regulatory expectations. It can also strengthen government support by aligning private sector efforts with national development goals.
[v] https://dailynews.co.tz/crdb-secures-790bn-investment-for-mahenge-graphite-project/
[ix] https://smallcaps.com.au/black-rock-mining-multiple-funding-investments-mahenge-graphite/
OTHER SOURCES
https://smallcaps.com.au/black-rock-mining-mahenge-debt-financing-facility-african-banks/