In recent years the Australian gold industry has gone through a major
expansion phase. The need for finance has led to adoption of different
approaches such as the well known gold loan, forward selling, equity
participation by suppliers and equipment leasing. During early periods of the expansion, significant new equity was
raised chiefly for high risk exploration ventures. The major form of new
equity finance was ordinary shares, often in 'No Liability' companies.
The increasing capital requirement of the huge new development projects
of the 1980s also spurred the use of debt finance. This trend was
accelerated as high inflation and the taxation advantages of debt finance
made borrowing attractive. This paper reviews major financing techniques used by the Australian
gold industry with particular emphasis on the innovative financing
techniques initiated recently. An analysis has been undertaken of the
effects on the industry of issues such gold loans, forward selling, equity
participation by suppliers, fly-in fly-out operations, contractor mining and
equipment leasing. In order to achieve a better understanding of the innovative financing
techniques, a survey of already published financial data from well known
Australian gold mines was carried out. Data was collected from various
published financial reports of gold mining companies. In addition, a
questionnaire survey was sent to gold mining companies to assist the
collection of further information. The results of this study show that there are a significant number of
gold mines variously using gold loans, forward sales, contractor mining
and fly-in and fly-out arrangements to finance their projects. Only four
operations have vendor suppliers investing capital funds in their projects.
Based on the findings of this study, conclusions and recommendations are
drawn that these approaches are likely to be with Australian gold industry
for some time in the future and will continue to be intensively applied to
finance gold projects.