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Johannesburg - South Africa's Industrial Development Corporation (IDC) is seeing an increase in funding applications for mining projects as other funders, who had initially committed, are now either cutting down or pulling the plug altogether.
"This past month we have already received applications from banks to co-fund with them three projects they had already committed to funding," Ufikile Khumalo, head of the IDC's resources business unit, told Fin24.com. "That requires over R2bn of the IDC's commitment."
He would not reveal the particulars of any of the projects, except to say the applications come from some of SA's big four banks.
Khumalo said banks and other commercial funders were scaling down on funding new mining projects because of the slump in commodity prices.
"We anticipate more (such) applications in the near future." He added the IDC would be having discussions with another institution this week.
Prices of major base metals and other commodities have fallen sharply since January 2008, some by as much as 55%.
After surging to a record $144 a barrel in July, Brent crude oil has come crashing down to below $40, while copper is languishing at $3 000/t after hitting $9 000/t earlier in 2008. Platinum is trading below $800/ounce after reaching over $2 250/oz in early 2008.
Many financial backers have opted out of projects because they have ceased to be economical at current market prices.
But the IDC has committed R60bn to mining and resource projects for the next five years and Khumalo says that won't be reduced because of gloomy commodity markets.
He says the IDC will step in to fund projects that might be delayed or scrapped because the banks pulled out.
"We will probably overspend the R60bn budget, not necessarily on the same projects we had budgeted for," says Khumalo.
"Once the (global) recession has been dealt with, it will be smooth sailing for resources," says Khumalo. "It has happened in the past, it will happen again."
He says the consensus on commodity prices is that they will start rising in 18 months' time. "If you take a long-term view, you're okay."
- Fin24.com