RMBprovidedabespokegoldfundingsolutiontoPanAfricanResources

 

The challenge

Pan African Gold wanted to reduce their cost of funding and take advantage of favourable gold prices off the back of a solid production track record.

The RMB solution

RMB provided a unique funding solution by lending physical gold worth R400-m to Pan African Resources over a 12-month tenor to reduce their funding costs and match their revenues with the liability.

Gold can be used as an effective and low cost funding instrument for gold producers, with the interest cost linked to the gold lease rate instead of JIBAR or LIBOR. At the time, this offered Pan African Resources significant savings relative to their existing ZAR debt. This type of solution can be effective not only for gold, but for most traded commodities. RMB acted as sole funder and structurer in delivering a quick and efficient solution for the client by understanding their capital structure and operational context.

Proven client results

This solution enabled Pan African Resources to reduce their overall funding costs and also allowed them to capitalise on the higher gold price. By locking in the loan with RMB, they effectively locked in the high price of gold, as the loan is equivalent to bringing future production forward. They used the proceeds from the gold loan to replace higher-cost debt with a well-matched, structured instrument.

Client	Pan African Resources
Deal value	R400-m worth of gold
Sector	Mining
Capabilities	Commodities backed finance, trading and lending in gold
RMB's role	Sole funder, structurer
Country	South Africa