How to Start a Mine with No Cash

How to Start a Mine with (almost) No CapEx. (The Collaborative Model)

"I have the permit, but I don't have the machines." This is the most common frustration I hear. And it reveals a fundamental misunderstanding of modern mining - you don't need to own the machines, you just need access to them.

From my last post, and the reason for that title, is because from my engagements with mining startups, I often find that their CapEx ask usually seems unrealistically high because in their startup costs, they have included capital equipment like excavators, haul trucks etc which, for a startup they do not need to own.

What I mean is, there is no way, you need even R10m to kickstart a project if all you have is a mining permit that covers a few hectares and within those hectares no more than 250,000 tons of coal. The same applies to chrome and most permitted mining projects.

The Starter Pit Model isn't about buying assets. It's about renting capacity.

Here is how you bootstrap a mine for under R5 million using Collaborative Strategies:

1. The Contract Miner (Yellow Metal Strategy) Don't buy excavators. Partner with a contract miner who has idle fleet.

> The Deal: They bring the machines and operators. You pay them a rate per ton (OpEx) instead of buying the fleet (CapEx).

> Risk Shift: If the mine stops, you aren't stuck paying off a bank loan for a R5m Dozer or worse losing your mine to a private investor like Transvaal VC because you used your mining right as collateral.

2. Toll Washing (Processing Strategy) Why build a R20m wash plant when your neighbour has one running at 60% capacity?

> The Deal: Truck your ROM (Run of Mine) to a nearby plant. Pay a tolling fee.

> Benefit: Immediate saleable product with zero construction risk.

3. Offtake Financing (Diesel Strategy) Your biggest daily cost will be diesel.

> The Deal: Find a trader who wants your product. Ask them to prepay for the diesel in exchange for a discount on the coal/chrome or whatever commodity you are extracting.

> Benefit: Your customer funds your working capital.

4. The "Sweat Equity" Technical Team As I wrote last week, don't hire consultants. Partner with a Mine Manager who is tired of corporate life. Give them upside in the Starter Pit in exchange for running operations.

The Result? You have a running mine, a well run mine i might add, and you haven't bought a single piece of equipment. You have traded Ownership for Flow.

Prove the model works. Then—and only then—raise capital to buy your own kit or scale up or oboth, provided ofcourse, that there is a business case that supports these moves.