Debt Financing

If the conditions are appropriate, Morty Mines may get debt financing, by issuing a bond or a debenture and selling units in it to the public. The bond or debenture is treated as a loan and must be repaid when the company begins to make money.

In some cases, the bond or debenture certificate can have a warrant or right attached to it. This is in order to give the investor an extra inducement to buy the bond.

A warrant most of the time gives the purchaser the right to purchase so many equity shares at a stated price if exercised by a stated time. The warrants or rights are themselves negotiable on the market, and their prices are listed on the stock exchange with the share prices of the issues they represent.

Banks are often willing to consider project loans to a mining company for a determined mine, or for an expansion. But the mining company must have a sure orebody and management with a proven track record.

One way to borrow money at low interest rates is to negotiate a loan of gold. This is an option for companies with a potential gold mine in the works. In this case, a company borrows bullion from a financial institution in exchange for bullion from future mine production. The company sells the bullion at the prevailing market price and uses the money to build the mine. Once in production, the company afterwards pays back the loan with actual bullion produced from the mine.

If markets are weak, Morty Mines may decide to form a joint venture with a senior company to develop the mine. As is typical, the principal company will put up the capital required to build the mine in return for a direct ownership interest. This may range from 25% to 60% or more, depending on the project's economics and the capital cost requirements.

In some cases, the principal company may make an offer to buy all the shares of Morty Mines, sometimes at a premium to the trading price. In this way, a patient shareholder can be rewarded by receiving a return many times his original investment.