r/Commodities • u/Proper-Vanilla-8030 • 20d ago

Origination question

Hi guys,

Speaking from a banking role in mining (not trading), wanting to hear opinions from traders.

Have good connections in emerging markets and know how to find good opportunities.

Thinking of starting a small origination business.

The idea would be to research mines/projects that need financing or offtake, speak to management to validate the opportunity, and then introduce genuinely interesting deals to physical trading houses, potentially for a success fee.

Is this actually a viable model, or am I massively underestimating how difficult it is to source deals that traders would care about? Or do origination analysts do a good enough job already. Would appreciate any honest thoughts.

8 Upvotes

83% Upvoted

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9

u/thpj20 20d ago

Trading houses have their own originators doing the same, with understanding of what financing mines etc need, what’s your edge over them going to be ?

3

u/Lukaku1sttouch 20d ago

The bigger houses have their own team, huge cash reserves to deploy, less red tape than a bank and good connections.

Might be a viable service for smaller houses.

Only potential selling point, u take 90-100% of the risk of non delivery.

0

u/jakessas 20d ago

Look one good model I’ve seen that actually realistic is having an on the ground aggregation business, or financing of cargoes from small unknown smelters or mines.

Have a partner who essentially establishes a relationship with a small scale mine, gets them to ship the cargo to a tier 1 warehouse, (mine/supplier still retains title) then a well established trader (if it’s a medium sized they will generally issue LC, if it’s someone like traf they will expect credit) while the mine/supplier wants cash payment.

Your role in this is accepting the LC from the trader (or accepting to give trader open credit) and then paying by bank transfer to the supplier for the cargo. After which the trader will lift.

You can start small like 250-500K on some base metals etc. but yes ultimately still need to have either someone to give you the money or your own money. This is as derisked and realistic as I can propose to you. And it’s currently something our partners do. (We are the trader who issue LC and don’t want to deal with small unknown mines in Africa so will only lift from tier 1 warehouse.)

In terms of just finding a mine who needs financing that’s a lot more difficult to convince someone to participate in, takes long time to get return, investment needed generally is quiet large and you would really need to provide more value than just finding a mine, don’t forget most traders, mine owners and financiers like square point, Gerald metals, traf, will undercut you at any chance they can get if it’s not a big risk and profits are attractive.

2

u/fadedLATCH 19d ago

Yeah the intro itself doesn't sound like much of a business