The capital stack: how a mine's build is funded
Building a mine usually takes several kinds of financing at once. The capital stack shows the typical mix, and who gets paid first.
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No single source pays for a mine. Construction is funded by a stack of debt, streams, royalties, offtake prepayments and equity, each with a different claim on the mine.
What it is
The capital stack is the full mix of financing behind a project, ordered by who gets paid first. The higher a claim sits in the stack, the safer it is and the less it costs; the lower it sits, the riskier and more expensive it is.
A typical stack for building a mine
| Rank | Source | Typical share of build cost | Claim |
|---|---|---|---|
| 1 | Senior debt (project finance) | 40–60% | Repaid first, secured on the mine |
| 2 | Mezzanine or subordinated debt | 0–15% | Repaid after senior debt |
| 3 | Streams and royalties | 10–25% | A share of output or revenue, ahead of shareholders |
| 4 | Offtake prepayments | 0–10% | Repaid in product |
| 5 | Equity | 25–40% | Whatever is left after everyone else |
The mix varies with metal prices, the jurisdiction, the project's risk and the owner's size. A major miner often funds construction from its own cash and corporate debt.
How the stack changes through a project's life
| Stage | Typical sources |
|---|---|
| Grassroots and discovery drilling | Equity, earn-ins, small royalties, grants |
| Maiden resource and resource upgrade | Equity, royalties, strategic stakes, joint ventures |
| Pre-development | Larger royalties, strategic equity, early streams, bridge loans |
| Development and production | Project debt, streams, offtake prepayments, equity |
The gap in the middle, when a project has a resource but no studies to support debt or streams, is where funding is hardest to find. The stage guide shows how the odds and costs change across this gap.
Why the order matters
When a mine runs into trouble, the stack decides who loses first. Lenders are repaid before stream and royalty holders, and both before shareholders. Shareholders take the first loss but keep all the upside once everyone else is paid.
Terms and ranges are indicative and vary by market, jurisdiction and project. This is educational material, not investment advice.
Key terms
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Educational material only. Nothing here is investment advice or an offer to buy or sell any security or mineral interest.