How to reduce financing gap for mid-sized mining projects

They argue that closing the gap will require specialised mining finance institutions, blended financing models, stronger technical project preparation and advisory-led due diligence to improve bankability and reduce lender risk.

ASNL Advisory director Humphrey Simba said Tanzania would benefit from specialised mining finance institutions, partial credit guarantee schemes and blended finance vehicles capable of absorbing risks that commercial banks are often unwilling to take.

“Introducing blended finance structures, guarantee mechanisms and specialised funds would help bridge the financing gap, reduce perceived risks and unlock more domestic capital into the sector in line with Vision 2050 objectives,” he said.

According to Bank of Tanzania data, lending to mining projects has increased steadily over the past five years, reflecting growing financial sector exposure to the industry.

Commercial bank lending to mining and quarrying projects stood at Sh474 billion in 2021 before rising to Sh500.31 billion in 2024. In 2025, lending nearly doubled to Sh955.92 billion, representing a 91.1 percent increase compared with the previous year.

Mr Simba said despite the increase in lending, most commercial banks still lack sector-specific expertise and the risk appetite needed to finance medium-sized mining projects.

He added that advisory firms are becoming increasingly important in helping transform technically viable projects into bankable investment opportunities.

Mr Simba said many projects fail to secure financing because they lack the level of technical documentation required by lenders and investors.

Advisory firms help bridge that gap through technical due diligence, JORC-compliant resource reporting, financial modelling, environmental and social governance assessments and regulatory compliance support.

“Many mid-tier projects are technically viable but lack the level of documentation required by lenders.

Advisory firms help convert geological potential into bankable financial propositions.”

Mr Simba said investors and lenders remain cautious because of geological uncertainty, unreliable resource estimates and execution risks such as cost overruns, infrastructure constraints and operational delays.

Commodity price volatility, permitting delays and changing regulatory and local content requirements also contribute to higher perceived risks, particularly for medium-sized projects where independent technical validation is often limited, he added.

The financing challenge comes as Tanzania’s mining sector continues to play a growing role in the country’s economy, supported by increasing global demand for critical minerals used in battery manufacturing and energy transition technologies.

Presenting the 2026/27 ministerial budget in Dodoma, Minerals minister Anthony Mavunde said foreign direct investment stock in the sector rose to $9.79 billion in 2024 from $9.15 billion in 2023 and $8.64 billion in 2022.

He added that mineral exports reached $5.4 billion in 2025, while the sector’s contribution to GDP rose to 10.1 percent in 2024 and averaged 11.9 percent during the first three quarters of 2025.

Despite this growth, stakeholders say financing constraints remain most severe among medium-sized mining projects, particularly those attempting to move from exploration into commercial production.

Minxcon Exploration director Uwe Engelmann said mining projects typically face a financing vacuum after early exploration stages.

He explained that early-stage drilling and resource definition can require between $5 million and $10 million, while progressing a project into production may require between $50 million and $500 million.

Mr Engelmann said lenders generally require a Definitive Feasibility Study before committing financing.

According to him, the study provides detailed engineering designs, production planning, metallurgical test results and cost estimates with greater accuracy, giving lenders more confidence in the viability of a project.

Without that level of technical certainty, many projects struggle to secure commercial financing, he said.

Tanzania Bankers Association executive director Tuse Joune said banks continue to face difficulties in understanding the long-term and cyclical nature of mining revenues.

“Banks operate on certainty of repayment. If you do not understand the borrower’s business model, lending becomes extremely difficult,” she said.

Minerals commissioner AbdulRahman Mwanga said financing risks vary depending on project size, with medium and small projects facing greater uncertainty than large-scale mines backed by established investors.

Analysts say strengthening mining finance capacity will become increasingly important as Tanzania expands exploration and licensing of graphite, nickel, lithium and niobium projects linked to growing global demand for battery and critical minerals.