EDC representatives pitched their financial services to local mining suppliers at an October 14 breakfast meeting organized by the Sudbury Area Mining Supply and Service Association (SAMSSA).
A Crown corporation, EDC’s corporate mandate is to support and develop Canada’s export trade by offering financing, contract insurance and bonding, accounts receivable insurance and political risk insurance. The corporation operates on commercial principles and is financially self-sustaining.
In 2007, EDC’s 1,200 employees performed business in more than 175 countries, including 153 developing markets. It currently has offices in 14 countries, but plans to be in 20 countries by 2012.
“We didn’t make ourselves known to mining suppliers in years past like we should have,” said Kimberly Lok, EDC’s sector advisor for extractive industries. However, in the last couple of years, more effort to familiarize mining suppliers with the services offered has proven fruitful. “Now, suppliers account for 84 per cent of EDC’s customer base in mining. That’s proof that we are successfully pushing in a new direction.”
EDC has formed a partnership with SAMSSA to better understand the needs of its members and companies throughout the region, and thus increase its client base. Presently, EDC serves between 40 and 50 mining clients in the northeastern Ontario mining-supply corridor.
As an export credit agency, EDC acts as a bridge between financial institutions and companies to develop and support foreign trade.
“Mining is crucial to Canada’s economy and equally important to our export business,” Lok said. “We also know there is a real gap in terms of Canadian banks’ appetite for supporting mining transactions. … so we’re here to work with them (suppliers).”
In 2007, the volume of EDC’s mining-related business exceeded $9 billion and represented 13 per cent of its total business ($77 billion). By September 2008, the volume of mining business had surpassed the previous year. The most widely used service by dollar value was accounts receivable insurance, which in 2007, totalled $6.4 billion.
Lok and senior account manager Guy Racine highlighted some of their services and ways EDC supports mining suppliers.
Accounts receivable insurance is available to protect against non-payment and create room for new working captial from banks. Financing is also available to foreign buyers to purchase products from a Canadian supplier. Guarantees on any performance or contract bonds are available to free up working capital and EDC can guarantee a loan from the Canadian supplier’s bank to finance costs related to the sale.
On a larger scale, if a Canadian mining company wanted to build a mine in another country, EDC could provide it with coporate or project financing for mine construction and operation; political risk insurance for the value of its assets abroad; accounts receivable insurance on sales of the product being mined to foreign buyers; and financial guarantees for reclamation bonding requirements.
Jeff Fuller, president of Fuller Industrial, a Sudbury-based rubber lining and fabricating business, spoke about how EDC helped his company take on a large project in Madagascar.
“I had to post a performance bond and get accounts receivable insurance,” he said. “They came in, helped with the performance bond and guaranteed the receivables, so I was able to take on the project.”
Fuller said EDC also helped his company establish a business relationship with a Central American customer. “At the time, it was risky for us, but they gave us accounts receivable insurance so we could get that job.” Last year, this Central American company was their single biggest customer. “It built a relationship with EDC and they came on board for this next project (Madagascar).”
The EDC can help Canadian exporters have access to working capital and arrange bonds required by their foreign buyers by providing a 100 per cent guarantee to the financial institution issuing the bond.
Lok said between 2006 and 2007, the EDC grew its business in mining $2 billion, and expects similar growth between 2007 and 2008. She plans to remain focused on this sector, particularly in light of the economy’s downturn.
“Our services are needed during the boom times and the more difficult times like we’re experiencing now,” she said. “There is a real gap in terms of what the banks are willing to provide for Canadian companies and we’re here to step into the gap whenever we can.”