Legal finance for mining

Mining and commodities are an industry beset by high-value commercial and investor disputes. With lithium nationalization in Latin American jurisdictions, global ESG issues, the energy transition and international conflict creating a perfect storm for disputes, mining companies are looking at new ways to fund those disputes, as well as ways to monetize their valuable claims.  

Burford recently conducted research into economic impacts on different industries and their litigation and arbitration portfolios. For senior in-house lawyers and finance leaders at companies in the mining sector, the key takeaways were:  

• 85% of finance and legal leaders at mining companies say they have an affirmative recovery program or are developing one.  

• Finance and legal leaders at mining companies are twice as likely to have previously used legal finance than the average across industries. 

• Almost two thirds (65%) of finance and legal leaders at mining companies say they are likely to monetize legal claims in the next 15 years.   

• Finance and legal leaders at mining companies are the most likely across all industries to predict increased use of legal finance in next 15 years, with 75% attesting to its likely increase.

At its core, legal finance enables businesses in the mining sector to maximize their recoveries in commercial disputes and to ensure they can fully leverage their legal assets.  

There are numerous ways mining businesses can leverage legal finance to generate value from their litigation and arbitration assets—without impacting control of their disputes.  

• Fund claims and recoveries: Burford takes on the financial burden of paying lawyers to pursue meritorious high-value claims, allowing businesses to pursue meritorious cases without incurring upfront costs.  

• Eliminate downside risk: Legal finance provided by Burford is non-recourse, meaning that the investment and return are contingent on a successful outcome. This allows businesses to lock in guaranteed minimum returns and shift legal risk off their books. 

• Manage cash flow: Burford can accelerate expected entitlements from pending claims and awards, providing companies with the flexibility to time cash flows according to their desired schedules, enhancing liquidity and working capital.

• Identify opportunities: Leveraging proprietary data and industry-leading insights, Burford can assist legal teams in setting priorities for their commercial litigation and arbitration portfolios. This helps businesses identify the most valuable claims and allocate resources effectively. 

• Manage exposure: Burford can provide a hedge for litigation risk in the company’s portfolio. This allows businesses to mitigate the potential financial impact of litigation and protect their interests. 

• Enforce judgments: Through funded enforcement and asset recovery, Burford can help businesses transform unenforced judgments and non-performing loans into cash. 

Managing budget risk while pursuing a valuable recovery ACME Co., a publicly traded mining company, has a $70 million claim that will cost approximately $5 million to litigate. Its GC recommends moving forward with the claim, but the budget is already under considerable stress and the CFO is concerned about the negative impact of litigation spending on company’s P&L and market value.

ACME Co. seeks financing for the entire $5 million litigation budget and secures funding for these costs on a non-recourse basis. In the case of a win, the funder will earn its investment back and a return, which is priced based on risk at 25% of the net proceeds. ACME Co. compares the cost of proceeding without financing and the cost of proceeding with legal finance. Ultimately, it determines that it prefers to give up some eventual potential upside in exchange for shifting the entirety of its budget burden to a third-party funder.

Without adding any budget risk, the company can pursue a valuable legal claim that will potentially bring a significant sum of cash into the business.