Bankability gap review — critical-minerals project, Southern Europe

Context

A feasibility-stage critical-minerals project in Southern Europe, sponsored by a junior listed company, was preparing for a senior debt round. An institutional investor evaluating an equity ticket alongside the debt instructed ISR to test the technical and financial assumptions of the feasibility study before committing capital.

The sponsor's case rested on three claims: a resource model supported by drilling at indicated category, an offtake LOI from a European downstream consumer, and a capex envelope endorsed by an EPC contractor.

ISR's role

ISR was engaged on a fixed-fee mandate as independent technical and financial advisor to the investor. Scope:

• Independent review of the resource model, geotechnical envelope, and metallurgical test work.
• Site visit by a principal and a senior geologist; inspection of drilling logs, processing test work, and the proposed plant footprint.
• Reconstruction of the financial model from the asset up, with sensitivity to grade variability, recovery, and processing reagent prices.
• Review of the offtake structure, the permitting envelope under the applicable EU and member-state regimes, and the planned debt structure.

Findings

Three issues material to the financing decision were identified.

First, the recovery curve in the metallurgical test work had been extrapolated beyond the bench-scale sample range. The sponsor's case assumed a recovery within a band that the test work itself did not support. Tightening that band moved the model from accepting senior-debt covenants to breaching them in two of four sensitivity cases.

Second, the offtake LOI was non-binding and conditional on a delivered specification the project had not yet demonstrated. ISR recommended the LOI be reframed in the financing pack as a commercial intent rather than as a take-or-pay commitment.

Third, the capex envelope had not been priced through the EPC's current order book. Equipment lead times under the prevailing market had moved by ten to fourteen months. The financing pack required a contingency band that reflected the lead-time premium.

Outcome

The investor proceeded on revised terms: a smaller equity ticket, a phased deployment tied to met-test-work confirmation milestones, and a renegotiated covenant package on the senior tranche. The sponsor accepted the revised package on the basis that the alternative was a delayed close.

Takeaway

A bankability review's purpose is not to repeat the sponsor's case in independent voice. It is to identify, before committee, the points at which the sponsor's case and the case a senior lender will underwrite diverge, and to price that divergence into the structure.