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Commodity traders are more cash-rich than ever – but where does that leave banks?

Global precious metals trader Auramet has signed a US$300mn syndicated borrowing base facility with a group of eight banks, as it works to boost its liquidity amid ongoing volatility in the markets in which it operates.

The deal sees Auramet increase its financing from last year’s US$235mn facility, while a spokesperson for ING Capital, which led the financing on behalf of the firm, tells GTR that funding will once again be used for working capital purposes.

ING acted as mandated lead arranger, bookrunner and administrative agent on the oversubscribed facility, which was initially launched at US$275mn. Rabobank served as lead arranger.

The deal includes a US$50mn accordion feature, allowing Auramet an increase  to US$350mn, and also permits additional bilateral transactional credit facilities of up to US$80mn outside the syndicated borrowing base deal.

Alongside ING and Rabobank, other lenders on the deal include Bank of China, Brown Brothers Harriman & Co, CIBC Bank, HSBC, Macquarie Bank and Mizuho.

“Long-term partnerships are crucial in the complex commodities markets and we are excited to continue our association with ING and expand our syndicated lending group,” says Mark Edelstein, CFO of Auramet. “This increase in liquidity will allow us to take advantage of the opportunities we currently see in precious metals, well into the future.”

Matthew Rosetti, managing director and head of commodity finance North America at ING, notes that the oversubscription of the deal is “further validation of Auramet’s continued ability to perform, despite volatile and challenging markets”.

The commodity finance industry was rocked last year by a series of fraud scandals in Singapore and the impact of the Covid-19 pandemic.

In the wake of these issues, major banks have announced plans to limit their exposure or withdraw from the space entirely.

ABN Amro announced last year that it would cease all trade and commodity finance activities,  while Bloomberg revealed in July last year that Société Générale would shut its Singapore-based trade commodity finance unit, moving operations to Hong Kong and severing ties with smaller traders.

In November last year, GTR reported that ING would “refocus” its wholesale banking operations, including trade finance, by targeting a smaller number of core clients – though the bank said at the time the decision was unrelated to the string of fraud scandals in Asia’s commodity finance sector.

In the ensuing months, ING then restructured its trade and commodity finance unit and appointed Maarten Koning as global head of the new division.

Auramet, which operates globally, says that in 2019 it generated revenues of more than US$14bn from the physical purchase and sales of tens of millions of ounces of gold, silver and platinum group metals.