In Chapter 1, we explored the transformative potential of tokenisation within the mining sector, highlighting its benefits for both mining companies and investors. Chapter 2 delves deeper into the practical aspects of implementing the Real-World Asset (RWA) tokenisation of mining projects. This chapter provides a comprehensive, step-by-step guide to the RWA tokenisation process, ensuring that mining companies can effectively leverage this innovative approach to enhance liquidity and attract investment, ultimately positioning themselves for success in a rapidly evolving fintech landscape.

RWA Tokenisation Process for Mining Projects

Due Diligence and Asset Evaluation

The RWA tokenisation begins with selecting a mining project for tokenisation. Its value needs to be carefully assessed and documented through a thorough assessment including evaluating its viability, reserves/resources, and financial projections and determining the market value of the assets to establish the token's worth.

Legal and Regulatory Compliance

Tokenising mining assets requires careful adherence to licensing requirements established by regulatory bodies governing digital assets and mining operations. Licensing requirements vary according to asset type, eligible investor profiles, geographical location, and other critical factors. Thorough research into the legal requirements concerning both the jurisdiction of the mining project and the tokens traded is essential. Securing the necessary licenses or approvals from relevant regulatory authorities is a fundamental step to ensure compliance and smooth operation in the tokenisation process.

Tokens Design

The type and structure of a token play a pivotal role in aligning investor expectations with the project’s financing needs. 

Token Types

There are many types of RWA tokens, e.g., security - backed tokens (including equity tokens and debt tokens), revenue-share tokens, and commodity-backed tokens. Equity tokens represent ownership shares in the project, giving investors the potential to benefit from asset appreciation or receive dividends. In contrast, debt tokens are structured as loans or bonds, offering fixed returns and repayment terms based on the project's revenue, making them attractive for investors seeking predictable income. Revenue-share tokens, entitle investors to a percentage of the project’s revenue without granting ownership, appealing to those interested in returns directly tied to performance. Commodity-backed tokens are backed by a specified quantity of the commodity, offering investors exposure to the commodity's price movements without physically holding it. Selecting the right token type ensures that the token structure meets both the project’s funding requirements and investors’ financial goals.

Smart Contract Creation

The purpose of the smart contract e.g., ownership transfer, profit distribution, voting rights, and compliance should be decided to ensure that the contract is tailored to meet the specific requirements and investor expectations. These details will be written as code, so the smart contract can automatically and securely handle token issuance, compliance checks, voting, token transfer, ownership records update, and dividend distributions to token holders, minimizing the need for intermediaries and enhancing trust.

To maintain transparency, the smart contract can integrate real-time data feeds from the mining project, such as resource updates, production levels, financials, and operational updates, which could be made available to token holders through an API.

After successful testing, the contract will be deployed on a chosen blockchain.

Token Issuance

Token Creation

Once all detailed information about the token—such as its structure, type, and smart contract characteristics—is determined by the issuer, tokens will be created by converting ownership/rights of the mining project into digital fractions based on these specifications. The smart contracts will then be deployed on the chosen blockchain network.

Know Your Customer (KYC) and Anti-Money Laundering (AML) processes

Before distributing the tokens to investors, Know Your Customer (KYC) and Anti-Money Laundering (AML) processes for all potential investors are essential for verifying their eligibility and maintaining regulatory compliance. Different jurisdictions impose specific requirements for investor verification and AML compliance, so the KYC/AML process must be tailored to align with regulatory standards where the tokens are offered or traded. It is also crucial to identify whether certain investor types (e.g., retail, accredited, or institutional) are restricted by law and to customise KYC criteria accordingly.

Initial Offering

The Initial Offering is the first sale of tokens to investors following token creation, allowing them to participate in the project by purchasing tokens that represent ownership, revenue share, or debt interest in the asset. This offering enables issuers to raise capital to support the project, either through a private sale to accredited investors or a public offering.

Exchange Listing

Once tokenised, tokens can be listed on primary marketplaces, allowing investors to engage in secondary trading through digital wallets. Two types of exchanges are available: exchange platforms such as Binance and Coinbase or peer-to-peer transactions, enabling token trading without intermediaries.

In the next chapter, we will guide you through the tokenisation process using a case study of a junior mining company.

If you are a mining company looking to raise funds, please submit your project for our assessment on how we can assist you. 

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