Streaming Agreements Mining

Nevertheless, entering into streaming contracts offers greater benefits. On the part of the operator, the deposit received as part of the purchase price may be allocated freely and without dilution of the equity participation; the obligation to sell the diffused metal on the implicit condition that the metal is actually manufactured without the buyer intervening in the undertaking; and, more importantly, they allow the operator to monetize non-essential products before they are even produced. In addition, they can be perfectly combined with other forms of financing without compromising the operator`s credit capacity, since in most of these agreements the diffused metal is a by-product of the operator`s main activity. As funding challenges continue to affect many players in the mining sector, we expect streaming transactions to continue to have a strong market in the industry and evolve with other creative financing solutions. In February 2014, Klondex Mines completed the acquisition of the Midas mine and associated ore mill mill from Newmont Mining for $83 million, making Klondex a fully integrated producer. The acquisition, cost and repayment of the debt were financed by a $42.6 million private placement, $25 million in mezzanine debt guaranteed debt of 11% and a $35 million streaming and licensing agreement with Franco-Nevada. The Franco-Nevada financing agreement included a prepaid gold stream that required the delivery of 38,250 ounces of gold over five years and separate net return royalties of 2.5% on Klondex`s Midas and Fire Creek concessions, and which took effect after the completion of firm gold deliveries. The other major advantage for mining companies is that they can raise funds before production starts using their reserves. Projects can be put into production much faster without the need for other forms of financing. This transaction is not dilutive to shareholders and is generally less restrictive than debt financing. It can also be seen as external support to a project, which supports its investment potential. For the streaming company, this is a way to invest in mining companies without being exposed to operational risk. Streaming companies typically invest in multiple mines around the world, this diversification ensures that the failure of a mining company does not affect their portfolios.

Other forms of financing that mining companies could consider to raise capital are debt financing, equity financing, asset sales and royalty financing. The table below describes the advantages and disadvantages of this financing compared to streaming financing. The main objective of these interconnection agreements is to define the primacy of interests and rights in the event of delay. However, unlike streaming agreements, where the interests of the parties are more or less coordinated, intercreditor agreements involve a much more complex negotiation, as the buyer will insist that the operator remain in business, while the financial institution will follow the realization of the securities5. 5 In early 2015, KBL Mining Limited entered into a streaming agreement with Quintana Mineral Hill Streaming Co. LLC, under which Quintana agreed to acquire KBL $23 million out of several installments in exchange for the right to acquire a percentage of KBL`s base metal, gold and silver production. . .


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