Streaming agreements may provide for a buyback option that provides the resource company with some protection in the event of a production shortfall. A typical buyback option would allow the resource company to buy back a percentage of the production promised to the streaming company at a fixed price, usually in the form of a refund of a portion of the advance if the project does not reach a target production level. This option is usually only available once and in specific circumstances. A streaming operation can also be seen by the market as a confirmation of the potential of the project by an external financial service provider, which increases investor confidence and a rise in stock prices. From the buyer`s perspective, streaming agreements allow for long-term delivery of metal (whether in the form of real concentrates or credits to metal accounts) at a price below the market price, without taking on operating costs and risks. Among the latest streaming transactions is the deal, Anani Investments Limited (a 100% subsidiary of Glencore) concluded in 2015 Silver Wheaton (Caymans) Ltd (a 100% subsidiary of the Silver Wheaton Group), under which silver Wheaton agreed to pay $900 million to Anani Investments and pay 20% of the cash price per ounce of silver provided. In exchange, Silver Wheaton receives 33.75% of the silver produced up to the delivery of 140 million oncs and 22.50% of the silver production for the life of the mine. Diversify. Most miners have a handful of mines in operation at all times. This makes sense given the cost and complexity of mine ownership. But streaming companies are simply making financial investments backed by the production of gold and silver. They don`t need to limit themselves to a handful of investments.
Some streaming companies have hundreds of streaming deals across the spectrum, from already producing mines to assets in the early stages of development. This allows streaming companies to run a much more diverse business than miners – and with streamlined business structures, as it doesn`t require a huge staff base to operate the assets they invest in. Avoid the risk of operating a mine. However, the large margin is just one of the many positive aspects of the streaming model. For example, streaming companies do not operate mines, which protects them from the risks and complications of mining activity. The increase in labor costs, which can affect a miner`s margins, but usually doesn`t affect a streaming company`s contract purchase prices. Mining costs like this often rise when commodity prices rise. That`s why the large margins generated by streamers are so stable over time, but it`s also one less thing that a streaming company`s management team needs to take care of. Conversely, streaming agreements are essentially contracts for the purchase and sale of metals in which the streaming company (the buyer) pays the purchase price in advance to the mining company (the operator), either as a down payment or through a series of payments, in exchange for the right to acquire a certain amount or percentage of the production of a particular refined metal. with a long-term lifespan (more than 20 years) or even the life of the mine.3 Allow the streaming company to benefit from resource exposure without having to participate in the operating or capital costs of the project after the first payment and avoid many of the risks that operators are often exposed to (e.g.B. increase in labor and fuel costs, B.
Environmental commitments). . . .