What Is A Stream Agreement

The year 2012 included a number of major streaming transactions, including Franco-Nevada`s $1 billion precious metals streaming agreement on inmet`s Cobre Panama copper project (see above) and Hudbay Minerals Inc.`s $750 million precious metals stream transaction with Silver Wheaton relating to the copper mine, of zinc, gold and silver 777 from Hudbay and the Constancia copper project. We expect demand for these non-traditional funding arrangements to continue in 2013. Streaming agreements can provide a buy-back 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 initial payment if the project does not reach a target production level. This option is usually exercisable only once and in very specific circumstances. In addition to restrictions on the sale of shares or equity rights through the operator, which the buyer may require from the operator`s shareholders or parent companies as an additional guarantee, streaming agreements typically contain restrictions on the change of control of the parties. Finally, in direct relation to the provision of a guarantee to the buyer, there are the provisions relating to inter-creditor agreements, whether or not the operator has already guaranteed its assets for the benefit of other lenders and creditors. Since streaming agreements do not necessarily prevent the operator from participating in traditional debt financing that would impose certain leverage restrictions, an operator should always receive additional funds for its core business through traditional project financing, especially since the deposit paid by the buyer can be allocated at the discretion of the operator. Therefore, a streaming contract would normally include an obligation for the buyer to subordinate the guarantees granted to it to the guarantees granted to the banks or other financiers of the mining project. Of course, if there are no ways to mine and produce the primary metal, there will be no production of the metal in streaming.

The streaming agreement between Inmet/Franco and Nevada also provides for a buyback option under which, in the event of a lack of precious metal production, MPSA has the option to reduce electricity by repaying up to 10% of the $1 billion deposit less the value of all metals delivered to Franco-Nevada under the streaming agreements prior to the option exercise date. This option can only be exercised once on the occasion of the 3rd or 5th anniversary of production growth. There is also a replenishment option in case a certain level of production is not reached within the planned time frame. Streaming agreements typically include the following agreements: Streaming agreements allow the streaming company to benefit from resource exposure without having to participate in the operating or investment costs of the project after the initial payment, and to avoid many of the risks that operators are often exposed to (for example. B, rising labour and fuel costs, environmental liabilities). Finance companies typically hold flows in terms of projects in the production and development phases, in different geographic locations, and often in terms of multiple raw materials, allowing them to diversify, so the failure of a project may not have a significant impact on a streaming company`s overall portfolio. .