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Peru's mineral streaming options

Emil Ruppert
Mineral streaming is a transaction whereby an end user or trading company (and these days also investors and hedge funds) makes an upfront capital payment in exchange for the right to purchase a percentage of a mining project's future production.

Also known as volumetric production payments or metal purchase agreements, this mechanism provides mining companies with the necessary financing to bring projects to production.

For the mining company, it has the advantage of being cheaper than equity as there is no shareholder dilution, and allows it to capitalise on reserves before they are brought into production.

For the underwriter it is safer than debt, and since the deals they secure are usually for a percentage of the mine's production for life, the streaming company stands to benefit immensely if new zones are discovered and actual production comes in higher than originally forecast. This often occurs in this industry, as drilling delineates new resources, either increasing annual production or vastly extending the life of the mine.

Obviously, this mechanism requires the existence of proven reserves, so it is not available for greenfield projects. But once reserves have been proved and the project is ready, mineral streaming can be a source of capital for construction and development of a project.

Emil Ruppert

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