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It’s prime time for the companies that specialize in providing money to cash-strapped miners.
These businesses offer funds today in exchange for metals tomorrow. With most commodities trading far below their boom-era highs of four years ago, the cash-for-production swap has become a vital elixir for mining companies struggling to cope with debt hangovers from happier days.
So-called “streaming” companies, such as Silver Wheaton Corp., Franco-Nevada Corp. and Royal Gold Inc., have signed a flurry of deals in recent months with many of the world’s largest miners.
The details vary but the common pattern is that the streaming company pays cash to the miner now in exchange for the rights to buy future streams of metals at prices well below market levels.
Skeptics ask whether the mining sector is selling off its future in exchange for a quick hit of cash.
But in a market where investors are less than eager to bankroll miners, many producers have limited options. They’re turning to streaming deals in increasing numbers.
“This market is the strongest we’ve seen in terms of opportunities in the 11 years we’ve run this company,” said Randy Smallwood, chief executive officer of Silver Wheaton. He added that it’s being driven by the extreme financial pressure being felt by many miners in an environment where many commodity prices have been in free-fall since 2011.
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