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Overwhelmed by the sheer volume of opportunities available in volatile commodity markets, precious-metal “streaming” companies are looking to team up to take on large acquisitions that they might not be able to readily afford on their own.
Randy Smallwood, chief executive of Silver Wheaton Corp., said he thinks the streaming firms will be doing syndicated deals within the next year.
“It is something we’ll have to consider more as our capital capacity has been reduced by some of the acquisitions we’ve made recently,” he said.
In a streaming transaction, a company like Silver Wheaton gives a cash-starved miner an upfront cash payment. In exchange, it secures the right to buy ongoing precious-metal output from the miner at a heavily discounted rate. The streaming company can then turn around and sell the metal at market prices to net a profit.
For years, royalty and streaming companies provided most of their capital to miners trying to finance construction of new projects. But these days, the biggest deals are going to debt-heavy companies that need to clean up their balance sheets.
Mining giants like Glencore PLC, Barrick Gold Corp. and Teck Resources Ltd. have sold streams worth hundreds of millions of dollars this year, and insiders expect more transactions in the months ahead. The miners need cash, and they would rather sell streams than issue equity while their stock prices are depressed.
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