Silver Wheaton’s US$800 million deal shows streaming firms still have buying opportunities – by Peter Koven (Financial Post – August 3, 2016)

Silver Wheaton Corp.’s US$800-million gold acquisition from Vale SA shows that metal streaming firms still have good buying opportunities despite improving market conditions.

The Vale deal is only the second major streaming transaction of the year and the first since February, when Franco-Nevada Corp. bought a US$550-million stream from Glencore PLC. By comparison, there were 11 streaming deals in 2015 worth about US$4.2 billion, according to Financial Post data.

In a streaming transaction, a royalty firm such as Silver Wheaton makes an upfront cash payment to a mining company. In exchange, it can acquire a fixed amount of precious metals from the miner at extremely low prices, which it sells for a profit.

Streaming is a crucial source of capital for the mining industry when commodity prices are depressed, because issuing debt or equity is extremely difficult in a bear market. That was the key reason for all the deals last year. But now that commodities have rebounded, miners have more options to raise money and it is no surprise that streaming activity has slowed down.

“There has been a swing in market sentiment,” Randy Smallwood, chief executive of Vancouver-based Silver Wheaton, said in an interview. “A year ago, streaming was pretty well the only source of financing. Now we’re competing with other sources of capital.”

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