Silver Streaming Agreement

Despite the current relevance and existence of streaming agreements in the mining industry, there are some drawbacks for the parties involved in these transactions.7 For example, there may be a negative impact on the operator`s cash expenditure, because once a streaming agreement exists, by-product credits cannot be deducted from operating costs. Even if an operator agrees to sell a percentage of the production of a certain metal in streaming, the buyer will benefit from the extension of the operation, although the amount of the down payment and the fixed price remain unchanged and therefore there will be no additional capital contribution from the buyer. This price variability can also harm the operator if the purchase price of the streaming metal is too low below the market price, with no possibility of adjusting the fixed price as soon as the agreement is in force. Streaming agreements allow, among other things, sufficient flexibility to take into account the interests of both parties, so that risks are distributed more or less equitably, unlike other types of agreements and financing mechanisms. In addition, as explained below, streaming agreements are not participatory in the mining sector and are not diluting to the operator`s shareholders, unlike equity financing; It is therefore an attractive source of funding, particularly for exploration and mining companies. But small and medium-sized enterprises and large companies have also entered into such agreements to diversify their investment and credit portfolios. However, there are advantages to entering into a streaming agreement. On the operator`s side, the deposit received under the purchase price can be distributed freely and without dilution of the shareholders` equity shares; the obligation to sell the metal in streaming is conditional on the implied condition that the metal is actually manufactured without the buyer intervening in the transaction; and, more importantly, the agreement allows the operator to monetize non-nuclear products before they are even produced. In addition, the agreement can be combined with other forms of financing without affecting the operator`s borrowing capacity, since in most streaming agreements, streamed metal is a by-product of the operator`s core business. The question is how these agreements are generally structured and what benefits, opportunities, benefits or risks they bring to the streaming company or investor and mining company.

The central point associated with streaming agreements is that the mining company may inadvertently place too little price on the streaming product and therefore not benefit from a subsequent increase in its market value. If the mining company is unable to negotiate optional buybacks to purchase all or part of the electricity, the investor can make a significant wind without having to compensate the mining company for that benefit. This problem can be predominant when the streaming product market is particularly volatile. As a general rule, parties to streaming agreements agree to maintain confidentiality and not disclose the terms of an agreement or any information they have received or verified, (1) except with the prior approval of the public party, 2) to accountants, legal advisors, lenders and, in general, to all those for whom confidential information is relevant or (3) , except in the event of a breach of the confidentiality conditions of the party or parties prior to the conclusion of the contract or has been independently collected. They also agree to comply with existing laws or the court order. For example, it may be problematic for exploration and mining companies to give large amounts of sales value in exchange for an immediate injection of money. Streaming offers usually include selling metal at a price under the market, so if a company`s mine produces a lot of hardware, the streaming company may be the only one that benefits.