Metal Streaming Instruments As an Tool to Increase Mining Project Values

Wirth Herbert () and Koński Maciej ()
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Wirth Herbert: KGHM Polska Miedź S.A., Prezes Zarządu, Lubin, Poland
Koński Maciej: Naczelny Centrum Analiz Strategicznych i Bazy Zasobowej, Poland

Gospodarka Surowcami Mineralnymi / Mineral Resources Management, 2017, vol. 33, issue 2, 129-144

Abstract: Stream financing is an important instrument that supports bringing projects from their development stage into production and maximizing their value. Taking relatively significant difficulties encountered by mining companies with securing project financing in recent years into account and, on the other hand, based on fundamental analysis, the positive potential of the copper market in the upcoming years, stream financing instruments can play a significant role in the copper market by supporting the development of new mining projects owned by companies with limited access to basic sources of funding. On the basis of a fundamental analysis of the copper market, the article explains and justifies presumptions for using metal streaming transactions in financing the development of mining projects at different stages of advancement. T he article explains key metal streaming structuring and valuation rules in such transactions. Additionally, it explains the main requirements related to project stages of development and the competitive position that determines the ability of efficient capital raising by means of streaming. The performed analysis justifies the potential of using metal streaming instruments to maximize project value. Disadvantages of metal streaming are related mainly to the lack of participation in potential further metal price increase in relation to the prices used in streaming instruments. Due to the discount in company valuation that may occur in the event the cost of production increases after additional revenue from precious metals no longer exists, streaming instruments are suitable mainly to the low cost assets.

Keywords: streaming; financing; mining projects; mining (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:gosmin:v:33:y:2017:i:2:p:129-144:n:8

DOI: 10.1515/gospo-2017-0018

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