A streaming agreement is a non-dilutive, financial transaction whereby a commodity producer – for example, a precious metal miner that also yields some base metal by-products – synthetically sells forward the right to a percentage of its future, life-of-mine production (commonly by-products) at a preset discounted price in exchange for a large, tax-deferred upfront payment. Streaming agreements are also referred to as volumetric production payment (VPPs) agreements and metal purchase agreements.
How it works
Among several ways of operationalizing a stream, the following is one mutually beneficial method that is long-proven and often-used in many mining jurisdictions/countries:
- Streaming company makes a large, tax-deferred upfront deposit payment to mine owner’s offshore affiliate.
- After the mine owner receives payment for the sale of its payable metals to the offtaker of its choosing, its offshore affiliate purchases the equivalent amount of the agreed to fixed percentage on an exchange (e.g., LME or COMEX) or from a warehouser and “delivers” it to the streaming company through tradable instruments (e.g., LME or COMEX warrants or warehouse certificates).
- The streaming company then makes an additional delivery payment to the offshore affiliate.