Checkout the updated Outsider Trading research page which now includes reports covering Mineral Royalty Stream Financing and The Hybrid Solution to Portfolio Management. The latest paper analyzes a lesser known, but quickly evolving, type of financing in the mining industry (abstract below).
Resource streaming, also known as volumetric production payments (VPP) or metal purchase agreements, provides commodity exploration and production companies the necessary financing to bring projects into production. This has become an attractive financing option due to the fact that VPP’s are cheaper than equity (no shareholder dilution) and safer than debt, making this a “win-win” for both the mine operator and financing company. Streaming agreements allow the mining company to capitalize on proven reserves before the operation becomes productive.
These diverse agreements are crafted to emphasize each party’s strengths and protect against the others weaknesses. The underwriting financier enjoys the resource upside while avoiding the downside risk associated from operations. Stream financing allows the mine operator to leverage proven reserves to fund production or expansion, while avoiding many negative side effects associated with traditional financing methods.
We have some great research projects and articles in the pipeline, stay tuned for more!