Druckenmiller at TEDxWallStreet

http://new.livestream.com/accounts/50006/events/2492895/videos/33567113/player?width=560&height=315&autoPlay=false&mute=false

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Mineral Royalty Stream Financing

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. Full Report

[Photo: Buckdog]

Mineral Royalty Stream Financing

(Photo: Sandstorm Gold)

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!

NY Fed: Maiden Lane III “AIG bailout” generates $6.6B

The fed recently sold its remainder share (ML III) related to the bailout assistance given to AIG during the recession, which resulted in a $6.6 billion profit.

“The completion of the sale of the Maiden Lane III portfolio marks the end of an important chapter—our assistance to AIG—that was undertaken to stabilize the financial system in the midst of the financial crisis. I am pleased that we were able to achieve our principal goal, which was to protect the U.S. economy from the potentially devastating effects of AIG’s failure, while demonstrating sound stewardship of taxpayer interests. I am proud of and commend all of the people at the New York Fed who worked tirelessly and diligently to get us here.”

China’s Economic Crisis Creates Uncertainty

(Photo: Reuters)

I believe that China will be the next region of economic volatility, post slow Euro-zone improvements. A massive housing market has been artificially created, where billions of dollars of investment into infrastructure have been spent on ghost towns that are struggling to stay alive. The Yuan currency peg has cultivated an unsustainable economic liability that will greatly damage the global recovery. China’s “economic growth” has been created by dumping their exports into developed economies, where national workers cannot compete with production costs. By tying the Chinese Yuan to the US Dollar, they gorge the international market by trading with an abnormally and consistently low valued currency. Like the gentlemen in the video suggests, I believe that the Chinese government intervention and regulation will ultimately polarize major groups of societies — with the majority of the negatively affected working in the lowest income bracket.

Wall Street Journal reporter Bob Davis recently posted two articles on this topic. In the first, he suggests that the hope for Chinese economic reform lies in the government allowing private companies and entrepreneurs more opportunity. The latter article is appropriately named State-Run Firms are the Giants of China’s Economy, with the government owning about 45% of the economy.

“The report warns that China’s growth is in danger of decelerating rapidly and without much warning. That is what has occurred with other highflying developing countries, such as Brazil and Mexico, once they reached a certain income level, a phenomenon that economists call the “middle-income trap.” A sharp slowdown could deepen problems in the Chinese banking sector and elsewhere, the report warns, and could prompt a crisis, according to those involved with the project.

It recommends that state-owned firms be overseen by asset-management firms, say those involved in the report. It also urges China to overhaul local government finances and promote competition and entrepreneurship.”