November 24, 2017

Streaming minerals as a debt-reduction measure the in-thing

As a character in Chinua Achebe’s best-selling masterpiece, Things Fall Apart, observed: “As men have learned to shoot without missing, birds have learned to fly without perching”, likewise debt-laden mines have discovered a smart way to reduce the their deal burden – selling future earnings from mineral reserves. This trend is called streaming, to those not in the know.

Recently, AFP reported that Switzerland based Glencore, one of the world’s largest miners and producers of copper, had adopted streaming to reduce its $30 billion debt by at least half.

The company had experienced an earnings drop of 2% in nine months. During boom times this could be regarded as trivial, but given its current financial situation, it is relatively sizeable chunk.

The drop in production, was a consequence of its Argentina asset reaching the end of its span and the suspension of activities at its Katanga mine, Democratic Republic of Congo (DRC).

Glencore has reached a long-term streaming $900 m deal with Silver Wheaton of Canada. As part of the transaction, the company would initially provide the Canadian company with around 34 percent of the silver produced at the Antamina mine in Peru.

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