Sunday 19th August 2018

Resource Clips


Posts tagged ‘Vale SA (VALE)’

Emerita Resources finishes drilling, plans Brazil zinc resource estimate in two weeks

July 26th, 2018

by Greg Klein | July 26, 2018

With its initial drill program wrapped up on time and on budget, Emerita Resources TSXV:EMO expects to release a resource estimate for its Salobro zinc project in eastern Brazil within two weeks. The campaign totalled 22 holes for 3,676 metres. Thirteen holes were intended to expand the historic resource and four others twinned historic holes, while five large-diameter holes collected material for metallurgical tests.

Some standout assays from the batch released July 26 include:

Emerita Resources finishes drilling, plans Brazil zinc resource estimate in two weeks

Emerita Resources’ drill program expanded Salobro’s
mineralization without exceeding the previous depth.

Hole 012

  • 11.19% zinc and 1.26% lead over 2.8 metres, starting at 111.65 metres in downhole depth

Hole 013

  • 11.62% zinc and 0.4% lead over 1.71 metres, starting at 102.97 metres

Hole 016

  • 3.65% zinc and 0.2% lead over 8.46 metres, starting at 119 metres

  • 7.71% zinc and 0.99% lead over 3.43 metres, starting at 141.1 metres

The company interprets widths to be close to true widths.

The overall program succeeded in expanding mineralization up dip and along strike, with the historic deposit remaining open at depth, Emerita stated. The results also improve continuity, while geophysical analysis shows potential mineralization plunging to the west.

An historic, non-43-101 estimate compiled by Vale NYSE:VALE calculated 8.3 million tonnes averaging 7.12% zinc-equivalent at a cutoff of 3.5% zinc-lead.

Adding mineralization that does not require increasing depth should have a positive impact on the PEA results.—David Gower,
chairperson and incoming CEO
of Emerita Resources

“We have increased the limits of the near-surface mineralization, which was a key objective of the program,” pointed out chairperson David Gower. “The NI 43-101 mineral resource estimate that is being prepared will be the basis for the planned preliminary economic assessment and adding mineralization that does not require increasing depth should have a positive impact on the PEA results.”

Effective August 1, Gower and current CEO Michael Timmins swap positions, with Gower becoming CEO and Timmins chairing the board.

Also emphasizing the shallow mineralization, project manager Carlos Cravo added: “The relogging of the historical drilling combined with the new data has resulted in an improved understanding of the deposit morphology that will improve drill targeting and should benefit any future mine plan should the deposit be put into production.”

Emerita holds a 75% share of the 1,210-hectare property, with the remainder held by IMS Engenharia Mineral Ltda. Regional infrastructure includes paved roads, rail, power and water.

In northern Spain’s Reocin mining district, Emerita takes part in a 50/50 joint venture on the Plaza Norte zinc-lead project. The JV has drill permitting underway to update historic work.

Emerita also announced a private placement offered up to $3 million, with proceeds intended for Salobro. The company closed an oversubscribed private placement of $4.24 million last December.

Read more about Emerita Resources.

Canada’s six biggest miners boost exploration spending by 31%: PwC

July 5th, 2018

by Greg Klein | July 5, 2018

Canada’s six biggest miners boost exploration spending by 31%: PwC

(Photos: PricewaterhouseCoopers)

 

The half-dozen Canadian companies among the world’s top 40 miners increased exploration expenditures last year at twice the rate of the others. That info comes from the upbeat results found in PricewaterhouseCoopers’ Mine 2018, a study of the planet’s 40 biggest companies by market cap. The six Canadians spent C$620 million looking for new resources last year, compared with C$473 million in 2016. The report forecasts continued improvement throughout the current year.

Globally, exploration rose 15% in 2017 to US$8.4 billion, according to S&P Global Market Intelligence figures cited by PwC.

Not so impressive, though, was the equity raised on three key mining markets, which fell $1.7 billion last year for the industry as a whole. Especially hard-hit was Toronto, which plunged 36%. Australia slipped 9%, while London actually jumped 47%. However this year’s Q1 investing “reveals that activity in Toronto and Australia is starting to pick up and signals a renewed interest in exploration and early development projects.”

Overall, higher commodity prices propelled the top 40 companies’ revenues 23% to about US$600 billion, with cost-saving efficiencies contributing to a “sharp increase in profits.” The report sees several years of continued growth as global annual GDP increases about 4% for the next five years.

Meanwhile market caps for the top 40 soared 30% last year to US$926 billion.

The top 40 companies’ capex outlay, however, floundered at its lowest level in 10 years. But the authors “expect next year’s level to increase as companies press ahead with long-term strategies, be it growth through greenfield or brownfield investments, or new acquisitions.”

Should that investment fail to materialize, the report asks, “will there be a temptation to spend without sufficient capital discipline when demand outstrips supply?”

At a number of points PwC admonishes miners not to “give in to the impulses” engendered by the previous boom: “Perhaps the most significant risk currently facing the world’s top miners is the temptation to acquire mineral-producing assets in order to meet rising demand. In the previous cycle, many miners eschewed capital discipline in the pursuit of higher production levels, which set them up to suffer when the downturn came.”

Canadians among the 2017 top 40 consisted of the Potash Corporation of Saskatchewan (since merged with Agrium to create Nutrien TSX:NTR) in 13th place, Barrick Gold TSX:ABX (14th), Teck Resources TSX:TECK.A and TSX:TECK.B (16th), Goldcorp TSX:G (25th), Agnico Eagle Mines TSX:AEM (26th) and First Quantum Minerals TSX:FM (30th).

The top five companies, holding a top-heavy 47% of the top-40 combined market cap, were BHP Billiton NYSE:BHP, Rio Tinto NYSE:RIO, Glencore, China Shenhua Energy and Vale NYSE:VALE.

In addition to exploration spending, the half-dozen Canadian companies also got special mention for workplace safety, as “world leaders in digital transformation” and for boardroom diversity in which “women make up 25% of directors among Canadian miners, compared to 19% among their global peers.”

Download PwC’s Mine 2018 report.

Streamers turn to cobalt as Vale extends Voisey’s Bay nickel operations

June 11th, 2018

by Greg Klein | June 11, 2018

It was a day of big moves for energy minerals as China bought into Ivanhoe, Vale lengthened Voisey’s and streaming companies went after the Labrador nickel mine’s cobalt.

On June 11 Robert Friedland announced CITIC Metal would pay $723 million for a 19.9% interest in Ivanhoe Mines TSX:IVN, surpassing the boss’ own 17% stake to make the Chinese state-owned company Ivanhoe’s largest single shareholder. Another $78 million might also materialize, should China’s Zijin Mining Group decide to exercise its anti-dilution rights to increase its current 9.9% piece of Ivanhoe.

Streamers turn to cobalt as Vale extends Voisey’s Bay nickel operations

At peak production, Voisey’s underground operations are expected to
ship about 45,000 tonnes of nickel concentrate annually to Vale’s
processing plant at Long Harbour, Newfoundland.

Proceeds would help develop the flagship Kamoa-Kakula copper-cobalt mine in the Democratic Republic of Congo and the Platreef platinum-palladium-nickel-copper-gold mine in South Africa, as well as upgrade the DRC’s historic Kipushi zinc-copper-silver-germanium mine. Ivanhoe and Zijin each hold a 39.6% share in the Kamoa-Kakula joint venture.

Even bigger news came from St. John’s, where Newfoundland and Labrador Premier Dwight Ball joined Vale NYSE:VALE brass to herald the company’s decision to extend Voisey’s Bay operations by building an underground mine.

The announcement marked the 16th anniversary of Vale’s original decision to put Voisey (a Friedland company discovery) into production. Mining began in 2005, producing about $15 billion worth of nickel, copper and cobalt so far. Open pit operations were expected to end by 2022. Although a 2013 decision to go ahead with underground development was confirmed in 2015, the commitment seemed uncertain as nickel prices fell. That changed dramatically over the last 12 months.

With construction beginning this summer, nearly $2 billion in new investment should have underground operations running by April 2021, adding at least 15 years to Voisey’s life. The company estimates 16,000 person-years of employment during five years of construction, followed by 1,700 jobs at the underground mine and Long Harbour processing plant, with 2,135 person-years in indirect and induced employment annually.

Nickel’s 75% price improvement over the last year must have prodded Vale’s decision. But streaming companies were quick to go after Voisey’s cobalt. In separate deals Wheaton Precious Metals TSX:WPM and Cobalt 27 Capital TSXV:KBLT have agreed to buy a total of 75% of the mine’s cobalt beginning in 2021, paying US$390 million and US$300 million respectively. They foresee an average 2.6 million pounds of cobalt per year for the first 10 years, with a life-of-mine average of 2.4 million pounds annually.

Both companies attribute cobalt’s attraction to clean energy demand and a decided lack of DRC-style jurisdictional risk. But Vale also emphasizes nickel’s promise as a battery metal. Last month spokesperson Robert Morris told Metal Bulletin that nickel demand for EVs could rise 10-fold by 2025, reaching 350,000 to 500,000 tonnes.

Total nickel demand currently sits at slightly more than two million tonnes, Morris said. New supply would call for price increases well above the record levels set this year, he added.

Emerita Resources steps out to cut 5.7% zinc over 8 metres in Brazil

June 7th, 2018

by Greg Klein | June 7, 2018

Three more holes from eastern Brazil’s Salobro zinc project have Emerita Resources TSXV:EMO encouraged about potential expansion to an historic, non-43-101 Vale NYSE:VALE estimate. The results follow the first two holes, released June 1, of a program that’s expected to sink 23 holes totalling about 3,500 metres. Seventeen holes have been finished so far.

Emerita Resources cuts 5.7% zinc over 8 metres in Brazil

DDH-007 stepped out 100 metres from an historic, non-43-101 interval of 6.09% zinc and 0.73% lead over 10.43 metres. The new intercept hit:

  • 5.7% zinc and 0.84% lead, for 6.54% zinc and lead, over 8 metres, starting at 239.5 metres in downhole depth
  • (including 8.82% zinc and 1.48% lead, for 10.3% zinc and lead, over 4 metres)

Two near-surface holes tested potential for a starter pit in an area where an historic, non-43-101 trench assay showed 1.35% zinc over 22 metres. The new assays show:

DDH-005

  • 4.59% zinc and 0.08% lead, for 4.67% zinc and lead, over 1.5 metres, starting at 65.82 metres

DDH-006A

  • 1.52% zinc and 0.01% lead, for 1.53% zinc and lead, over 3 metres, starting at 26 metres

True widths weren’t provided.

Scheduled for Q3 is a resource to update Vale’s now historic, non-43-101 estimate of 8.3 million tonnes averaging 7.12% zinc-equivalent, using a 3.5% zinc-lead cutoff. The campaign will also collect 400 kilograms of material for metallurgical tests.

Last week Emerita released the current program’s first two assays, showing 4.05% zinc and 1.24% lead over 9.62 metres, along with 5.15% zinc and 0.51% lead over 3.32 metres. The company also reported that new assays from Vale core showed consistency with historic results, easing the way to a 43-101 resource.

Emerita has a 75% stake in the 1,210-hectare property, with the remainder held by IMS Engenharia Mineral Ltda. The region’s infrastructure includes paved roads, rail, power and water.

Emerita also shares in a 50/50 joint venture on the Plaza Norte zinc-lead project in northern Spain’s Reocin mining district, where the company has drill permitting underway to update historic work.

In December the company closed an oversubscribed private placement of $4.24 million.

Read more about Emerita Resources.

Emerita Resources releases first zinc-lead assays from its Salobro project in Brazil

May 23rd, 2018

by Greg Klein | May 23, 2018

The near-term goal is a 43-101 resource to replace an historic estimate as drilling continues at Emerita Resources’ (TSXV:EMO) Salobro zinc project in eastern Brazil’s Minas Gerais state. Out of a planned 23-hole, 3,500-metre campaign, the crew has so far sunk 15 holes totalling 2,133.9 metres, with the first two assays released May 23.

Infill hole DDH-001 was collared within 24 metres of an exceptional historic Vale NYSE:VALE interval of 10.39% zinc and 2.13% lead over 13.92 metres. The new hole revealed:

  • 4.05% zinc and 1.24% lead for 5.29% zinc plus lead over 9.62 metres, starting at 257.9 metres in downhole depth
  • (including 9.74% zinc and 3.66% lead for 13.4% zinc plus lead over 2.72 metres)
Emerita Resources releases first zinc-lead assays from its Salobro project in Brazil

A high-grade historic zinc estimate from
Vale brought Emerita Resources to Brazil.

DDH-002 extended an historic mineralized zone approximately 30 metres up-dip, with an assay grading:

  • 5.15% zinc and 0.51% lead for 5.66% zinc plus lead over 3.32 metres, starting at 108.38 metres

True widths weren’t provided.

Vale’s historic, non-43-101 estimate came to 8.3 million tonnes averaging 7.12% zinc-equivalent using a 3.5% zinc-lead cutoff. Emerita hopes to increase those numbers in a 43-101 resource scheduled for July. The company filed a 43-101 technical report on the 1,210-hectare property in March.

The current program includes six large-diameter holes to collect 400 kilograms of material for metallurgical tests.

Emerita closed its 75% acquisition of Salobro in March, with the right to take on the remaining 25% from IMS Engenharia Mineral Ltda. The region’s infrastructure includes paved roads, cell phone reception, rail, power and water.

Emerita also partners in a 50/50 joint venture on Plaza Norte, a northern Spain zinc-lead project with considerable historic work and regional infrastructure that sits adjacent to the former Reocin mine that produced about 62 million tonnes averaging 11% zinc and 1.4% lead up to 2003. With drill permitting underway, Emerita could produce a maiden resource for Plaza Norte in early 2019.

Last December the company closed an oversubscribed private placement of $4.24 million.

Read more about Emerita Resources.

Emerita Resources mobilizes rigs to Brazilian zinc project, plans mid-year resource

April 10th, 2018

by Greg Klein | April 10, 2018

With one or more rigs now en route, Emerita Resources TSXV:EMO has field staff preparing its Salobro zinc project for a 3,500-metre program and a late-Q2 resource estimate. Located in eastern Brazil’s Minas Gerais state, the 1,210-hectare property has an historic, non-43-101 estimate compiled by Vale NYSE:VALE of 8.3 million tonnes averaging 7.12% zinc-equivalent using a 3.5% zinc-lead cutoff.

Emerita Resources mobilizes rigs to Brazilian zinc project, plans mid-year resource

Regional infrastructure includes paved roads,
cell phone service, rail, water and power.

“We see excellent potential to expand the existing resource and the previous work completed by Vale was to a high technical standard, which provides an excellent base from which to accelerate the evaluation of the project,” said Emerita chairperson David Gower.

The company closed its 75% acquisition of Salobro in March, retaining the right to pick up the other 25% from IMS Engenharia Mineral Ltda. Also last month, Emerita filed a 43-101 technical report on the property.

As part of the resource update work, Emerita has assays pending for resampled core from 10 selected historic holes and has relogged 11 holes.

Additionally, an engineering firm has completed a preliminary mine plan for the project. Emerita also has a community engagement proposal under review.

The work comprises part of an ambitious campaign that might reach pre-feasibility as early as next year.

In northern Spain, meanwhile, the company takes part in a 50/50 joint venture on Plaza Norte, another zinc-lead project with substantial historic work and regional infrastructure. Emerita has permitting underway for a drill campaign that could bring a maiden resource early next year.

The company closed an oversubscribed private placement of $4.24 million in December.

Read more about Emerita Resources.

Trans-Atlantic treasures

February 26th, 2018

Emerita Resources fast-tracks high-grade zinc in Brazil and Spain

by Greg Klein

Two years of escalating prices and several years of historic work have Emerita Resources TSXV:EMO in an exceptionally sanguine mood. Following December’s oversubscribed $4.24-million cash infusion and last month’s TSXV approval to close the Brazilian acquisition, the company announced a breathtakingly ambitious timeline for its Salobro zinc project. Should all go to a very optimistic plan, the company would advance from updating an historic resource to completing pre-feas and mine permitting within two to three years.

Emerita Resources fast-tracks high-grade zinc in Brazil and Spain

Should success reward optimism, Salobro
could reach pre-feasibility next year.

The 1,210-hectare former Vale NYSE:VALE project’s located in southeastern Brazil’s Minas Gerais state, where regional infrastructure includes a zinc smelter, paved roads, rail, water and power.

Salobro comes with an historic, non-43-101 Vale-compiled resource of 8.3 million tonnes averaging 7.12% zinc-equivalent lying at shallow depth and showing expansion potential along strike and down dip. The geology suggests either a Mississippi Valley-type or sedimentary exhalative deposit, Emerita says. A standout among historic intervals assayed 10.39% zinc and 2.13% lead over 13.92 metres.

The acquisition would give Emerita a 75% stake in Salobro and the right to pick up the remaining 25% from IMS Engenharia Mineral Ltda. Vale, meanwhile, has begun the process of withdrawing a civil claim against IMS concerning ownership of the property, Emerita stated. The company expects to close the deal by the end of March.

“Ambitious” might be an understatement for such an optimistic timeline. But the project “has consistently exceeded our expectations during our scoping and analysis phase,” says newly appointed CEO Michael Timmins. The veteran of Agnico Eagle Mines’ (TSX:AEM) expansion from one to nine operations adds, “We are encouraged by the outcome of this early mine study and are very excited to have the opportunity to utilize our award-winning mine-building team in Brazil to fast-track the development of Salobro.”

With that in mind the company foresees a 43-101 technical report filed by the end of March, a 43-101 resource by the end of Q2, 3,500 metres of exploration drilling to begin in early March, a PEA complete by the end of Q3, baseline enviro studies beginning in Q3, a pre-feas finished by Q3 2019 and mine development permits in hand by Q2 2020.

Obviously such an agenda depends on favourable outcomes at every stage. The company has already been resampling historic core for the new resource, which will also include upcoming step-out holes to expand the deposit’s shallow areas. A conceptual mine plan will build on info inherited from Vale.

Emerita credits its Brazilian team with significant involvement in projects including Belo Sun Mining’s (TSX:BSX) Volta Grande gold project and Aguia Resources’ (TSXV:AGRL) Tres Estradas phosphate deposit.

The deal calls for Emerita to pay Vale an initial US$350,000 after IMS turns Salobro over to a subsidiary held 75% by Emerita and 25% by IMS. Once Vale formally withdraws its claim against IMS, Emerita pays Vale legal costs of approximately 760,000 reals, about C$297,000. Further payments to Vale would cost Emerita US$1.65 million by July 14, US$1.5 million in 2020 and another US$3 million in 2024.

Emerita may buy out the IMS 25% for C$2 million and a million shares by 2021.

Emerita Resources fast-tracks high-grade zinc in Brazil and Spain

The Plaza Norte agenda aims for a late-
2019 preliminary economic assessment.

Helping on the financial side will be December’s oversubscribed $4.24-million private placement. But some of that cash will go to another Emerita zinc project—and for that, the focus shifts to northern Spain.

Situated next to the former Reocin mine that produced about 62 million tonnes averaging 11% zinc and 1.4% lead up to 2003, the 3,600-hectare Plaza Norte property sits amid regional infrastructure including rail, road and port facilities, along with a Glencore zinc smelter about 180 road kilometres away. The project is a 50/50 JV with the Aldesa Group, a specialized construction and infrastructure firm operating in Spain and internationally.

Emerita’s Spanish team now has permitting underway for a 5,000-metre campaign anticipated to start in May. The plan is to build a 43-101 resource over an area that’s already seen more than 300 holes totalling about 73,000 metres. Some historic intercepts include 9.72% zinc and 0.09% lead over 18.96 metres, along with 7.05% zinc and 0.3% lead over 8.2 metres. The company anticipates an initial resource in Q1 next year and a PEA by 2019 year-end.

Meanwhile Emerita awaits resolution of disputed ownership concerning two other Spanish zinc properties, Paymogo and Aznalcollar. The latter’s Los Frailes deposit hosts an historic, non-43-101 estimate showing 20 million tonnes averaging 6.65% zinc, 3.87% lead, 0.29% copper and 148 ppm silver. The company considers the project ready for feasibility studies.

Paymogo’s La Infanta deposit has another historic, non-43-101 estimate of 800,000 tonnes averaging 1.77% copper, 6.91% lead, 12.66% zinc and 148 g/t silver. About seven kilometres away, Paymogo’s Romanera deposit holds an historic, non-43-101 34 million tonnes averaging 0.42% copper, 1.1% lead, 2.3% zinc, 44 g/t silver and 0.8 g/t gold.

Emerita Resources targets high-grade Brazilian zinc project drilled by Vale

July 14th, 2017

by Greg Klein | July 14, 2017

Historic high zinc grades amid regional infrastructure have Emerita Resources TSXV:EMO planning to take on a new acquisition in east-central Brazil. Backed by 40 holes totalling 13,885 metres of drilling, the 1,210-hectare Salobro zinc project in Minas Gerais state comes with an historic, non-43-101 estimate of 8.3 million tonnes averaging 7.12% zinc. One historic intercept graded 10.39% zinc and 2.13% lead over 13.92 metres.

Emerita Resources targets high-grade Brazilian zinc project drilled by Vale

Mineralization occurs in three lenses, all remaining open, the company stated. Emerita has already commissioned a 43-101 technical report.

The project’s mineralization “was delineated by the highly respected technical group of Vale [NYSE:VALE] and remains open for future expansion,” said Emerita chairperson David Gower. “The project is located in an area with excellent infrastructure and a supportive environment for responsible mine development. Emerita has an exceptional technical team in Brazil and is ready to advance the project quickly.”

Local infrastructure includes paved roads, rail, water, power and cell phone reception, the company added.

The deal would resolve a legal dispute over Salobro between Vale and IMS Engenharia Mineral. Under a definitive agreement with Emerita, Vale would withdraw its ownership claim against IMS in return for US$6.5 million over seven years from Emerita, which would also cover Vale’s legal costs of about US$245,000.

Emerita and IMS have signed a binding LOI to create a subsidy to be held 75% by Emerita and 25% by IMS. IMS would then transfer its Salobro rights to the new entity in return for one million Emerita shares. The subsidiary would hold Salobro until Emerita completes its schedule of payments to Vale. Emerita would have the right to acquire the 25% IMS stake for C$2 million and one million shares. Emerita and IMS expect to sign a definitive agreement within 90 days.

Emerita also announced the termination of a non-binding LOI to acquire the Masa Valverde zinc project in Spain. But the company remains committed to another Spanish project, Aznalcollar, which hosts an historic, non-43-101 estimate of 71 million tonnes averaging 3.86% zinc, 2.18% lead, 0.34% copper and 60 ppm silver. The property is subject to a legal dispute in which Emerita alleges another company was wrongfully granted ownership. In an update last March, Emerita said a Seville court “has indicated that this result is highly irregular, inconsistent with the laws and regulations governing public tenders in Spain and further investigations need to be made to determine if there were any criminal acts committed in connection therewith.”

Ontario backs deep-mining research with $2.5-million grant

November 2nd, 2016

by Greg Klein | November 2, 2016

Sudbury’s status as a global capital of mining R&D gained additional recognition with a $2.5-million provincial grant. Announced at the Mining Innovation Summit on November 1, the money goes to the non-profit Centre for Excellence in Mining Innovation and its Ultra Deep Mining Network.

Ontario backs deep-mining research with $2.5-million grant

The UDMN works to improve safety, efficiency and sustainability of operations at depths below 2.5 kilometres. While China has announced support for deep-mining research as part of its Three Deep program, the alarming accident rate at South African mines has been attributed partly to the unprecedented depths of some operations, one breaching the four-kilometre mark.

Ontario hosts two of the world’s 10 deepest mines, according to Mining-Technology.com. Vale’s Creighton nickel-copper mine in Sudbury holds tenth place, at about 2.5 kilometres’ depth. Glencore’s Kidd copper-zinc mine in the Timmins region holds eighth place at slightly more than three kilometres. The other eight mines are all South African gold operations.

Another type of research goes on at Creighton, which hosts the SNOLAB physics experiments including the Sudbury Neutrino Observatory that won Art McDonald a Nobel Prize in 2015.

Why Creighton? As quantum physicist Damian Pope told the National Post, the lab’s two kilometres of rock shields neutrinos from other sub-atomic particles, allowing them to be studied in relative isolation. That research, conducted where the sun don’t shine, somehow helped eggheads understand how the sun shines.

As for mining research, Sudbury hosts nine institutes dedicated to innovation, the province stated. Ontario now has 42 operating mines supporting 26,000 direct jobs and 50,000 additional jobs associated with mining and processing, according to a statement from mines minister Michael Gravelle. He valued Ontario’s 2015 mineral production at $10.8 billion.

The Ministry of Northern Development and Mines hosted the two-day Sudbury summit to bring together “government, industry, academia, thought leaders, entrepreneurs, as well as research and innovation organizations” to further encourage mining innovation.

Read about Laurentian University’s Metal Earth project.

Visual Capitalist: How precious metals streaming works

September 12th, 2016

by Jeff Desjardins | posted with permission of Visual Capitalist | September 12, 2016

Miners seeking new capital have always had a variety of options: They could issue new shares, take out a loan, enter into joint-venture agreements or divest non-core assets.

However, in the last decade, a new option has emerged called “precious metals streaming”—in which streaming companies essentially offer capital up front to mining companies in exchange for metal later. If properly executed, the result is a win for both parties that can ultimately provide value to investors.

Precious metals streaming

This infographic from Silver Wheaton TSX:SLW explains the precious metals streaming model and the arbitrage opportunity that creates value for both the streamer and the miner seeking to acquire capital:

How precious metals streaming works

 

The aforementioned arbitrage opportunity in precious metals streaming is key.

For a traditional base metal miner, the majority of forecasted mine revenue may come from a metal like copper or nickel. However, along with those “target” metals, smaller amounts of gold and silver may be produced from the deposit as well.

Investors would still value those byproduct precious metals in a base metal miner’s portfolio, but the metals may be typically valued at an even higher multiple in a precious metal streamer’s portfolio. This allows the base metal miner to transfer these future “streams” to the streamer in exchange for up-front capital, which can be a win-win scenario for both parties.

Streaming benefits

In other words, miners use streaming to acquire non-dilutive financing and to extract value from non-core assets. This allows them to deploy capital on purposes more central to their strategy. Major miners such as Teck Resources TSX:TCK.A and TCK.B, Barrick Gold TSX:ABX, Vale NYSE:VALE and Glencore all sold streams in 2015.

Meanwhile, streaming companies have been very successful since this model was first pioneered 12 years ago. They are getting gold and silver at a discount, and this has created significant value for investors over the last decade. Today there are many valuable streaming companies out there, including the major ones such as Silver Wheaton, Royal Gold and Franco-Nevada TSX:FNV.

Posted with permission of Visual Capitalist.