Streaming is the term often used when a funder makes an agreement with a mining company to purchase all or part of their precious metals production at a low, fixed, predetermined price to which both parties agree. The streamed resource is often a by-product of the mining company's operations (e.g. most silver is a by-product of base metals mining).
Streaming agreements, also referred to as volumetric production payment (VPPs) agreements or metal purchase agreements, were pioneered in their current form for precious metals resource application by Silver Wheaton in 2004. They are financing arrangements whereby companies are offered capital, often prior to mine infrastructure being built, in exchange for an interest in future mine production. Stream agreements are an accretive financing tool that can enable resource or business owners to minimize dilution and accelerate production or sales.
Key Capital employs a hybrid case-by-case approach through alternative structured streaming and/or financing arrangements. This approach can provide junior mining companies the opportunity to achieve early production, despite the unknown value down the road of any additional reserves beyond those technically established as feasibly minable at the time of deal.
Since the streaming agreements are based on projected resource output, the upside for Key Capital is potentially large if the actual metal production were to exceed the projected output or the market price of the respective mined commodities were to rise. Structured, equity and/or streaming financing enable both Key Capital and mine operators to leverage capital to achieve their respective goals and potentially deliver strong ROIs.