Glencore clinches debt-cutting silver streaming deal

JOHANNESBURG (miningweekly.com) – A long-term streaming agreement has been entered into between Glencore's wholly owned Anani Investments and Silver Wheaton for delivery of silver produced at the Antamina mine in Peru as part of Glencore's earlier-announced debt reduction plans.

A streaming transaction is a forward sale of a supply of precious metal and Scotiabank Europe is acting as financial adviser to Glencore, the London-, Hong Kong- and Johannesburg-listed diversified mining and marketing company headed by CEO Ivan Glasenberg.

Streaming is helping an increasing number of mining companies to raise cash quickly.

Silver Wheaton will make an advance payment of $900-million to Glencore five business days after the closing of the transaction and thereafter 20% of the spot price at the time of delivery for each ounce of silver.

Glencore will provide 33.75% of silver produced by the Antamina mine at a 100% payable rate, the company said in a media release to Creamer Media's Mining Weekly Online.

"It's a good deal... and certainly demonstrates that management is progressing rapidly with its plans to reduce debt," Investec analysts said in a note on Wednesday.

After 140-million ounces have been delivered, the stream will be reduced to 22.5% of silver produced by the Antamina mine.

Compañía Minera Antamina, which owns and operates Antamina, is not a party to the streaming agreement and no physical silver produced by it will be delivered to Silver Wheaton as part of the streaming agreement.

A large copper and zinc mine located 270 km north of Lima, Antamina last year produced 12-million ounces of silver.

The shareholders of Compañía Minera Antamina are Glencore and BHP Billiton with 33.75% each, Teck Resources with 22.5% and Mitsubishi Corporation with 10%.

A streaming transaction involves the metal purchaser making an advance payment, which represents a prepayment of a portion of the purchase price, for metal equivalent to a fixed percentage of future precious metals production from the mine.

The purchaser benefits from any production and exploration upside, but bears operational risk as well as the producer.

A stream does not carry any fixed yearly delivery obligations, only a percentage of actual production from the mine and there is no requirement for the mine owner to change how it manages the mine's operation.