Insight
The cost of stream financing for copper miners
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Report summary
Project financing through streaming and royalty contracts was fairly inconsequential in 2004. Since then, these contracts have cumulatively injected US$10.3 billion into the mining sector. When considering mines affected by a streaming or NSR contract (roughly 5% of our copper mine coverage, or 2Mlb) we conclude that at the C1 cash cost level, the inclusion of streaming contracts results in a 15c/lb paid Cu increase in costs due to the lower net revenue received from precious metals.
What's included
This report contains
Table of contents
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Executive summary
- Valuation and cost of stream and NSR financing
- Streaming and NSR contracts have become less profitable for providers
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Valuations suggest streaming is increasingly attractive for producers
- A positive shift in the cost of capital for miners
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The impact of stream finance is relatively small on the global cost curve
- Copper Mine Cost Model (CuMAM) and adding stream/royalty contracts into a scenario
- Sensitivity to the inclusion of an NSR royalty or streaming contract
- Conclusions and outlook
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Appendix
- Background – Streams/royalty agreements, an alternative form of financing
- A brief history of share price performance of streaming/royalty companies compared to copper and gold miners
Tables and charts
This report includes 10 images and tables including:
Tables
- Base case metal price assumptions
- Bear case metal price assumptions
- Bull case metal price assumptions
- Valuations for 31 streaming and royalty contracts – valued under our base case scenario
Images
- The cost of stream financing for copper miners: Image 1
- Degree of contract leverage to metal price changes (Bull versus Bear case scenario)
- Relationship between life of contract (LoC) yields and capital raised from 2004 until 2015
- C1 cash cost sensitivity for mines affected by stream financing
- C3 cost sensitivity for mines affected by streaming and royalty financing
- Indexed price performance of the major stream/royalty financiers compared with copper and gold miners
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