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January 2024

Streaming Arrangements

By Dolphy D’souza, Chartered Accountant
Reading Time 11 mins
Mining companies (also referred to as producers) use metal streaming arrangements to raise funds. The Producer enters into a metal streaming arrangement with a streaming company (the “Investor) where the Producer may receive an upfront cash payment plus ongoing predetermined per unit payments for part or all of the metal production and sometimes by-product metals (e.g., silver extracting from zinc ores). This enables the Producer to access funding by monetizing the product or by-product metal. The Investor too is assured of a supply of metals without having to develop or operate the mine. The accounting of such arrangements can be extremely complex and is dealt with below.

QUERY

Hindustan Metal (HM), owns iron ore mines. HM enters into a streaming arrangement with the Investor. HM commits to deliver 60 per cent of the iron ore production of the mine over the life of the mine in exchange for an upfront advance of $100 million and the lesser of, $120 and the market price per tonne of iron ore, for each future tonne or iron ore delivered. The upfront advance funds generally will be used to finance capital expenditures in the development of the mine project for which HM holds the mineral rights. When the market price exceeds $120 / tonne, the notional drawdown of the upfront advance funds is based on the difference between the market
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