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Glencore agrees streaming deal with Silver Wheaton on Peru mine to cut debt
November 3, 2015 / 10:42 PM / 2 years ago

Glencore agrees streaming deal with Silver Wheaton on Peru mine to cut debt

The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, September 30, 2015. REUTERS/Arnd Wiegmann

(Reuters) - Glencore Plc (GLEN.L) has agreed to sell future silver output from its stake in the Antamina copper mine in Peru to Silver Wheaton Minerals SLW.TO for $900 million in cash in a so-called “streaming” deal, the two companies said on Tuesday.

Glencore, a global miner and trading company whose shares have been under pressure due to investor concerns about its debt, said it will use the funds to reduce debt.

Streaming transactions are a type of alternative financing in the mining industry where funds are provided upfront to a miner in exchange for the sale of a fixed amount of future, usually by-product, production at a discounted price.

This type of alternative finance has been emerging as the new go-to funding for miners bowed by debt as weak share prices, courtesy of a four-year commodities’ downturn, make raising equity and other types of finance expensive and difficult.

Glencore said in September that about $2 billion (£1.30 billion) of a $10 billion debt reduction plan it had unveiled will come from asset sales, which could include precious metals streaming transactions.

In terms of the transaction, Vancouver-based Silver Wheaton will also make ongoing payments of 20 percent of the spot price for silver for every ounce of metal delivered.

Glencore will deliver silver from its 33.75 percent stake in Antamina to Silver Wheaton until 140 million ounces is reached. After that, the stream will be reduced to 22.5 percent of the silver produced at Antamina.

Reuters reported in September that Glencore was in talks with Franco-Nevada Corp (FNV.TO), Silver Wheaton, Royal Gold Inc (RGLD.O) and two other companies to sell portions of the future production of three South American copper mines, including Antamina.

Silver Wheaton pioneered the streaming concept more than a decade ago.

The company said it would fund the $900 million from cash on hand and also dip into its $2 billion revolving credit facility.

Glencore’s partners in the Antamina mine are BHP Billiton BHP.L (BHP.AX), also with 33.75 percent, Teck Resources TCKb.TO with 22.5 percent and Mitsubishi Corp (8058.T) with 10 percent.

Teck Resources did a streaming transaction on its stake in the Antamina mine last month, raising $610 million, to help cut its debt.

Reporting by Nicole Mordant in Vancouver; editing by Cynthia Osterman, Bernard Orr

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