Gold Streaming and Royalty: An Industry Overview
Gold streaming and royalty are two of the most common methods used in the mining industry to share the profits of a mine. In this article, we will provide an overview of these two methods and their respective advantages and disadvantages.
Gold Streaming
Gold streaming is a contractual agreement between a mining company and a third party, usually a financial institution or a private equity firm, where the mining company agrees to pay a percentage of its gold production to the third party in exchange for a certain amount of capital. The third party then uses this capital to fund the mining company's operations, including exploration, development, and production.
The advantages of gold streaming are that it allows the mining company to access capital quickly and at a lower cost than traditional financing methods. It also allows the mining company to retain ownership of the gold, which can be valuable in the event of a downturn in the market.
However, the disadvantages of gold streaming are that the mining company is required to pay a percentage of its gold production to the third party, which can be a significant cost. Additionally, the third party has a say in the mining company's operations, which can limit the mining company's autonomy.
Gold Royalty
Gold royalty is a contractual agreement between a mining company and a third party, usually a financial institution or a private equity firm, where the mining company agrees to pay a percentage of its gold production to the third party in exchange for a certain amount of capital. The third party then uses this capital to fund the mining company's operations, including exploration, development, and production.
The advantages of gold royalty are that it allows the mining company to retain ownership of the gold, which can be valuable in the event of a downturn in the market. It also allows the mining company to access capital quickly and at a lower cost than traditional financing methods.
However, the disadvantages of gold royalty are that the mining company is required to pay a percentage of its gold production to the third party, which can be a significant cost. Additionally, the third party has a say in the mining company's operations, which can limit the mining company's autonomy.
Conclusion
Gold streaming and gold royalty are two of the most common methods used in the mining industry to share the profits of a mine. While both methods have their advantages and disadvantages, the choice between the two will depend on the specific needs and goals of the mining company. It is important for mining companies to carefully consider the terms of the agreement and the potential risks and benefits before entering into a gold streaming or gold royalty contract.
