Juniors take note — Silver Wheaton (TSX:SLW,NYSE:SLW) believes major miners are on the prowl for streaming contracts. That could make a tough financial environment even tougher.
“The mining industry is very, very hungry for capital right now and there are not a lot of sources out there,” Silver Wheaton CEO Randy Smallwood told Bloomberg.
His company is what some call an alternative source. And tough access to capital seems to be making its services more attractive.What is a streaming company? Silver Wheaton is the world's largest streaming company. For those unfamiliar with the business model, that means the company makes upfront payments to miners to help them to fund their projects and fulfill their capital needs. In return, those mining companies grant Silver Wheaton the right to purchase metal at a low fixed rate of about $4 an ounce for silver and $400 an ounce for gold. “With early-stage juniors that have strong indications of a resource, we're willing to front them anywhere from $5 to $15 million. Instead of being an equity shareholder, we come in and give the cash up front and within 10 years we'll put that as a credit towards the silver stream,” Smallwood told Resource Investing News last year. Major miners finding streaming attractive Juniors miners are not the only companies showing interest in streaming agreements. Smallwood said major miners are also making proposals for funding. “Doors that we've been knocking on for a long time, they are all of a sudden knocking on our door,” he told Bloomberg. And if those miners come with an attractive enough deal, Silver Wheaton has shown that it is willing to answer the call.