DEALTALK-Big miners may balk on streaming as S&P changes tack

Thu Oct 24, 2013 2:32pm EDT
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By Nicole Mordant

Oct 24 (Reuters) - A change in the way ratings agency Standard & Poor's accounts for a novel type of mining project funding may drive big miners away from this cash source at a time when fundraising is already tight.

S&P said this month it will start classifying streaming deals - where miners get cash upfront in exchange for agreeing to sell future production of a by-product like silver or gold at a set price - as debt rather than as non-debt financing.

Until now, one attraction of streaming deals for large mining companies, many of which have high debt levels, was that ratings agencies did not view the transactions as debt.

The S&P revision, which other rating agencies have not followed, leaves big miners with streaming deals with less headroom for borrowing, unless they want to overload on debt and perhaps put their credit rating at risk.

It may dim expectations that financiers like Silver Wheaton Corp that provide streaming deals can boost business by wooing global mining majors after a breakthrough deal this year. These financial firms remain confident, however, of finding a workaround.

"Some CFOs who we are speaking to, they will pay attention to this, put that in the mix of what they are thinking about, and it may impact their decisions," said Paul Brink, senior vice-president of business development at Franco-Nevada Corp , a Toronto-based stream and royalty company competing with Silver Wheaton, Royal Gold Inc and others.

He said ratings was just was "one of many" issues CFOs look at when deciding on a streaming deal.   Continued...