Engineering & Mining Journal

APR 2019

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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illpic - Pacific Empire E&MJ • APRIL 2019 53 MINING IN BRITISH COLUMBIA AND YUKON The royalty and streaming model, on the other hand, continues to go from strength to strength. With commodity prices deflated, the value of upfront and periodic payments for a return of current or future mineral pro- duction has become increasingly attractive. "From a macro perspective, mining com- panies typically use royalty and streaming when equity becomes more expensive and when their share prices are down, which is why many royalty and streaming compa- nies have been very busy in recent years," explained Brett Heath, president, CEO and director of Metalla Royalty & Streaming. Streaming has brought a significant change in the mining landscape, originally for producing companies, but also now in- creasingly for development projects that require financing. "As the capital markets have been constrained, streams have been pursued all the way down the value chain," added George Pyper, director of Endeavour Financial. Vancouver is home to a number of roy- alty and streaming firms that have seen significant growth in recent years, the larg- est of which is Wheaton Precious Metals (WPM), a pioneer in the metals streaming space. Focusing on assets that fall into the lower part of the cost curve, WPM's portfo- lio includes Vale's Salobo mine, the largest copper deposit ever discovered in Brazil, and Glencore's Antamina polymetallic mine in Peru. Randy Smallwood, WPM's president and CEO, elaborated on the benefits of the financial model: "By taking a non-core value and reinvesting it into core franchise a com- pany can continue to grow and that is exactly what streaming delivers," he said. Sandstorm Gold Royalties has hit record production each year for the last eight years, and looks set to continue on an upward tra- jectory with a portfolio of streams due to come online including Yamana's Cerro Morro mine in Argentina, the Hod Maden project in north-eastern Turkey and Lundin Gold's Fruta del Norte gold project in Ecuador. "The world has truly changed with respect to the way capital markets function," stated Nolan Watson, Sandstorm's president, CEO and director. "The advent of passively managed capital has become such a strong force, as the fees are extremely low, and these passive ETFs are making investments based on only two criteria: the size and the liquidity of the company. Companies thus need to self-ratio- nalize and merge to grow in size and liquidity to attract financing." Vancouver-based mid-tiers diversify their international asset portfolios A number of Canadian mid-tier producers have experienced impressive growth in re- cent years, capitalizing on the availability of undervalued assets in a 'buyer's market.' Precious-metals producers like SSR Mining have been adding value to their asset port- folios by diversifying across the Americas, and have completed four acquisitions in the past four years: the Marigold mine and Valmy property in Nevada, the Seabee gold operation in Saskatchewa, and the Puna op- erations JV in Argentina. "SSR is proactively on the lookout for more properties," affirmed Paul Benson, president and CEO. Vancouver-based Silvercorp Metals, with its six operating mines at the Ying mine dis- trict in Henan and the GC mine in Guang- dong, China, has managed to thrive despite a deflated commodity market, generating positive free cash flow of around US$40-45 million per annum, according to chairman and CEO, Rui Feng. Citing the significant improvements made in the grades of sil- ver, lead and zinc resources at its operating mines, Feng credited the 2016 implemen- tation of Silvercorp's innovative productivity management tool, "Enterprise Blog", which has increased head grades and minimized dilution through improved efficiencies. Silvercorp recently diversified its asset portfolio by investing US$23 million for a 30% stake in in New Pacific Metals Corp., and Feng sees great potential in New Pacific Metals' Silver Sand project in Bolivia: "We believe that the project has the potential to become a formidable mine. The first batch of drilling results were released on January 22, 2019, with a remarkable 94 out of 98 holes having returned attractive grades, the highlights of which included 135 m of 240 g/mt silver." In January 2019, New Pacific entered into a mining production contract (MPC) with La Corporación Minera de Bolivia (COMIBOL), the national mining corporation of Bolivia. The MPC grants New Pacific the rights to carry out exploration, mining, and production activities in the areas adjoining Randy Smallwood, president and CEO, Wheaton Precious Metals.

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