SMM7 March 13: a wholly owned subsidiary of Luoyang Molybdenum Co., Ltd. recently reached a metal flow agreement with Australia's Triple Flag. According to the agreement, China's molybdenum industry will sell 54% of the gold production of Northparkes copper and gold ore until a cumulative delivery of 630000 ounces, and 84% of silver production until a cumulative delivery of 9 million ounces. Meanwhile, Toronto-based Triple Flag will make a cash advance of $550 million and pay Luoyang Molybdenum at 10 per cent of the spot price.
It is reported that this is the first metal flow agreement signed by a domestic mining company. Metal flow is an agreement between mining companies and investors that combines pre-sale and financing. Investors usually buy part of the future production of mining companies at a fixed price below market value. Pre-sold products (called "streams") are usually a by-product of the main business of mining companies.
The metal flow operation is usually performed by the investor who prepares a one-time or a series of capital inputs to the producer in exchange for a fixed sales price of the specified metal within the mining life or limited period (allowing for inflation). The investor's advance payment will be set as a deposit in the agreement. In essence, metal flow agreements can help mining companies monetize their future production before they start production.
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