Gold and gold ETFs, however, offer no advantage to the exploration process: an ounce of gold will be the same ounce of gold tomorrow. This is an important reason why investors often prefer to hold shares in mining companies rather than directly own gold. To simplify, a successful new mine or mine extension can significantly increase the value of a mine stock. On the other hand, the decline is generally due to high operating costs and highly variable commodity prices and generally only exploits a handful of assets at any given time. EBITDA margins, which look at earnings before interest, taxes, depreciation and amortization, are an important measure to observe when considering the effectiveness of a company in converting its revenue into profits. Interest and amortization expenses can be significant in the mining sector and may mask significant results. However, miners often see that EBITDA margins fall into negative territory during the downturn because they are unable to adjust costs quickly enough to offset falling commodity prices. Streaming companies don`t have to worry because their costs are low and are often tied to a percentage of spot prices. Streaming agreements, on the other hand, allow streaming companies: debt reduction. During the deep downturn in the commodity market, which began in 2011 and lasted until 2016, miners often used cash from streaming agreements to reduce their debts. Slowdowns like this are very common in the industry because it is very cyclical, but they always seem to catch miners with feet and over-indebtedness. It is supply and demand that fuel commodity prices over time and move the sector between debt-financed and contraction-financed expansion (over) phases.

Few are willing to provide capital to miners during the back of the cycle, so streaming companies have an open field. In streaming agreements, the consideration to be paid or the purchase price of the streaming metal is paid in advance by the buyer; Therefore, such a down payment is treated in practice as a down payment that can be structured as a full down payment or a series of payments that depend on the completion of pre-defined sequential terminals or a combination of the two. Depending on the stage of development of the mining project, these steps may include the completion of predictability or feasibility studies, the obtaining of operating licences and approvals, the start or completion of construction, and the start of commercial operations. Streaming agreements are relatively new to the mining industry, which means there is no standard form or model; they can be tailored to each transaction to reflect the interests and expectations of each party. However, they have certain characteristics that set them apart from other agreements – for example. B royalties and buyers – such as the form of the provision of funds and the purpose of the agreement, both of which are discussed below. Other relatively common provisions under bilateral funding agreements, such as confidentiality, dispute resolution mechanisms and existing legislation, will be discussed below. Conversely, streaming agreements are essentially agreements for the purchase and sale of metals in which the streaming company (the buyer) pays the purchase price in advance to the mining company (the operator), either as a down payment or through a series of payments, in exchange for the right to acquire a certain amount or percentage of the production of a certain long-term refined metal (over 20 years) , or even lifespan3. to operate a mine. However, the wide margin is only one of the many positive aspects of the streaming model.

Streaming companies, for example, do not operate mines, which protects them from the risks and complications of mining activities.