On Sept. 1, astronomers celebrate an annular solar eclipse, which will produce a "ring of fire" for observers in Madagascar and parts of central Africa. European astronomers will have to content themselves with the square of Pegasus, which is currently prominent in the night sky. Although not very impressive — none of Pegasus' stars are brighter than second magnitude — the square is one of the oldest western constellations, dating back to Babylonian astronomy.
Much closer to home, Sept. 2 marks the 350th anniversary of the Great Fire of London. The conflagration of 1666 broke out in Thomas Farriner's bakery in Pudding Lane, and his maid was the first fatality. The four-day blaze went on to destroy over 60% of the "City" — the 2.9-square-kilometer area of London inside the old Roman walls, often described as "the square mile," although actually extending for 1.12 square miles.
The fire would destroy or badly damage 13,200 houses and 87 of the 109 churches in the City, leaving an estimated 100,000 people homeless. The diarist Samuel Pepys wrote, "ten thousand houses all in one flame, the noise and cracking and thunder of people, the fall of towers, houses, and churches, was like an hideous storm." Pepys described the scene as resembling "the whole heaven on fire."
England was at war with Holland and France at the time, and in uncomfortable parallels with modern politics, immigrants from Europe were quickly blamed for what was considered, mistakenly, as an act of terrorism. Indeed, a Frenchman apparently "confessed" to starting the fire and was executed, but was later proven to be innocent.
Nevertheless, it was a transformational moment for London, with a better city emerging, including Sir Christopher Wren's new St. Paul's cathedral — the fifth to stand on the site. The insurance industry was also invented in the wake of the fire, and many of the country's building regulations date from that time.
S&P Global Market Intelligence has a connection, of sorts. Our London office is less than 200 meters from the 62-meter Doric column, the "Monument," that was built in 1677 to mark the site of the initial fire.
This week, Gregory Rodwell, a member of our Mine Economics team in London, is publishing a report on streaming transactions. These financing arrangements, which have been the hottest deals of the past few years, involve a company making an up-front payment in return for the future supply of metal, normally from a specific mine at a predetermined price. Rodwell explains that the first notable deal was by Silver Wheaton Corp. in October 2004.
These deals gained considerable traction after 2013 as miners struggled to raise capital from other sources to finance project development. In his research article, Rodwell identifies a total of US$14.7 billion that has been raised in 77 streaming deals for base, precious and minor metals in the past 12 years. These include US$7.84 billion raised by Silver Wheaton, US$3.20 billion by Franco-Nevada Corp. and US$2.40 billion by Royal Gold Inc. Separately, a further US$1.4 billion in streaming deals has been identified for iron ore, coal, potash and diamonds.
Since 2004, streaming deals for gold alone have accounted for US$5.67 billion (39% of the total base, precious and minor metal deals) with gold-silver deals yielding a further US$4.29 billion (29%) and silver-only transactions almost US$2.91 billion (20%).
The number of base, precious and minor metal streaming deals rose from only two in each of 2011 and 2012, to six in 2013, 10 in 2014 and a peak of 21 in 2015. In the year to end-August, the SNL Metals & Mining database, an offering of S&P Global Market Intelligence, has recorded 11 streaming deals. Of all the transactions over the past 12 years, almost 52% have been secured against already operating mines, with these deals accounting for nearly 68% of the total value of the transactions.The most important targets have been operations in Latin America, accounting for two-thirds of the value of the global deals since 2004. Leading the way at the national level are Brazil, with 22% of the total streaming value, Canada and Peru with 18% each and Chile with 9%. Rodwell notes, however, that this geographical distribution is skewed by a few huge deals. For example, over 96% of Brazil's streaming funding came from Silver Wheaton's arrangement with Vale SA for gold production from the Salobo mine. The original deal in 2013 was subsequently extended to 75% of Salobo's gold, at a price of US$400/oz, for cash payments of over US$3.0 billion.
The primary listing of the mining companies that have benefited from streaming deals is dominated by the Toronto Stock Exchange, accounting for over 54% of the total value raised. Rodwell identifies a gap in the market, with very few funds having been raised for mining companies listed in Australia, Africa or Asia. This, he observes, is probably because there are very few streaming companies in those regions. Indeed, only one streaming company exists in Australia, and it doesn't appear to have any mining deals on its books. A spark might be required.