Evaluating the Kemess Stream sold by Centerra Gold in 2018

Bell, Peter Newton (2018): Evaluating the Kemess Stream sold by Centerra Gold in 2018.

Abstract

In a streaming contract, a mining company sells future revenues derived from a mine. Typically, the mining company sells the revenue for a secondary metal rather than the primary economic driver of the project. This paper considers a particular stream known as the “Kemess Stream”, where a public company called Centerra Gold Inc. sold future silver production from the Kemess Project to a private financial company. The Kemess Stream represents a typical streaming contract and provides an instructive example as a modelling exercise. This paper shows how to calculate the economics of the stream in detail based on economic reports published by Centerra Gold and discusses general principles reflected in the deal terms.

• Item Type: MPRA Paper
• Language: English
• Keywords: Engineering Economics, Mining, Streaming, Finance
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C00 - General; G - Financial Economics > G0 - General > G00 - General; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L72 - Mining, Extraction, and Refining: Other Nonrenewable Resources

References

Bell, P. (October 5, 2014). Effects of streaming loans for commodity producers. Retrieved from https://ideas.repec.org/p/pra/mprapa/59818.html

Centerra Gold (May 17, 2018). Centerra Gold Announces US$200 Million Sale of Royalty Portfolio and Kemess Silver Stream. Retrieved from https://s3.amazonaws.com/cg-raw/cg/news-releases/nr-20180517.pdf

DiFilippo, D.V. (2015). AN ECONOMIC AND FINANCIAL DECONSTRUCTION OF THE COMMODITY STREAMING BUSINESS MODEL (Masters dissertation). Retrieved from https://qspace.library.queensu.ca/bitstream/handle/1974/12706/DiFilippo_Daniel_V_201501_MASc.pdf

Golder Associates Ltd.200-2920 (July 12, 2017). Technical Report for the Kemess Underground Project and Kemess East Project, British Columbia, Canada. Retrieved from https://www.centerragold.com/operations/kemess/technical-reports