COMPANY COMMENT
Sibanye streaming deal is double-edged sword
In the world of mining, the streaming company is the same as the bank in the casino; they don’t lose
As a way to understand the true nature of a streaming deal in the mining industry, one instructive measure would be to quickly compare the tangible book value per share (BVPS) of the companies involved. The BVPS of gold companies is about six times its share price on average. The most valuable streaming company, Franco-Nevada, on the other hand, trades about 25 times tangible BVPS. In the world of mining, the streaming company is the same as the bank in the casino; they don’t lose. So news that Sibanye-Stillwater has concluded a streaming deal for $500m is something of a double-edged sword. One way of looking at a streaming deal is to think of it as you would a bond issued to a distressed bank. The bank is betting it can trade its way out of its problem and is prepared to give away some of its financial upside to back that bet. But should shareholders celebrate or mourn? In Sibanye’s case, the streaming deal has two immediate benefits. It means a thumping cash call is now off the ca...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.