THE Canadian mining company, Sandspring Resources Ltd announced earlier this week that it has agreed to sell a small percentage of the gold produced at its Toroparu Mine in Region 7 (Cuyuni/Mazaruni) to the metals streaming entity, Silver Wheaton.The sale price will be US$400 an ounce, for the duration of the mine life, in exchange for an up-front payment of US$148M.
The announcement said the current market price for gold is around US$1,300 an ounce but new deal would allow Sandspring Resources to get the advance payment, from Silver Wheaton, for mine construction at Toroparu.
A reliable source said that arrangement is in keeping with a number of agreements which Silver Wheaton has, in which, for an advance payment, it has the right to purchase all or a portion of the silver and/or gold production, at a low fixed amount, from high quality mines located in politically stable regions around the globe.
The transaction is known as metal streaming which the source explained is an adaptable and evolving financing alternative through which a cash-strapped mining company may receive a capital injection without sacrificing control over operations or compromising shareholder equity.
This model allows Silver Wheaton to take advantage of high quality, earlier stage projects.

Critical funds
Meanwhile, Sandspring gets access to critical funds without diluting shareholder value.
However, a metal stream can reduce the overall value of a mining project in the event of a future sale, particularly if the market value of the metal being streamed increases significantly.
The source said metal streaming companies have no control over the mines that produce their gold or silver, meaning that, when production falls short of expectations or is affected by political instability, a company must, itself, incur the losses.
Because of the lack of control over production, earnings are based entirely on the difference between the fixed discount on the price of the metal that is agreed to and the actual market price of the metal.
In a media release, Sandspring Resources disclosed that, in keeping with the recently signed agreement, through its wholly owned subsidiary, Silver Wheaton (Caymans) Ltd., the latter will pay Sandspring cash upfront, payments totalling US$148.5 M for 10 percent of the payable gold production from the Toroparu Mine in Guyana.
Additionally, Silver Wheaton will make ongoing payments to Sandspring for the market price of US$400 per ounce of gold delivered to it over the life of the Toroparu Project, subject to a one percent annual increase, starting after the third year of production.
Upon satisfaction of certain conditions, Sandspring is entitled to an initial draw down of US$13.5 M of the cash payment, to be used primarily for advancement of the final feasibility documentation for the Toroparu Project.
Will return
If Silver Wheaton elects not to proceed with the gold stream, Sandspring will return all but US$2M of the US$13M paid in advance.
The balance of the US$148.5 M is subject to Silver Wheaton’s election to proceed and is payable in installments during construction of the Toroparu Project, once all necessary mining licences have been obtained and conditions pertaining to final feasibility, the availability of project capital finance, the granting of security to Silver Wheaton and other customary details are satisfied.
If, following receipt of feasibility documentation Silver Wheaton elects not to proceed, Sandspring may elect to either return US$11.5 M to Silver Wheaton and terminate the agreement or reduce the stream percentage from 10 percent to 0.774 percent.
Sandspring Chief Executive Officer Rich Munson said: “This streaming transaction provides a non-dilutive capital commitment of approximately 30 percent of the US$464 M project finance required for the Toroparu Project as determined in Sandspring’s pre-feasibility study and marks a significant milestone for Sandspring.”
He added:“Furthermore, the addition of Silver Wheaton as a strategic partner brings significant experience and expertise to Sandspring as it continues to develop Toroparu,”
Sandspring is aiming for potential large scale production in 2015, Munson indicated.