Glencore agrees streaming deal with Silver Wheaton to cut debt

By Nicole Mordant

VANCOUVER (Reuters) - Glencore Plc has agreed to sell future silver output to Silver Wheaton Minerals for $900 million in cash in a so-called "streaming" deal, the two companies said on Tuesday.

Glencore, a global miner and trading company whose shares have been under pressure due to investor concerns about its debt, said it will use the funds to reduce debt.

It said it would be using its share of production at the Antamina mine in Peru as a reference point to deliver silver from elsewhere across it portfolio.

Glencore owns 33.75 percent of Compañía Minera Antamin (CMA), which owns and operates the Antamina mine. CMA was not a party to the agreement, Glencore said.

Streaming transactions are a type of alternative financing in the mining industry where funds are provided upfront to a miner in exchange for the sale of a fixed amount of future, usually by-product, production at a discounted price.

This type of alternative finance has been emerging as the new go-to funding for miners bowed by debt as weak share prices, courtesy of a four-year commodities' downturn, make raising equity and other types of finance expensive and difficult.

Glencore said in September that about $2 billion of a $10 billion debt reduction plan it had unveiled will come from asset sales, which could include precious metals streaming transactions.

In terms of the transaction, Vancouver-based Silver Wheaton will also make ongoing payments of 20 percent of the spot price for silver for every ounce of metal delivered.

Glencore will deliver silver equivalent to 33.75 percent of silver produced at Antamina to Silver Wheaton until 140 million ounces is reached. After that, the stream will be reduced to 22.5 percent of the silver produced at Antamina.

Reuters reported in September that Glencore was in talks with Franco-Nevada Corp, Silver Wheaton, Royal Gold Inc and two other companies to sell portions of the future production of three South American copper mines, including Antamina.

Silver Wheaton pioneered the streaming concept more than a decade ago.

The company said it would fund the $900 million from cash on hand and also dip into its $2 billion revolving credit facility.

Glencore's partners in the Antamina mine are BHP Billiton, also with 33.75 percent, Teck Resources with 22.5 percent and Mitsubishi Corp with 10 percent.

Teck Resources did a streaming transaction on its stake in the Antamina mine last month, raising $610 million, to help cut its debt.

(Reporting by Nicole Mordant in Vancouver; Additional reporting by Olivia Kumwenda-Mtambo in Johannesburg; Editing by Bernard Orr and Susan Fenton)