For the second time this week, and the fourth time this month, mining companies are being financed by other mining companies — and not the market. Welcome to the world of royalty companies whose business is providing cash in return for a share of the output.

Vancouver-based Sandstorm Gold Ltd. is the latest example. On Thursday, it announced a $75-million bought deal financing (later upped to $130-million) at $10 per unit where investors will receive a common share plus one-third of a warrant. The issue didn’t do wonders for Sandstorm’s share price: a day after hitting an all-time high of $10.71, the shares fell to $9.51.

Sandstorm defines itself as gold streaming company, meaning it provides upfront financing for gold mining companies looking for capital — and receives an agreement giving it the right to purchase a percentage of the gold produced over the life of the mine, at a fixed price. It has made seven such investments and plans to diversify its low cost production profile through acquiring additional gold streams. Hence it needs cash.

Consider the following deals:

• On Monday Franco-Nevada Corp. agreed to invest $1-billion in Inmet Mining Corp. to help with the funding of Inmet’s share of the development costs of Cobre Panama, a copper-gold-silver-molybdenum porphyry deposit. The investment is a so-called precious metals stream whereby Franco-Nevada will pay, respectively, US$400 and US$6 per ounce for each ounce of gold and silver produced for about the first 20 years of production.

• On the previous Monday, Thompson Creek Metals Co. announced a $200-million gold stream investment from Royal Gold. Inc. The latest investment means Royal Gold has agreed to provide Thompson Creek with $782-million of capital; in return Thompson Creek has agreed to provide Royal Gold with 52.25% of the output from its Mount Milligan (BC) mine. Plans call for Royal Gold to provide that cash over the next 12 months.

• On August 8, HudBay Minerals Inc. announced it had entered into a precious metals stream transaction with Silver Wheaton Corp. providing for upfront deposit payments of US$750 million. That cash infusion, combined with a new US$600-million credit facility, will allow HudBay to develop the Constancia project in Peru. Of the US$750-million, US$500-million will be provided up front and will allow Silver Wheaton to receive all the gold and silver produced until 2016; after that it will receive half the gold and all the silver produced.

PearTree’s role

PearTree Financial Services is also on the spectrum of financing mining companies.

The company, which has been around since 2006, is in the business of sourcing flow through shares and matching that supply to subscribers who are looking to make charitable donations.

“We manage that process in such a way that the shares are donated to the charity of the subscribers’ choice and then ensure the charity has liquidity. It all happens on the same day,” said Ron Bernbaum, one of the founders of the Toronto-based firm that does business nationally, adding that on the day of closing, the charity receives a cash amount equal to what was pledged and the fees. “Our forte is juggling all the relationships so that it works for all the stakeholders. And we have expanded the universe of buyers because under our method, non-Canadian investors can buy the shares.”

Since 2007, Bernbaum estimates its donors have funded more than $250-million of flow-throughs. PearTree earns a fee of about 13%.