RE:Financing Fiasco du jour I maintain that Skeena should try something different, namely, a US$1000 debenture convertible into half an ounce of gold."
Temple,
1) Can you name a gold mining company that has used this strategy and achieved success with it over and above the typical equity / debt / streaming agreement mine financing strategy?
2) If it's a debenture, SKE will still be paying interest on them from Day 1.
Further, I assume the holder of the debenture will have the option of:
a) converting the debenture into the 1/2 ounce of gold once production begins on or after an agreed-upon date,
or
b) simply holding the debenture to term and getting their principle back in full at maturity in addtion to all interest earned up to that date.
Now, unless SKE is able to cut a deal in which the interest rate on the debenture is much lower than it would have been otherwise (and that's up to the potential lender to agree to just as it is SKE), the floor on the price of gold for the holder will be roughly $2,000. If you believe the gold price will rise significantly more than that over the next 3-5 years, the holder would collect all interest to date, then, when the opportunity presents itself, convert the debentures into the 1/2 ounce of gold. If gold is trading at say $2,400 at that time, the holder would get this as a bonus in addition to the interest on the debenture to date.
That's why streaming agreements are used instead. SKE would get a lump sum of cash up front to fund the mine build and the holder of the streaming agreement would be entitled to receive X ounces of gold and/or silver at Y price (paying SKE a price that is expected to be significantly lower than market at that time).However, the upside is no interest is paid on that lump sum of cash received up front by the miner, no shares granted to the streaming company, and terms of the streaming agreement are typically such that the mining company is given a very reasonable amount of time (sometimes with extension terms added to the agreement if certain unforeseen events occur) to produce those ounces while still retaining enough gold / sliver for themselves to succeed as a profitable operation.
Bottom line:
Regardless of the strategy employed, there are still only three fundamental ways to finance a project that I know of:
Equity Raise, Debt Financing, Streaming Agreement(s).
If I'm understanding your proposal correctly Temple, your wrinkle to the debenture (debt financing) is to provide HOLDER of the debenture with the additional option to convert their debentures to 1/2 ounce of gold if they so choose. Unless the interest rate paid on those debentures is much lower than otherwise would be the case, you are providing an extra bonus to the holder that plain vanilla debentures do not.