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ARTICLE · 14 MARCH 2022

Addressing Market Volatility By Using Production As A Financing Tool

Mayer Brown
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Metal prices and equity markets are currently extremely volatile. This has sometimes made it difficult for commodities companies to raise equity financing.

United StatesFinance and Banking
Maria A. Alevras-Chen
Maria A. Alevras-Chen
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Metal prices and equity markets are currently extremely volatile. This has sometimes made it difficult for commodities companies to raise equity financing. So what should a company do if they are struggling to raise equity but need or want to fund mine development and production? One possible solution involves using production as a financing tool. This discussion seeks to provide an overview of commodity forward purchase products and how they benefit the different parties involved, an outline of the legal framework applicable to such agreements, and a description of common commercial considerations.

Product Features

Commodity forward purchase agreements are essentially sales contracts where a buyer agrees to purchase a set quality and quantity of a commodity from a producer in exchange for an up-front payment. Each contract is bespoke to the results of the investor's due diligence of the underlying assets, the profile and nature of the borrower's business, the

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