When Buyers Become Sellers

The recent moves by Glencore to monetize some of their silver production, is quite telling as to where we are in the commodity cycle. If you are not familiar Glencore entered into a streaming arrangement with Silver Wheaton whereby Glencore sold a share of its future silver output for an upfront payment equivalent to a 20% of the spot and constitutes 34% of the Swiss company’s total silver output at their Antamina mine. What strikes us as most interesting is that historically one would expect Glencore to be on the other side of this trade. We feel that this is one more indication that the capital markets are starting to force the discipline on commodity producers that to date has been slow to appear.