Offtake agreements for African gold mines.

What an offtake agreement means for a gold mine

Most gold mines — particularly junior producers and small-to-medium artisanal operations — sell their production on a parcel-by-parcel basis, negotiating each transaction separately at or near spot price. This approach is operationally simple but commercially inefficient. It exposes the seller to price volatility at the worst possible time (when you most need to sell), creates financing uncertainty (a buyer may not materialise for weeks), and prevents the mine from planning capital expenditure against predictable revenue.

An offtake agreement is a binding commitment from a buyer to purchase a defined volume of gold production at a pre-agreed price formula over a defined period. The mine commits to supply; the buyer commits to purchase. Both parties gain certainty. The mine can plan. The buyer can allocate treasury capacity in advance and build a reliable supply chain for their refinery or vault.

Price formulae in offtake agreements take several forms. The most common in the African-to-Asian gold trade is a fixed discount to the LBMA PM Fix — for example, the current active mandate at USD 5,000 per kilogram below the PM Fix on the date of each transaction. This approach gives the mine the full benefit of any gold price appreciation (the buyer's discount is fixed, not a percentage), while giving the buyer a predictable margin. A percentage-of-spot formula (for example, 95% of LBMA spot) is also common and may be preferable in a high-price environment. Hybrid structures — a fixed floor with a percentage cap — are negotiable for larger or longer-term arrangements.

The period of an offtake agreement is typically 12 to 36 months for a first arrangement, with an option to extend. It is structured as a series of individual transactions rather than a single large forward commitment, which means the mine retains operational flexibility and the buyer retains the right to assay and inspect each parcel independently.

Our buyer network for offtake

Malaysian refineries and licensed bullion dealers have a structural preference for long-term supply relationships over one-off transactions. Their import planning, refining capacity allocation, and correspondent banking arrangements all function more efficiently when they know the origin, volume, and cadence of incoming supply in advance. A one-off parcel requires the same compliance work as the first parcel of an offtake relationship — the incremental cost of the second and subsequent parcels is much lower.

Our current active mandate — 10kg, USD 5,000/kg below LBMA spot, 10-business-day close — is explicitly designed as the opening transaction of a long-term supply relationship, not a one-time purchase. The buyer has set this mandate at 10kg for the first transaction to establish a clean track record with a new counterparty: a documented, bank-settled, inspection-passed transaction that both sides can point to as the foundation of an ongoing relationship.

A mine producing between 5 and 50 kilograms per month is ideally positioned for this kind of arrangement. At 5kg per month, you can aggregate two months of production into a single 10kg parcel, transact quarterly, and maintain a consistent relationship with a single buyer who knows your documentation and supply chain. At 50kg per month, you can transact monthly across multiple buyers in our network — Malaysia, Singapore, Dubai — and begin to access more sophisticated pricing structures as your track record develops.

Mines producing more than 50kg per month may be better served by a formal tender process or a direct relationship with a major refinery. We can advise on that pathway as well, though it is outside our core mandate.

Structuring a compliant offtake

The paperwork for a gold offtake transaction is repetitive, not complex. Each parcel in the offtake arrangement requires the same set of documents, produced in the same sequence. Once you have completed the first parcel successfully, subsequent parcels follow the same template. This is one of the practical advantages of an ongoing relationship: the compliance work becomes routine rather than novel.

Each parcel requires an independent assay certificate — obtained from an SGS, Bureau Veritas, or equivalent laboratory operating in your jurisdiction — that confirms the purity, weight, and physical form of the specific parcel being shipped. The assay is conducted on the export parcel, not on a sample, so the certificate precisely characterises what the buyer will receive.

Each parcel requires a mineral export permit from the relevant government authority in your country. The permit must match the assay certificate exactly. This is issued per shipment, not per agreement — the offtake arrangement does not give you a blanket export authorisation. Each parcel's permit is obtained against that parcel's assay.

Each parcel requires a specialist precious metals carrier — Brinks, Malca-Amit, or Loomis International are the three principal operators with African-origin and Malaysia-destination capability. The carrier provides insurance documentation, airwaybills, and chain of custody records from collection to delivery that the buyer's bank requires for escrow release.

Settlement per parcel is by bank escrow or letter of credit, with funds deposited before the gold is released to the carrier. On confirmation of delivery and re-assay at destination — typically 48 to 72 hours after arrival — the escrow is released to the seller. The standard transaction cadence from agreement to funds receipt is ten business days. As the relationship matures and both sides are comfortable with the counterparty and the documentation, this can be shortened.