Raising Capital Against Metal Stocks: Base-Metal Repo Financing Explained
Raising Capital Against Metal Stocks: Base-Metal Repo Financing Explained
Copper cathodes sitting in an LME-approved shed are more than inventory—they are collateral lenders recognise. Through commodity repurchase agreements(“repos”), producers, traders and fabricators can convert warehouse receipts for copper, aluminum, zinc or nickel into short-term cash while retaining price upside and supply security. This article breaks down how metal repos work, typical loan-to-value ratios, risk controls, and the role Financely plays in arranging balance-sheet-friendly facilities.
What Is a Metal Repo?
A metal repo mirrors the mechanics of a securities repo: you sell warehouse receipts to a lender today and contract to repurchase them on a future date at an agreed price. The price difference equates to interest. Title to the metal transfers to the lender for the term, giving the lender perfected security while you receive cash up front.
Transaction Flow
- Client pledges LME-, CME- or SHFE-acceptable receipts stored in an accredited warehouse.
- Lender pays x % of the metal’s prompt cash value—usually 60-75 % for base metals.
- Margin calls trigger if price falls below a pre-set buffer; surplus can release if prices rally.
- At maturity (30-180 days), client repurchases the receipts at original price + repo fee.
Key Terms at a Glance
| Parameter | Common Range (Base Metals) |
|---|---|
| Loan-to-Value (LTV) | 60–75 % cash value |
| Tenor | 30–180 days (rollable) |
| Pricing | SOFR + 250–450 bp |
| Eligible Warehouses | LME, CME, LBMA, INE approved |
| Eligible Grades | Copper Grade A, P1020 aluminum, SHG zinc, nickel briquettes |
Risk Controls Lenders Expect
- Daily Mark-to-Market: Independent pricing feeds (Fastmarkets, LME official) determine variation margin.
- Third-Party Warehouse Acknowledgment: Warehouse operator issues a letter recognising the lender as temporary title holder.
- Insurance & Loss Payee: All-risk policy with lender named as beneficiary.
- Legal Opinion: Counsel confirms enforceability of repo title transfer in warehouse jurisdiction.
How Financely Adds Value
- Structuring: Optimise LTV, tenor and fee to balance liquidity needs and carry cost.
- Warehouse Vetting: Approve sheds, coordinate acknowledgement letters, track location concentration limits.
- Lender Panel: Match your metal profile with banks and commodity funds that specialise in base-metal collateral.
- Hedging Integration: Where required, we embed LME forwards or zero-cost collars to neutralise price risk during the repo term.
- Lifecycle Monitoring: Margin-call dashboards and covenant reporting keep the facility in good standing, avoiding trade disruptions.
Example Use Case
A cable manufacturer holds 5,000 tonnes of copper cathode valued at US $9,500 per tonne. By entering a 90-day repo at 65 % LTV, the firm unlocks roughly US $30 million in working capital at SOFR + 300 bp, funding a bulk cathode purchase discount without dipping into core revolvers.
Holding base-metal stock and need liquidity? Submit your warehouse receipts and financing target—Financely will structure a repo proposal and source term sheets from our commodity-finance lenders.
Unlock Capital from Metal InventoryTerms reflect Q2 2025 base-metal repo levels for OECD warehousing hubs. Final pricing depends on metal grade, warehouse location, counterparty credit and market volatility. Financely Group arranges facilities through regulated banks and commodity funds; this article is not an offer or solicitation to lend.
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