Identifiable Commodity Units for Fair Financing

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Solution Overview

Problem

The mining industry faces challenges with asymmetric risk-return profiles in financing, unfair pricing mechanisms, and lack of transparent commodity pricing, leading to difficulties in securing capital and managing risks effectively.

Innovation Solution

A system involving identifiable physical products with unique internal patterns or densities, tracked electronically, and a proprietary marketplace for trading these commodities, allowing for fair valuation and risk distribution among multiple counterparties, thereby reducing the asymmetric risk-return profile.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Use of energy by moving object

If traditional debt financing is used, then near-term liquidity is provided, but the company is burdened with repayment liabilities that restrict future fundraising and strategic execution

Engineering Contradiction:

ImproveliquidityVSAvoidstrategic execution capability

Core Design Contradiction:

Use of energy by moving objectVSReliability

Solution Approach 1:

The patent segments the financing structure by separating operational control from capital provision. Mining companies retain operational control and strategic decision-making, while capital is provided through structured notes held by investors. This segmentation eliminates the need for traditional debt covenants that restrict strategic execution, as the structured notes are unsecured and do not impose operational constraints.

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

The patent introduces structured notes as an intermediary instrument between mining companies and investors. These structured notes serve as a mediator that provides capital without requiring traditional debt relationships. The notes are backed by future production cash flows rather than company assets or operations, eliminating the need for restrictive covenants and maintaining operational flexibility.

Inventive Principle:

Principle #24Intermediary (Mediator)

2Use of energy by moving object

If equity financing is used, then funds are raised through share issuance, but shareholder control rights and dilution risks are introduced

Engineering Contradiction:

Improvecapital raisingVSAvoidcontrol stability

Core Design Contradiction:

Use of energy by moving objectVSReliability

Solution Approach 1:

The patent extracts the control rights component from equity financing. Instead of issuing shares that grant voting rights and control influence, the company raises capital through structured notes that do not confer ownership or control rights. Investors receive fixed returns based on future production payments, completely separating capital provision from control mechanisms.

Inventive Principle:

Principle #2Taking out (Extraction)

Solution Approach 2:

The patent inverts the traditional equity relationship where investors would normally seek control rights. Here, capital providers receive fixed returns without any claim on control or ownership. The structured notes are designed to provide capital with explicit exclusion of control rights, inverting the conventional equity paradigm.

Inventive Principle:

Principle #13The other way round (Inversion)

3Use of energy by moving object

If stream financing agreements are used, then upfront capital is provided in exchange for future production commitments, but asymmetric risk-return profiles are created favoring streaming companies

Engineering Contradiction:

Improveupfront capitalVSAvoidrisk-return symmetry

Core Design Contradiction:

Use of energy by moving objectVSReliability

Solution Approach 1:

The patent changes the key parameters of the financing agreement by eliminating fixed purchase prices and production commitment obligations from the mining company's perspective. Instead, structured notes provide fixed returns to investors while the mining company retains flexibility in pricing and sales strategies. This parameter change eliminates the asymmetric risk-return profile by removing the streaming company's fixed-price advantage.

Inventive Principle:

Principle #35Parameter changes

4Quantity of substance

If commercial sales agreements with unknown prices are used, then future production can be committed, but miners become price-takers subject to market volatility

Engineering Contradiction:

Improveproduction commitmentVSAvoidprice certainty

Core Design Contradiction:

Quantity of substanceVSReliability

Solution Approach 1:

The patent introduces dynamics to the pricing mechanism by allowing miners to set their own prices for future production rather than being locked into fixed or market-dependent prices. The structured notes provide investors with fixed returns, while miners retain the flexibility to dynamically price their production based on market conditions, transforming them from price-takers to price-setters.

Inventive Principle:

Principle #15Dynamics

Data Source

PatentUS20230394577A1Identifiable physical form, sales instruments, and information marketplace for commodity trades

Publication Date: 2023.12.07 SANTERI HOLDINGS LLC

AI summary

A method and system of forming an identifiable unit of a meltable material includes: melting a unit of the material to a liquid state; injecting a second material into the unit of material while the unit of material is in liquid state to change a density of the unit of material; cooling the unit of material to solid form while retaining the change in density; and recording the density of the unit of material so that the unit of material can be positively identified among other similar units of the material having a different density.