Ann: Debt Finance , page-50

A soon-to-be or currently profitable outfit is much better off using debt than additional equity. Why?

Additional equity is like a debt that is never paid off - like a consol (perpetual debt issued by UK centuries ago). Equity is exactly that, it is an equal entitlement to a share of the profits.

Debt is limited in duration and can be retired as soon as cash flow allows it.

CCU will only be hedging 30% of production for the life of the loan. So if the silver price does go "to da moon" the loan will be paid off that much quicker, hence hedging will cease that much sooner.

Of course if an entity is not sure of its profitability, it will not have the cash flow to pay down debt so it will raise more equity. In taking out a loan, CCU is signalling that it expects to be profitable (no surprise there) but what is significant is that some banks think so too.