Cost – surety bonds are often a much cheaper solution vs. a letter of credit. Depending on the underwriting, the cost of these bonds can range from 1-2.5% of the bond’s face value, annually.
Security – unlike letters of credit, surety bonds are typically based on an unsecured relationship. Depending on the financial strength and track record of the mining company these bonds are secured either on the basis of an indemnity agreement or a combination of an indemnity agreement and a modest amount of collateral in relation to the value of the bond.