Why Precious metals streaming and royalty companies make sense

2020년 11월 10일

I am always looking out for opportunities to diversify my small but growing portfolio. I came across streaming and royalty companies during the course of my research into ways of investing in precious metals and was blown away by the business model.
There is a plethora of information on the web on streaming and royalty companies business models. I will attempt to summarise the most important ones here:
- Under a streaming agreement, a streaming company pays upfront for the right to acquire future physical deliveries of metals (at predefined percentage).
- A royalty company on the other hand provide funds for mines in exchange for future profits (by receiving a fixed percentage of the revenue generated by the mine)
- Streaming and royalty companies do no have the same underlying risks with physical mine operations as do the mining companies, and consequently they have a very small management team/staff and huge profit potentials
- Royalty companies have traditionally reported very high revenue per employee, which dwarfs all mining companies combined including tech giants (comparing to others outside the mining industry). I recommend reading Kitco's analysis titled "This is the Rolls-Royce of the precious metals business" for charts that perfectly illustrates this.

The list below contains the biggest streaming and mining companies:
- Franco-Nevada Corp (FNV)
- Wheaton Precious Metals Corp (WPM)
- Royal Gold Inc (RGLD)
- Osisko Gold Royalties (OR)
- Sandstorm Gold (SAND)
- Metalla Royalty and Streaming (MTA)
- ELY Gold Royalties (ELYGF)
- Abitibi Royalties
- EMX Royalty Corporation (EMX)
- Maverix Metals
- Sailfish Royalty Corp
- Nomad Royalty Co Ltd

From the list above, I have selected the following as my favourites:
- Franco-Nevada Corp (FNV)
- Wheaton Precious Metals Corp (WPM)
- Royal Gold (RGLD)
- Osisko Gold Royalties (OR)
- Sandstorm Gold (SAND).

Unfortunately, my broker platform doesn't list Osisko Gold Royalties so will only invest in the 4 others to diversify my portfolio.
These will be in addition to my other high quality gold stocks:
- Barrick Gold
- Newmont Corporation
- Newcrest Mining Limited
- Agnico Eagle Mines Limited (waiting for buying opportunity).
- Jubilee Metals (a small industry player - an interesting speculative play in precious metals scrap recovery/conversion to sellable products)