In Gold We Trust

In Gold We Trust



Royalty and streaming companies: An under appreciated segment of the gold and metals investment landscape. Many market participants do not even know of their existance! Allow us to break it down for you: 🧵time! 1/

Royalty & streaming companies (R&S) do not build mines, they do not produce gold, or silver, or anything else. They do not have to deal with cost overruns, growing labor costs, or endless permitting processes. They simply invest in royalties and streams. 2/

A royalty is a right that entitles its owner to receive a share of the proceeds from the sale of a mine’s production. A stream entitles its owner to buy a portion of a mine’s production at a predetermined price, usually far below the prevailing market price. 3/

The owner of a royalty does not have to make any ongoing payments related to the royalty. He pays to acquire the royalty and then he collects payment on a regular basis. 4/

The owner of a stream must make not only an initial investment to acquire the stream but also ongoing payments in order to acquire his share of the mine’s production. This price can be fixed, e.g. USD 300/toz gold, or be a percentage of the prevailing market price. 5/

This unique model has interesting advantages, including: Limited risk of growing production and cost overruns, cost-efficiency, diversification and leverage to growing metal prices. 6/

The disadvantages of this model: Lack of control, as R&S holders are not part of the decision making in the mining process. 7/

The R&S industry has grown exponentially over the last 20 years, as can be seen in the chart below and the sector is dominated by Franco-Nevada and Wheaton Precious Metals. A smaller player worth looking into is EMX Royalty. 8/

Follow us on Twitter for more threads like this, daily charts and news about precious metals. If you are interested in further reading about R&S companies, we have a chapter detailing this market segment in the 2022 IGWT report, page 331-341: 9/9

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