E Check Out These 15 Royalty/Streaming "Mining" Stocks (And One ETF )

Royalty and streaming (R&S) companies are lower risk because they don’t mine metal themselves but contract with other mines to take part of their future output. Here are the details on all 15 R&S companies and on 1 ETF with 43% exposure to R&S companies.[TM Editors' Note: This article discusses some penny stocks and/or microcaps. Such stocks are easily manipulated; do your own careful due diligence.]

What Are Royalty and Streaming Companies?

R&S companies serve as specialized financiers that help fund exploration and production projects for cash-strapped mining companies. In return, they receive royalties on whatever the project produces, or rights to a “stream,” an agreed-upon amount of gold, silver, or other precious metal.

  • Under a metal streaming agreement, the streaming company provides an upfront payment to acquire the right to future deliveries of a predefined percentage of metal production of a mining operation.
    • They pay ongoing payments - a fixed sum per troy ounce of gold mined, a percentage of the prevailing metal price, or a combination of both - that are usually well below the market price of the metal.
  • royalties type arrangement usually applies to a small fraction of the mining project production (usually 1-3%) and is not connected with ongoing payments. They can have various forms, but the most common is a small percentage of the net smelter return (“NSR”). The NSR is calculated as revenues from the sale of the mined products minus transportation and refining costs.

Advantages of Royalty/Streaming Companies

  • Leverage to commodity prices
  • Fixed operating & cash costs ensuring consistent and ongoing strong margins
  • Exploration & mine expansion upside at no additional cost
  • No Capex or cost overrun exposure
  • No limit to growth as execution risk does not rise with each acquisition
  • No dilution
  • Agreements with multiple miners spread & mitigate any potential risk
  • Benefit immensely if new zones are discovered and actual production comes in higher than originally forecast
  • Enjoy a favorable tax situation courtesy of the Canadian Government. As long as they reinvest their proceeds or pay it out as dividends, they are gifted with a tax rate in the neighborhood of 0-8%. That’s a huge advantage when it comes to net profit margin.
1 2 3 4
View single page >> |

Visit  munKNEE.com and register to receive our free Market Intelligence Report newsletter (sample  more

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.