Royalty/Streaming Companies – Investment Case.
The Sasfin Precious Metals Yield (PMY) Portfolio
The Sasfin Precious Metals Yield portfolio is designed for investors who wish to gain exposure to the intrinsic value inherent in precious metals, with the notion that returns may be uncorrelated to traditional asset classes. It aims to achieve this by using a combination of active and passive strategies, diversified across the royalty, mining and physical sectors. In this reading, I give an overview of some of the royalty and streaming instruments held in the Sasfin PMY portfolio.
What are Precious Metals Royalty/Streaming Companies?
Royalty and streaming companies are companies that invest in the development or exploration projects of traditional mining companies. The agreements usually involve the partial financing of the project costs, and once the mine becomes operational, the royalty/streaming company will receive a certain percentage of revenues (royalty agreement) or get a stream where it can buy a certain amount of production at a discount to the market price (streaming agreement). Like any other investments in the stock market, royalty and streaming companies are subject to upside and downside risks.
A Case for Franco-Nevada Corporation (FNV)
Franco-Nevada is a gold-focused royalty and streaming global company. It was founded in 1983 by Seymour Schulich and Pierre Lassonde under its original name, “Franco-Nevada Mining Corporation Limited”. It then became the first public mining royalty business following its acquisition of the Goldstrike royalty in 1985. It has the largest and most diversified portfolio of royalties and streams by commodity, geography, revenue type and stage of project and has listings on the Toronto and New York stock exchanges.
A Case for Wheaton Precious Metals Corporation (WPM)
Wheaton Precious Metals is one of the largest precious metals streaming companies in the world. The company has entered into agreements to purchase all or a portion of the precious metals or cobalt production from high-quality mines for an upfront payment and an additional payment upon delivery of the metal. It currently has streaming agreements for 23 operating mines and 8 development stage projects. WPM’s production profile is driven by a portfolio of low-cost, long-life assets, including a gold stream on Vale’s Salobo mine, and a silver stream on Newmont's Peñasquito mine.