An article in Seeking Alpha today discusses five companies that rely on royalties from metal producers.  Of the five, two rely on gold royalties, two on silver royalties, and one on base metal royalties.  The companies featured in the article are:

I have taken the information in the first two columns of the table from the article.  The information in the third – sixth columns I sourced on the StockResearchPortal.com website.  Given the ease of searching that website and the manner in which the information is presented it took me 8 minutes to find the information on all five companies.  Dollar values are Canadian, and are stated at the close of trading March 5.  For full disclosure Silver Wheaton is an advertiser on StockResearchPortal.com.

The article’s author is of the view  that investing in royalty companies is a low risk approach that he “especially recommend(s)” to investors “near retirement”, and that “the low risk is due to the fact royalty companies are not exposed to the high capital costs in the mining business and still offer full exposure to rising gold, silver or base metal prices depending on the company. Another plus is it doesn’t matter who owns the mine. The royalty companies still get paid.  You still have to consider country risk and management though”.  He says:

•    of the two gold royalty companies “Royal Gold is considered the industry leader and has a well diversified royalty portfolio effectively minimizing country risk”;

•    the two gold royalty companies are trading near their all time highs while most senior mining stocks are still trading far below their respective all time highs;

•    Silver Wheaton is the industry leader in silver royalty companies if an investor wants to leverage their exposure to the price of silver;

•    International Royalty is the best known of the base metal royalty stocks; and,

•    “right now” he prefers Royal Gold and Franco-Nevada.

My Comments:  I have never spent time analyzing any of these companies other than Silver Wheaton which I owned and sold at a profit about 3 years ago.  I would not describe Silver Wheaton as a ‘royalty company’, although I can see why someone might.  I think of Silver Wheaton as a ‘silver arbitrager’ since it is committed to purchase silver from producers who primarily produce other metals, and profits or loses from the spread between the price it is contractually committed to pay for the silver and the market price of silver when it sells it.  That said, I have planned for some time to study royalty companies and Royal Gold in particular.  The referenced article has caused me to focus on doing that.  I will write a blog post on my findings in the next ten days.

Read the referenced article by clicking here.

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