5 Precious Metals Picks To Add Some Glitter To Your Portfolio

After lackluster returns in recent years, gold is finally showing signs of life, according to several leading newsletter advisors and contributors to MoneyShow.com. Here are some favorite precious metals ideas for investors seeking to add some glitter to a diversified portfolio .

Nick HodgeWall Street's Underground Profits

Most major gold mining stocks are down 50% or more in the past 10 years. But one company is up more than 30% over that time — Franco-Nevada. And it’s because of the way it operates. It doesn’t own, operate, develop, or explore for gold mines. Instead, it owns a large portfolio of royalties and streams on some of the best gold mining projects in the world.

For example, Franco-Nevada bought a 2%-4% net smelter return (NSR) royalty and a 2.6%-6% net profit interest (NPI) royalty on Goldstrike — the largest gold mine in North America, owned and operated by Barrick. From those alone Franco-Nevada generates around $20 million in revenue annually.

It owns hundreds of royalties on projects in various development and production stages and various geographic locales, including more that you’ll recognize. Franco Nevada has a deal to receive 6% of production from the Sabodala mine. That mine is owned and operated by Teranga Gold, which is a recommendation of this publication.

The company also owns a 1.7% NSR on future production from the Stibnite mine in Idaho. This project is owned by Midas Gold, which happens to be one of our top recommendations. In total, it has 211 deals in the precious metals space, 84 “other” mining deals, and 82 in the oil and gas space.

You also get a bit of diversification because around 7% of the company’s revenue comes from oil and gas deals. That’s not a bad place to be with America’s shale basins now cranking out record barrels. In fact, Franco estimates 2018 revenue from oil and gas will be upwards of $75 million, well above the $47 million generated in 2017.

Guidance for 2022 is a 17% increase in gold equivalent ounces sold per year from 2017 and a 155% increase in oil and gas revenues. Mining would still be over 85% of the business.

And you also get a dividend. It’s 1.55% annually at last check. I like the timing at this point in the cycle, with Franco-Nevada stock trading at the same price it was in 2012. I like the commodity and geographic diversification. I also like the oil and gas kicker.

Brien LundinGold Newsletter

Both the technical and the fundamental situations are now firmly in favor of gold. This is good, and there’s more to come. It’s good news that gold has put some distance between it and $1,300. It’s not uncommon for the metal to drop back below big number levels before clearing them for good.

There are some relatively minor resistance levels just ahead, but the big target is the $1,372 level that represents the 2016 high. That’s relatively close to the really big target of $1,400.

There’s little technical resistance above that big number before we get to the all-time nominal highs around $1,800-$1,900. So if gold gets above $1,400, we’ll see massive buying coming in from generalist funds and traders.

SSR Mining — a Vancouver-based mining company — released its full-year production numbers a couple of weeks back, and the results outlined another stellar year in 2018. The firm's mines produced 345,000 gold-equivalent ounces for the full year and 88,000 gold equivalent ounces during Q4 2018.

Those numbers were supported by Marigold — a mining operation in Nevada. The company’s Seabee operation in Saskatchewan hit its highest production total in its history. For 2019, the company is forecasting 395,000 gold-equivalent ounces of production at cash costs of $700 per ounce.

I had the chance to meet recently with a member of the SSR management team, who pointed out how the company has demonstrated greater leverage to gold and silver prices than most, if not all, of its peer group.

Why? Well, for one, Marigold is a low-grade deposit that provides excellent leverage. The mine’s Red Dot deposit contains around one million ounces of measured and indicated resource not currently classified as reserves. At $1,400/ounce, this mineralization becomes economic.

Another levered asset is the company’s Pitarrilla project in Mexico. Pitarrilla is one of the largest undeveloped silver projects in the world, with a measured and indicated resource of 500 million ounces of silver. Pitarrilla effectively acts like an out-of-the-money call option on silver, one that will provide huge leverage on a big rise in silver prices.

SSR Mining is a great option for any gold or silver bug looking to anchor their junior portfolio with a solid producer. It’s a buy at current levels.

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