Royal(ty) Flush with Cash
by Gerardo Del Real
Gold remains wobbly as interest rates have perked back up.
The U.S. 10-year Treasury yield rose to a 14-month high as vaccination rollouts have gained momentum and trillions is the new billions.
High unemployment? Print money, more stimulus.
Stock market slumping? Print money.
Stock market surging? Print money.
Whether we like it or not, more spending is in the cards.
The latest stimulus offering in the works is a $3 trillion infrastructure program.
While the Dow makes new highs and Bitcoin makes new highs, gold stocks continue to be treated like the plague.
You would think producers are struggling to survive and juniors are in ride out the storm mode.
Nothing could be further from the truth.
Gold producers had a record year in 2020, averaging a record margin of $828 per gold ounce sold. The previous record was $666 back in 2011.
Explorers aren’t just back in the field, they are making exceptional discoveries and mostly not being rewarded by the market...not yet anyway.
Royalty companies — whose business model allows for efficiencies producers can’t match — are flush with cash.
The bigger names in the space like Franco-Nevada (NYSE: FNV), Wheaton Precious Metals (NYSE: WPM) and Royal Gold (NASDAQ: RGLD) are reporting record revenue, increasing dividends, and leveraging the weakness in the precious metals prices by adding royalties on favorable terms.
It’s why I like the royalty and streaming model, and why I think this consolidation presents such an incredible opportunity in not only the producers and explorers, but the royalty space.
The business model is efficient, risk is mitigated by having exposure in multiple jurisdictions. And during consolidations, I actually get paid — in the form of a dividend — to wait.
Though I typically gravitate towards explorers, with some exceptions of course, I’ve found a new royalty company that has an exceptional and aggressive team, is cash flow positive, diversified, extremely undervalued relative to its peers and has the added bonus of being under the radar as it recently started trading.
All the details are available for you here.
Let's get it!
Gerardo Del Real
Editor, Resource Stock Digest
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Resource Stock Digest, Junior Resource Monthly, and Junior Resource Trader. For more about Gerardo, check out his editor page.
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