Investing in Gold Royalty Companies Can Generate 3 Times the ROI of Gold
If you have been keeping track of the latest sell-off in the markets, you know how well gold has performed. In fact, gold prices have actually increased by 3.8% since the 1st of October 2018 even though the NASDAQ and S&P 500 are down 10.4% and 7% respectively.
Since gold has always been considered a safe haven, this comes as no surprise.
Interestingly, this is not the first time that gold is acting this way. At the time of the global financial crisis almost a decade ago, when the S&P lost 55.6% of its value, gold notably gained 25.4% during the same period (between October 2007 and March 2009).
It is clear that gold is an incredible hedge against market turbulence.
And now, we have something even better – gold royalty companies.
Royalty business model
It is simple. Building and operating a precious-metal mine is a very expensive endeavor. In most cases, the miners don’t have enough money to get the metal (for example, gold) out of the ground. That’s where a streaming and royalty company comes in to save the day.
It gives cash upfront to a mining company and assumes the role of a silent partner. In exchange, a royalty on the future production of gold is negotiated.
A stellar opportunity
A gold royalty company provides cash to miners to help them operate their business. When these miners sell the gold they mined, the royalty company receives a royalty from them as a payment of their upfront investment.
And here’s the best part: the royalty payments rise when gold prices rise. This means that the percentage of profits received by the company and its shareholders also increases.
If the life of the mine is extended or the mine increases its gold production, the royalty company reaps the benefits – without making any additional investment!
Royalties are also earned by property/claim owners that lease or sell the underlying mineral rights to the mining companies. Many royalty companies stand ready to purchase existing royalties from these third-parties looking to cash out of their royalty stream for a lump sum cash payment.
As for the downside, they are extremely limited. A royalty company doesn’t have to worry about any additional costs. Also, it is well-protected against any risks and variable costs that may manifest themselves while operating a mine.
If you are looking to invest in gold, investing in a gold royalty company offers far greater benefits than owning a gold miner.
Old-time and experienced investors agree that gold mining is one of the toughest businesses in the world. It may sound unnecessarily harsh, but the facts are hard to ignore.
Consider all the dangerous hazards that are almost impossible to control or predict in a miner’s life, including political risks, environmental activism, safety regulations, and unions.
On the other hand, a royalty company offers the best of both worlds.
This article contains the author's opinions. These are not investment-related recommendations. Do not consider the article as any type of commercial solicitation or an investment product offer.
About the Company
Ely Gold Royalties Inc.is an emerging royalty company with development assets focused in Nevada and the Western US. Its current portfolio, which includes a large number of Deeded Royalties and Optioned Properties, is currently generating significant revenue.
Ely Gold’s royalty portfolio includes producing royalties, fully permitted mines, mines under construction and development projects that are being permitted for mine construction.