The Gold Miners Problem, the More They Mine, the Less There Is

The Gold Miners Problem, the More They Mine, the Less There Is

The Gold Miners Problem, the More They Mine, the Less There Is


There is a problem in the Gold mining business, and even the biggest mining companies cannot escape it.

The more Gold they mine, the closer they are to running out.

When that happens, companies scramble, do risky deals, dilute shareholders.

They even try to build another mine quickly. This often does not go as planned, and the market does not wait around to see if the company can find its next Gold treasure.

You see, Gold mines are depleting assets.

When Gold comes out of the ground, it is gone for good. That is why, to stay in business, Gold miners constantly have to hunt for their next great Gold discovery.

That is not always easy….. and yet, it is always expensive, and shareholders foot the bill.

That’s why some of the most successful Gold investors buy Gold royalty and streaming companies. What they know is these are the real growth stories in the Gold business.

The best example is Franco Nevada.

Pierre Lassonde and Seymour Schulich, the founders of Franco-Nevada, 1st sold shares in their new exploration company for $0.35.

They quickly realized their fledgling exploration company would go belly-up if they could not create reliable income.

From a tip to answer an ad in the Reno, Nevada newspaper, they bought a small package of Gold royalties. One of those royalties covered land bought by mining giant Barrick Gold Corp (NYSE:ABX).

Barrick Gold discovered a massive deposit called Goldstrike on the property. It became the largest Gold project in North America. The tiny royalty company with a $0.35 stock became Franco-Nevada (NYSE:FNV).

They were able to use this cash flow to buy more Gold and Silver royalties. Thus creating a real growth story that is still around and thriving today.

You see, Franco Nevada’s founders figured out this Gold growth stock secret.

They did not get caught up in get-rich-quick stories. They did not look for Gold on the Moon or at the bottom of the Sea. They focused on just 1 money-making idea.

And then after several years, the 2 sold their once fledgling Gold company to Newmont Mining Corp (NYSE:NEM) for $2.6-B. Shareholders booked a gainer of 1,250X the price paid for the company’s 1st shares.

That means every $1,000 invested early turned into $1,250,000

Franco-Nevada again trades on its own today, it went public at C$15 in Y 2007. Those shares now sell for over C$85, making Franco-Nevada 1 of the best performing stocks of all time.

In the beginning when its stock traded for $0.35, the smart money paid attention.

Even though the company told investors exactly what it planned to do….few listened.

The ones that did, made a fortune to last several lifetimes.

Royalty Companies: The Real Growth Stories in the Gold Sector

As we all know, Gold royalty and streaming companies do not operate big trucks, complex processing facilities, and do not employ thousands of people. They have small teams that purchase interests in precious metal mining operations. They own these interests through royalties and streams.

These companies can often complete 2-4 transactions per year, with each transaction giving royalty companies interest in that operation that typically has at 10-20 years life spam.

That is in stark contrast to the average mining company, as it gives the investor exposure to 1 asset over 10-20 years, that is constantly issuing shares diluting real stakeholder ownership of that asset.

Royalty companies are the only growth businesses in the mining sector that allow precious metals investors to “Buy & Hold” for long term gainers. This is why they have continued to out-perform the rest of the sector through the Bull & Bear market cycles.

The best time to own a royalty company is at the beginning of a Bull market in Gold and Silver. This is because as the the prices of Gold and Silver rise, the profits rise too. The royalty company’s costs are fixed, allowing shareholders to be the main beneficiaries of rising Gold prices.

Notably, few royalty companies focus exclusively on precious metals. That means, truly great opportunities to buy Gold & Silver royalty companies do not come along very often. When they do, shareholders have the opportunities to make incredible gains.

The way to make a fortune is to own a new Gold royalty company at the beginning of a Bull market in Gold and Silver.
New royalty companies can have internal growth of 100% Y-Y often for the 1st 3-5 years.

The major royalty companies, Franco Nevada, Silver Wheaton (NYSE:SLW), Royal Gold (NASDAQ:RGLD) although great investments, are now too big to have this expansive growth.

The Next Great Opportunity?

Last month I discovered Metalla Royalty & Streaming, Ltd, a new company that looks to be on the path to success already. Although still in its early days, this company has acquired several royalties.

A few of the royalties are on properties held by some notable counterparties including: Goldcorp (NYSE:GG), Tahoe Resources (NYSE:TAHO), Glencore Plc (OTCMKT:GNCNF), Detour Gold (OTCMKT:DRGDF), and Osisko Mining (OTCMKT:OBNNF).

The company is Metalla Royalty & Streaming Ltd. (CN.MTA) (OTCMKT:EXCFF) and (X9CP.SG), has accomplished this in the 1st 6 months by acquiring 2 royalty portfolios and has a producing silver stream on the way.

In my interview with CEO Brett Heath early last month he said, “Metalla is just getting started”.

We expect that stakeholders in for the long run are likely see great returns.

For more information about Metalla  Royalty & Streaming Ltd, go here

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.