Sandstorm has a 30% interest and a 2% net smelter return royalty on the project, which, it said, is a multi-million-ounce discovery that is shaping up to be a high-grade, low-cost project with significant exploration upside. Credit: Yamana Gold. Further, the ongoing 'payments-on-delivery'are valuable as continued income to offset costs of production by a mining company. The companys flagship asset is a 5% net smelter return (NSR) royalty on the Canadian Malartic open-pit gold mine, Canadas largest gold mine, located in Quebec. The companys core assets include a gold and silver stream fromFirst QuantumMinerals (TSX: FM) Cobre Panama mine in Panama; a gold and silver stream fromLundinMinings (TSX: LUN) Candelaria mine in Chile; a silver stream fromTeck Resources (TSX: TECK.B; NYSE: TCK) Antamina mine in Peru; and a gold and silver stream fromGlencores (LSE: GLEN) Antapaccay mine in Peru. Thus, even an increase to a level similar to the Americas would imply that significant opportunity exists for current players and new entrants in, for example, Australia and Southeast Asia. Market cap: C$993.25 million ($823.32 million). Credit: Rio Tinto. Osisko also owns a royalty onNewmonts (TSX: NGT; NYSE: NEM) Eleonore gold mine in James Bay, Quebec. The company holds a portfolio of 14 royalty, stream, and gold loan assets, of which six are on producing mines. Since the inception in the 1980s and early 2000s of the mining royalty and streaming sectors, respectively, these alternative forms of financing have grown steadily from $2.1 billion in 2010 to more than $15 billion in 2019. Donot involve operational management, allowing the company to put together a large and diversified portfolio without significant corporate overheads. Maverix Metals(TSX: MMX; NYSE-AM: MMX) is a gold-focused precious metal streaming company. Financing can have its pitfalls through delayed payments or too much debt while the issue of new shares can be extremely dilutive to existing shareholders or impose an additional financial burden on existing shareholders to maintain their level of shareholding. The gold-focused company generates revenue from various types of agreements, ranging from net smelter return royalties, streams, net profits interests, net royalty interests, working interests and other types of arrangements. This dodges jurisdictional risks and political problems, and generally allows the company (and the investor) to avoid putting all their eggs in one basket. There are some distinct differences between the two types. alternative financing in the mining secto, McKinsey_Website_Accessibility@mckinsey.com. While the growth in private debt and equity has been below expectations, one form of alternative financing that has blossomed has been streaming-and-royalty financing. The company has a large and diverse portfolio of assets, including royalties and streams from 58 gold and gold-equivalent producing mines, 55 energy producing assets, 42 advanced stage gold and gold-equivalent assets, 224 exploration stage gold and gold-equivalent assets, and 27 exploration stage energy assets. We believe there is room for significant growth in the industry, and several factors will drive tailwinds.
Royalty companies usually draw from the revenue of a mine rather than from the mining company's ultimate profit. Fifty-eight percent of its portfolio is in North America, with 18% in South America, 9% in Africa, and 8% in Asia. To understand how it all works, let us look at the mining industry first. There are two most common royalty types out there: revenue-based royalties and profit-based interest royalties. Market cap: C$2.93 billion ($2.42 billion). Investments in royalties are often seen as less risky as they provide a steady income, compared to direct investment in traditional stocks and shares.
IOC is a joint venture between Rio Tinto (58.7%), Mitsubishi (26.2%), and the Labrador Iron Ore Royalty Income Corporation (15.1%). Every move in the mining space comes with a massive pile of overhead costs and risks, from tonnes of high-priced equipment and teams that include dozens of individuals with unique roles and responsibilities. These audience insights are used to make our website more relevant. It also has royalties on advanced exploration stage projects, including a 1% NSR royalty onTroilusGolds (TSX: TLG; US-OTC; SKREF) Troilus gold project in Canada. The streaming model has started to become more popular due to the flexibility provided to operators. Thus, miners receive payment on delivery for streamed physical volumes. Credit: First Quantum Minerals. Copyright Proactive Group Holdings Inc, 2022. A machine operator underground at Pan American Silvers La Colorada silver-gold property in Zacatecas, Mexico. Investors are increasingly looking for direct exposure to commodities while minimizing environmental, social, governance, and operational risks. However, outside the Americas, streaming deals are limited. However, the industry remains very consolidated, with the top three playersWheaton Precious Metals, Franco-Nevada Corporation, and Royal Goldrepresenting approximately 80 percent of the total value of streaming-and-royalty contracts as defined by volume of gold equivalent ounces (GEOs). To put it simply, royalty companies provide mining companies with capital in return for a chunk of the miner's eventual production or revenue. Furthermore, because costs per ounce are contractually defined, this protects streamers from cost overruns. Exploration stage assets include a gold royalty onYamana Golds (TSX: YRI; NYSE: AUY; LSE: AUY) Camflo Norwest property in Canada and a gold royalty onNewcrestMinings (TSX: NCM; ASX: NCM) Fortuity 89 property in Canada. Here are the top ten royalty and streaming companies headquartered in Canada ranked by market capitalisation as of June 3 and compiled by Mining Intelligence. In addition, investors in streaming companies are able to tailor metals exposure more than royalty companies can. Maverixs assets include royalties and streams on projects held by four major miners. The company is focused on precious metals, with 80% of its cash flow generated from gold assets. Royalty and streaming companies have grown in number and popularity over the years. In the worlds first streaming transaction, Silver Wheaton purchased the yet-to-be-produced silver from Wheaton Rivers Luismin mining operations in Mexico (including the San Dimas mine) in consideration for an upfront payment, plus additional payments on delivery of the silver. Something went wrong. Mining is at every stage an incredibly complex, incredibly expensive process. Terms of use. Strictly necessary cookies relate to our hosting environment, and functional cookies are used to facilitate social logins, social sharing and rich-media content embeds. But still, with quantitative easing continuing apace, a looming global energy crisis, and economic uncertainty running amok, the outlook remains strong for gold. Currently, streaming-and-royalty contracts cover only a limited share of metals production. A royalty company can therefore be seen as a 'specialised financier'thathelps fund exploration and production projects for mining companies. Last year Nomad generated revenue of $26.8 million, of which 77% came from its gold assets and 23% from its silver assets. Franco-Nevada is focused on royalties and streams on gold, silver, and platinum group metals (PGMs), which combined generate around 89% of its revenue, with other mining and oil and natural gas assets accounting for the remaining 11%. The companys portfolio includes 60 royalties in the U.S. and Canada, 17 in Scandinavia, 20 in South America and the Caribbean, six in Turkey, three in Serbia, and two in Australia. When executed well, this arrangement should benefit a streaming company via sustainable cash flows and dividends derived from predictable costs and lower risks. The terms of the royalty payments are laid out in the agreement and are usually based on a royalty rate that benefits both the licensee (the company paying out the royalty) and the licensor (the company receiving the royalty). Following this initial transaction, Franco-Nevada went on to purchase royalties in various other commodities, further developing the mining sectors royalty business model. In February, EMX signed option agreements on five battery metal projects, including three nickel-copper-PGE-cobalt-projects in Norway and two in Sweden with Martin Laboratories EMG Ltd. (MLE), a private company in the U.K. In evaluating and deciding which projects to invest in, streaming-and-royalty companies will typically assess four kinds of risk: Overall, large miners with operating assets obtain significantly better deals than smaller companies with development projects, due to a longer track record of project delivery and operation. Streaming deals are normally focused on specific commodities produced by a particular project, such as precious-metal by-products from a base-metals project. About 44% of these assets are owned by major mining companies and 43% by mid-tier companies. In addition, EMX has strategic investments including a 19.9% interest in Rawhide Acquisition Holdings Rawhide gold-silver mining operation in Nevada and net smelter royalty interests on 18 properties in northern Chile operated byRevelo Resources(TSXV: RVL). Though it's true that the companies listed above are a mere slice of the larger royalty market, there are several good reasons why royalty companies are often a better choice than other mining options. The Hot Maden gold-copper project in Artvin Province, Turkey.
The mill at Agnico-Eagle Mines and Yamana Golds Canadian Malartic gold mine in Quebec. Tesla dumps Bitcoin but holds on to Dogecoin, Crypto in the red as Ethereum breaks below US$1,500 and Musk ditches Bitcoin, Shanta Gold lifts quarterly gold production by 54%, Caledonia Minings Bilboes acquisition a boost for investor confidence - broker says, Thor Mining's gold assets energise the share price, FIVE at FIVE AU: Petrol prices to fall, gas supply to deplete further, ANZ makes play for Suncorp and great work being done in heart health, Ship of fools: Three Arrows Capital used borrowed money to buy superyacht, The FIVE at FIVE AU: The ASX finishes down, low unemployment will lead to a large cash rate rise and trading platform spruiked by Aussie cricketer slammed shut by ASIC, Castillo Copper boosts grades up to 10x with tests on ore from Big One within NWQ Copper Project, Castillo Copper releases positive metallurgical results from the Big One copper project, Sunstone Metals wide gold-copper intersections pave way for maiden Brama-Alba resource estimate in Ecuador, First Au advances Victorian project with gold samples up to 135 g/t and 74.54 g/t and maiden diamond drilling complete, Emmerson Resources makes significant gold and copper strides at Tennant Creek. Additional capital investment will be required to close the reserve gap and bring new production to market to meet future demand growth. And while we're certainly an advocate for mining companies at every stage of development, we see investors overlooking royalty companies all the time. Market cap: C$764.85 million ($633.99 million).
But the best royalty companies draw revenue from dozens of projects, all over the world. Royalty ownership in the mining industry is generally agreed to have originated with Franco-Nevada in the mid-1980s. And as you survey the precious metals field for new investments, we'd urge you to consider gold royalty companies. If you would like information about this content we will be happy to work with you. We don't think the bull market for gold is over. The royalty covers 15,600 sq. Subscribed to {PRACTICE_NAME} email alerts. Last year, Franco-Nevada generated record revenue of $1.02 billion, 70% of which came from gold, 11% from silver, and 8% from PGMs. First Graphene sees out June quarter with record revenue, secures strong Caledonia Minings Bilboes acquisition a boost for investor Yandal Resources gets the greenlight for 25,000 metres of drilling. Advertising Cookies collect information about your browsing habits such as the pages you visit and links you follow. To put it in simple terms: A royalty company provides fundings to miners in exchange for a share of production revenues. When compared to equity-based deals, streaming-and-royalty deals are less dilutive because streaming and royalties are applied to a single asset only; are advantageous when share prices are trading below net asset value; do not have changes in ownership and none are implied on the management team; and usually have no additional costs such as brokerage or market discount fees. Please email us at: A single approach to culture transformation may not fit all, Five trends shaping tomorrows luxury-car market, Why Infosyss cofounder Nilekani is urging leaders to use tech for good, Find the smartest technologist in the company and make them CEO, Americans are embracing flexible workand they want more of it. 
It remained the leading public mining royalty company until 2002 when it was acquired by Newmont Mining for US$2.5 billion. Processing facilities at Yamanas Chapada open pit gold-copper mine, located in Brazil. Without the need for drill rigs and huge teams, royalty companies can create value with only a laptop. Major shareholders in the company include Newmont (30%), Pan American Silver (18%), Kinross Gold (8%). By 'streaming'the mines silver to a new subsidiary company - the beginning of the Silver Wheaton Group -the market value of the mines silver was crystallised. We strive to provide individuals with disabilities equal access to our website. In March, Wheaton also acquired a precious metals stream from Capstones Santo Domingo project in Chile. Today, its market cap sits over $22 billion. Performance Cookies collect anonymous information designed to help us improve the site and respond to the needs of our audiences. Data delayed 15 minutes unless otherwise indicated. These deals are especially attractive for mining companies for which the streamed product is noncore or a by-product. Franco-Nevada(TSX: FNV; NYSE: FNV) retains its position this year as the number one royalty and streaming company by market capitalisation. Streaming as an alternative financing source has several advantages when viewed from a mining companys perspective. That's not to say that royalty companies aren't still fairly high-risk propositions, but they're far less risky than their junior mining counterparts. In Canada, these assets include a 4% net smelter return (NSR) royalty onHudbay Minerals (TSX: HBM; NYSE: HBM) 777 copper-zinc mine in Manitoba, five potash mines owned byNutrien(TSX: NTR, NYSE: NTR), and a number of coal mines in Western Canada, as well as a 0.3% NSR royalty onVales (NYSE: VALE) Voiseys Bay nickel-copper-cobalt mine in Labrador. Management and insiders hold 8%. Metalla Royalty and Streaming(TSXV: MTA; NYSE-AM: MTA) has a portfolio of gold and silver royalties on over 60 assets, including five producing mines, 23 development stage projects, and 41 exploration stage projects. Nomads royalties include a 1% net smelter return (NSR) royalty onEquinoxGolds (TSX: EQX; NYSE: EQX) Riacho dos Machados producing mine in Brazil, and a 2% NSR royalty from oxides and a 2% NSR royalty from sulphides on the Sucura zone atLundinMinings (TSX: LUN) Chapada copper mine in Brazil. A drill rig at Pan American Silvers Joaquin silver project in Argentina in 2009, where Metalla Royalty & Streaming has acquired a royalty. To date, the majority of streaming deals have been focused on precious metalsgold and silver account for more than 90 percent of streamed volumes as of 2020 (Exhibit 1)although there is increasing interest in streaming other commodities. Wheaton River, a junior mining company created a new company Wheaton Precious Metals - that was spun out in 2004 and championed precious metals streaming. Credit: Mariana Resources. Finally, we are starting to witness renewed interest from investors in the mining sector, albeit often targeted at specific in-demand subsectors such as battery materials (including cobalt and nickel). READ: High Peak Royalties enhances green hydrogen project royalty agreement, Create your account: sign up and get ahead on news and events. Although the streaming-and-royalties sector has shown strong growth over the past five years, currently the sector represents only a fraction of total equity and debt financing for the mining industry: that is, an average 1 to 3 percent of debt and equity financing from 2017 through 2019. All Rights Reserved - Proactive Australia PTY LTD ACN:132787654 ABN:19132787654. About 53% of Maverixs assets are in the U.S., with 30% in Australia, 9% in Canada, and 5% in Mexico. And, since their costs remain relatively static, they're not exposed to the bulk of the massive risks that come with the mining space. The streaming-and-royalty business model provides exposure to commodities while minimizing many of these risks, as well as offering diversification across a larger portfolio of mining assets. Osisko Gold Royalties(TSX: OR; NYSE: OR) is focused on North America and has a portfolio of over 150 royalties, streams, and precious metal offtakes on 17 producing assets (primarily gold mines), 35 development stage projects, and 103 exploration stage projects. Credit: Agnico Eagle Mines. See our Cookie Policy for more information. Jindalee Resources continues to increase North American investor Base Resources brings in record sales revenue over June quarter, Nightingale Securitys drone technology to soon feature on the ASX, International Graphite buoyed by new graphite exploration findings.
In April, Franco-Nevada acquired 14.7% ofVales (NYSE: VALE) outstanding royalty debentures from the Brazilian Development Bank and the government of Brazil for $538 million. We use cookies to personalise content and ads, to provide social media features and to analyse our traffic.
Historically, the geographic focus for streaming-and-royalty transactions has centered on North and South America, with approximately 50 percent of all streaming deals associated with mines in Canada, Mexico, Peru, and the United States. These cookies are used to deliver our website and content. Following the commodity downturn in 2014, many miners were forced to focus on cost-out initiatives, deleveraging balance sheets and returning cash to shareholders who had become disillusioned with the industrys track record. With the best contracts there is also an exploration upside, so streamers receive the benefit of mine exploration and expansion activities, typically at no additional cost. C29 Metals targets first drilling at Reedy Creek Project by year end, just weeks after ASX debut. Once in production, Hod Maden is expected to more than double Sandstorms attributable production. 
On June 17, Metalla acquired an existing 1.35% net smelter return royalty on the northern portion of the Cote gold project and all of the Gosselin project, which are owned byIamgold(TSX: IMG; NYSE: IAG) and Sumitomo Metal Mining. Market cap: C$481.26 million ($398.92 million). Market cap: C$2.94 billion ($2.44 billion). Which makes the current market a good one for considering new mining companies to add to your portfolio. We'll email you when new articles are published on this topic. This provides the mining company with funds when they're most needed, while providing the royalty companyand its investorswith long-term value. Alternatively, companies issue shares. A royalty company stands between the commodity and the miner and offers the least amount of exposure to risks directly in the commodity or the miner. From a cost perspective, streaming companies provide stable and predictable costs in comparison to the mining companies themselves (and usually low-selling, general, and administrative costs, given their small staffing requirements versus those of the mine operators). Sandstorm Gold(TSX: SSL; NYSE-AM: SAND) has a portfolio of royalty assets on over 220 precious metal, base metal, and diamond assets, including 24 producing mines, 25 development stage projects, 19 projects at the advanced exploration stage, and 152 at the exploration stage. Primary crushers and a conveyor at First Quantum Minerals Cobre Panama copper mine under construction in Panama. As a result, many industry commentators predicted the emergence of private debt and private equity. Therefore, alternative financing sourcessuch as streaming and royalty will be presented with many investment opportunitiesand may even result in increased exploration spend. New players have emerged in the past decade in the streaming-and-royalty sector, including Triple Flag in 2016, Nomad Royalty in 2019, and Deterra Royalties in 2020. The project will extend the mine life of Canadian Malartic from 2028 to at least 2039. The agreement with MLE provides EMX with a potential 5% equity interest in MLE, a 2.5% net smelter return (NSR) royalty on each project, and other considerations, including advanced annual royalties and milestone payments. Credit: Mirasol Resources. Furthermore, streaming deals may be used as an alternative form of financing in regions regarded as higher risk, which consequently attracts higher debt rates, such as in Africa or Southeast Asia.
have been delivered, thereafter dropping to 33% of silver production for the life of the mine. This article was a collaborative effort by Scott Crooks, Siddharth Periwal, Oliver Ramsbottom, Elijah Saragosa, and Jessica Vardy, representing views from McKinseys Metals and Mining Practice. Expansion in this form of alternative financing, coupled with increasing focus on growth by management teams, leads us to believe that streaming-and-royalty financing is poised for strong growth over the next decade. In May the company reported record first-quarter revenue of $324.1 million, up 27.2% year-on-year. For more data from MiningIntelligence go to:https://www.miningintelligence.com/, (This article first appeared in The Northern Miner), 2022 Glacier Media Group, All Rights Reserved. In recent years, we have started to see streaming expand into other metals, such as cobalt and nickel, which are in large demand but short supply. In return for this up-front cash payment (the deposit balance), the streaming partner secures a share of future production at an agreed-upon discounted price, which may be fixed or alternatively a floating percentage of the prevailing spot price. Market cap: C$354.80 million ($294.10 million). Different reasons exist for sellers to enter into streaming and royalty contracts, but these are usually related to market capitalization and project development status. It is primarily focusing on royalties in oil and gas in prolific Australian producing regions and is also participating in the 'green energy' sector. An active ASX-listed participant and specialist in royalties is High Peak Royalties Ltd (ASX:HPR). But the best royalty companies are lean, streamlined operations. MGC Pharmaceuticals appoints experienced industry executive in new chief Ethereum cruises past US$1,500 as Bitcoin holds the line. In the meantime, we'd urge you to do some research on the sector and make your own discoveries. 
In the worlds first streaming agreement, Silver Wheaton purchased yet-to-be-produced silver from Wheaton Rivers operations in Mexico in return for an up-front payment and additional payments on delivery of the silver. Nearly three-quarters of its assets fall in the lowest cost quartile. Investments in royalties are often seen as less risky as they provide a steady income, compared to direct investment in traditional stocks. As a result, many candidates exist for which streaming-and-royalty deals present a potentially attractive form of financing, such as when a company is in need of capital to fund growth projects, engage in M&A, or further pay down debt. This capital can be hard to secureespecially when the gold market is unfavourable. The greenlight paves the way for a drilling program that's been a year in the making, and Yandal plans to hit the ground running with a Only registered members can use this feature. The company also holds a 3.7% stream onLundinMinings (TSX: LUN) Chapada open-pit copper-gold mine in Brazils Goias state and a royalty onExcelsiorMinings (TSX: MIN) Gunnison copper mine in Arizona. Spot gold, meanwhile, only rose 49%, while the VanEck Gold Miners ETFone of the best gauges of the junior mining marketrose just 60%. Overall, royalty companies offer leveraged exposure to what many see as an upcoming gold market, with many of the dreaded risks of the sector absent. The companys producing assets include a gold and silver royalty onPan American Silvers(TSX: PAAS; NASDAQ: PAAS) Joaquin and COSE mines in Argentina and a gold royalty onCoeurMinings (NYSE: CDE) Wharf mine in the U.S. Its development stage assets include a gold and silver royalty onAgnico Eagle Mines (TSX: AEM; NYSE: AEM) El Realto project in Mexico and a gold royalty onMonetaPorcupines Garrison project in Canada. This allows the royalty company to continue pulling in value even when the price of gold stalls. The arrival of the precious-metals streaming business model is often attributed to Wheaton River: while seeking to raise funds in 2004 to expand its core business of gold mining, the company conceived the idea of streaming silver by-product from the San Dimas gold mine in Mexico to a new subsidiary company, Silver Wheaton. Management and insiders hold 2.3%. In contrast, royalty deals are normally commodity agnostic and based on overall project revenues; the royalty company never actually sees the commodities that the mine produces, but rather just receives a share of the revenue generated (the royalty).
EMX Royalty founder, president and CEO David Cole. Building a mine is an extremely expensive undertaking as it consumes capital and time from exploration to development and actual production and offtake. Indeed, the acceleration over the past half-decade has taken place in an environment in which raising capital has been challenging within both the public-debt and public-equity markets as the mining and commodities sectors have been less favored by investors in comparison to the commodity supercycle of the 2000s. Revenue-based royalties are based on the value of the production or net proceeds received by the operator with defined deductions outlined in the royalty contract. It also announced the first cobalt delivery fromVales (NYSE: VALE) Voiseys Bay mine in Newfoundland and Labrador, for which it has a 42.4% cobalt stream, and the first silver fromCapstoneMinings (TSX: CS) Cozamin mine in Mexico, where it is entitled to receive 50% of the silver production until 10 million oz. Streaming and royalties in mining: Let the music play on. The company has a highly diversified portfolio, with over 90% of its royalties and streams on assets in the Americas. The use of streaming may provide the financing required to unlock production for mines with such by-products. The current structure of the streaming-and-royalty sellers market is quite fragmented: the top five sellers represent about 50 percent of the market, while small and junior miners make up 25 to 30 percent of the total market. As a result, they are also more likely to sell future production of measured and indicated resources. In the post-boom environment, many mining companies found it challenging to raise capital from either the public-debt or public-equity markets. By the end of 2010, it had a market cap of $13 billion. Wheaton River came up with the streaming model while seeking strategies to raise capital for its own core business of gold mining. Several potential reasons underlie this, including the geological concentration of base-metals mines, established mining industries and legal frameworks, and a receptive audience to alternative financing structures. But before we get into that, it's worth diving into how royalty companies work, and how they make money. The attractiveness of streaming contracts may be challenged if we see more competition in the space or if access to capital from other sources increases. 