I'm not a gold bug by any stretch, but I do like the basic business model pursued by precious metal royalty companies like Franco-Nevada (FNV), Royal Gold (RGLD), and Silver Wheaton (SLW).
By providing financing to mining companies and getting a low-cost cut
of their metal production in exchange, these companies offer leverage to
precious metal prices and better diversification of operating risks.
They're also something of a "heads I win, tails I don't really lose"
proposition, as periods of weaker metal prices limit miners' financing
options and allow royalty companies to set up new agreements on better
terms.
The long and short of it is that I believe Franco-Nevada
offers a pretty efficient way to gain exposure to precious metals. The
company has generally outperformed gold in good times and bad and also
offers a dividend stream - addressing one of the major complaints with
precious metal investments. These shares are not exactly cheap at around
1.9x NAV, but that's a little below the middle of the historical range
for a company with a good operating history and solid production growth
prospects in the future.
Find the full article here:
Quality Doesn't Come Dirt-Cheap With Franco-Nevada
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