Seeking Alpha: Silver Wheaton Still Looks Like A Quality Option

Investors have plenty of options for investing in silver, including silver miners like Fortuna Silver Mines (NYSE:FSM), Pan American Silver (NASDAQ:PAAS), and Coeur Mining (NYSE:CDE), bullion ETFs (as well as mining ETFs), physical bullion, numismatic silver, and so on. Amidst those options, I think streaming specialist Silver Wheaton (NYSE:SLW) remains a strong candidate, given its low fixed cost structure, attractive balance sheet/liquidity, and disciplined approach. Although weaker silver prices and producer missteps are both threats, weaker prices would at least potentially create more streaming opportunities to generate long-term value.

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Silver Wheaton Still Looks Like A Quality Option

Seeking Alpha: Quality Doesn't Come Dirt-Cheap With Franco-Nevada

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.

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Quality Doesn't Come Dirt-Cheap With Franco-Nevada

Seeking Alpha: Weak Prices, Operational Uncertainties Pressuring Royal Gold

As a primarily precious metals royalty company, Royal Gold (RGLD) would have more than enough trouble just from the freefall in gold prices over the last fifteen months. Making matters worse, a significant percentage of Royal Gold's value and future revenue streams are tied to projects like Thompson Creek's (TC) Mt. Milligan and Barrick Gold's (ABX) Pascua-Lama that are facing some real stress and uncertainty.

With that, Royal Gold is another precious metals stock that is trading well below past valuation norms, currently trading around $45 per share. There is definitely potential downside in these shares, as my estimates of NAV would slide below $40/share at $1,000 gold and below $30 at gold prices of $750/ounce. I'm well aware that metal prices frequently overshoot on both the high and low points of the curve, but the global cost curve of gold production would suggest that a large percentage of supply would disappear below $1,000 and that should be supportive of long-term prices. Although I don't disagree that the challenges at Thompson Creek and Barrick do merit some discount to past multiples (likewise for the current price of gold), I'm starting to think the re-rating on these shares might have gone far enough.

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Weak Prices, Operational Uncertainties Pressuring Royal Gold

Seeking Alpha: Taseko Hoping To Offer Its Own Copper Growth Story

One of the reasons I like First Quantum (OTCPK:FQVLF) is that I believe that company is poised to deliver excellent low-cost/high-value growth from its copper mines both already operating and on the drawing board. The same could apply to Taseko (TGB), as this BC-based Canadian miner has an existing mine with expansion capacity and a potential new mining project that could offer excellent cash costs.

Of course there is a "but", and with Taseko it's a triple-but. The first "but" is that a lot of copper mining projects are on the books now and it is going to take a real recovery in global demand to maintain prices in the face of that supply. The second "but" is that the company's current copper mine is on the high end of cash costs. The final "but" is that the company's biggest near-term expansion possibility may be derailed by wrangling over environmental and cultural issues.

Even though Taseko is in solid financial shape, the stock has gotten pummeled like most other mining companies. With that, I see significant potential opportunity here. I believe Taseko could rise 30% just on the basis of its existing mine if copper prices stay at $3/lb, and the upside could be into the $4 range (100%-plus potential) if the expansion, cost, and pricing scenarios all work out.

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Taseko Hoping To Offer Its Own Copper Growth Story