The company anticipates receiving roughly 33.5 million silver-equivalent ounces from its partner mines in 2013, with room to significantly grow its annual silver stream in the future as Silver Wheaton Corp. (USA) (NYSE:SLW) has also financed 4 development projects that will start contributing silver streams in the near future. The company also has the potential to add additional metals streams, and management hasn’t been shy about deploying its cash, having already struck financing deals with three separate mines in 2012 and 2013.
Royal Gold, Inc USA) (NASDAQ:RGLD) is one of the largest gold-focused metals streaming companies, and received roughly 160,000 gold-equivalent ounces in fiscal 2012 from its 36 operating partner mines. Royal Gold, Inc USA) (NASDAQ:RGLD) has perhaps even more growth upside than Silver Wheaton, with 21 financed development projects, and an impressive $673 million in cash sitting on its balance sheet at the end of March that can be used to acquire additional gold streams.
The third royalty company I will discuss is Sandstorm Gold, which is the smallest of the three. Sandstorm Gold Ltd. (NYSEMKT:SAND) projects to receive just under 40,000 gold-equivalent ounces in 2013 from its portfolio of 10 separate streams. However, Sandstorm Gold Ltd. (NYSEMKT:SAND) has a steep growth trajectory ahead of it, as management believes its total stream will increase to well over 70,000 ounces by 2017 thanks to several financed projects that will start production in the near future. Additionally, while Sandstorm Gold Ltd. (NYSEMKT:SAND) is a small, young company, it has an impressive management team that should help calm investor anxieties. For example, Sandstorm Gold Ltd. (NYSEMKT:SAND)’s CEO, Nolan Watson, was the former CEO of royalty stream giant Silver Wheaton. Finally, the firm is in good financial health, with $97 million in cash at the end of March versus zero debt.
Concluding thoughts
All three precious metals royalty companies mentioned in this article have diversified mining portfolios, solid management teams, and good financial health. Furthermore, all three offer investors ample production growth, with Royal Gold, Inc USA) (NASDAQ:RGLD) and Sandstorm with a slight edge over the much larger Silver Wheaton. Although, Silver Wheaton offers greater stability as the largest producer among the three as well as with the longest track record.
Looking at trailing price to earnings multiples, Silver Wheaton was trading at 12.6 times 2012 earnings as of market close July 15, in comparison to 26.4 times trailing earnings for Royal Gold and 25.2 times trailing earnings for Sandstorm. Given that Silver Wheaton still has good growth potential, but trades at a much more reasonable valuation than Royal Gold and Sandstorm, it may be the precious metals royalty company that deserves the closest look from investors.
The article Get Exposure to Precious Metals Prices While Minimizing the Risk originally appeared on Fool.com and is written by John Park.
John Park has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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