Welcome to my review of Royal Gold 2022!
The company claims to be the GOLD STANDARD when it comes to precious metals investment!
If so, should we believe them? Can they really keep their word?
Royal Gold provides investors exposure to precious metals without many of the risks of investing in traditional precious metal producers.
So, how's that?
Let's now get to know Royal Gold!
What is Royal Gold?
The company began in 1981. They started as Royal Resources Corporation, an oil and gas exploration, and production company. After several good years, oil prices collapsed in 1986, and this led the company to shift its focus from oil and gas to gold.
At the time, Mr. Dempsey was a director of Royal Resources and co-founder of Denver Mining Finance Corporation (DMFC), a merchant bank to mining companies. Later in 1986, Royal Resources acquired DMFC. The newly formed company was called Royal Gold.
Today, Royal Gold is a precious metal streaming and royalty company, owning interests in several of the world’s most attractive mines.
Basically, they acquire and manage precious metals streams, royalties, and similar interests in mining projects operated by third parties.
Also, their business model is designed to provide shareholders with long-term exposure to resource upside and metal price optionality for the life of a mining project.
Business Model of Royal Gold
The company's principal activity is the acquisition and management of precious metal streams and royalty interests.
More so, by partnering with capable operators, they focus on building and managing a diversified, cash-flowing portfolio of precious metal assets, while also accumulating a pipeline of earlier-stage assets that are not yet cash-flowing but have the potential to do so in the future.
Streams and Royalties
- Streams – First, a metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement.
- Royalties – On the other hand, a royalty is a non-operating interest in a mining project that provides the right to a percentage of revenue or metal produced from the project after deducting specified costs if any.
Streams and royalties can also be acquired outright from either a resource company or a private party. In the case of new streams or royalties that are sold to raise financing, the capital provided by Royal Gold is typically directed by their partner companies towards three broad uses:
- First, investing directly in mining assets (for example, for mine development and construction, mine expansion, or funding exploration work)
- Second, providing liquidity to strengthen balance sheets
- Lastly, funding merger and acquisition activity
Royal Gold is also an attractive financing option for mine operators because they understand their underlying business (both from a technical and financial perspective) and can provide a form of non-dilutive capital with no associated debt obligations.
Key Benefits of Royal Gold's Business Model
So, what are the benefits of their business model?
- Upside Optionality – Their transactions are structured to give exposure to potential higher metal prices, future production expansion, and resource conversion.
- Limited Downside – Their investments are also less exposed to operating and capital cost risks.
- Efficiency – Furthermore, their business model is scalable and allows us to operate effectively with only a fraction of the employees of a producing mining company.
- Versatility – And, the royalty and streaming business can perform throughout the commodity cycle and allows them to invest counter-cyclically in attractive acquisition opportunities during downturns while enjoying leverage to higher commodity prices during upturns.
Royal Gold's Portfolio
In this Royal Gold's 2022 Review, Royal Gold owns a large portfolio of producing, development, evaluation, and exploration stage streams and royalties on properties.
With this high-quality portfolio that spans the development cycle for mining projects, Royal Gold also maintains upside potential through exploration success by the operators and generally benefits when new reserves are discovered and produced.
More so, they categorize their portfolio according to periodic reviews of our estimates of the potential revenue contribution and stage of development for each individual property, as follows:
- Principal Properties are generally in production and are the most significant contributors of revenue to our portfolio.
- Producing Properties are generally in production and contribute revenue to our portfolio.
- Development Properties generally do not produce revenue and activity is underway by the operator to develop the properties towards production status.
- Evaluation and Exploration stage properties do not produce revenue and activity may or may not be underway by the operator to advance the property towards development status.
Reviews and Ratings of Royal Gold
What I Like About Royal Gold
They Have a Unique Business Model
With the number of reviews that I have done, Royal Gold's business model is quite unique. Basically, their business model provides optionality to gold price and production and reserve growth.
More so, their business model has a high operating margin and revenue generation per employee.
The company has global diversification with revenue from 41 producing properties, as of June 30, 2021.
More so, their FY2021 revenue is 74% from gold, derived mostly from primary precious metals assets.
Furthermore, the company is well-capitalized with ~$1.2B of liquidity (at June 30, 2021) and strong operating cash flow. They also have a $1B credit facility that provides low cost and flexible access to liquidity.
What I Don't Like About Royal Gold
Not for Everyone
After reviewing their website and business model, they really do have a promising business where you can invest from. However, it is very complicated, and if you are looking for somewhere to invest your retirement funds, I think this is not the place.
It also did not mention how much is the minimum amount to invest.
So, I think it's not for everyone, it is for the rich folks.
Did Not Mention ROIs
I think for anyone who wants to invest, their initial question is how long would be the return of investment.
However, it did not really mention anything about ROIs.
It is full of charts and graphs on their performance, but no realistic computations were provided.
The company also has limited reviews and ratings. They are not accredited by trusted review websites and others.
Is Royal Gold a SCAM?
With their complicated but very promising business model, THEY ARE NOT A SCAM.
More so, the company has been in the industry for a long time.
So, that's one way to guarantee their legitimacy.
However, it is still a business and you will be investing in their business and not in the actual precious metal.
So, that's something to consider.
When it comes to investing, what you need to do is to do A LOT OF RESEARCH!
You should always remember that investments bear risks, and so, we should keep in mind that we may gain or lose as we move forward.
More so, investing in precious metals is different from investing in a business that invests in precious metals.
So, if you want to directly invest in precious metals, I would love to recommend GOLDCO.
Goldco is a leader in the precious metals industry, with over a decade of experience helping customers protect their retirement savings. If you have an IRA, 401(k), 403(b), TSP, savings or similar tax-advantaged retirement account, a Goldco Specialist can help you protect those assets with a Precious Metals IRA.
They are rated A+ by the Better Business Bureau and Triple A by Business Consumer Alliance. Their quality customer service, dependability, and ethical business practices have resulted in thousands of satisfied customers and positive reviews.
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