The Value of Precious Metals Royalty Agreements

The mining sector is known for its high potential returns, but it hides a unique investment with long-term revenues and high upside potential: precious metals royalties.

Royalties provide holders with a percentage of a mine’s revenue for the life of the project, while also offering exposure to the mine’s increases in production and resource expansion.

This graphic by Vox Royalty breaks down the catalysts that unlock compounding value for royalty holders, and how precious metals royalties outperform other income investments.

The Anatomy of a Royalty Agreement

Royalties are interest-bearing agreements that were first created between prospectors and mining companies, so prospectors could receive long-term revenue from the development of their discoveries. Over time, royalty agreements became a funding mechanism allowing mining operators to take up-front funding to develop a mine in exchange for 1-3% of the mine’s lifetime revenue.

Once created, royalties can be bought and sold as income assets, enabling royalty companies to purchase and build a diverse portfolio of income-generating royalties.

It’s worth noting that royalties are calculated from the mine’s top line revenue, meaning royalty holders are not impacted by the mine’s operational or administrative expenses.

Along with the interest on a mine’s revenues, royalties also provide holders with upside exposure to further investment and expansion of the mine, resource expansion of the project, along with mine restarts and life extensions.

The Value-Driving Catalysts of Great Royalties

Since royalties give holders all (Read more...)