A wide range of investors have been choosing streaming and royalty companies in recent years. They can finance many of the most promising mining projects in the world, providing investors with an ideal storm of economic upside and minimized risk.

This type of alternative financing is poised for major expansion in the coming decade, thanks to its unparalleled exploration, diversification and acquisition potential.

What is royalty streaming?

Katusa Research chairman Marin Katusa told Kitco News that he would begin at the royalty side. This is because these teams are taking on the risk.

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Electric Royalties Ltd. (TSXV,ELEC) is a royalty firm that aims to build a premium portfolio that capitalizes on the demand for a wide variety of commodities. Send me an Investor Kit

While streams and royalty agreements have similar structures, key differences distinguish them.

• Royalty agreements - Also called net smelter profits, these agreements give royalty holders a percentage of the specific mine's production revenue. This is usually around one to three per cent. Net profits interests are another common form of royalty agreement. This is where the royalty holder gets a percentage of the profit, rather than the revenue.
• Streams These agreements allow you to buy a percentage of the metal produced directly from the mine. This can typically range from five to twenty percent. Streams will often have a predetermined metal purchasing price. This price can be either a fixed dollar amount, or a percentage of the spot prices.

Important distinction between streaming and royalty companies is that they are not mine operators. They seek to unlock untapped value by financing and working with miners in order to create agreements that give their shareholders steady exposure to different metal and mineral markets. These agreements allow recipients mining companies to develop and expand their projects, thereby generating greater returns for their vested interests as well as the companies that receive royalties and stream arrangements on the projects.

Junior mining companies can benefit from the financial support and funding of royalty and streaming stream players. This will help to boost exploration and development efforts, and balance out portfolios with high-prospective projects.

Royalty streaming: Risks and rewards

The pros and cons of royalty streaming can help you see the potential downsides and why they are one of the most sought-after financial strategies in 2021.

The structure of a business is one of the biggest problems with royalty streaming. The streaming industry has been characterized by intense competition. Royalties and streaming companies need large amounts of capital to invest into precious metals mines. This can be done through debt or stocks. Either company accumulated debt or issued stocks which could lead to stock dilution. There are not many royalty groups that focus on clean energy metals, and the cost of deals is much lower.

The actual spot price and the production of mines are another risk. Spot prices can fall which could impact revenue generation for royalty companies as well as metal selling prices for streaming. In the event of mine delays, both types may be affected by delayed commodity flow. There are no operating costs for holding a royalty, so shutting downs are not an option. The G&A required to run royalty companies is also very low. You can find out more.

By avoiding many operational costs, streaming and royalty companies can reduce the risks associated with mining investments. While operating costs for mining companies may rise, stream and royalty holders can still enjoy the potential benefits of high margins at peak pricing periods. They have acquired their metals at lower fixed prices as per their agreements.

A key advantage for streaming and royalty companies is their portfolio diversification and ability to be selective in the terms of their agreements. Companies can reduce concentrated jurisdictional and asset risk by having the right management team and strategic acquisition team. They can also make agreements with mines that are already in near-term production stage. This protects streamers against cost overruns throughout the mine's life.

Electric Royalties (TSXV,ELEC) is a royalty firm that aims to build a premium portfolio and take advantage of the growing demand for a variety of commodities and critical metals such as lithium, vanadium and manganese, tin and graphite, cobalt and nickel. The company's emphasis on essential battery and base metal elements capitalizes on the global demand for electrification in virtually every sector, including transportation, large-scale energy storage and renewable energy generation.

A robust commodity portfolio is a key asset of the company. It helps diversify investment, mitigate risk, and maximize exploration upside. The company currently holds 12 royalties, with extraordinary exploration potential, and four additional royalties that are currently being acquired.

Electrification: A growing market for royalty streaming businesses

From US$2.1 billion in 2010, to over US$15 billion in 2019, the mining royalty and streaming industry have steadily grown. As the world moves to more sustainable energy and power, gold and silver still dominate the streaming market. However, new metals such as copper and cobalt are showing exceptional growth potential. Market analysts expect both commodities to have bright futures despite production disruptions in 2020.

Year to date:

• Prices for lithium are up 313 per cent
• Copper prices have risen 25 percent
• Zinc prices have risen 22 percent
• Nickel prices have risen 18%
• Prices for tin have risen by 82 percent
• Prices for cobalt are up by 75 percent

Potential investors have access to these raw materials, as well as many royalty-streaming companies, in multiple sectors. This includes new economy drivers such electric vehicles, batteries and energy storage. .

Nova Royalty (TSXV,NOVR) is an international royalty company that focuses on the discovery of copper and nickel as the fundamental building blocks for clean energy decarbonization. Nova has a strong portfolio of base metal royalty assets that are located in mining-friendly mining jurisdictions. This could make it a major royalty company for the transition to sustainable energy.

The company is strategically positioning itself to be a leader in the transition from an electric-powered world, given the recent battery revolution and the growing demand for copper or nickel. It is a royalty company and has lower risk in a portfolio.

Investment upside potential from royalty financing

Streaming and royalty companies are attractive to investors because they offer lower risk, can provide commodity-price leverage, and expose to in-demand commodities and price movements. Streaming companies also have the advantage of being able to contract metal prices, delivery and tailor metals exposure better than royalty companies.

Innovative companies are capitalizing on the momentum of the transition to decarbonization and green power, and investing in these companies beyond precious metal markets like silver and gold. Market researchers expect more money investment opportunities in the sector for streaming and royalty companies that are exposed to these commodities due to unprecedented demand.

Takeaway

The streaming and royalty companies offer unparalleled investment opportunities. They provide low-risk, stable and diversified exposure to the mineral markets and support for high-prospective mining projects around the world. It is no surprise that royalty funding has been a popular strategy for both new and experienced investors. There are no operating costs or capital cost overruns as a result of predetermined metal pricing agreements and revenue generation agreements.

Electric Royalties (TSXV,ELEC) sponsored this 11 Ways to Make MoneySpired article. Electric Royalties approved this 11 Ways to Make MoneySpired article. It contains information that was sourced from 11 Ways to Make Money. This is to assist investors in learning more about the company. Electric Royalties is a client 11 Ways To Make Money. The campaign fees paid by the company cover 11 Ways To Make Money for creating and updating this 11 Ways To Make MoneySpired Article.

11 Ways To Make Money is not an investment advisor and the profile information should not be construed as a recommendation to purchase or sell any security. 11 Ways To Make Money is not a company profiler and does not endorse or recommend any products, services, or securities.

This information is provided for informational purposes only. It should not be taken as an offer to sell or solicitation for purchase or sale of securities. All information about the company should be researched independently by readers. Before making any investment decisions, readers should consult with Electric Royalties directly and seek the advice of a qualified investment advisor.

By: 11 Ways to Make Money
Title: Royalty Financing and Investing In Rapidly Emerging Commodities Outside of Gold and Silver
Sourced From: investingnews.com/innspired/royalty-financing-and-emerging-commodities/
Published Date: Wed, 03 Nov 2021 20:00:48 +0000

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