Palisade Research May 30, 2017 Category: Research
Since 2009, royalty and streaming companies have gained 230 percent while gold and the TSX Venture have returned 50 percent and 1 percent, respectively.Royalty and streaming companies are able to sign advantageous deals during poor market conditions, at times when equity investments become less accessible. Desperate times call for desperate measures. In the troughs of a bear market, issuers seeking development and production capital often times must sell away future production at a discount.Therefore, we wanted to compare equity investments vs. royalty and streaming deals since 2009 to see if a shift is underway.
2016 saw a significant drop in streaming and royalty activity, and an increase in equity deals. It seems the major streamers will now slow business development, and allow the recovery in metal prices to increase the value of their newly bolstered portfolios. Yet another sign that times are changing for gold stock investors!
We want to note that while the portfolio growth phase of the majors is now done, the junior streamers (sub-$200 M market cap) will now flourish. During this transition phase, the juniors acquire the rest of the royalties that have either been looked over or too small for the majors.This building and incubation stage can be very lucrative for investors, and if done correctly, almost always end in an acquisition by a major. We have determined a junior on the right path, and have written outlined their growth trajectory and its already-rich portfolio here.