Royal Gold is a precious metals streams and royalties business. Streams are structures where the company purchases rights to buy a portion of a mine’s production via an upfront deposit. Royal Gold has a diverse portfolio of exploration, production, development, and evaluation royalties and streams in geographic areas like Canada, Chile, Mexico, and the US. The company’s prospects are closely linked to the price of gold. The price has been on an uptick during the last week of March 2021. While metal stocks have been on a bull run, gold prices have softened lately, following an uptick from March 2021 to June 2021. Stabilizing gold prices could set up stocks like Royal Gold for future long-term growth. While most investors buy metal stocks that deal with traditional metals like steel, copper, and aluminium, looking at precious metals could also be rewarding.
What Exactly Is Royal Gold’s Business?
Royal Gold earns revenue from gold mines in two ways, through stream agreements and royalty agreements. In the case of a streaming agreement, Royal Gold pays an upfront deposit to the mine in exchange for a predetermined proportion of the mine’s output at a predetermined price. This price may stay constant throughout the life of the stream agreement. A royalty agreement is where Royal Gold holds a non-operating interest in a mine, and it entitles Royal Gold to receive a percentage of the revenue or metals produced from a mine after accounting for specific cost items. The majority of Royal Gold’s revenue (about 72%) is derived via the stream agreement structure. The company had seven stream agreements as of 2020. Precious metal stocks could be among the best metals stocks to buy for the longer term.
Royal Gold trades on the Nasdaq exchange under the ticker symbol RGLD. Its stock last closed at $113 on 28th June 2021. The dividend yield at the time was 1.06%, while the P/E ratio was slightly over 27. The 52-week high was $147.64.