Stream and Royalty Finance
Stream and royalty finance is a cost-of-capital efficient alternative to traditional debt project finance and equity. Returns are based on life of mine cash flows, with no required reserve tail or final maturity date. With returns based on production, Royal Gold shares in the operating risk of the project, thereby eliminating the possibility of financial distress often caused by principal payments, maturity dates and hedging delivery requirements.
While streams and royalties share in a percentage of price and production upside, each stream or royalty is limited to a specific project. This differentiates it from the issuance of equity, which dilutes the upside of a company’s entire portfolio of properties.
Royal Gold can structure transactions on a traditional royalty basis or a combination of upfront and per ounce payments under the streaming model. We seek metal streaming and royalty opportunities on gold and silver deposits as well as polymetallic/base metal ore bodies containing precious metal by-products.
Benefits of Royalty and Stream Finance
The benefits of stream and royalty finance include: (1) returns calculated over the life of the mine, thereby enhancing internal rates of return to the operator, (2) payments a function of price and production, providing needed financial flexibility in the event of production disruptions or declining commodity prices, (3) no required hedging, front end fees, financial covenants or account structures, (4) straightforward and easy to comprehend legal documentation, and (5) a short execution timetable.
Purposes for Royalty and Stream Finance
Stream and royalty finance can be used to assist in the funding of exploration and development, mine and mill expansions, mergers and acquisitions, the restructuring of hedge positions or balance sheets, and reclamation obligations.
Comprehensive Project Finance
Royal Gold’s product can participate as one layer in an overall financing that includes debt and equity. With payments calculated on a life of mine basis, a stream or royalty can actually reduce debt requirements and associated required hedging, while also limiting the dilution to existing shareholders of a larger equity issue.
Unique strengths of Royal Gold Management Team
Ethical standards and professionalism of a management team are critical when considering a long-term relationship. Royal Gold is highly regarded in the industry for these qualities.
No two transactions are identical. We strive to tailor business opportunities to the unique characteristics of counterparties through creative structures.
Our team has considerable operating expertise in a variety of commodity markets and in many international locations. Almost all mining operations experience unexpected issues during exploration, development and operations and it is important for mining operators to be able to talk through these issues with an experienced and qualified partner, like Royal Gold.