ROI: SST 52.08% vs. Franco Nevada 9.3%
Silverstone vs. Franco Nevada: Silverstone's recent gold and silver stream purchase is even more outstanding than first thought.
My thanks to "Dferg" for recently posting a comparison of the recent precious metal streams purchased by Silverstone and Franco Nevada. I have taken his information and processed it a little differently here. I figure that based on today's precious metal prices, the return on investment is 52.08% for Silverstone and 9.3% for Franco Nevada! Here are the numbers:
For Silverstone (based on the recent purchase of a gold and silver stream from Sherwood Copper):
30,000 ounces of gold annually at $575 ($875 market price minus $300 for each ounce) = $17,250,000
300,000 ounces of silver annually at $7.60 ($11.50 market price minus $3.90 for each ounce) = $2,280,000
Total for gold and silver = $19,530,000
ROI = $19,530,000 / $37,500,000 = .5208 (52.08%)
Meanwhile, for Franco Nevada:
11,000 ounces of gold annually at $875 market price = $9,625,000
ROI = $9,625,000 / $103,500,000 = .093 (9.3%)
The comparison here between Silverstone's and Franco Nevada's recent purchase is absolutely stunning.
Silverstone is getting a 52% return each year based on present metal prices while Franco Nevada is getting just 9.3%.
At higher metal prices the comparison becomes even more amazing. At approximately $1,250 gold and $35 silver, Silverstone's annual ROI will be 108.09%, while Franco Nevada's gold stream will achieve only a 13.29% ROI.
Finally, to get such an incredible, prospective ROI as compared to Franco Nevada, Silverstone paid $37.5 million while Franco Nevada paid $103,500,000. No matter how you look at it, Silverstone made a purchase on absolutely outstanding terms, while Franco Nevada's purchase appears to be barely acceptable based on ROI. I don't know what is more shocking - how good Silverstone's deal is or how mediocre Franco Nevada's deal is.
tooclassy
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Most of Dferg's posting is shown below:
"Saw this article today on Franco Nevada (FN) buying a gold NSM royalty of 7.29% from one of Newmont (NEM)'s Nevada gold mines, for just over $100M. This deal is expected to give FN at least 11,000 royalty ounces of gold per year.
https://seekingalpha.com/article/112259-franco-nevada-s-conservative-acquisition-from-newmont-mining?source=yahoo
It's interesting to compare this deal with SST's purchase of gold (and silver) from CS (formerly Sherwood)'s Minto mine, for $37.5M. On the one hand, SST gets almost three times the ounces of gold each year in their deal, for 64% less than what FN paid NEM. On the other, SST pays $300 for each of their ounces of gold; FN gets their 11,000 ounces per year free and clear.
At today's prices, SST clears $550 ($850-$300 = $550) for each of their 30,000 ounces received, while FN clears the full $850 for their 11,000 ounces. This brings a net annual return to SST of $16,500,000, compared to NEM's $9,350,000. (And this only counts the gold portion of SST's deal. SST also receives ~300,000 ounces of silver per year, as well as the right of first refusal for the precious metals in the Kutcho mine.)
On the face of it (maybe NEM plans to triple gold ounces from this mine; NEM's mine is much more viable than Minto; NEM's mine will run longer than Minto; etc.???), SST's deal is REALLY good in comparison.
With a higher gold price, SST's deal improves, relatively speaking. At $300, SST's cost per ounce is 35% of the current gold price of ~$850. If the price of gold rises to, say, $2,000, SST's cost per ounce declines to 15% of the price.
There is little doubt in my mind that SST is WAY undervalued at its current price. Unless I'm missing something, this comparison reinforces that view..."