DNG "ACTS" AS A "POOR MAN`S"(MILLING FOR OTHERS)=
"ROYALTY" COMPANY NOW!
THIS EXCERPT FROM JAMES SINCLAIR.
QUESTION IS:
DOES THIS NOT PARALLEL THE
“OPERATION OF DNG” (in its infancy)
JUST A WEE BIT?
“DNG” IS GAINING REVS FROM OTHERS FOR MILLING THEIR GOLD FOR THEM
AND STILL MINES & MILLS THEIR OWN ORE AS WELL ?
(In time allowing “DNG”To act as a “Royalty Partner” to the locals as well.)
Rgd`s, delazus
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Sinclair writes:
Remember when Barrons did the hatchet job on Royal Gold?
Now here is a Royal Gold article that you will find interesting. In my opinion, technically RGLD has at least an $80 number on it.
Gold Royalty Companies Outshine Gold Miners, Bullion
Monday, February 16, 2009 9:30:00 PM (GMT-08:00)
By Matthew Walls
LONDON (Dow Jones)–Companies that buy royalties from miners of precious metals are proving attractive to investors who are bullish on gold but find stock in mining companies too risky and bullion too staid.
Two of the biggest royalty companies, Canada-listed Franco-Nevada Corporation (FNV.T) and Utah-based Royal Gold Inc. (RGL.T), have returned 31% and 58% respectively over the last year, easily outdistancing bullion and greatly outperforming mining equities, according to Morningstar.
Record-high prices for gold, silver and platinum helped as investors turn to traditional safe havens to ride out a very uncertain outlook for the global economy. But so has the business model of the companies: Buying royalties gives them full exposure to precious metal prices without exposure to miners’ operating risks and costs, which until recently have hurt miners.
Some analysts believe the miners - which were sold off heavily in last year’s turmoil - should outperform royalty companies in 2009. The collapse in oil prices, stagnant wage costs and price declines in other inputs should lower miners’ operating costs and fatten their margins. A U.S. index for gold miners, the New York Stock Exchange’s Arca Gold Miners Index, appears to back this up. The index is up 87.93% in the past three months.
But royalty companies, despite a more conservative business model, have rallied nearly as much, with Canada-based Silver Wheaton Corp. (SLW) up 133.12% in the same period.
One attraction right now may be their extremely high margins - around 80% - versus 30% to 50% for miners. Royal Gold, a company with a market capitalization of $1.6 billion, has just 14 employees. In today’s tight credit environment, these high cash flows allow them to buy new royalty purchases with little debt.
"There’s a big premium for any liquidity in the market now," said Franco-Nevada Chief Executive David Harquail. "There’s many more companies looking to create new royalties."