Post by
Roddiggiti on Feb 04, 2021 9:51am
The Beauty About Gold Royalties
Gold might have a little correction here before Biden gets his major stimulus plan pushed out, but it doesn't worry me about PGOL. When you got a solid gold royalty paying every month, the flucuations aren't really that big of a deal. Lets use Northern Vertex's most recent numbers to show this, which was 12,000 ounces equivalent of gold mined:
12,000 ounces X $1800 gold = $21,600,000 X 0.03%(NSR) = $648,000
12,000 ounces X $1700 gold = $20,400,000 X 0.03%(NSR) = $612,000
12,000 ounces X $1600 gold = $19,200,000 X 0.03%(NSR) = $576,000
The point I am trying to make here is that yes, royalty payments will drop, but a $200 difference is still bringing in quite a bit of positive cash flow. In comparison to the G&A costs which are around $250-400k per quarter MAX. This is always mentioned in PGOL's MD&A, so we know what their yearly G&A budget is.
So am I worried about the gold price drop? Not really. That $200 difference, with output being consistent, changed the cash flow by $72,000 for the quarter.
On top of that, PGOL doesn't have staff, reclamation costs, and other expenses that might hurt the bottom line. It's a direct payment every quarter for the next decade. Some people expressed worry about the mine shutting down, which I think is very silly. NEE was producing gold/silver when prices were $1,200 / $14 back in 2018. They are still ramping up production and proving more ground, especially with the merger and financing nearly complete.