Royalties Continue to Outperform Miners

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Royalties Continue to Outperform Miners <>

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Separately, the first gold pour has taken place at its next major mine, Cerro Moro, in Argentina. The ramp up of this mine will largely drive a 17% increase in production by 2020. Some sales of minor assets have helped improve the balance sheet, with net debt now $1.55 billion, down from over $1.7 billion at year-end. Assuming the ramp up goes up, cash flow from Cerro Moro should help cut debt further in coming years.

Certainly, there are signs of improvement at Yamana and the valuation is competitive, particularly the price to book value at just 0.7x relative to 1.26 x for the XAU index. However, we have been burned before, so, particularly given the move from $2.60 in the last three months, we are holding.

Slow progress towards its lofty goals

Goldcorp Inc. (G:TSX; GG:NYSE, US$14.21) had a slow start to the year. Despite somewhat improved production, driven by Peñasquito, operating costs also rose. Two new mines still in ramp up, Cerro Negro and Éléonore, actually saw lower production. Ramp up is taking longer than expected, though these long-life mines should generate strong revenue for the company once fully operational. We are holding but not buying at the current price.

Adrian Day , London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is "Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks."

Disclosure:

1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Franco-Nevada, Royal Gold. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Franco-Nevada, Royal Gold, Yamana Gold and Goldcorp. I determined which companies would be included in this article based on my research and understanding of the sector.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Leagold Mining. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

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5) From time to time, Streetwise Reports and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports (including members of their household) own securities of Franco-Nevada and Goldcorp, companies mentioned in this article.

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