Brightest & Best: Why Wheaton Precious Metals Makes Sense Right Now

Photo: Brightest & Best: Why Wheaton Precious Metals Makes Sense Right Now

Royalty and Streaming (R&S) companies aren't always the first sector to come up when gold and silver investments are discussed, but they offer investors a unique way to gain exposure to the sometimes volatile precious metals market.

The big discoveries always grab the market's attention, and why shouldn't they?

A huge new deposit of gold has dreams of wealth written all over it, but most people don't understand how difficult it is to take that new find and make a buck on it.

That is where R&S companies enter the picture. They employ some of the brightest and best, because they have to be able to decide if a mine can make good on their investments, and provide them with a solid stream of royalties.

Wheaton Precious Metals (WPM), formerly known as Silver Wheaton, is one of the best R&S plays in the market. While they were founded as a silver royalty company, today, they have a great portfolio of both gold and silver assets.

This makes them an attractive investment for anyone who wants to gain some extra exposure to precious metals. Like any R&S company, they have some attributes that should be attractive to investors who want yield, as well as the potential for capital appreciation.

ONE Great Income Stream

R&S companies are all about income. This sets them apart from many of the other kind of equity investments that are available to investors in the precious metals sector.

Unlike gold mining companies that have to operate mines to realize an income, in most cases R&S companies will realize a return on their investment, even if the miner they invested in has operational issues.

The ongoing problems that Barrick Gold is having at Pascua Lama are a perfect example of how R&S companies can thrive, even when the miners they support hit a rough patch. WPM invested nearly $700 million USD in the Pascua Lama project, which Barrick stopped work on in 2013.

WPM has still received nearly $400 million USD in payments from the Barrick's Lagunas Norte, Purina and Veladero mines. These income streams are set to continue, and when done, they will have provided WPM with a net profit of around $250 million USD on their investment in a stalled mining project.

TWO Solid Performance

As Frank Holmes points out in this panel discussion from the most recent VRIC, R&S companies tend to fare better when the broad markets take a turn for the worse. This gives investors a solid business model to fall back on, and peace of mind in an equity market that is looking shakier than it did last year.

Over the last few years R&S companies have also done very well as both precious metals prices, and the broad markets have rallied.So unlike the junior mining sector that can be spotty in term of leverage to positive metals prices, R&S companies seem to respond well.

Three Positive Chart Action

Despite spending some time this year under its 200 day moving average (MA), over the last month, WPM has shot past it. This could prevent the chart from registering a 'death cross' where the 50 day MA crosses the 200 day MA to the downside.

From a broader perspective, the chart for WPM has been basically steady for a few years. If precious metals stage a decisive break out higher, these best in breed R&S companies are well placed to take advantage of the strength in the sector.

Making The Most of the Move

The upcoming International Mining Investment Conference (IMIC) is a great place to be if you want to learn more about some of the most interesting resource investment opportunities this year.

This year's IMIC will feature presentations from investing legends like Frank Holmes, and will be happening on May 15-16 at the Vancouver Convention Center East, in downtown Vancouver, B.C.

Registration before the event will allow you free access to all that the IMIC has to offer, and if you want to get up-to-date information about where the smart money is going, this is the place to be!