How $2 million became $20 million — a year

A lesson in perseverance 💪                                                                                                                                                                                                                                                                                                                                                                                                                 February 04, 2024 How $2 million became $20 million — a year A lesson in perseverance 💪 [Did you miss this]( 😥 I [Unlimited still open]( 🥳 I 👉[Join JW@9AM]( 📩Monday’s Open House📩 9:00AM EST: Dive into trading the SPY in the [Market Navigator]( session 11AM: The fun continues with Jeff in [Bullseye Unlimited](! 👉[ROOM LINK HERE]( Hey Folks, Jeff Bishop here. If you fail forty-three times in a row, it might be time to give up, right??? Especially if your company is rapidly running out of money. That’s exactly where business partners Seymour Schulich and Pierre Lassonde found themselves. [Image Source:]( Seymour Schulich and Pierre Lassonde They were sick and tired of paying for gold exploration and coming up empty-handed. But they desperately needed a steady stream of cash for their new company. On a whim, they decided to take a page out of the oil & gas playbook, bringing its ultra-successful royalty model to the gold industry. Their new mission was to find an explorer who didn’t have the funds to take a mine all the way to production. Then, Schulich and Lassonde would trade up-front capital for a percentage of the potential future revenue or profits from mining. The idea is that other people would have paid to establish mineral resources; they’d only have to provide funding to try to get it out of the ground. But Schulich and Lassonde were essentially the first to try this new concept — so finding someone to go along with it was not easy. Eventually, a geologist found a classified ad in a Reno newspaper for a land package being sold by a Texas company. Lassonde and Schulich took more than half of their remaining funds — $2 million — and bought the whole 3,416-acre package. Except, they didn’t actually purchase the land — what they bought was the rights to 4% of any gold mined on the land. As it turns out, their investment was successful, and the property was home to a small gold mine called Goldstrike. And with that purchase, the men had struck gold — and identified what I and many others think is one of the best business models in the gold world. Their company, Franco-Nevada (FNV), still doesn’t do exploration. They don’t run mines. They do zero mine operations. They just try to put their money where the gold is. And, in their case, it has paid off tremendously for Franco-Nevada, Today, Franco-Nevada makes more revenue per employee than Apple, Facebook or Google. While Franco-Nevada is maybe the best success story in the sector and its results are obviously not representative of every company in the royalty sector, I think it is a good example to show just how great a model the royalty business is. Somehow, I think gold royalties are less risky than gold mining itself — and far more profitable. Let me explain why. As Good As Gold – No, Better The largest gold miners in the world, like Newmont or Barrick Gold, will have less than 20 operating sites. If the mining environment in a single country changes for the worse, or if a single site gets shut down, it can be a major blow to profitability. But typically, since gold royalties pay 1-3% of the production value of a mine to the royalty holder, royalty companies can hold dozens — even hundreds — of royalties. Franco-Nevada, for example, has more than 100 revenue streams — That high level of diversification means very low risk across the entire royalty portfolio. But here’s the best part in my opinion… The Best Kind of Surprise Usually, the upfront payment is for the whole life of the mine. If an operator invests more capital to increase production, a percentage of the additional profit goes straight to the royalty holder provided that the royalty covers the area of production. Even better, deposits tend to grow organically over their lifespan due to exploration. Any expansion in the mine reserve on the same royalty ground, royalty companies get as upside. Recall Franco-Nevada’s Goldstrike investment. It was originally a 3-million-ounce deposit. Three years after the investment, though, a new discovery took the reserves from 600,000 ounces to more than 20 million. Since then, Goldstrike has produced more than 50 million ounces — and the royalty is still kicking off $20 million a year. Again, Franco-Nevada and Goldstrike are exceptional success stories and not representative of every royalty or royalty company, many of which don't generate revenues. Remember: The mine is responsible for capital expenses, operating expenses and exploration expenses. That makes royalty companies relatively efficient, with a small handful of employees handling operations. The normal operations consist of finding, acquiring, and managing these passive royalty interests. It’s the best kind of business — if you can get it and identify paying royalties or royalties with good operators that are ramping up into production. Because of course, there’s a catch. Over the decades, Franco-Nevada has grown into a behemoth. Along with two other massive companies, it represents 80 percent of the value of all gold royalties. In my opinion, there’s little upside left in their overweight, $20B+ stocks. They’re trading at huge multiples that imply they have lots of growth left — but in my opinion, they don’t. 👉 In the coming days, I am going to share with you a very specific stock that I think has enormous potential in the royalty space. Sometimes, Wall Street gets caught up in “hype” sectors like AI and semiconductors and misses out on some of the most obvious opportunities that are right in front of them. I am going to show you one such opportunity very soon, so keep your eyes peeled 👀. To Your Success, Jeff Bishop 👊 By the way, if you are NOT getting my mobile text alerts – text “RAGE” to 1-(888) 404-5747 to get all of my latest HOT STOCK ideas delivered right to your phone (make sure you put the “1” at the front!). Don’t miss out! Questions or concerns about our products? 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