The Royalty King's Research: In This New Cycle Royalties Will Reign Supreme
Compounding Through Every Cycle.
As longer term readers will know, around 2 years ago I began to change my investment style and went deep down the rabbit hole of understanding royalty and streaming type business models.
Royalty and streamers are perpetual compounders of value per share even in disinflationary times. During the period 2011 to the end of 2016 the gold price actually declined nominally by c30% yet gold royalty Co. FNV returned 73% over the same period exclusive of dividends.
In a less exciting, but equally instructive example, WPM which prior to 2015 was primarily exposed to silver, was negative in its equity return over the period but still outperformed its main commodity over the same period.
After pivoting towards a more even focus across precious metals, WPM soon caught up over the next 5 years, a period in which again showed anaemic price growth in both gold and silver.
Running the math on the performances above shows that over a period where the prices in gold and silver rise at typical rates, the 2 main royalty and streamers once again outperform handsomely.
Blending the bear and the base case together I’ve come up with the below returns, excluding dividends of the two stocks in question.
Now it’s time to address the bull case as this year all we gold bugs have been delirious with joy every time we glance at our accounts. 5 years haven’t quite passed since 2021 given that I’m writing this in October of 2025, however the 2021- Oct 2025 scorecard stands thusly:
Silver has caught up thanks to its recent rally and yet WPM outperforms both metals even before dividends.
You might be wondering what happened to FNV?
Well FNV decided to take on an agreement in Panamá and unfortunately the producing mine to which that stream belongs was shut down secondary to political protests in that country.
FNV has also diversified somewhat away from its traditional gold royalty business however the main reason for its divergent performance is the shut down in Cobré Panamá which shut down November 28, 2023.
Combining multiple 5 year periods which nicely illustrate bear, base and bull cases for Gold and Silver as well as their two largest royalty operators the results look like this:
Interestingly, the S&P 500 over the same period returned a CAGR of 10.7% exclusive of dividends. Upon reflection, a more interesting question presents itself - if this is the performance of the royalties over what might be considered ‘your grandfather’s’ typical precious metals cycle, what might their performance look like in a new-world-order 1970’s meets the 1940’s cycle?
Extrapolating & Speculating.
Let’s engage in that fool’s errand of trying to predict the future. Let us further embarrass ourselves by doing so extrapolating the information above.
Some assumptions:
Gold will be the anchor, assumed to rise at 8% compounded annually over the next 10 years. This is approximately 2 percentage points higher than the US m2 supply growth since 1971, however given the US Debt/GDP is now ~130% vs ~30% in 1971 the assumption is less aggressive than perhaps it initially seems.
The CAGR performance ratio relative to gold is how we shall extrapolate the returns of the assets examined. I.e:
Applying the expected 8% CAGR to Gold the extrapolated performance stands:
In a world of decaying fiat currencies the gold price is likely to do even better than 8% compounded and that of course would be expected to result in further outperformance of the major gold Royalty and Streamers.
It will be recalled that the calculations also do not consider dividends which currently stand close to a 1% yield for FNV and WPM.
Readers may now be considering that both these behemoths in the space would be starting such an epic cycle, should it indeed unfold, at much large market capitalisations. An aggressive reader, convinced of my ‘Royalty Maxxing’ philosophy might wonder whether even higher performance might be found in smaller cap companies with similar business models.
This will be explored in a subsequent piece.
For now, take care.
Benjamin
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Interesting article thank you for your work. I think it would be interesting if you started to include RGLD in these types of discussions.