NO SHOVELS, NO PROBLEMS: How Royalty and Streaming Companies Profit From Mines They Don't Own

28 July 2026

Royalty and streaming companies finance mines without operating them, and some of gold's biggest players house only 40 staff. This piece breaks down how royalties differ from streams, the numbers behind their margins, why miners sign these deals, copper's growing role, and where the model breaks down.

Many of the world's most influential gold firms do not produce a single ounce themselves. Franco-Nevada has around 40 employees and interests in 445 assets. Royal Gold staffed around 30 people against $719 million of revenue in 2024. Wheaton Precious Metals has around 44 staff and delivered around 700,000 gold-equivalent ounces in 2025. These companies do not operate mines themselves. Their business is not in physical capital, nor human capital, but financial capital. They finance other people's mining projects and take a cut from the haul. Welcome to the royalty and streaming model, one of the most distinct and misunderstood structures in the entire industry.

Many struggle to understand the nuances in these models, and even further misunderstand the difference between streaming and royalty models. I hope to provide value through a breakdown of how these models work, the numbers behind them, and where weaknesses exist.

Where it all began

The oil and gas industry was where these models originated from, where financiers would invest in drilling, shale, and production companies for a cut of the revenue. In 1983, Seymour Schulich and Pierre Lassonde founded Franco-Nevada in Toronto with the idea of applying royalty structures to gold.

They spent around $2 million on a net smelter return royalty (which equates to about $6 million as of writing. This was also about half of their treasury at the time). The project was called Goldstrike, a small heap-leach operation in Nevada. American Barrick acquired the property shortly after, and well…

After some deep drilling, they were able to find an orebody of around 50 million ounces. That single royalty went on to generate well over $1 billion in cash flow.

The streaming model arrived later. In 2004, Wheaton River Minerals needed capital and leveraged by-product silver from its San Dimas mine in Mexico into a separate company, Silver Wheaton. They understood that by-product silver and gold, produced at copper, lead and zinc mines was mispriced by markets. The streaming model succeeded in unlocking that value.

Royalties: pay the price, take a slice

A royalty gives its holder a continuous percentage of a mine's production or revenue. The operator carries every cost. The holder pays nothing further, ever.

The most common form is the Net Smelter Return (NSR), typically between 2% and 5%. The holder receives a percentage of what the operator gets from selling metal, after deducting transport, insurance, smelting and refining charges, but before any mining or capital costs.

For example, let's say mine X produces 100,000 ounces of gold in a year and sells at $3,000 an ounce. Gross revenue is $300 million. Subtract $30 million in smelting, refining and transport, and the net smelter return is $270 million. A 2% NSR pays the holder $5.4 million for that year.

Now push gold to $3,600. The same royalty pays roughly $6.5 million. The holder captures the entire price move without lifting a finger. Not bad right?

Other structures do exist. A Gross Overriding Royalty takes a percentage of total revenue with few or no deductions like the forementioned examples, so the percentages are usually smaller.

A Net Profits Interest takes a share of profit after the operator recovers costs, which is riskier because it pays nothing in a high-cost year. Sliding-scale royalties adjust with metal price or production volume.

Royalty deals are created in three ways: they are either retained by an original claim holder who sold or optioned the land, purchased from third parties in secondaries markets, or generated by financing exploration and keeping a share of the project.

Streams: buy low, sell high

A stream works differently, and this is where most of the confusion lives.

The streaming company pays a large sum upfront in exchange for the right to buy a fixed percentage of future production at a fixed, deeply discounted price. That last part is the crucial distinction. Unlike a royalty, a stream involves an ongoing payment every single time metal is delivered.

Wheaton's agreements have historically referenced fixed prices around $400 to $450 per ounce of gold and around $4.50 per ounce of silver, with small annual inflation escalators built in. By the third quarter of 2025, the average prices Wheaton actually paid had drifted up to $515 per ounce of gold and $6.35 per ounce of silver.

Let's run the numbers on silver. If spot sits at $30 and your contracted purchase price is around $5, you are making $25 an ounce. That's a margin of roughly 83%. Multiply that across millions of attributable ounces and you begin to see why Wheaton reported a cash operating margin of $3,941 per gold-equivalent ounce in the fourth quarter of 2025, up 76% year on year.

Streams are frequently placed on by-product metals, meaning the gold or silver produced incidentally at a copper or zinc mine. As Wheaton puts it, those by-product metals aren’t the mine's business focus, and the operator cannot always get maximum value from them. The miner gets capital and full value for something non-core. The streamer gets extremely cheap precious metal.

So, in the simplest possible terms: a royalty is a cut of revenue with no ongoing payment. A stream is the right to buy metal at a fixed low price, with a payment made on every single delivery.

Why would any miner agree to this?

On the surface, selling away a permanent slice of your own mine looks like a terrible trade. There are good reasons it happens anyway.

It's non-dilutive. No new shares get issued, so existing shareholders are not diluted. For a management team who sees their own holdings water down every equity raise, this is significant.

There are no covenants and no fixed repayment schedule. A bank loan demands interest and amortisation regardless of whether the mine is producing anything. A stream only costs you when metal is actually flowing.

It's also available when other options aren’t. Development-stage projects, single-asset juniors, and companies operating in difficult jurisdictions often can't access affordable debt or equity at all. A stream can fund a meaningful share of mine construction when the alternative is no mine at all.

And it monetises something subsidiary; selling by-product gold from a copper mine raises capital without impacting the main copper business.

The trade-off is permanent though. That stream can burden the mine for its entire life, and plenty of operators have looked back at deals signed during a period of tough financing and concluded they were extremely expensive capital indeed.

Why investors love the structure.

The margins man. Costs are contractually fixed and there's no operating budget to worry about, gross margins at the seniors commonly sit in the 80% to 90% range. A producing miner typically runs somewhere between 30% and 50%. More interesting than the raw margin is the cost-inflation insulation. When a producer's all-in sustaining cost climbs from $900 to $1,400 an ounce on higher labour, fuel and capex, its margin gets crushed. The royalty holder feels absolutely nothing. It collects the same percentage or pays the same fixed price regardless. Rising costs destroy the operator's economics and leave the royalty holder completely untouched.

Optionality is also to be considered; ‘bonuses’ such as exploration success, reserve growth, and mine-life extensions all accrue to the royalty holder at zero additional cost.

Furthermore, royalty companies are naturally diversified; a single royalty company can hold interest in hundreds of assets, operators, and geographic jurisdictions. In comparison, no single mining company can come close to this level of diversification.

And fundamentally, royalty companies make a whole lot of money. Franco-Nevada earned roughly $27.8 million of revenue per full-time employee, in 2024. Read that again.

Copper: the newer frontier

Streams and royalties that offer gold and silver by-product from copper mines are surging in high-profile demand; Wheaton's gold stream on Vale's Salobo mine in Brazil (the largest copper deposit ever discovered in Brazil) was built across three tranches for roughly $3.0 billion. Franco-Nevada's largest asset is a gold and silver stream on Lundin's Candelaria copper mine in Chile. Hudbay's Constancia in Peru carries a life-of-mine silver stream. Wheaton closed a $4.3 billion silver stream over BHP's Antamina (seventh largest mining operation in the world based on the extraction of copper and zinc, accounting for 2% of all copper produced in the world), in April 2026.

On top of this, direct copper royalty and stream demand is also beginning to take shape as copper grows in its role as a critical resource. For example, Altius holds copper royalties and a stream on Chapada. EMX holds the Caserones copper royalty. Royal Gold absorbed Horizon Copper outright in October 2025 as part of its Sandstorm acquisition. As copper's strategic profile continues to rise, it's taking up more and more room in royalty portfolios, directly and as by-product.

All that glitters…

The key disadvantage is the lack of operational control; these companies are unable to influence how a mine operates, when expansion takes place, or whether projects are placed in care and maintenance. Royalty and streaming companies are passengers in this sense.

Cobre Panama is the case study every investor should know (covered partly in the blog named ‘The Ugly Side of Gold, Silver, and Copper Mining. Is Ethical Investing Possible?’). Franco-Nevada held two precious metals streams tied to First Quantum's copper mine in Panama. After a contract dispute, mass public protests, and a Supreme Court ruling that the concession was unconstitutional, the mine was shut down in late 2023 and simply stopped delivering. That asset accounted for almost 20% of Franco-Nevada's revenue and forced an impairment of $1.169 billion.

A caveat however, as streams carry no operational costs, FNV paid nothing for production it didn’t receive. In fact, despite losing a fifth of their asset base, Franco-Nevada recorded profitable and debt-free books throughout the entire ordeal.

Concentration risk is also an underrated weakness of many streaming and royalty portfolios; A portfolio of 445 assets sounds bulletproof until you notice that a handful of cornerstone mines drive most of the actual revenue. Growth depends on continually sourcing new deals, and competition for quality assets has intensified as more royalty companies have entered the field.

Royalty companies also typically trade at higher multiples than producers, commonly cited around 1.5 to 2.0 times NAV against 0.7 to 0.9 for miners.

Finally, it’s crucial to consider that the price of lower risk is capped upside… In a bull market, a well-run producer with strong operating leverage can comfortably outperform a royalty holder. Some will opt to hold both, others will need to choose.

Final thoughts

Understanding the unique business models of royalty and streaming companies is fundamental for any investor interested in the gold, silver, and copper space; many of the most influential companies on the board adopt one or both of these models. It is key to understand that they are not a safer version of a miner. They're structurally different business, exposed to the same metal.

Working out where any company sits on that spectrum, and what that means for how you size and manage the position, is exactly what the Macro Funnel and Portfolio Frontend are designed to manage.