March 20th, 2009

When I wrote about Dorato Resources I noticed that FNV had a royalty deal with them over a part of their claims; the deal is worth 1-2% of net smelter profit (depending on gold price) and basically for getting this deal FNV has to partake in a lot of equity financings.

The main reason that I choose to write about FNV here is because the company simply represents a great investment if you want to safely invest in gold, PGM's, gas and oil. FNV's whole business-strategy is to acquire royalties on (mainly) gold and PGM-mines (also base-metals to a small degree), as well as gas and oil-wells. Today they have a huge collection of operations and they are constantly picking up royalty money and using a lot of that money to invest in great prospectors like Dorato.

If you are afraid of investing in gold-funds, individual gold-miners and you don't particularly like the idea of having to buy physical gold, then I beleive a company like FNV would be the best choice. Their 2008 results are coming out on March 26 and I think they'll see a ~$40-45M net profit. Their total net assets were valued at $1.57bn in the third quarter (I assume it's gone down a bit by now). The mcap is about $2.5bn today.

On a profit/mcap ratio it's not looking too cheap and the shares have gone up by ~100% since november. The high price may well be related to the large holdings they do have, and the great decisions that management has made in the past when picking out projects to support. As time goes by they'll inevitably see higher and higher amounts of royalty-money coming in and I guess they'll keep investing in great looking companies like Dorato.

I wouldn't personally buy into this company today, but if the SP comes down from 30 today to perhaps 20 then I'd be willing to buy, as this represents a great opportunity to safely collect income from a large number of miners and energy-companies and at the same time get a holding in a lot of very promising projects. If you want to see a list of all their investments they have a very easy-to-use website.

I include this map from Dorato to further show you in just what a great location their concessions are: