How Mining Royalty and Streaming Companies Work: A Plain Guide for Investors

Mining royalty and streaming companies make money from mines without running them. Instead of digging, they usually pay up front for a right to a slice of a mine's future revenue or metal. This explainer covers how they work, the main risks and what to read in their filings. It is general education, not a view on any company. If you're new to the sector, start with our guide on how to invest in gold mining companies.

What a royalty is

A royalty is a contractual right to a share of a mine's output, revenue or profit. Franco-Nevada's annual information form describes it as a payment "typically based on a percentage of the minerals or other products produced or the revenues or profits generated from the property" (Franco-Nevada 2025 AIF).

The three common types differ in what gets deducted before the percentage is applied:

• Net smelter return (NSR): a percentage of what the operator receives from the smelter or refinery, after deductions such as transport, insurance, smelting and refining. Franco-Nevada notes the deductions are generally minimal for gold and can be much larger for base metals.
• Gross revenue royalty (GR): a percentage of total revenue from selling production, with few if any deductions.
• Net profit interest (NPI): a percentage of profit after production costs set out in the agreement. Franco-Nevada notes NPI payments generally begin only after capital costs are paid back, and that rising production costs reduce the payment.

Hypothetical example. A mine sells 100,000 ounces of gold at $2,000 an ounce, so revenue is $200 million. Refining and transport cost $2 million, and other production costs are $150 million.

• A 2% gross revenue royalty pays 2% of $200 million: $4.0 million.
• A 2% NSR pays 2% of $198 million ($200 million minus $2 million): $3.96 million.
• A 10% NPI pays 10% of the $48 million profit ($198 million minus $150 million): $4.8 million. If costs rise to $180 million, profit falls to $18 million and the NPI pays $1.8 million, while the NSR still pays $3.96 million.

The numbers are invented; the point is that the further a royalty sits from the top line, the more it depends on the mine's costs.

What a stream is

A stream is a metal purchase agreement, not a royalty. Franco-Nevada describes it as an arrangement where, "in exchange for an upfront deposit and ongoing payments for metal delivered," the holder buys all or part of one or more metals from a mine at a preset price. Wheaton Precious Metals, which calls itself a streaming company, says its agreements buy metal "for an initial upfront payment plus an additional cash payment for each ounce or pound delivered which is fixed by contract, generally at or below the prevailing market price" (Wheaton 2025 AIF).

According to Franco-Nevada, the ongoing price for gold is typically either a fixed price per ounce (often the lesser of about $400 with a small inflation adjustment, or the spot price) or a percentage of spot. Once the upfront deposit is fully used up, the buyer pays only the ongoing price. Some contracts change the rate at that point: one of Wheaton's agreements pays 20% of the gold spot price until the deposit is recovered, then 22%.

Hypothetical example. A streaming company pays a $100 million deposit for 10% of a mine's gold. The mine produces 100,000 ounces a year, so 10,000 ounces are delivered. The company pays $400 an ounce on delivery and sells at $2,000.

• Margin: $1,600 an ounce x 10,000 = $16 million a year.
• If gold falls to $1,500, the margin falls to $1,100 an ounce, or $11 million a year.
• At $16 million a year, the cash margin equals the deposit after about 6.25 years, ignoring taxes, timing and the time value of money.

Franco-Nevada notes that a fixed per-ounce price gives a stream "higher leverage to commodity price changes". In the example, a 25% fall in the gold price cuts the margin by about 31%.

How this differs from owning a miner

A mining company carries the costs of building and running the mine. Franco-Nevada's filing says a royalty holder is generally not required to fund operating costs, capital costs or environmental and reclamation liabilities. By contrast, a working-interest owner pays its share of those costs. The trade-off is control. Wheaton says it "is not directly involved in the ownership or operation of mines and generally has no contractual rights relating to the operation" of them.

So a royalty or stream gives exposure to production and metal prices, with less exposure to cost overruns but no say in running the mine. Holders usually spread this across many mines: Wheaton reported 42 agreements with 34 mining companies, covering assets in 18 countries, as of December 31, 2025.

The main risks

• Operator risk. The operator decides whether to expand, slow, suspend or close a mine. Wheaton's filing says its business is "fully exposed to the risk that Mining Operations will not meet production forecasts or targets." Franco-Nevada says it has "limited access to data" on the operations it has interests in.
• Counterparty risk. Payments depend on the operator staying solvent. Franco-Nevada notes its rights must in most cases be enforced by contract "without the protection of the ability to liquidate a property," and that royalties and streams may be terminated in some insolvency proceedings.
• Project delays. A royalty or stream on an undeveloped project usually pays nothing until the mine produces. Wheaton describes "delay ounce" provisions in certain agreements: if construction isn't finished by an agreed date, the operator delivers extra ounces.
• Metal price. Revenue moves with metal prices. Wheaton says its business is "fully exposed to changes in the market prices of precious metals and cobalt."

What to read in their disclosures

Start with the annual information form. Look for:

• The asset list: each interest's type (NSR, GR, NPI or stream), the percentage, the metals covered and the operator.
• Each asset's stage: producing, in development, or on care and maintenance. Wheaton's AIF, for instance, gives counts of operating and development-stage assets.
• Stream terms: the ongoing price per ounce or percentage of spot, how much of the deposit is still unrecovered, any step-ups after recovery, and any completion tests or guarantees.
• Concentration: how much revenue comes from the largest assets and operators.
• The source of technical data: under National Instrument 43-101 (s.9.2), a company whose only interest is a royalty or similar interest doesn't need to file its own technical report if certain conditions are met. Those conditions include the operator having disclosed the material scientific and technical information and the royalty holder naming its source. Franco-Nevada, for example, says its property disclosure is based on what owners and operators publish and has not been independently verified, and that its interests often cover less than 100% of a property's reported resources, reserves and production. Read the operator's filings too.

For how this fits alongside other mining investments, see our junior mining stocks guide and Canadian mining stocks guide, or browse the company directory.

This article is general information, not investment advice. Do your own research or consult a licensed adviser before investing.

How we checked this: AI-drafted from the sources linked above and checked against them by our AI editor.