Canada is the fourth-largest gold producer in the world and, naturally, has a healthy selection of gold-related stocks. Most are gold mining stocks, with streaming and royalty stocks making up a relatively small sector segment.
Ironically, one of Canada’s most well-known and beloved gold stocks is a royalty stock — i.e., Franco-Nevada (TSX: FNV). From a long-term performance numbers perspective, it’s miles ahead of many mining giants in the country, making it an attractive pick. But despite dominating this sector segment, it’s not the only royalty stock that should be on your radar.
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A smaller contender
Orogen Royalties (TSXV: OGN) is a Vancouver-based company focusing on both precious and base metals. It was founded in 2005 and currently falls in the micro-cap category, with a market capitalization of just $294 million. However, considering its exceptional growth pace (short term), it may soon enter the small-cap category.
The company has two flagship projects, one in Mexico (a gold and silver mine), where it has 2% Net Smelter Royalties (NSR). It’s the returns a royalty company like Orogen Royalties is entitled to after the net sales of the metals.
The company has 1% NSR in a project in Nevada, U.S., though it’s still in development and expected to start producing by 2026. It has a sizable portfolio of exploration-stage projects in Canada, the U.S., Mexico, South America, and Africa. The highest stake level is 3% NSR in some of the projects.
The stock has exploded in 2024, increasing by 120% since the beginning of the year. Strong financial results have both augmented and accelerated this growth. If it continues at this pace, it may offer more growth in a few years than many gold mining stocks in a decade. The only downside is the high valuation.
The royalty giant
Franco-Nevada has a market capitalization of about $30.9 billion. The company has been around for over four decades and has a massive portfolio of royalties. Its portfolio is also geographically and asset-wise diversified, though about 75% is still from precious metals, primarily gold and silver. There are 430 assets in its portfolio, and 118 of them are already being produced.
From a performance perspective, the stock has a more impressive long-term profile, though it doesn’t match the current growth pace and pattern of Orogen Royalties.
The stock has been fluctuating for the last five years and has returned just 24% to its investors over that period (30% if you include the dividends). But its 10-year returns are quite impressive at 200% (total returns). It’s also an established Aristocrat with a current yield of 1.2%.
Foolish takeaway
Considering the current bull market phase, Orogen is the ideal short-term choice. But if you are thinking more long-term, Franco-Nevada might fare better. If dividends are an essential factor for you, Franco-Nevada is the only viable choice.
However, that assumption relies upon the presumption that Orogen will not be able to sustain its current growth pace. On the off chance that it might, Orogen will not just be the right royalty stock pick from the two but also one of the best growth stocks in the TSX you can buy.
