210 THE BiG DROP
include some of the largest gold development and exploration
projects in the world. FNV’s royalty portfolio is diversified geo-
graphically, with most exposure in safe mining districts: the
U.S., Canada and Mexico.
The company also holds high-return interests in oil fields.
In November 2012, it acquired an 11.7% net royalty interest
in the Weyburn Oil Unit in Saskatchewan for C$400 million
in cash, or just C$16.53 per proved and probable barrel of oil.
Weyburn has performed well for shareholders.
By owning a business with such high profit margins and a
high return on invested capital, you can enjoy a large, growing
stream of future free cash flow. The higher gold, platinum and
oil prices rise, the faster FNV’s free cash flow will grow.
Capital is scarce in the gold mining business, right now.
That puts FNV in a great position. Management has $1.8 billion
to invest — putting them in the position to create lots of value
for you, the shareholder. At current prices, I believe FNV offers
an excellent way to boost your portfolio’s exposure to gold.■ One Safe Haven Where The Elites Hide Their
Money
When elites and institutional investors see a catastrophe com-
ing, the first things they look to buy are U.S. Treasury notes
and bonds. Making money in the Treasury market is relatively
straightforward, because there is minimal credit risk.
Imagine a seesaw. Bond prices are on one side of the seesaw,
and bond yields are on the other side. Treasury bond prices rise
when yields fall; prices fall when yields rise. The longer the ma-
turity of the bond, the more its price will rise or fall in response
to changes in interest rates.
During the last crisis in 2008, U.S. Treasuries soared. From
Lehman Bros.’ bankruptcy filing in September 2008 to the end
of the year, the 30-year U.S. Treasury Bond Index rose 15%.