From the air, the north end of the Carlin Trend looks like a suburban housing development – of gold mines. Most of the mines dotting this region are simply huge holes in the ground (called open-pit mines) but several of the richest mines follow the ore bodies nearly a half-mile underground.

The Leeville Mining Complex, owned by mining giant Newmont Mining, contains one such underground mine. It’s part of a huge cluster of mines located on the north end of the Carlin Trend.

The mine I visited, West Leeville, should produce about 400,000 ounces per year for six to eight years… and provide a revenue stream of about $100 million to $150 million at today’s gold prices. While Newmont technically owns this stream of gold, another company gets a steady paycheck from that production…

You see, if Nevada were a sovereign nation, it would be the world’s third-largest gold producer. The state produced 6.3 million ounces last year, 78% of U.S. gold production, and 12% of the world’s production. The heart of Nevada gold production is the Carlin Trend, which has produced more than 50 million ounces since the 1960s.

While Nevada’s mining riches are no secret to many investors, few have heard of the gold royalty business. Investing in gold royalty streams gives you a safe and diversified way to participate in the bull market in gold… without risking it all on one big strike or worrying about rising production costs.

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You see, building a large gold mine is usually a messy, expensive business.

First, you have to pay geologists to scour the Earth in search of prospective ore bodies – but that’s only after paying governments the proper permitting and licensing fees.

Let’s say you find a large body of ore after punching hundreds (and often thousands) of exploratory drill holes. Now you have to spend millions on mine infrastructure. This includes roads, mine shafts, electricity, and a smelter. In Newmont’s case with the West Leeville mine, it took six years and hundreds of millions of dollars to get it up and running.

One way a producer offsets that cost is by selling a small royalty for the life of the mine. In general, a royalty is simply the right to receive a portion of a mineral resource. It could be oil, gold, copper, or any other commodity.

The mining company gets a lump-sum payment up front, and the royalty investor gets a paycheck for the life of the mine. A royalty company may make hundreds of small investments to spread its risk and even out future payments. The royalty company then distributes a small portion of its paychecks to shareholders through dividends and invests the rest in new projects.

Investing in royalty companies is like taking the shotgun approach to mining. You get many small chances to participate in exploration, so you have the potential of a big discovery. In addition, you have minimal risk and you get a paycheck for the risk you do take.

I believe gold’s bull market will last a long, long time… and the more gold rises, the more money these royalty companies will make. If you don’t own any gold stocks, and you’re not sure how to get started, gold royalty companies are a fantastic option for the conservative investor.

Good investing,

Matt

P.S. I think royalty companies are the ideal gold investments to put in your retirement account and forget about for years. If you’d like to learn more about them and my favorite picks in the sector, click here.

Source: A Shotgun Approach to Gold Investing

For the tale of the tape, the TSX Exchange surged 1.64%, while the TSX Gold Index exploded upwards to the tune of 5.8% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, rallied 1.39% with advancing issuers swamping the declining issues by a 601 to 423 margin with good volume of over 207 million shares traded.

Shares in Yamana Gold continued to move higher following news that company posted a profit of $134.7 million, or $0.20 per share in the first quarter of 2008. Total production rang in at 237,495 gold equivalent ounces at cash costs, after byproduct credits of $124 per gold equivalent ounce. Yamana ended the day up C$1.11 at C$14.92.

Moving in the other direction, FNX Mining tabled earnings of $24.1 million or $0.28 per share for the first quarter, compared to a profit of $30.2 million or $0.36 per share for the same period in 2007 when the nickel price was soaring. FNX ended the day down C$2.26 at C$27.75.

Allied Nevada Gold got a boost after announcing an inferred resource of 5.2 million ounces of gold and 75 million ounces of silver at its Hycroft property in Nevada. The oxide portion holds just over 1 million of those gold ounces in 53.1 million tons grading 0.019 ounce gold per ton. Allied ended the session up C$0.26 at C$5.78.

It was a good day for Minera Andes as the company reported first quarter production of 12,140 ounces of gold and 968,000 ounces of silver from its 49% owned San Jose mine in Argentina. Minera ended the session at C$1.40 for a C$0.15 gain.

Iamgold inked a deal to sell its La Arena copper-gold project in Peru for $47.55 million and a 5.5% equity stake in Rio Alto Mining. Iamgold ended the day up C$0.42 at C$6.25.

Timminco put the short sellers on edge after announcing that its wholly owned subsidiary signed a second agreement to supply solar-grade silicon to Solar Power Industries. Timminco ended the day up C$1.15 at C$24.85.

The gold miners are finally starting to garner some investor recognition as the thought that the bullion price has peaked seems to be dissipating. We will see what Friday trading has in store.