Royalty companies are a good way to get low-risk exposure to the gold sector while retaining most of the upside. In essence, a “pure” royalty provides the royalty owner with a share of the production without having to take on the cost of building the mine and ongoing capital requirements.  The cost of the royalty is known upfront.

Franco-Nevada (FNV, NY, 44.17) is the largest gold royalty company, and in my mind, the best. It has a super strong balance sheet, top management, and well diversified asset base in politically safe jurisdictions, with plenty of upside from royalties on undeveloped properties.

Royal Gold (RGLD, Nasdaq, 52.71) is the second largest. It carries some debt and has a less diversified asset base; until recently, three royalties were responsible for over half of net asset value and revenue. Having said that, I think it's a great company with, arguably more short-term upside in a strong market than Franco.

Osisko Gold Royalties (OR, Toronto, 14.86)(OKSKF) is the new kid on the block, formed as a result of the takeover of Osisko Mining Corp. 18 months ago. A  royalty on Osisko's Malartic Mine was created as part of a friendly takeover of the company, and Osisko Gold Royalties was launched. The company has the goal of building a portfolio of royalties from its foundation of two of the best gold royalties in the world.  These are attractive royalties (5% net smelter return in one case) on two low-cost, long-life mines in Quebec, one of the safest jurisdictions in the world.

But it is pursuing a different approach from the two largest royalty companies, Franco-Nevada and Royal Gold.  It is challenging to buy significant royalties at attractive prices when competing against these two well-financed behemoths. So Osisko is going about building a royalty company a different way, both by generating royalties through its own exploration programs, and by investing in juniors seeking to create royalties from them.