Two of our latest featured recommendations are precious metals stocks, but neither is a miner — instead, both are streaming plays, explains Mike Cintolo, growth stock specialist and editor of Cabot Top Ten Trader.

Royal Gold (RGLD) doesn’t actually engage in mining. The company is a provider of up-front payments to miners in exchange for the right to buy gold, silver, copper and other resources at a set (low) price, or else receive a percentage of the sales of the metal when they occur. This focus on royalties gives the firm an advantage over traditional mining companies in a weak gold price environment.

At first glance, Royal’s Q3 report was a disappointment, as revenue of $131 million ($99 million in streaming revenue and $33 million in royalties) was 25% lower from a year ago, while per-share earnings of 71 cents missed estimates by 1 cent.

But this obscured some solid tidings, including that Royal achieved the full recovery of a $782 million stream advance payment at its Mount Milligan copper/gold mine in Canada. It also announced the mine’s expected life has been extended by four years, to 2033, which means a significantly longer runway of gold and silver payouts are likely.

Royal also maintained its long-term growth strategy in Q3 by adding significant assets to its royalty portfolio. Moving forward, Royal said it’s on the lookout for additional opportunities to expand its mine portfolio.

The firm remains focused on obtaining cash flow from the best assets and cranking out huge margins (36% after-tax profit margins in Q3). Analysts, meanwhile, see sales and EPS jumping around 13% this year, which should prove conservative as gold prices rebound.

Wheaton Precious Metals (WPM) is one of the world’s largest streamers, with agreements for 21 operating mines and 13 development stage projects to purchase all or a portion of their gold, silver or cobalt production for an upfront payment.

This business strategy produces big margins and allows the company to remain relatively insulated from the rising cost inflation impacting other miners. Wheaton’s main focus is on high-quality, high-margin operations with a goal of returning a minimum of 30% of cash flow to its shareholders.

As was the case for most gold firms, revenue was lower for Wheaton in Q3 (down 19% from a year ago), mainly due to lower gold and silver prices, while EPS of 21 cents missed estimates by a cent; overall gold production was also lower due to the closure of one of the mines in Wheaton’s portfolio.

Management said it sees a “very healthy appetite” for streaming as a source of capital for the mining industry and is actively pursuing a number of new deals. The company further invested a total of $47 million in the quarter to advance three key projects which it sees fueling organic growth.

Wheaton also disbursed $59 million in dividends in Q3 (current yield 1.4%) and said it remains on track to generate “sustained long-term production and strong growth” over the next decade and beyond. Wall Street sees earnings bouncing a touch this year, though those estimates should rise nicely if the latest gold/silver price rally sticks.

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