My dear wife recently read an ad about the "Chaffee
Royalty Programs" and asked me to comment on what they are about. This topic is
near and dear to my heart and my wallet. It's about something that a man
named Chaffee learned a long
It also has much to do about publicly-traded royalty companies like Royal
Gold (Nasdaq:RGLD), Silver Wheaton (NYSE:SLW) and International Royalty Corp.
(AMEX:ROY) which specialize in securing low-risk, long-term cash flow through
royalty interests in mining properties.
The "Chaffee-style" royalty programs also speaks to energy royalty trusts
like Hugoton Royalty (NYSE:HGT), San Juan Basin Royalty Trust (NYSE:SJT) and
Enerplus Resources of Canada (NYSE:ERF) which pay out the most generous cash
dividends on the royalty income each trust takes in. Now back to Mr. Chaffee
(this article is a little longer than usual but if you read it to the end I
promise you'll learn a lot and be a little entertained as well. Jerome B.
Chaffee didn't make enough income as a schoolteacher. So he took a job as a
sales clerk in a dry goods store.
[Related -Goldcorp Inc. (USA) (GG): Which Gold Stocks Should You Buy This Year?]
Then he took that money and started a dry goods store of his own. When that
wasn't enough, I'm told he packed his bags and went to Colorado in 1860. See,
Colorado then — as right now — was mineral rich. And even though Chaffee knew
next to nothing about mining, he saw the possibilities. And started snapping up
the "royalty rights" on as many gold and silver claims as he could afford. This
story and the following details was conveyed to me by one of my mentors and
respected colleagues Chris Mayer, an analyst know for his careful research.
[Related -SPDR Gold Trust (ETF) (GLD): The Best Opportunity To Profit From Gold In 15 Years]
Every time one of those royalty rights started to pay off, he bought more.
Until he had a business making between $300,000–500,000 per year — or as much as
$17.3 million today. Suddenly the ex-schoolteacher was very rich. And powerful.
Chaffee took up politics, pushing for laws that would lock in the same kinds of
opportunities for everybody. He even went to Washington and became a senator —
and a friend of the president, Ulysses S. Grant. Chaffee's own daughter even
married the president's son, Ulysses S. Grant Jr.! In 1872, Grant expanded on
protecting the resource rights that Chaffee championed by signing the General
Mining Act, a law that still safeguards mineral rights today... has already
created countless American millionaires... and helped blow open the gateway to
the American West.
"Chaffee Royalties" let you tap into rich mineral rights more easily than so
many others did years ago. You don't need a lot to get started. In fact, you do
practically nothing. Even as the rich resource wealth piles up. All the value in
"Chaffee Royalties" is backed by real resource wealth. Oil. Gas. Gold and
silver. Copper. Nickel. Diamonds.
But the beauty of these royalty streams isn't just the hard asset value
that's behind them. Instead, it's the fact that... as you watch the wealth pile
up... you do it with none of the major risks that most mineral and hard asset
investors face. How so? That's the unique opportunity with "Chaffee Royalties."
They're designed to deliver all the upside of the world's rich mineral wealth.
But without passing on any of the major exploration, management or environmental
costs of mining or drilling to the end shareholders. Imagine, for instance, if
you could own a "piece" of Apple's iPod sales... without paying a nickel toward
the operating costs, research or advertising.
Imagine if you could collect Google's ad sales... or Exxon Mobil's oil
revenue... without forking over for employee salaries, building and maintaining
headquarters, or any of those other costs that typically nickel-and-dime
shareholders out of gains. "Chaffee Royalties" let you do that, backed by pure
gains on some of the most valuable mineral and other raw resource deposits in
the world. Right now, resource companies are lining up to swap some of their
gross profits for these royalty programs. Why would they do that? It's simple.
See, right now, the global credit crunch is just one of the forces destroying
the U.S. dollar. And that, plus unstoppable Asian demand, has sent the value of
gold... silver... copper... nickel... zinc... lead... and just about every other
mineral asset you can name... soaring. That's great for anyone who produces or
sells those resources.
Trouble is, as energy prices go up, so do the operating and production costs
for the miners. So if they want to expand to capitalize on the resource boom,
they need money. Usually, that money comes from the banks. But the banks don't
want to make any new loans today.