If you're looking for exposure to precious metals miners, you have more options than you might realize. There are actual miners like Hecla Mining Company (NYSE:HL), which has over 100 years of experience in the industry, or you can buy a streaming company like Royal Gold, Inc (NASDAQ:RGLD), which doesn't actually do any mining at all. Oddly enough, the company that doesn't pull any gold or silver from the ground is actually one of the best ways to get exposure to precious metals.

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One of the first reasons I'd pick Royal Gold over Hecla is diversification. Hecla's 100-year history is impressive, but the company currently has just four operating mines. There are two in the United States and then one each in Canada and Mexico. Hecla has a lot going on development-wise, relatively speaking, since it has nine mining projects in some form of development, as well. But even put together, that's just 13 projects.    

A man wearing a yellow hard hat and with a coal-darkened face, holding a gold nugget

Image source: Getty Images.

Royal Gold is a streaming company, so it doesn't actually have any mines at all. What Royal Gold does is give miners cash up front for the right to buy silver and gold in the future at reduced rates. To give you an idea of what that means, in 2015 Royal Gold provided $610 million to industry giant Barrick Gold in exchange for the right to buy gold from the Pueblo Viejo mine in the Dominican Republic. That's one of the largest gold mines in the world

Royal Gold doesn't have to do anything else to get access to that gold and silver -- just wait for Barrick to do the hard work of mining it, and then buy it. In that way, Royal Gold is kind of like a specialty finance company that gets paid in precious metals. But here's the interesting thing: Royal Gold's portfolio of investments includes royalty interests on 35 producing properties, 18 development-stage properties, and 135 exploration-stage properties. That's a lot more diversification than you'll get from owning Hecla (or most other miners, for that matter).

How much for that gold?

Then there's the issue of cost. For the cash Royal Gold provides miners, it not only gets the right to buy precious metals in the future, but it gets to buy them at reduced prices. For example, that Barrick deal allows Royal Gold to buy gold and silver from the Pueblo Viejo mine at 30% of the spot price until a certain volume of each metal has been delivered, and 60% thereafter. Those prices are locked in and provide Royal Gold with wide margins. 

Hecla has to deal with the uncertainties of doing the actual mining on its properties. That means costs will go up and down based on geology, the life stage of a mine, labor costs, and supply costs, among other things. And if the price of gold and silver fall, Hecla has to adjust its business in response to protect profits. Royal Gold's low gold and silver costs are contractually set, even if its top and bottom lines fluctuate with commodity prices.

RGLD EBITDA Margin (TTM) Chart

RGLD EBITDA Margin (TTM) data by YCharts.

Just look at the chart above to see how beneficial this is. In good years and bad, Royal Gold's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin handily bests Hecla's. In fact, over the last decade, Royal Gold's EBITDA margin has never fallen below double digits. And that period includes a deep industry downturn.

Don't forget about Royal Gold's dividend

So Royal Gold is more diversified than Hecla, and its business model essentially ensures wide margins in an often volatile industry. Those are the basic reasons that I think Royal Gold is a better option for precious-metals investors. But there is something else to consider.

I mentioned Hecla's 100-plus years in the mining business. Well, Royal Gold can't make a claim like that. But the streaming company has increased its dividend each and every year for 16 consecutive years, and right through the industry downturn. I don't know of a mining company that has rewarded investors so consistently, which is proof of the inherent strength of Royal Gold's business model -- and one more reason to select Royal Gold over Hecla Mining.    

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.