The current environment is perfect for streaming and royalty companies to enlarge their portfolios. Despite the recent run-up in gold and silver prices, they remain low, and as a result miners have certain difficulties with financing their projects through debt or equity, and turn to royalty and streaming deals. Yet, companies like Franco-Nevada (NYSE:FNV) and Royal Gold (NASDAQ:RGLD) carry large amounts of cash on their balance sheets. When are they going to put this cash to work?

Franco-Nevada's fresh deal is relatively small
Coeur d'Alene Mines (NYSE:CDE) has recently announced a new gold stream agreement with Franco-Nevada. Coeur d'Alene Mines and Franco-Nevada terminated the current agreement on the Palmarejo operation and entered a new one. Palmarejo has been an underperforming asset for Coeur d'Alene Mines, and the previous royalty stream agreement played a key role in the mine's poor performance.

According to the new agreement, Franco-Nevada will contribute $22 million for capital requirements to develop the Guadalupe mine at its Palmarejo operation. Franco-Nevada's cost contribution will be $800 per ounce instead of just $408 per ounce in the previous agreement. The key thing to notice here is the size of the new deal in comparison with the amount of cash that Franco-Nevada has. The company had $667 million of cash on the balance sheet at the end of the first quarter, so this is a small deal compared to the capital available.

Royal Gold is in a similar situation with $638 million of cash on the balance sheet. Only Silver Wheaton (NYSE:SLW) has relatively little cash, as it scored a $1.9 billion deal with Vale last year. The problem seems to be a lack of major projects in the current gold price environment.

Big projects stalled
The big project that could be under way soon is Barrick Gold's (NYSE:GOLD) Pascua-Lama. At least, Barrick Gold reached an initial agreement with local communities on the Chilean side. While a number of legal hurdles are still ahead for Barrick, the first step has been made. The next piece of the puzzle is to find additional financing.

Importantly, Silver Wheaton and Royal Gold are already participating in the project. Royal Gold's royalty interest in the project is $372 million. Opportunities of this size are welcome for royalty companies, but it is difficult to find new ones.

Yet, there will probably be more opportunities for streaming and royalty companies to fund Pascua-Lama once again, as the project is huge. Another big undertaking, Newmont Mining's Conga, has been stalled since 2011 for reasons similar to Pascua-Lama. In both cases, environmental concerns regarding the water management system are creating opposition among locals.

Will Franco-Nevada and Royal Gold put their cash to work soon? The most likely answer is no. The volatile price environment makes miners cautious about committing to big projects. Thus, royalty companies will have to hunt for a multitude of smaller projects, which is difficult and time-consuming.

Bottom line
One can expect Franco-Nevada and Royal Gold to announce new deals this year, but these deals are unlikely to be big. Thus, these companies will retain their significant cash positions. So far, having a pile of cash did not hurt their businesses, and their stocks are among top performers in the gold mining field this year. This is not surprising, as the streaming and royalty business model is sound, especially in times of market volatility.