Gold & Silver Private Placements

Private offerings in precious metals combine two things that require precision: mining economics and exempt securities structures. Sponsors often blur four entirely different businesses under the single label of a “gold offering.”

Before looking at terms, identify which of the four you are actually evaluating.

1. Physical Metal Funds

A vehicle that takes cash, buys bullion, and holds it in a vault. You own units in the vehicle.

• The risk: Storage security, audit frequency, and fee drag. Unallocated accounts carry counterparty risk to the custodian; fully allocated storage is safer but costs more.
• The return: Spot price movement, less storage and management fees.
• The question to ask: Is the metal fully allocated and segregated, and who audits the vault?

Note on tax: Physical metals are generally taxed as collectibles at a maximum federal capital gains rate of 28%, rather than the standard 20% long-term rate, though entity structuring can sometimes affect this.

2. Royalty Interests

A right to receive a percentage of a mine’s production or gross revenue, typically in exchange for providing upfront capital.

• The risk: Operational failure. The royalty is a top-line claim — it doesn’t pay the mine’s operating costs — but if the mine stops producing because those costs exceed the metal price, the royalty pays nothing.
• The return: Yield tied to production volume and spot price, often for the life of the mine.
• The question to ask: Where is the operator’s break-even cost, and is the royalty capped by volume, time, or dollar amount?

3. Streaming Agreements

A contract to purchase a set percentage of a mine’s production at a fixed, discounted price (e.g., the right to buy silver at $5 an ounce, regardless of the spot price).

• The risk: Same as a royalty — if they don’t mine it, you don’t get to buy it. Also carries counterparty risk on the purchase contract itself.
• The return: The spread between the discounted contract price and the spot price when the metal is delivered and sold.
• The question to ask: What constitutes a force majeure event under the stream agreement that lets the operator suspend delivery?

4. Exploration Equity (Juniors)

Buying shares in a company that is looking for metal but not yet mining it. Frequently structured as a Private Investment in Public Equity (PIPE) if the company is listed in Canada or Australia.

• The risk: Binary failure. Most exploration projects do not become mines. The company is burning capital to prove a resource and will likely need to raise more, diluting early investors.
• The return: Equity appreciation if the deposit proves economic and is acquired by a major producer.
• The question to ask: What is the monthly burn rate, and how many months of cash does this round provide?

Private placements in junior miners often include warrants (the right to buy additional shares at a set price) as an incentive. The warrants provide leverage; the trade-off is a statutory hold period during which the shares cannot be sold, exposing you to price drops without the ability to exit.

The Red Flags

Guaranteed returns. Mining is a geological and operational endeavor subject to commodity price swings. Nobody can guarantee the yield on a working mine, let alone an unbuilt one.

Unpermitted projects marketed as near-production. Getting metal out of the ground is a fraction of the timeline. Permitting, environmental review, and community relations take years. If a deck treats a permit as a formality, the sponsor hasn’t built a mine before.

Jurisdiction risk ignored. A great deposit in a country that expropriates foreign assets or changes tax regimes retroactively is worth less than a mediocre deposit in Nevada or Ontario.