* Major gold mining stocks lagging gains in streaming companies
* Gold prices up 12 pct this year and set for upbeat 2018
* Streaming stocks vs gold mining equities-http://reut.rs/2yXQhkr
By Jan Harvey
LONDON, Oct 11 (Reuters) - Investors in precious metals are opting for streaming and royalty companies over pure gold and silver miners this year despite a rise in metal prices, as producers struggle to win confidence in their ability to capitalise on the rally.
Streaming and royalty companies provide financing for exploration and development to precious metals producers in return for a cut of any future output. That gives them exposure to a range of companies in the gold sector, rather than being reliant on any individual stock.
The model makes them a nominally safer bet for investors, but gives them lower leverage to a strong rise in underlying gold prices.
Among the biggest streaming companies, shares in Toronto-based Franco-Nevada are up 24 percent and Royal Gold Inc is 40 percent higher this year, while among smaller names, Osisko Gold Royalties has risen 25 percent.
But even with an 12 percent bounce in gold this year, the FTSE Gold Mines Index, which represents mining companies, has risen just 10 percent. Gold mining stocks are historically leveraged at two or three to one to the gold price.
Streaming companies' higher net asset value shows how much more favourably investors view their risk profile compared to those of the underlying mining companies, Keith Watson, co-fund manager for City Natural Resources High Yield Trust, said.
"Lots of people are prepared to pay a premium for something that doesn't necessarily have the same level of operating and financial risk as would an underlying miner," he said.
"It is quite telling, the value, for relatively few ounces in comparison, of the collective basket of streaming companies, compared to the collective basket of companies from which they stream."
Gold producers' failure to capitalise on rising prices has been a familiar gripe over the last 15 years. While gold prices, despite their retreat from 2011's record high, are still up more than fourfold from end 2001 levels, none of the top five gold miners has even doubled its share price in that time.
New York-based Paulson & Co, a longtime investor in precious metals, became the latest to criticise gold mining companies' poor returns, calling at the Denver Gold Forum last week for action to tackle miners' "dreadful" performance.
The dividend yields of the major mining companies, a measure of the productivity of an investment, have fallen back sharply since the steep drop in gold prices of 2013. Those of streaming companies have held firm.