Royal Gold, Inc. (RGLD) Earnings Call Transcript & Summary

Welcome back. Thanks for joining us again. We have the pleasure of hosting a panel discussion. Now this is the differentiated senior royalty and streaming model panel. With us today, we have the CEO of -- President and CEO, I think, of the 3 major royalty streaming companies with Paul Brink, President and CEO of Franco-Nevada; with Bill Heissenbuttel, President and CEO of Royal Gold; with Randy Smallwood, President and CEO of Wheaton Precious Metals. In the interest of time, I'm going to dive right into the questions, but I know there are company descriptions and presentations on our app for the 3 companies if you have any interest in the background information on the 3 companies. Just a reminder, of course, please submit questions to the panelists through the BMO conference app.

Paul Brink, I'm going to start on a question for you. The equity prices for the royalty streamers have underperformed gold producers just probably about August. What part of the cycle do you think would be more constructive for the royalty streaming model? And do you think we're getting closer to those conditions in 2021?

Well, Jackie, the first part of that question is when are we going to get gold investors back, right? In this market -- and the recovery from COVID, which -- thank goodness we're seeing the recovery from COVID, but obviously, it's a risk-on market. Investors are rotating many -- a lot of people made good profits in gold. We've seen a lot of the generalists rotating to take those profits, put them into the sectors that are going to be driven by the initial cyclical growth here. So we know gold is on a bit of a back burner for the moment. But the surest thing in resource markets is it is a cycle. And you know that the -- with all the capital going into those cyclical stocks, that's part of what's fueling inflation. The back end of the cycle we'll certainly see a lot more inflation, and I think gold will continue to the back end of this gold bull run. And I say the back end of the gold bull run because I do think, broadly, the producers and the royalty streamers performed differently in the 2 parts of the bull, the gold bull market cycle. When you get that initial price move, yes, the operators, they've got more leverage. The gold price, it is an attractive place to be. But as you go through the gold bull cycle, a lot of capital is available to the sector, and inevitably, that results in greater production, a lot of drilling, discoveries, increases in reserves and resources. So the back end of the gold bull market really is driven by volume growth, a lot more production. And that is really where the royalty and the streamers shine. In a sense, we get a double whammy at the back end there. We get the price appreciation plus we get the volume impact. And in general, our business models are protected against inflation. Inflation is what eats away at many of the operating margins at the back end of that gold bull market. So I think the best days are right ahead of us. I couldn't put my finger on the timing, but I know it's coming.

It definitely feels like we're getting closer to a royalty-focused market again. So I think you might be right on that. I'll send a question to Randy Smallwood with this beautiful Vancouver sunrise behind you there.

It's pretty rare, that's my figure to share. Usually, it's just clouds and rain.

How do you think COVID-19 continues to offer -- to impact operations going forward? I'm asking this to you because it looks like Wheaton saw your sales sort of lagged production in Q4. I think we saw the same with Royal Gold when you reported. And it's -- is that really an impact of logistics in COVID? Or is there a risk that we could see that kind of continuing that lag?

Well, what we had was, of course, the worst of the impact, hopefully so far, was during the second quarter of last year where we had a number of operations that had to suspend production. Now in the end, we only lost about 4%, maybe just a little bit under 5% of our overall production guidance for the year. A little bit light, but on a relative basis, I think we did relatively well on that front. But what happened was with those suspensions in production, of course, the pipeline that takes it from production to sales runs itself out a little bit. And I'm going to sort of hypothesize that what happened during the third quarter, we thought that we'd have a bit of a sales miss in the third quarter, but it kind of pushed itself all the way through to the fourth quarter. And it seemed that we seem -- we were surprised at how good the production was in the third quarter. I think when operations restarted, they restarted with a bang. They really went in pretty hard. But I think the whole system sort of normalized itself in the fourth quarter. And hopefully, it's behind us now. I really do think it was just a residual impact from those suspensions on the production side during the second quarter. Of course, in terms of COVID risk, I mean, it's still out there, although we are seeing the -- or sorry, the vaccines get -- come more and more into play. It sounds to me like they're probably going to have to be modified in a pretty consistent basis because there's all sorts of variants that are now being identified all over. But the one thing I will say about the mining industry is that we do have a bit of an advantage in the fact that a lot of mining operations are in rural, remote locations where it's a lot easier to control traffic and manage the risk. And I have to say that when I look around our partners' portfolio, our portfolio of assets and our partners', they have done a great job in terms of managing that risk and keeping the lights on really and so to speak. And the other side of it that I think came through this was just, again, a reinforcement about how important the mining industry is to economies around the world. And we did see a number of operations, a number of countries that sort of deemed mining a critical asset or a critical industry. And it really comes down to the focus of making sure that we are delivering value back to all stakeholders, including all the communities and such. So I'm pretty confident that the mining industry is going to manage this risk well going forward. And I think we have seen the worst of it behind us.

Segue into a discussion on ESG, I think. And ESG, more broadly, is such an important topic in the mining sector. It's just been an important topic at our conference for the past several years. And certainly, this year it's probably even more so. We've had a presentation this morning on environment from Tom Butler, and of course, that will continue through the week with the rest of the ESG theme. And continuing on the splitting of the letters into E, S and G, I figured I'll ask one of those to each of you. So I'll start with Bill Heissenbuttel on the environmental sustainability side. As a royalty streaming company, you don't control most of the mining operations directly, probably none of the mining operations directly in your case. Do you consider the environmental record of companies or management teams when you're thinking about making an investment in a company or in a royalty or stream? And once that investment is in place, is it something that you can do to contribute to sustainability efforts of your partners?

Yes, sure. Just to be clear about your point, we don't control any of the operations. And it used to be that...

I was thinking that [indiscernible].

Yes, that's gone. And it used to be, when it came to these issues, you could sort of say, look, we're a passive investor. We don't have any control and then go talk to the operators. That's not the way it works these days. So the environmental record of the operators is absolutely critical to our due diligence process. Our due diligence team will have a specialist dedicated to that area. It is part of the internal screening process. It is part of the Board review process. And I will tell you, we have walked away from investments that, in every other aspect, looked very attractive, but they just -- they didn't have the environmental record plan that would be sufficient for sort of our standard. So it is, it's as important as understanding the geology, the metallurgy and everything else about a mining operation. What can we do after we're in? One of the benefits of having a great portfolio is we see a lot of best practices across our portfolio and we have the ability to look at what somebody is doing and go to another site and say, "Hey, one of our other operators is doing this. Have you ever -- have you thought about it? Maybe it's appropriate." We actually have established a relationship through some of our COVID-19 community-giving and been able to hook up a charity with one of our operators and just have them start a dialogue. So we can contribute there. And I guess the final point is we all have budgets with respect to community-giving support. So if we see a program that we like, we don't have a problem going into that budget and saying we'd like to support your local community program.

That's great. And I think you're right, having a diverse portfolio, you definitely have a broader perspective on [indiscernible]. Randy, I guess we sort of touched on this with the COVID question, but I'll ask you about the social aspect. It's probably an area where miners can make the most or at least a meaningful impact is in social programs. What is the Wheaton view on corporate social responsibility? And how do you complement your partners' programs? How do you choose which initiatives to support? And maybe kind of just cynically, is that something that Wheaton sees value from in terms of contributing to those programs? Or what's the benefit to Wheaton from doing that?

Look, at Wheaton, our belief is the stronger our partners are, the stronger we are. And one of my jobs, one of our team's jobs is to find ways to deliver value to our partners post the upfront payment. The streaming and royalty business, of course, is attractive to the mining industry for that upfront payment because you're crystallizing capital from [indiscernible] assets but in reality, after that, to try and deliver value afterwards. And so we've got a very robust program that works with -- well, we try and work with all of our partners. Some of them, a little bit tougher to work with than others in terms of they just rather push their way down, but our mandate is to provide support with all of our partners. So we've got a program where 1.5% of our cash flow averaged over the previous 4 years gets pushed back into the communities. The majority of that, 2/3 of that, goes actually into the communities around the mine sites. Now we don't do that alone. What we do is work with our partners. And I have to say the benefits from a Wheaton perspective, of course, it's the right thing to do. There's no doubt. We're getting minerals from these holes in the ground, whether they're underground or open pit. This is coming from the community and from the -- from everyone in that area. And so to deliver a bit back in terms of helping sustainability initiatives in these areas and trying to leave a lasting benefit for this operation is the right thing to do. But the other benefit that Wheaton gets is the fact that we tend to work directly with site staff and -- in terms of implementing these programs because what we do is we structure it so that we match. We don't have people on the ground. So it's very tough for us to actually oversee these programs. Matter of fact, it's impossible for us to oversee these programs, but what we rely on is the drive and the incentive for our partners to make sure that the money that they put into the communities is effectively placed back in. And it's not just money. It's effort, it's time, it's delivering long-term sustainable benefits to these communities. And I have to say that by expanding their own capacity to do that, we are helping our partners be stronger, and that's one of the key aspects of a good strong structure. We've had this policy in place for a long time. I really do think it's something that is needed in the streaming and royalty space in terms of not taking that passive approach. If we're achieving -- if we're receiving a benefit from these operations, we should be doing our best to make sure that we also share and leaving a benefit for the communities that are so kind to let us operate in these areas. So it is something that's very, very important to us. It's long been important for us and will continue to be. It's a journey as we continue to shape this industry into making sure that society recognizes how important we are as an industry in terms of delivering benefits to mankind and to humanity.

I think that sounds like a great initiative definitely and then a good motivator, for sure. I'm going to change the subject a little bit and talk about governance. Paul, this is probably the least popular letter of the ESG acronym. What message Franco to do to ensure good governance, to align the management and the Board with your shareholders? You have obviously the largest portfolio of both producing and early-stage royalties and stream. So is it possible for you to reflect that diversity of your portfolio within your company, within your Board? Is that something that you can do or should do, do you think? So maybe there's 2 questions there, but I guess the first one on alignment and then the second one on the diversity side.

Sure, Jackie. And I don't mind being G. In my mind, G stands for gold. I was assuming that's why I got the letter G. Randy got the letter S, which is for silver.

Yes, that's a very good point. You'll go with Bill finding in the E side, but I don't want to know.

It is for eloquent. Bill is more eloquent than Randy and I, that's why he got it. But seriously, on the government side, and first, you asked about alignment and we think the key thing in governance is alignment with shareholders. We always hold at Franco, as a management team, we don't want you thinking as managers. We want you thinking as owners so that you're aligned with our shareholders. And to achieve that, it means 2 things. The first is high share ownership, high share ownership by management and the Board to make sure we have that alignment. And the second is keeping management entitlement down, keeping G&A low so that for the management team, we -- our returns really are driven more by how the stock does than the salaries we're paid. Want to maximize that alignment, but also to show our shareholders the -- we respect the money and that we spend their money like our money and keeping our G&A low. The second piece there on diversity. It's another big part of governance. Two areas, gender diversity to start with. We have committed a number of years ago to have at least 30% women on our Board. We now have 3 of the 11 on our Board with -- in our May meeting. The Board will be down to 10 and so we'll achieve that 30% target, which is important for us. We're looking to grow the participation of women within our management ranks. And particularly in the mining industry, that starts with encouraging women participating in the industry. As part of that, we are -- a number of our Board members are -- have initiated a project, the prosperity project. We are sponsoring that. It's a project around collecting the data on diversity, particularly gender diversity, tracking how women are moving through the ranks in various industries. And we think it's important to have that initiative so that we all focus on that and can help promote the advancement of women through the industry. The other side of that is on racial diversity. We signed on to the BlackNorth pledge through the back end of last year. We're actually very fortunate. In our team, we already have the benefit of very good racial diversity in our management ranks but still want to promote it. So as part of that, we have started a scholarship program now, particularly targeted at richly diverse candidates, trying to attract them into the mining industry. I think the industry can benefit both attracting women and racially diverse candidates. I think it's part of demonstrating, as Randy spoke about earlier, that mining is a progressive industry. And I think it will be a great benefit for us.

Absolutely. I think that's a great perception for the industry. I mean, maybe on the technology side too, but also on a openness to different sort of backgrounds and people. I think it'd be great to see more people want to be in mining of all types of people in. Let's shift gears a little bit. I know the title of this session is the differentiated stream or royalty model. And so let's talk a little bit about what differentiates your companies, I guess, from others in the model. And I'm going to start with Bill, but this, I guess, applies to all of you. The large size of your companies generally probably makes it difficult or more difficult to find growth opportunities that move the needle. So Bill, are you seeing opportunities right now for growth of meaningful size, of the size that would catch the interest of the market? I mean, can you give us maybe some high-level commentary on what you're seeing in terms of growth opportunities at the moment?

Sure. We're at a bit of an event relative to my esteemed colleagues here in that we are smaller and finding transactions that move the needle might be a little easier for us than it would be for them. And I -- the one I really referenced is Khoemacau. We've invested $212 million. That investment could go up to $265 million, which I don't think anybody would look at and say that's a large transaction. But when we announced it, we did a comparison of what that silver stream would contribute relative to what our trailing GEOs were, and it was 5% growth, and that's meaningful to us. So I think the hurdle might be a little bit lower for us than the other folks. Just in terms of what we're seeing in terms of opportunities, I'd just remind you that because we've become much more of a mainstream source of capital, we see a lot more of those opportunities. And because we put capital in to build projects or deleverage balance sheets or finance M&A, there's always a need. When COVID hit, we were looking at all the base metal companies saying, okay, whose balance sheet is going to need some stress relief. And here we are today with very healthy balance sheets saying, okay, who's got a project that they need finance. So we can very quickly pivot from one thing to another. So I do think there, for our company, there are opportunities to show meaningful growth. And if it means hitting a couple of singles instead of a home run, so be it. We're happy to take on as many as we can.

Yes. We have heard, I think, yesterday more talk about growth from all different kinds of miners think -- based on all angles. So it'd be interesting to see how that plays out this year, but potentially good opportunity for all of you, I'm sure. Maybe I'll pass it to Randy. And the feeling, I guess, quickly on Bill's comments, how big do deals need to be before they move the needle for you? Do you have a preference? I mean, in the past, you seemed like you've prioritized deals that are already cash-flowing or assets that are already cash-flowing. Is a longer pipeline something that you would look to add of earlier-stage assets? Or are you really looking for those market-moving transactions right now?

Well, and just to echo some of Bill's comments, I mean, our expectation is that current commodity prices will be pretty close to $1 billion in cash flow this year. And so the challenge is moving the needle. We need to move the needle, but that doesn't mean that we shy away from lesser transactions because I have to tell you that -- and just to expand on Bill's analogy, they're about getting a base hit versus home runs. You don't have to hit home runs all the time. A number of base hits will also help you win the game. And that's what I would say. As deal size, like -- if you look at the Cozamin deal with Capstone in December, it's $150 million. Not a very big deal by any means, but it's a good solid asset that's going to be a part of our portfolio now for a very long time. As you might remember, it used to be in our portfolio, but it was a term contract that we inherited. And now it's permanently in our portfolio. It's a mine that shows that. And so there's always space for quality in our portfolios. And although it might not move the needle, cumulatively, it will deliver value. And I have to say that every time one of our larger assets seems to hiccup, it's amazing how many times the smaller ones all seem to step up and sort of fill that gap. And so I don't think there's any concern about -- you should never fall into the trap of having to move the needle with every transaction, with every acquisition. At Wheaton, our focus is really on quality, is really on pushing that. The market that we're seeing right now is a very interesting market. In fact, we're about as busy as we've ever been and probably considering expanding our technical team mainly because base metal prices have climbed substantially. And I have to say that when it comes to financing a base metal project, a stream is still, by far and away, one of the most attractive ways of supplying some of that equity capital towards advancing or expanding or building a greenfields-based metals project. Anytime you can sell a precious metal at a much higher NAV multiple than what you're being valued in that space, it opens up opportunities, very attractive opportunities. And so the market reaction to that Capstone deal that we had in December really sort of highlighted the benefits of a stream and how much value a stream can deliver to a base metal company. And I could tell you that we had a lot more knocks on the door post that transaction as they watched Capstone's share performance, coming to us saying we'd like a little bit of that dessert, too, please. And so we're quite busy on that front. In fact, in terms of focus, I think you asked, are we looking at development or operations. We just released 10-year guidance of 830,000 gold equivalent ounces per year. This year, we expect to do about 750,000. So we've got good, strong, solid assets that are going to be here for a long time. We've got over 30 years of reserves in front of us. Again, another 7 years of M&I resources and 26 years of inferred resources. And we've got some pretty exciting exploration success coming from a lot of these assets, too. Salobo, we haven't seen the updated resources yet from there. It's going to be -- we've just got good, strong growth all the way through the portfolio. So for us, we're not focused specifically on longer-term development or operations. Whatever comes forward, again, just driving home, the real focus for us at Wheaton is just making sure that the assets that we're investing into are first, second quartile assets that will be good, strong value and then profit, not only for us but for all the other stakeholders, the operators and the communities.

Is it -- funny a lot of people think of contract negotiations and trying to get as much as possible from the other guy, but as an example, a great example of the benefit of the streaming model in general, which is it can be win-win for both parties or for all parties, yes?

It truly is. And you hear that phrase a lot. It gets used way too many times. But when you see value accretion on both sides of the equation, when you see their share price go up and our share price go up, it truly does stream. It truly does create value.

Paul, maybe I'll just ask you your thoughts on growth. In fact, if we rewind to maybe September around the Denver forum, you had talked a bit about kind of, I guess, casting a wider net in terms of commodity exposure, looking at other commodities. Is -- are you seeing the same opportunity set now where maybe you can focus your energy more maybe on the precious metals or the conventional space, the space that people kind of want you to be in or expect you to be in? Or are you still looking broadly at other commodities as well for your streaming royalty transaction?

Jackie, as always, our focus is on precious metals. And when there are good precious metals to do -- deals to do, that's where the team is spending their time. But we've always said to our shareholders their time when -- it's a cyclical market. And as an investor in a cyclical market, what you don't want to do is spend a lot of capital, either at the top of the market if things get too pricy or during periods where, as we had in the last few years on the gold side, there's not a lot of activity and so there aren't good deals to do. We try to expose our shareholders to 2 things: The gold price optionality and then also resource optionality. And so when it gets to pricing gold or there aren't good deals to do, we say let us look at other commodities and see if we can expose you to as good resource optionality in those other commodities. So we have -- as you know, part of that for us has been energy, part of that has been other metals. Energy, particularly through the back end of last year, was very depressed. Our team has been busy. So as I look through this year in terms of where we think we can have additions, I think you will see some in terms of energy. We will certainly see some on the precious metals side. I think you may also see some in terms of other metals based on what the team has been working on in the pipeline. As I look forward into this year and with the pullback in the gold prices, I think that's a terrific opportunity. I think it's a good setup for us participating to help finance new gold mines into production. There is equity available but at a reasonable price. We look to be a part of a financing package in building a new mine, not the full financing package. So having a supportive equity market, having -- gold having pulled back a bit so the valuation is a bit more realistic, I think those are both a good setup. I think there's a really -- this is a really good market and would love to be putting more capital into financing gold mines over the next year.

And on a -- so some of these numbers are maybe a little bit out of date now because -- well, Royal Gold has reported its fourth -- calendar fourth quarter, sorry. Neither Franco nor Wheaton has yet. So Royal Gold has got liquidity, available liquidity of about $1.2 billion as of December. Franco-Nevada as of third quarter at $1.8 billion. Wheaton had $2 billion as of third quarter. So that brings us, between the 3 companies represented here, it's about USD 5 billion in available liquidity, and that's an awful lot of new deals you guys could finance. I know you seem fairly friendly to each other, but is there a competitive tension between the companies at this point for new transactions? Bill, do you feel that competition sort of creeping up?

Well, I've competed against these gentlemen for probably over a decade. We assume any transaction that we are looking at, that Franco and Wheaton are looking at it as well. So it's not new. And I would say you don't need more than a few competitors to make it -- to make pricing a little bit finer. Where we're finding competition a little more difficult really in 2 areas: One, the smaller transactions because we have a number of smaller new competitors. And those competitors, you're new. You have to do a deal. You feel like you have to do a deal, and maybe getting that first one is really important. So we've got that. The other side of competition are the capital markets. And if you look at the [ debt ] so the equity issuance of this industry in 2000 relative to 2019, it was much higher. And I personally haven't seen those markets as open in quite some time. And I know we lost a couple of transactions because those markets were available. So it's a little more competitive, but again, to Randy's point, I think we've got a great product. And the other thing, as I said earlier, is because we're more mainstream, we see more. So I wouldn't necessarily say our liquidity is growing faster than the opportunities. We're seeing a lot of opportunities that may actually be growing faster than the cash on our balance sheet.

That's an interesting question because my -- or an interesting point. My next question to Randy was going to be as your liquidity grows, do you look at capital returns to shareholders? Do you look at raising a dividend or, I mean, maybe a buyback? It doesn't make sense for the royalty streaming model given where you guys trade. But does it -- do you think more about a dividend at this point? Or maybe like Bill just said, maybe that's a problem that's going to solve itself in the near term? How are you thinking about the best use of that liquidity you have available?

Well, the best place to put that money is back into the ground by far. We are -- it doesn't take much math to see that at the end of the fourth quarter, we were pretty close to being outside of our revolver and to the positive side of 0, which is where I don't like being. I'd rather have -- I'd rather be into the revolver and paying 1.4% or whatever the revolver and doing that. So yes, we've got lots of liquidity there. Our dividend is a bit unique in the sense that it is tied to our cash flows. We set a floor every -- at the start of every year so that the -- so that we don't see any sort of quarterly volatility fluctuated up and down. But last year, we started the year at $0.09 a share and finished off -- the Q3 dividend was $0.12 a share. So it's already a 33% increase over the course of the year as we saw increased production and increased commodity prices come into play. And so there is a direct link to that. And as our production grows, that will continue to grow our dividend. And we haven't -- as I mentioned, we haven't released our fourth quarter results yet and haven't given our guidance for the dividend, but it's pretty easy to see that there will be further growth to that and it will be higher than $0.12 a share. I've always felt that what I'd like to do is if we can't put it back into the ground, build up a bit of a war chest, so to speak, a little bit of capacity ready to go. We have been on the positive side in the past, and that's what allowed us to sort of step into the original valet transaction at $1.9 billion. And so there are big opportunities out there. We have to work a little bit and set ourselves up for that. But what I would see is that if we can't put the money back into the ground -- and it is a challenge. At cash flows close to $1 billion this year, it will be a challenge for us to invest that as fast as it's coming in. If it doesn't go into the ground, it's going to ultimately go back to the shareholders. And where I would see it change is that instead of referencing our dividend based on a 30% of cash flow going back to our shareholders averaged over the previous 4 quarters, we'll bump that to 40%. I mean, it originally started at 20%. We bumped it to 30% back in, I think it was 2018, to 30%. And I can see it climbing to 40%, 50%, 60%. As the company matures, as our portfolio continues to deliver, as we see some of the optionality in our portfolio come into play, I just see us eventually having a much higher percentage of that cash flow going back to our shareholders. And sort of coming up to a sustainable equilibrium there, we're probably a little bit more focused on yield and returning capital back to shareholders but always keeping an eye out for those good projects to continue growing the business. Just to expand on what Bill said, if there's anything that I would say, we started this company 15 years ago, and I spent the first 7 years trying to teach everyone what a stream was. That's not the case anymore. That is not the case anymore. Every CFO in the mining industry understands what a stream is. And if they have to source capital, they always have to consider a stream just because it is such an attractive form and it just needs to be compared. Everyone needs to look at it. And so I would say that as the competitive landscape in terms of competitors have stepped up, so has the opportunity set. And I just don't know of a capital project that hasn't had a stream at least considered as part of that financing side.

Okay. This is not a question I had prepared for you guys. So anybody can answer this whenever something comes to mind. But one thing that we've heard, not just at the conference so far but probably through the fourth quarter earnings season, COVID definitely affected the exploration programs for a lot of mining companies. People were prioritizing production, maybe to the point we talked about earlier about affecting production, but that was certainly a priority. And maybe drilling or exploration was -- fell by the wayside or was less available because of travel restrictions. So a common thing I hear from CFOs or CEOs that get asked about potentially streaming is, well, I don't really know what my asset has yet. We haven't fully explored it. So is that something that would be a delay? Are people reluctant at this point to sign streaming transactions because maybe they have not completed as much exploration as they would have liked to at this point in their development cycle, if they're, say, constructing a new project? Is that something that you think we need to sort of work through before people are going to be comfortable signing streams? Or is there ways around that in the contract where you can share some of that upside or something like that?

Well, Jackie, I'll jump in there. The -- and first to say, our experience has been to the contrary in terms of exploration. I have to say through last year, we -- across our portfolio, we saw a big increase in the drills turning in the ground. We got some terrific results right across the portfolio. We were exposed to Detour where they've had great success with the saddle zone, expanding that at Malartic where they've drilled out the underground there, looking to put that into production. Guadalupe in Mexico, Duketon in Australia, which post-Island Gold, where they had great success expanding the underground. In our development portfolio with Valentine Lake, they keep having great success with [indiscernible] [ creek ], terrific results. So I would say, in this environment, one of the things that was able to continue was exploration, and that's certainly driving huge organic growth across our portfolio. I'm sure it's the same for Randy and Bill. The -- but on your question, so more of the impact that we had seen was capital projects. Case in point was Candelaria where they, at the start of the year last year, were looking to finish their mill expansion project. But with the onset of COVID, they just couldn't get the specialists, consultants in who would have been installing some of the components around that capital completion. So that was a sort of project that got put off. By the end of the year, they were able to get people back in again. They've completed that project, so they're now up and running. But in my mind, what we've seen is probably capital projects delayed. My hope is that now with COVID over, you see that resuming. So I think there's opportunity in all of that.

I guess it's that specific. Yes. It's a good point. If there's already drillers on the ground, maybe the drill programs are already still very well. Sorry, does anybody else want to comment?

Jackie, I'll just say operators telling us that they haven't been able to fully explore and understand the upside of their project is not a COVID thing. It's an everyday thing. And I like an operator who says that because they believe in the property, they believe in the upside. And if someone were to tell me that's all you're going to see, it might not be a project of interest. We try to deal with those things to really 2 things area of interest. Khoemacau is a great example. We don't have an interest in the entire property, but we do have upside potential. And then the other part is the way we drop the stream rates towards the end, which basically puts more of the ounces back in the operators' side of things to incentivize them to continue to grow the product.

Yes. And Jackie, I'll add in. Whenever we value a project, we always look at the exploration potential. And we come up with a couple of categories that I'm not allowed to report because NI 43-101 won't let me, but we actually do look at that from a geological perspective to try and come up with that concept. And so obviously, the risk associated with those ounces is substantially higher than defined resources and reserves. And so they don't get valued at the same level, but I will tell you that there is a value of science to the exploration potential. All of us would tell you that's a science to the exploration opportunity and the potential on the upside. And so my usual retort back is that this is the only way that you can sell ounces you haven't found yet. So it does have a higher risk rating. And because it's at the end of the mine life, it doesn't have a significant impact on value, but it nevertheless is part of the package. When we're investing into these mines, these are life of mine agreements, and we recognize that, that does mean the reserves and the resources and whatever is found after that. And so we do our best to try and value that in the transaction, in the valuation and capture that. And it is [ the easiest ]. How often can you sell ounces you haven't found yet so?

Sometimes in the equity market, but it depends on the day, I think, yes. I'll circle back to the question of liquidity. And Paul, you have the at-the-market program, which I think both you and Wheaton have. Is that something that makes sense for you in the current climate? You have already good liquidity on the debt side. You're building up cash. Do you need an at-the-market? And the at-the-market that you have, the $300 million, you used about $20 million, $22 million of that for a transaction back in the fall. Is that a meaningful amount? Why add that part into your financing package? Why not just do the whole thing with debt?

So Jackie, the -- overall in terms of our philosophy, we're an investment company. We raise the capital and then look for good opportunities to deploy it, and we've always had good opportunities to deploy it. So our view has always been, and we've always said to our shareholders over many years, we're going to raise equity capital. We'll put it to work. Once we have generated a good return for you, shareholders, we will come back to the market and raise more equity and repeat that process. So any time our stock has done particularly well, above where we've raised equity before, we will come and raise more equity in the market. So now in the past, a lot of that had been equity raises, discrete equity raises often bought deal transactions. At-the-market has been changing. So in the last couple of years, we said, let's make sure we've got all the financing options that are available to us. We'll try an ATM, tested that program. And then our stock performed particularly well in May of last year. We were hitting new highs. So we started a second program really under that philosophy. We're able to read a small amount under it before the market turned around, and the stock has traded down. So we're not -- it doesn't make sense to use it at this stage, but it's consistent with our overall philosophy of raising capital when it's available at good prices. We know they're going to be great opportunities to put it to work.

I do remember the last time you guys did a larger bought deal. I think I was a Franco-Nevada shareholder at the time in my previous life. And I think part of the pushback or criticism is that it's difficult to raise a large bought deal when we know a transaction is coming but we don't really know what that transaction is. So is that part of the motivation? Maybe you can put an ATM and that eliminates that sort of timing issue that was maybe the case with the bought deals. Is that fair to say?

Yes, it does -- it certainly helps with that, but it all comes down to the same thing, which is there's the time in the market when you want to be raising capital and there's a time in the market when you want to be spending capital. By definition, they're not usually the same time in the market. And so the way that we can generate the most value for shareholders is do them at 2 to 3 points in time. It does mean that at times when you're building capital on your balance sheet, and some people may look at it and say that's a lazy balance sheet. We prefer at that date -- that way. We want to make sure that we have -- can maximize the amount of capital available to us so that when capital is scarce in the market, that we can put the most amount of capital to work.

Makes sense. I'm going to go back to Bill. I'm going to ask him a question about something you mentioned earlier, the difference between hitting single hits versus home runs. Is asset concentration or portfolio concentration something that you think about? Is there intentional avoidance to concentrate too much of your portfolio to a single asset or jurisdiction or counterparty or any of the above? And so it's a more diversified approach to what you're sort of trying to put together?

Yes, absolutely. Our -- I think our top 5 revenue producers are something like 60% of our revenue. And Milligan has been over 20% for some time. And we all know that when Milligan sneezes, we catch a cold. And so one of my goals really is to get -- to diversify that top end of the revenue base as much as possible so that -- as I think Randy alluded to, sometimes you have one asset that's off and then another one comes and picks it up. Well, it's a little bit harder to do when you've got 5 or 6 big assets and then the other 40 -- the other 34 producing properties that we have, I can't make that up. So concentration is sort of top of mind for us right now. We'd love to reduce it so that if one property falls out in a quarter, it's not that big a deal.

Is commodity exposure -- that will be a different issue, though. Obviously, you're not worried about concentration to gold or to certain commodities. Is that fair to say?

Yes. We're a gold company. In fact, I'd like to increase my concentration in gold. As I always say, if I've got 5 projects I'm looking at and 3 are gold and 2 are silver, we will look at the 3 gold first. That's the name in the company and will always be a focus.

That makes sense. So I'll switch back to Paul. So we've been seeing in the base metal market very strong prices for copper, zinc. Obviously, the precious metals have been strong for a while now, gold and particularly silver. Miners are all earning strong free cash flows. So do we see a -- Paul, do you see a different shift from the traditional growth areas into new business areas as the miners are cash-flowing, as they maybe have other available financing options that you talked about earlier? Is there new business models or new forms of streaming deals that may be something for your future, do you think?

We're always flexible, Jackie. I think the beauty of all of us is we're not lenders. I think we don't -- our model doesn't fit in the box in terms of the form of financing we provide. We stop more philosophically. Our objective is trying to provide low-cost flexible financing to operators so that both they and we can be successful over time. So we've got the latitude that, that can take a lot of forms. And often, we sit down with them and say, here's a proposal, but we're a lots of ways to skin a cat. But if there are elements of this that don't work for you, let's find a way that achieves your financing objectives. So very open to being flexible within that basic construct of what we are trying to achieve. In terms of commodities, as I said earlier on, it's the -- for us, the focus always starts, what's the resource? Is this a great resource? Are we comfortable in the economics that we're certain that we'll get our money back? And what do we think the upside is? So it starts with that rather than the commodity in particular. So outside of gold, which is always the focus, we're very open to all the other commodities, provided we can get a good quality resource and expose our investors to create a resource upside. In the last year, spent a bunch of time looking at those other commodities. I got to say, in this current environment, we're always trying to be countercyclical. And the cyclical commodities are doing very well. So in a way, it's a blessing. It means probably the most attractive opportunities are in gold and precious metals, which is straight down the fairway, and that's where our focus will be over the next while.

Sounds good. And I'll ask Randy the next one. We are seeing more entrants in the space. I think Bill maybe mentioned earlier some small-cap royalty streaming companies. More focus on the royalties I think we're seeing from the smaller entrants these days, buying packages of royalties from producing companies or whatnot. Do you see a shift in the market, in the availability of products, investment options for yourselves at your larger level? Do you have any temptation effort to move more into that royalty model? Or do you still think that there's enough opportunity in the streaming side? It just sort of feels like the trend has kind of shifted. I was just wondering if that's something that you're seeing at the larger level as well.

Yes. Look, I'm not sure that, that trend is real. I think what you're seeing is a lot of existing royalties that are trading. They're already registered. They've already been filed. And I think just the track record that we've seen over the last 15 years since we created the streaming model has sort of highlighted the strengths of the streaming model versus the royalty. It allows typically a much larger scale deal. It has a lot more flexibility. Just to reinforce Paul's comment, the flexibility that a stream has in terms of it being a contractual relationship between parties as to how do we help this asset grow, how do we help this project proceed and move forward. So it's just -- it's got a lot of positives to it compared to the traditional royalty, which is typically just registered on land and doesn't have the same strength of relationship between the parties. Streams just have greater flexibility and greater -- and then -- and they actually deliver better value on a per ounce basis. And so I just -- I think that's one of the reasons why streaming has proven to be successful. And why all 3 of us, the bulk of our revenues do come from streaming transactions versus royalties. That being said, there's a lot of royalties around the world. And when it comes to earlier-stage projects where you can't quite get a handle on what the project looks like, for some reason, a royalty is the more preferred approach. We're just latching on and say, well, okay, 1% of whatever comes out of this property is worth this much. And we've obviously had a look at those royalty packages that have been offered up. We're a bit surprised at what's being paid for them, but this is a very strong business model and every time you have success in any business, there's always going to be people that want to ride that wave. And I think that that's what we're seeing is that a lot of companies are looking at it from that -- or a lot of people are looking at it from that perspective of starting up their own entities, of trying to build that foundation. We did start as a streaming company, but both Royal Gold and Franco started off as royalty companies. And you can see the success that they've had, that all started with royalties. And so it's not a bad place to start by any means. But I do really think that streams just are the way of the future in terms of having that stronger connectivity, that stronger -- that more -- that team approach. I go back and look at 6 out of our last 10 transactions were with existing partners. And it's because we have good strong relationships with those companies because we focus on doing this. We've gone back and modified probably about 6 or 7 of our streams because, again, the overlying mantra we have is that the stronger our partners are, the stronger we are. And so if there's ways that we can help that company grow stronger and we wind up getting a residual benefit from that, and so that's that inherent flexibility that I think you get from that partnership, from that relationship that you get out of the stream. So not looking at any royalties. We don't expect to go into that space. We do look at those portfolios when they come up, but it's usually very, very early stage projects. And of course, it's royalties that have existed and are being sort of traded around and such. There's not a lot of new royalties in today's world.

No, that's fair. Not new royalties, but royalties that are maybe becoming publicly available or available for purchase, I guess, would be a better way to phrase it, yes.

Exactly.

It looks like we're right out of time. Just before I let you guys go, I'm going to mention to the audience that if you missed it last night, you can catch on the replay. Randy Smallwood competes on CEO Jeopardy and raising money for very worthwhile charities along with colleagues, [ Tom Palmer ] and [indiscernible]. So please tune in if you missed that last night. It's worth a watch. And thank you Paul and Bill and Randy for joining us for this session. I appreciate your time. Thank you. And best of luck at the rest of the conference.

Thank you, Jackie. Thank you, BMO.

Thank you, Jackie.

Yes. Thank you all.