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

Hello, and good afternoon, ladies and gentlemen. My name is Liz Culley-Sullo, Vice President Media. On behalf of everyone here at Renmark Financial Communications, Inc., we want to thank you especially those of you joining us from New York and surrounding areas. It gives me great pleasure today to present to you Royal Gold, Inc. Trading on the NASDAQ Exchange under the ticker symbol RGLD. Presenting to you today is Alistair Baker, Vice President, Investor Relations and Business Development. Alistair's presentation will last just about 30 minutes to which point, there will be a live question-and-answer session that will follow. [Operator Instructions] Your questions will be curated by me, your moderator for today. and I will be reading them to Alistair following his live presentation. And now Alistair, without further ado, I hand the floor over to you.

Great. Well, thank you, Liz. Thanks, Renmark, for the opportunity to present again today, and thanks for everybody for joining. I will be making forward-looking statements during the course of this presentation. So please make yourselves familiar with the language on this slide, Slide 2, that I'm currently showing in the presentation. Now before I start in with the kind of the formal presentation, I will make a few comments on our fiscal 2021 results, which we released early in August. We had a fantastic year. Revenue was a record, cash flow and earnings were also a record. Our revenue was $616 million, cash flow of $407 million, earnings of $303 million, and each of those was up very strongly over the prior year period. And that was due to, first of all, stronger metal prices across the board, but also very good portfolio performance, and that was across the portfolio. So we're very pleased to see that consistent performance driving our financial results. Couple of things that also happened in 2021 that are worth noting are -- we're changing our year-end, and we have always had a June 30 year-end. We're moving to December 31 as of this coming December. And hopefully, that will allow you to make easier comparisons to some of our peers and some of the other investments that you look at. So that's big news for us. Also during the year, it was a very significant year. At the end of the year, we got very busy with transactions. We announced 3 transactions that we're working on towards the end of the year. A couple closed before and one closed after the year-end. But I'll go into those in a bit more detail in a few minutes. And then finally, as we always do, we increased our dividend during the year after the 20th consecutive annual raise, and I'll mention that in a bit more detail in a moment and get to it as well. So we -- in short, we fired on all cylinders in 2021, and we're in a great position to start 2022. So I'll start on Slide 3 now, and I'll just explain Royal Gold at a high level. And those of you who know us, this will be old news, but for those who don't, this should explain the company in a few short bullets. We're a high-margin precious metals business, and we generate consistent cash flows. We've been in the business since the mid-1980s, and we just celebrated this past summer, our 40th anniversary on the NASDAQ. Our business model provides exposure to precious metals without many of the risks that come through investing in operating companies. We have 2 operating segments -- sorry, my phone is going off. 2 operating segments, and streams comprise about 70% of our revenue and royalties provide about 30% of our revenue. But both provide us the same thing, and that's the opportunity to invest in the top line production from mining assets. We have a diverse portfolio of about 200 properties, 41 of which are in production or were in production at the end of June and 85% of our revenue comes from precious metals. 75% of that revenue comes from gold. Our market cap of about $7 billion in employee count of 28 employees, makes us a very efficient business model, and I'll explain that in a bit more detail as well. And then finally, we have a strong balance sheet. At the end of June, we had access to over $1.2 billion of liquidity, which positions us very well for the market we see ahead of us today. So moving to Slide 4. I've already spoken to some of this, and these are our core attributes. But there are 3 things that here I really want to highlight. First is our business model is designed to provide optionality to metals prices and reserve growth without the ongoing capital and operating cost commitments that operators have. We have a very experienced technical and commercial team. And when we look at new investments, we're always looking for those investments that can provide upside over the longer term. Secondly, when we think about our business, we think in terms of per share metrics, we aim to fund our growth using internal resources. So it's cash, operating cash flow and it's our revolving credit facility. And we look at those first in equity as the last source of potential funding. And the whole idea is to show per share growth to our shareholders. And then finally, the last thing I really want to drive home here is our commitment to our dividend. We have paid a dividend since 2000. We've increased it every year since. And that's unique in the precious metal sector. Now moving on to Slide 5. This demonstrates why we think we're a good investment for those who are looking for conservative exposure to precious metals through an equity. On the left-hand side of this slide, you can see we've got a beta of 1.77 to gold. That's over the last 10 years. So we have excellent leverage to gold. On the right-hand side, you can see how our share prices performed and I've gone back to the beginning of the GDX in 2006 to start this measurement. But we've performed better than the gold price and the GDX index as well as general market indices over that period. So a very good share price performance over the longer term. Now Slide 6 here shows a little bit of information from the World Gold Council on gold. And this is -- it's beyond the scope of this presentation and go into too much detail on gold, but there's a lot of information on their website, if you were to have a look at very well done research, easy to read, easy to understand. They've got some very good stuff on there about gold. But in summary, Gold is a unique strategic portfolio asset. And a portfolio provides diversification that can act as a hedge against market risk, currency deflation and inflation generally. It's also very liquid. And if you separate gold from other commodities, and it's often lumped in with the commodity basket, it's actually provided very competitive returns over time compared to other asset classes and has done that with lower volatility. Gold has done relatively well recently during this period of low interest rates and the price has moved in line with interest rates pretty closely. And over the long term, Gold has actually done very well as money supply has increased around the world as well. So if you think about the macroeconomic environment that we're in today, I think it makes sense for everybody to consider gold as a portfolio investment. Now there are different ways you can look at gold. And on Slide 7 here, we've tried to differentiate ourselves from the alternatives. And the important thing to note is that we try to provide exposure to gold and exposure to optionality while reducing the risk of gold investments through owning a diverse portfolio and also without exposing ourselves to direct operating capital cost risks. There are other ways you can invest in gold. You can buy the physical metal, but physical metal does not provide upside and it does not provide a dividend. You can also invest in junior companies or senior companies, and they will certainly provide leverage to gold, but they'll also provide exposure to operating capital cost risk. So I'll spend a couple of minutes on the next topic, which is optionality and efficiency in our portfolio. So this slide here, Slide 8, really shows the key to our business model, and that's providing optionality to reserve and resource growth. And there are 2 examples here I've shown on this slide. We've got PV, which is an asset in the Dominican Republic. We have a gold and silver stream on this asset. It's operated by Barrick. We're exposed to 60% of the assets through Barrick's share. On the right-hand side is Wassa, and this is a mine in Ghana that is operated by Golden Star. We made both of our investments in these assets in 2015. And today, in both cases, total reserves and resources are higher than at the time when we made our initial investments. And that is in addition to the 6 years of cash flow and stream deliveries that we've received from both of these assets that have allowed us to recover in the case of PV, 60% of our investment. In the case of Wassa, almost 100% of our investment. And today -- or at the end of 2020, when these folks put out the reserve and resource statements, there are more reserves and resources ahead of them, and there are 2 very interesting expansion projects at these assets. At PV, there's an expansion project that's underway to maintain gold production levels at 800,000 ounces a year on a 100% basis and also expand tailings facility -- expand capacity, which could extend the mine life to the mid-2040s. At Wassa, the team there has done an excellent job of looking at resource potential, and they've come up with a plan for mining resource houses that could add 11 years to an existing 6-year reserve life. So these are both -- in both cases, they're expansion projects that could expand production and extend the mine lives. And Royal Gold doesn't have to put any money into this. We get exposure to the upside without having to pay for it. So really, it's the exploration, the production upside that's key when we look at new opportunities. And whenever we look at something, it's got to have those 2 characteristics to fit into our business. So on Slide 9, I'll talk about the efficiency of our business model. As I said at the outset, we have 28 employees. And last year, we produced over $600 million of revenue. And our market cap today is just less than $7 billion. So on a per employee basis, we compare very well to other large mining companies, precious metals companies and other companies that are household names and those who are thought of as being the most valuable companies in the world. So it's a very efficient business model. And on Slide 10, looking at our margins, our low employee count really means that we have a low fixed cash G&A, which, obviously, contributes to our efficiency. Our EBITDA margin in 2021 was 80%, and our G&A was about 4% of revenue. And our G&A is made up mostly of salaries, professional services and office rents and things that don't tend to move quickly with inflation. So we don't expect that inflation will cause significant risk to our margins. And just to drive this point home a little bit further on Slide 11, I've shown here the different cost structures of Royal Gold and a typical gold -- the average gold mining operator. And you can see on the right-hand side of the chart, producers are exposed to inflation and input costs, and that could be through labor, energy, other site costs, consumables and things that tend to -- there are things that tend to rise when commodity prices rise. Our G&A, as I said, it's pretty fixed. It's salaries, it's consulting services and resources that we use to help us as a listed company. Office rents, things like that, that typically don't respond to short-term price increases. So our margins are much less exposed to inflation pressures. And really, it's a result of not being exposed to direct operating and capital costs. Now on Slide 12, I'll talk about our portfolio and what drives our performance. And at the end of June, we had over 40 assets in production and 150 assets at various stages of development. And you can see from the map that our portfolio was weighted towards lower risk and more mining-friendly jurisdictions. The principal properties that are called out in the right how side of this page are the larger portfolio of assets that really provide the bulk of our revenue. And then when we look at diversification on Slide 13, in diversification of revenue, we are very well diversified. So obviously, that provides stability. Our largest country exposures in terms of revenue are Canada, the Dominican Republic, Chile and the U.S.A. and all of those are arguably mining-friendly jurisdictions. Our revenue contribution is from 41 mines, and our portfolio breadth compares very well to operating companies. It's the revenue diversification that really helps us avoid exposure to single asset underperformance. And we saw that at the beginning of COVID when operations were temporarily curtailed or there were slight delays in production at various assets, but our overall revenue was -- remained strong. And the third thing to note here is that and it's less important today because base metals prices are relatively strong. But our underlying assets, the assets that we're invested in are predominantly precious metals. So we're not relying on base metals fundamentals, it's for the viability of our precious metals revenue. Now in our portfolio, you can see that on Slide 14, the portfolio spans the various stages of mining project development. And as I said, we have about 150 assets that are in various stages of nonproduction. So that's -- they're in exploration or in evaluation or they're in development. And we would expect the potential for organic growth from any of these assets that advance up through this triangle to production. And there are examples of this, I'll mention in a moment, but King of the Hills and Bellevue Gold are great examples of these. They've been in our portfolio for over 10 years, and they are getting closer and closer by the day for first revenue in the next year or 2. So this is the organic growth potential that's inside of our portfolio. Now to continue on this theme, I'll just -- I'll quickly talk about some of the catalysts that we see in our portfolio from various assets today. We see the potential for mine life extensions and production assets at several assets that are already in production. So they're already contributing revenue to us. We're just expecting that will either increase or get extended. I've already mentioned Wassa and PV, where there are significant projects underway. But at Peñasquito, which is about 8% of our revenue in 2021. So they've been in the asset and producing since 2007. New -- pardon me, Newmont acquired this asset from Goldcorp a couple of years ago, and they've done a fantastic job of improving recoveries and generally operating performance at the asset. So its production is higher and more consistent than it was. But they've also invested in exploration. They've identified exploration potential around the pit that could extend the mine life to 2040. So we'd love to see that occur. Another one is LaRonde and Zone 5 at LaRonde. And this is a smaller asset. But Agnico Eagle has been doing a lot of work on automated mining techniques that could improve production levels and also maintain higher throughput rates or higher production levels through to the end of this decade. And while this is a small asset, it's one of those examples of incremental revenue growth that could occur to us. And again, we don't have to pay for this. Now if you look further down on this slide, you'll see there are other assets that aren't in production yet. And we're expecting them to become producing assets soon. And probably the most exciting of which is Khoemacau. And this is an asset that we got involved in, in 2019 to help fund development and is getting closer to final construction completion. They produced their first concentrate on June 30, and they shipped the first concentrate in July. Right now, the asset's in commissioning. And we will be giving a full update on progress in our next quarterly conference call in early November. And then if you look at the next 4 assets, King of the Hills, Bellevue, Cote and Manh Choh. These are all assets that are in various stages of development, and we expect them to start producing as early as mid-next year. But we all have -- we have a meaningful royalty interest in all of these assets. So we're looking forward to those as they come online and provide incremental growth to us in the portfolio. And then finally, the last asset I've got on here is Back River, and this is Sabina's project in Nunavut. It's a project Sabina has done a tremendous amount of technical work on. And right now, they're going through the process to find a funding solution for development. So we're looking forward to seeing what they come up with, and hopefully, there will be some positive news there. But as the current metal price environment, just generally speaking now, is pretty supportive of new mine development. So we're seeing these assets as well as others in the portfolio getting pushed forward aggressively by the operators because they want to take advantage of today's environment. So that's good for us. Now I'll go into a bit of detail on the 3 new acquisitions in our portfolio. And each of these as I go through them, you'll see that they're very well aligned with our strategy of providing gold-focused revenue, but they're also -- they give us significant potential for production and exploration upside. So I'll start with Red Chris. And this is a royalty we acquired in August on the Red Chris mine, it's a producing mine in British Columbia, operated by Newcrest. We own a 1% NSR royalty. And for those of you who know Newcrest, you'll know that they are one of the world's leaders in large-scale bulk underground mining. And they got involved in this mine in 2019. And their idea is to transition the mine from a relatively small open pit to a large bulk underground asset within the next 5 to 6 years. And Newcrest has done a lot of work over the past couple of years in advancing this program. They've done a significant amount of exploration. And they've defined a world-class deposit, it's 1.2 billion tonnes as it stands now, containing 15 million ounces of gold and 4.3 million tonnes of copper. Our royalty covers over 5,000 hectares and it includes all of the known mineralization and prospective exploration areas on the porphyry corridor. So exposure to this asset in the form of a royalty should provide our shareholders with exposure to excellent longer-term resource upside and something that we'll be producing for what we expect will be multiple decades. So moving to the 25% gold stream that we announced with NX Gold right at the end of the year. This is an operation that is owned and operated by Ero Copper. And it's a small producing mine right now, but they have an excellent and large land packages, got excellent exploration potential. And they're doing a lot of work right now on that land package to really uncover the exploration potential. We've got a 60,000-meter drill program planned for this year. And a week after the announcement of the stream agreement they came out with their exploration results, and they showed the best intercept that they've encountered at this mine so far. It was 22 grams of gold over 9 meters of thickness. And that was 10 meters outside of the 2020 resource shell. So excellence in mine exploration potential. But they also announced additional new mineralization discovered 1 and 25 kilometers away from the mine. But within our area of interest, our stream area of interest. So we're very excited about the exploration potential here. We also -- we like the fact that they have underutilized processing capacity. So the mill is currently running at about 60% capacity. So there's potential for higher gold production from this asset if euro is successful in bringing more ore to the mill. So this asset, it's in production today. We're getting stream deliveries from it. So it provides immediate cash flow. It's got excellent exploration potential, and we're very pleased with the potential upside here at this asset. And then finally, what I'll mention is a royalty that we acquired in June on IAMGOLD's Cote project in Ontario. It's a 1% net smelter return royalty. And IAMGOLD is developing Cote as an open pit mine. And IAMGOLD is expecting 500,000 ounces a year of gold production for the first 5 years, and a mine life of at least 18 years. And the project is well underway, it's about 27% complete as of the end of last quarter, and it's fully funded. First production is expected to occur late and it will be the second half of 2023. Now our royalty here is on the Chester 3 claims, which you can see on the map in the blue outline. And we estimate that, that covers about 70% of the 7.3 million ounce reserve. And we also have royalty claim areas to the north in -- or sort of to the east and the northeast of the main deposit. This royalty will give us exposure to a large and long life project in a great jurisdiction. So we're very pleased to have this in the portfolio as well. So with that, I'll switch gears a bit and talk about ESG. So while our business model does not allow us to have direct operating control of assets, ESG is a very important part of our business. We have to invest for the long term. So ensuring that the sustainability of the assets that we invest in is really important when we do our due diligence. And when we do our due diligence, we look at the environmental and social factors to make sure that management teams will be able to continue operations sustainably. So we look at how companies manage their relationships with host communities and with the environment generally. So it's very important to us that we have counterparties who think about this issue the same way that we do. We also build language into our transactions to ensure that operations are managed to the highest standards. And where it makes sense, we look for opportunities to help fund social initiatives at some of the assets that we're invested in. And we did that with the NX stream. We're contributing $5 per ounce of gold delivered in the stream to their social programs around the mine. And we've done a couple of other investments as well at Golden Star and PV to name a couple. None of this is new, but what we have done recently over the past 2 or 3 years is really improve our transparency around how we think about ESG and how we manage this topic. And we've seen pretty material improvements in our ratings from Sustainalytics and MSCI, 2 of the bigger rating agencies in the space. And it's quite gratifying to see the improvements. And in fact, in September, we were -- we got a rating increase from MSCI to AA. So we now stand at the top of the class with a couple of our peers in the mining sector as having the best ESG approach according to MSCI's ranking. So we're very proud of that. Now just to talk about a couple of specifics of what we've done in this area, on the E, the S and the G. And the environmental side of the E, we sponsor groups working on innovation and improving best practices in the mining industry. We're also a member of some of the leading global mining industry groups, and we endorsed the principles for responsible development that they've set for the industry. On the S, or the social, we've been very actively involved in supporting community organizations where we live and work. And so in Denver, Toronto, Vancouver and user, we have offices, we've made pretty significant donations to community groups, looking after homelessness, elder care, food security and other things that are really important for those cities. And then finally, on the G, the governance. We've got a long record and a long commitment of corporate governance best practices. And we have very strong independent board with relevant industry experience, which I think is something that differentiates us as well. Now I'll talk on Slide 21 about the market for our product. And since 2004, when stream financing started, the majority of stream investments were really allocated towards balance sheet restructuring and project development with some M&A thrown in there as well. But as you can see on the right-hand side, stream financing is lumpy, and it comes and it goes. But it's something that is actually -- you can invest countercyclically, but you can also invest at the top of the cycle. Depending on the need or depending on what's happening in the metals price environment, there always seems to be a need for capital in the mining business. So when prices are high, like they are today, people are moving project developments forward. When prices are low, like they were in 2015, people were looking to restructure balance sheets. And M&A can occur really at any point in the cycle. So we tend to have a good runway of opportunities to look at, at all times in the cycle. On Slide 22, you can see our activity on the same time line. And again, it is very lumpy. We're always busy looking at opportunities, but not all of those through -- they -- none of all of those make it through to completion. So that could be for a number of reasons. But one of them is our due diligence process. It's a very extensive process, and we're very disciplined in the way that we deploy capital. So if we see any risks that we don't like, they could be technical, environmental, they could be legal, they could be social, they could be many different things. If there's a risk that we don't like and we're not satisfied with the mitigation plan for that risk, we'll walk away from transactions, and we have done that. We feel no pressure to do transactions. And if we can't find the right opportunities, then we're happy to sit back, collect revenue, build the balance sheet and wait for the right opportunities because we know that they will come. Now on Slide 23, this gives a snapshot of our liquidity. And part of being patient, as I just mentioned, means that you always have to have liquidity available because opportunities can come to you fairly quickly. And you want to make sure that you're fully funded for those things if and when they come to you. At the end of June, we had, as I mentioned before, $1.2 billion available on between our cash balance and our revolving credit facility, which positions us very well for the marketplace we see today. At the end of the quarter -- after the end of the quarter, sorry, we drew $100 million on our revolving credit facility to finance the recent transactions that I talked about, but we still have $900 million left. Now what we plan to do with that $100 million balance is to pay it down over time from cash flow. And we've had a very good track record of doing exactly that whenever we've had a balance outstanding on our revolving credit facility. We're very focused on maintaining a strong balance sheet. And so we prioritize our use of cash towards debt repayments, dividends and new business opportunities. On Slide 24, you can see a 20-year history of the way that we've allocated capital and the way we've grown. And it's really -- as I said at the outset, this is all about providing accretive growth to shareholders. And since 2000, we've grown revenue by 60x, operating cash flow by 100x. And that's far outpaced the increase in our G&A costs. And there are 3 things about this that I really want to highlight. First is our revenue growth far exceeds the increase in our G&A expense. So that illustrates the scalability of our business. Secondly, our revenue growth was not dependent on metal prices. We added volume during this period, and we added that volume accretively. And finally, we financed most of that growth through -- without issuing a significant amount of shares. So if you look at our share count that increased 4x over that period relative to the numbers that I just said. We are one of the founding members of the GDX Index, and we have the lowest share count in the GDX Index, and it's something we're very proud of because it shows discipline, and it shows per share improvements to our shareholders. Now I'll end my formal discussion with a few comments on our dividend. And this is a dividend price or dividend history in the last 20 years. We consider return of capital to be a really key strategic objective for ourselves. And one of the attributes that really makes us unique in the precious metals sector. We paid a growing and sustainable dividend since 2000, and we've increased the dividend every year despite volatility in the gold price. As I said at the beginning, we increased our dividend in November for the 20th consecutive year. We paid out about $660 million of dividends to shareholders since we started paying a dividend. And we're the only company in the GDX that has paid an increasing dividend since the GDX was started. So that is something we're also very proud of. Now I've come to the end of my presentation, and I'd be happy to turn it back to you, Liz, to see if there are any questions.

Thank you very much, Alistair. And yes, ladies and gentlemen, we have now moved into the live question-and-answer portion for today's virtual non-deal roadshow. If you didn't get a chance to submit a question for Alistair, don't fret. [Operator Instructions] Alistair, while you were speaking, we do get quite a few questions from the audience. So let's dive in right now. Your first, a viewer is asking here, can you explain to me what the difference is between a stream and a royalty?

So we actually have a slide in the appendix of this presentation. If you look at our website, you can see that summary description. But streaming and royalty basically provide, it's the same thing, which is, as I said at the beginning, it's kind of top line exposure to metal production. A royalty is often something that is registered on title, depending on the jurisdiction. And a royalty gives as a percentage of revenue produced from a mine. So in the case of Red Chris, the 1% NSR that we acquired in August. We have just 1% net smelter return on revenue from that line. So that mine produces in order of revenue it's copper, it's gold and silver. So we get 1% of that amount would be what we received. Now a stream is a percentage of metal that we actually physically receive. Royalties are cash settled, generally. But streams are settled with that physical metal. So in the case of NX Gold, we have acquired, we paid upfront for the right to acquire 25% of the gold produced from that mine. Now we pay 20% of the spot price of gold for every ounce that's delivered in the future. So they're similar -- they provide similar exposure to revenue, but their structure is different. And the structure is different there are pros and cons. But when you're looking as a counterparty, if you're a mining company, you want to raise capital, stream financing is often more tax efficient than a royalty. So that is -- we see that being where our business is expected to grow because we're at the point now where we've got lots of cash flow. We've got the capability and the resources to be able to fund project development. So that's where most of the business opportunity is coming from is in streaming. But we're always looking for good royalties as well. So I hope I've answered the question, but please have a look at that slide in our appendix and let me know if I have not answered the question, I'd be happy to take it up offline.

Thank you. And we're going to move on to another question. Still on the topic of royalties versus streams. A viewer asks here, could -- excuse me, could the revenue split get even -- ever get closer to 50-50 between royalties and streams?

Yes, it could. I mean we're looking at both royalties and streams as acquisition targets. And the last 3 deals that I just announced, 2 of them were royalties and one of them is a stream. I think if you asked me 6 months ago or a year ago where I expected our next deal to be, I would have said the majority would be streams. It really depends on what is coming up in the marketplace. I think, though -- I mean based on my -- the previous question, my answer there, I think where we see the bulk of our business development opportunities is really in streaming. That seems to be where the industry is looking for finance to come from the most. So I would expect that is where we'll deploy most of our capital. And as a result, we'll probably end up growing the streaming side of our business, and our royalty business will either stay the same or maybe it will actually shrink relative to the streaming size. But it really depends on the market and what happens and what comes to us.

Thank you. Moving on. And I'm still on the topic of royalties. A viewer is asking here, how do you make sure you receive the correct payment when you own a royalty on a portion of a deposit?

That's a good question. It's a lot of work, and we have people in-house who are very adept at managing this issue. We generally have information rights, whether it be a royalty or a stream, we'll have the right to receive certain production information. And in some cases, it's better information than others. But royalty statements are generally provided to us by the operators that detail the calculation of the royalty and the calculation of the royalty payments. And what we do is when we receive those, we will do our own analysis and make sure that we understand how those calculations were completed. And if there is the -- in the unlikely circumstance that there's a disagreement, then we have a discussion with our counterparty to understand what they're doing that perhaps is not what we expected them to do. But it's -- we use lots of tools at our disposal, including looking at operator production, information that's in the public domain. We look at the internal information that we've got. We also -- we know these assets pretty well. So that's one of the benefits of having people in-house who look after this stuff visit. We understand these assets that we've invested in. And so when we get something from an operator that doesn't look right, we generally have a good sense that it doesn't look right. We may have an idea as to what has happened that would be -- that explain the difference. But we certainly do follow it up. We're not a passive receiver of checks. We do a lot of active work on our side to verify it.

Thank you. And you just touched on it in your answer to that previous question. But on the operator side, a viewer has a question for you asking, "do the mine operators ever come to you whenever they have a decision to make concerning an asset that you've invested in?"

Well, yes, they will sometimes. I mean oftentimes, we're seen as a nonoperating partner, if you will. And so there's no obligation on the counterparty's side to come to us and explain what they're doing. In the case of stream investments that we've written, stream contracts that we've written, we often have advanced notice that something is happening to a mine, whether it's the change in life of mine plan or something material that's happening, we'll often have advanced notice is going to occur, but they don't come to us looking for approval. That's not our business. We're not actively involved in the management of these assets. But we do have dialogue with our counterparties all the time. And so it's a small business. We tend to know each other pretty well. And so often, we've got very good personal relationships. And so we'll have discussions about things that are happening. So it does occur, but there's no obligation generally speaking, for the counterparty companies to come to us to seek permissions or anything like that.

Thank you. We're going to move on and switch topics here, Alistair. A viewer asks, what producing assets do you see the most growth?

Well, I think the producing assets where we see the most growth will probably be PV in the Dominican Republic. With the expansion that's ongoing there, that will maintain production levels at a relatively high level for potentially quite a long period of time. So that's probably the most meaningful asset in our portfolio from a growth perspective, producing asset from a growth perspective. And we're very much looking forward to seeing how that evolves. Barrick has made a real commitment to advancing this project and they are -- right now, they're going through the construction of the plant expansion. They're also looking at the expansion of tailings capacity, and they've looked at a number of different sites. They're working with the government as well as permitting agencies to be able to look at, expanding the tailings facility, which will really give them the opportunity to bring resources into the mine plan and extend the mine life to the mid-2040s. When we invested in this asset in 2015, it had a very high production level for the first few years, and then it dropped off pretty significantly. So by doing what they're doing, they'll bring more ounces forward to our account and obviously improve the return significantly.

And just touching on another asset here, a viewer is asking, any news on Pascua-Lama?

No, no. Barrick has -- I know Barrick is doing a lot of work on kind of step back to first principles and they've done more work on the geology and the metallurgy. And what they have said is they're planning on updating the feasibility study and they're targeting for the end of 2021 for release of that study. But I haven't seen them make any commentary about Pascua for a few months. I think the work is probably not ongoing, but they're just not -- there's no result yet to talk about, so they haven't mentioned it. But we're certainly very curious. And if that asset comes back into their production pipeline, that would be a fantastic piece of organic opportunity that would come to us. We have a big royalty in Pascua-Lama, and it's one of the world's biggest undeveloped projects. So we'd be very interested to see Barrick push that forward.

Thank you. Moving on here, Alistair. A viewer is asking, was just curious to know where Royal Gold has seen the most interest currently. Is it still in the $100 million to $500 million range? And is it largely base metal producers looking to sell off the precious metal byproduct.

Well, I'll start with the first part of that question. I mean the range of transaction size is, yes, I'd say, it's $100 million to $500 million is where we seem to be seeing the most opportunity today. But really, it's at the lower end of that range is where we see the opportunity. And I think that's indicative or that's illustrated by the 3 transactions that we did, which were ranged in price from $75 million to $165 million. So relatively small transactions. We're happy to do small transactions as the smallest of the big 3 in this business. A small transaction of that size can actually be meaningful for us. So we're happy to pursue those things. Obviously, larger transactions move the needle that much more, but we're quite happy to be looking at that snack bracket. In terms of where the opportunities are coming from, it really runs the gamut. I think we are seeing some base metals companies who are looking at monetizing precious metals given how precious metals prices have traded. But it's really around project development. So it's around companies, whether they be base metals or precious metals looking for funding to be able to move their projects forward. So streaming is obviously, is a mainstream form of financing now. And so we get very involved in these discussions, but it is mostly project development. I think if you think back to where we have grown our business the most, it has tended to be in the countercyclical environment where you've got balance sheet stress and things like that. But in an environment like today, there's a lot of project development going on. So we are looking at earlier stage assets, not necessarily all producing.

Another viewer is asking here, Alistair, do you have any net profits interest?

We do. We don't have very many. We do. The one that comes to mind is Kurnalpi in Australia. And this is one on South Laverton, is the mine and the net profit interest is on the Kurnalpi piece. We don't have very many. And the reason we prefer not to have net profit interest. We rather have net smelter returns because those pay all the time. And net profit interest, it's -- with the accounting of what -- the accounting of how you define a profit, sometimes NPI royalties may not pay. There may be other charges against revenue that would cause them just to not be significant. So our preference is net smelter returns. And in our royalty portfolio, the majority of our royalties are net smelter returns. We have some gross smelter royalties as wells, so there are no deductions from those. And we have a handful of net value style royalties where there are special deductions.

Moving on here. A viewer is asking, what was the reasoning behind Glencore selling off their royalty on Red Chris to you, Royal Gold?

It's a good question. We -- so Glencore, their main business is not holding royalties. So they held this royalty for a long time. They got this royalty through their acquisition of Xstrata, which got it from Falconbridge, well before that. So they've held this royalty for a long time. We've known about it for a long time as well, obviously. And we've had conversations with Glencore at various times about this royalty and acquiring it. And they've never really been that interested. We happen to have a conversation with them earlier this year. And they said, oh, that's interesting. Well, maybe now it's the time to talk. I don't know what motivated them to do it, but it was not a core asset in their portfolio. And I think it was just a timing. It was a question of when we actually made our interest known more recently. And they said, oh, yes, would be worth having a conversation. And so we have that conversation, and that's what precipitated then selling us the royalty. It was not part of a wide process. It didn't run a process where they decided to sell the royalty and they called 10 or 15 companies and asked for bids, it was more of a one-off transaction, which we think we started.

Thank you. And staying on that topic, we just -- a viewer asks here how much revenue to expect -- excuse me, I'm just going to read that question again. How much revenue do you expect to generate annually from the Red Chris royalty once the block cave operations are in full production? Also, second question, to your knowledge, is the PFS on the project still on target to be released this month?

Well, I'll answer the first -- or the second part of the question first. And to my knowledge, yes, the PFS is expected to come out now. We've got 2 days before the end of the month. So it's either going to be tomorrow. I guess it could be today, tomorrow or Thursday. So we'll see, and we're looking forward to seeing that, it will be quite interesting for us. In terms of our expectations of revenue, we haven't given any dollar values for our expectations of revenue, but we did a lot of work on the project. And there's a ton of information in the public domain. This project was developed -- or sorry, it was discovered in the 1950s, and it was put into production by Imperial Metals in 2014 or so. So it's been operating for a number of years, and there's a lot of information in the public domain. We did our own analysis of what we thought based on what we could see would be a production profile for a block cave of this magnitude. And so the way that we thought about it is that we expect current production levels to continue from the open pit for probably the next 7 years or so. But then there's going to be a ramp-up into the block cave that would occur within 5 to 10 years. And we would see over 2,000 -- 200,000 ounces of gold and about 170 million pounds of copper per year, and that would go on for about 25 years or to year 25, sorry. And then after that, we probably see the block cave production come down to about double where we are today. And that would be because there -- Newcrest has made it clear that they're going to target the higher grade sections of the ore body first. And then they would -- once they've exploited the higher-grade sections and they would move on to the lower grade would be the conventional wisdom. So we would expect that they'll produce in the lower-grade portion of the ore body from year 25 to year 40, and that would probably be around double where current production levels are. So that's the -- as much granularity as we've given to the market as to our expectations. The big variable in there is obviously not the price. So I wouldn't want to give you a revenue number because I'd have to give you the gold and copper price numbers as well, which ends up having a lot of subjectivity in that. But that was the way that we looked at the resource itself, and we're quite comfortable with those projections. Now we'll see what Newcrest comes out with the PFS in the next couple of days. Guaranteed, our production profile will not be the right one. They've got better information than we do, but we did a lot of work to come up with what we thought was a very justifiable and sensible production profile for that asset.

Thank you. And moving on to another acquisition here. Does the Cote Gold royalty acquisition that was completed also include the project's potential Gosselin resource?

No. No, it does not. And so Gosselin is a little bit to the northeast of the main deposit. And we did consider Gosselin impacting the value of our royalties. So we looked at the Cote project itself as a stand-alone project, and we looked at the production profile for that project. But then we assumed that the Gosselin may come into the production profile. It is slightly higher-grade material and it's not very far away. So it could displace some of the material that's in the Cote project production profile. So we did make an allowance for it, but we do not have a royalty on the Gosselin project.

Thank you. And we're heading into your last few questions here, Alistair. A viewer is asking, what is the interest rate on the credit facility?

It's pretty low. It's about -- it's somewhere just less than 1.5%. So it's pretty low. And we're obviously, we've got a great business, we generate lots of cash, and the banks who lend to us give us very good terms on the credit facility. So it's a pretty cheap form of financing for us. And that's why we like it because we can draw on the credit facility, it doesn't cost us anything to draw. We draw and we pay the interest on whatever we've drawn. But then we can pay it back very flexibly. And so if we see periods of high metal prices and our portfolio is doing well, and we've got lots of cash flow, we'll pay that back aggressively. And so it's a very cheap form of financing. We'd much rather pay to use the credit facility and have debt outstanding for periods of time that we would to put permanent dilution into equity by issuing equity to raise money for transactions because once you issue equity, you've diluted your shareholders, and that is what we -- we want to avoid that. So that the credit facility allows us a nice flexible method for financing transactions.

Another viewer asks here. Have you provided any guidance for the balance of the year or 2022?

So we have provided guidance for the balance of the year and for the stub period because we're changing our year-end. So the stub period that we have said, it will be total GEO, gold equivalent volumes, will be 175,000 to 185,000 ounces, and that's for the July 1 to December 31 period. We have not given any guidance yet for 2022. We will do that in the -- earlier -- in 2022. With this change in year-end, we are going to start providing 1-year guidance. And for those who followed Royal Gold, you'll know that we have never done that before. So when we get into calendar year 2022 with our new December 31 year-end date, we will give guidance for 2022, the full year. So we're looking forward to being able to do that because I think it's a question we always get, and it will help the market get comfort with the way that we view portfolio performance over a longer period of time.

Excellent. And I'm sure that viewer who asked that question is also very pleased. Moving on. A viewer is asking here in a more general topic, was curious to know what your thoughts are on the current state of the precious metals sector.

Well, from a personal perspective, I'm not very happy. It's -- our share price hasn't done very well, but it's not Royal Gold specific. It's the general markets. I think the -- there's a lot going on in the markets right now. And I think there's -- precious metals have fallen out of favor. The S&P is doing really well. But there are some clouds on the horizon as well. You've got lots of debt out there. Governments are issuing debt on a regular basis. Interest rates are probably going to stay relatively low for a long period of time. And inflation who knows what's going to happen. So I think right now, there's not a lot of interest in precious metals generally. But my sense is that it's going to be an interesting period of time over the next several months to see what happens. Our stock hasn't traded at this level for 2 years. And it's quite surprising when you think about the performance that we turned in for fiscal 2021, the revenue cash flow earnings for all records and where our stock price is today, it's quite disappointing. But I think it's got more to do with the general markets and the S&P and what's happening more generally. So we'll wait and see as to what happens. I think the gold price will probably stay relatively strong. And at this price, at today's price, our business is quite healthy. So from a business perspective, it's quite good. I think from a share price perspective, it's disappointing, but we're working to try and bring interest back to the sector. And hopefully, that will bring our -- it will bring buyers into our stock, and we'll see what happens.

And your last question here, Alistair. A viewer is curious to know, what are your thoughts about today's announcement between Agnico Eagle and Kirkland Lake?

Very interesting. Two very good companies. So putting themselves together, I think we'll make one very, very good company. It's interesting to see the consolidation happening in the gold sector. If you look at the gold sector and all the different companies involved, there are a lot of companies, and some of them were pretty small. And consolidation probably should happen. And so I think it's interesting. I think what often happens is you get a merger like this and you may have a [indiscernible] a couple of others as other companies who look at the success of something like this, they may say, well, maybe it's time for us to do something similar as well. So it's interesting. What it means for us, we don't really have -- we've got a couple of royalties on assets that would be in this new combined company's portfolio, but I don't think for us, it's necessarily going to mean much. But for the sector, I think it's probably good. I think it's something that may bring, as I was just talking about in the last question, may bring interest back to the sector. Perhaps that will bring new eyes looking at the sector and they'll look at that company, but then they'll also realize that there's a lot of good value in the rest of the sector as well. So it was an interesting announcement. I wish them luck. I think it will be a great company.

Thank you for your input, Alistair. And so concludes the live question-and-answer portion for today's virtual non-deal roadshow. If you did not give a chance to submit a question for Alistair during today's session, don't fret. There's always time to do so by contacting your appropriate account manager here at Renmark. We will be happy to give your question over to Alistair as well as the rest of the Royal Gold team following today's live virtual non-deal roadshow. And now, Alistair, just before we let you go, I'm going to hand the floor back over to you for final remarks.

Okay. Well, thank you very much, everybody, for attending. I appreciate your questions, and I certainly appreciate your interest. It was great to talk to you again. I hope next time, it will be in person. New York is not very far from where I am, so I'd like to get there in person. So thanks very much. And if you do have questions, please send them through to Renmark. I'd be happy to respond. And if you want to give me a call, you can do that as well. Dan from Renmark has got on my contact information. So I'd be happy to chat with you. Thanks very much. Bye-bye.

Thank you. Once again, that is Alistair Baker, Vice President, Investor Relations and Business Development at Royal Gold, Inc. Trading on the NASDAQ Exchange under the ticker symbol, RGLD. My name is Liz Culley-Sullo, Vice President, Media. On behalf of everyone here at Renmark Financial Communications, Inc. thank you once again, especially for those of you in New York and surrounding areas for joining us for today's live virtual non-deal road show. Please stay tuned for other events in your area, maybe outside of them, of course. But until then, we look forward to welcome you all back here soon. Till then, stay safe, be well, and we will see you all next time. Bye now.