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

Hello, everyone and welcome to today's Virtual Non-Deal Roadshow. My name is Karina Tatarinova, virtual event moderator here at Renmark. And on behalf of our team, I like to thank all of you for joining us, especially those of you in Boston and surrounding areas for the presentation of Royal Gold trading on the NASDAQ under ticker symbol RGLD. The presentation will last approximately 20 minutes, which will be followed by a formal Q&A that we encourage you to participate in by clicking on the chatbox on the top corner of your screen and sending in questions. And with that, I am pleased to present to you Alistair Baker, Vice President of Investor Relations and Business Development.

Great. Thank you, Karina. And apologies, I'm having technical problems with my camera. So I'll have to do this by audio only. So I'll walk you through the presentation. And hopefully, the audio covers everything that we need to cover. So thanks, Renmark for the opportunity to present today. It's always a pleasure on these VNDRs, and thanks for everybody for attending. I'll turn to Slide 2, and just make a few comments. I will be making forward-looking statements during this presentation. So please make yourselves aware of the language on this page -- really explains Royal Gold at a high level. And in summary, we are a high-margin business. We generate consistent cash flows from precious metals. And we've been in business since 1980s. We've been on the NASDAQ for over 40 years. And our model provides exposure to precious metals without many of the risks that come with investing in operating companies. We operate with 2 business segments. We have streams that typically produce about 70% of our revenue, and royalties that produce about 30%. But both are similar and that they provide us the opportunity to invest in the top line of mining assets. So top line production of mining assets. We have a diverse portfolio. We have about 200 properties, 41 of which are in production today, and about 85% of our revenue comes from precious metals, and 75% of the revenue comes from gold. Our market cap today is around $7 billion. We have 31 employees. So it's a very efficient business model. For those who have followed Royal Gold for years, you'll remember that we've always had a June 30, year-end. We changed that effective last year, and now we report on a calendar year reporting cycle so December 31 being our year-end. And just to talk about 2021 as a calendar year. Performance was excellent. We had very good portfolio performance. And our royalty segment really did perform well during the year. Total revenue for the year with $654 million on volume of about 361,000 gold equivalent ounces. That strong performance continued in the first quarter of this year, and we had revenue of $162 million, operating cash flow of $101 million, and earnings per share of $1 even. We had no debt at the end of last quarter. And we were -- last quarter, one of the notable things was we were added to the S&P High-Yield Dividend Aristocrats index, and we're the only precious metals company in that index. At the end of March, we had $1.2 billion of liquidity, which really does position us well for the market we're seeing today. We will be coming out with our Q2 results in about 3 weeks, in the first week of August. Now I'll turn to Slide 4 here and just give you a little bit flavor of what we think are the core attributes of Royal Gold. And there are 3 things here that I want to highlight. The first is optionality. Our business model is designed to provide optionality to metals prices and reserve growth, and that is without the ongoing capital commitments that operating companies face. When we look at new investments, we're always looking for those who can provide upside over the long term. Second is we think in terms of per share metrics. We aim to fund our growth using cash on hand, operating cash flow and our revolving credit facility, and it's really in that order. And equity is the least preferred source of financing our growth. So the whole idea here is to show accretive growth to shareholders. And then thirdly, we're very committed to our dividend. We've paid a dividend since 2000, and we've increased it every year since. And as I said in the opening comments, that is unique in the precious metals sector. We were recognized for that long track record with the inclusion in the S&P High Yield Dividend Aristocrats index. Slide 5 just demonstrates why we think we're a good alternative for investors who are looking for a conservative exposure to gold. If you look at our beta of 1.8 or so, it's a gold that's excellent leverage. And that's with a relatively low beta to the general market. So very good to hold Royal Gold as part of the portfolio. We have -- and on the right-hand side here, you can see that our share price performance since the founding of the GDX has been very good. We've beaten the gold price, we've beaten the GDX index itself, which is really an index of our competitors. And then general market indices, we've also beat over that time period. Now I'll make a few comments on gold, on Slide 6. And I always put it in a plug for the Royal Gold Council. They do a very good job of putting timely research on their website and on the gold price as well as the gold market. I encourage anybody who's got any interest in gold to have a look at it. It's easy to read, and it's got some good stuff on there. But in summary, I think the way that we think about gold is,it's a unique strategic portfolio asset. Within a portfolio, it provides diversification that could act as a hedge against risk, whether that be market risk, currency risk, inflation, geopolitical risk. I mean you name it, it's a good hedge. It's a very liquid market, the gold market. And when you separate gold from general commodities, it has provided very competitive returns over time compared to other asset classes, and has done that with lower volatility. The gold price has done well over the last few years during this period of ultra-low interest rates. Very recently, it's fallen a bit. It stumbled as a result of the U.S. dollar strength, rising interest rates that we're seeing. But it's also general markets that are weak. I think gold is getting sold off because commodities are getting sold off generally. So I think you need to separate the short term from the long term. When you think about gold and its recent performance, it's actually done very well this year. It's one of the best performing assets -- asset classes through the first half of the year, and has delivered positive returns with lower volatility. So in the face of what's happening, the general markets has done well. So I think in summary, with interest rates increasing, but also high inflation and increased money supply and heightened geopolitical risk. It's an interesting time to add some gold to a portfolio if you don't already have some. So there are different ways, and I'm turning to Slide 7 here. There are different ways you can invest in gold. And this slide attempts to show how we are positioned. We provide exposure to gold and optionality, and that's while we reduce risk through owning a diverse portfolio that has no direct exposure to operating capital costs. And that is very important in today's high inflation environment. And I'll get to that in a moment or 2. There are other ways you can invest in -- and get precious metals exposure. You can buy the physical metal, you can buy an ounce of gold. But the thing about ounce of gold, it will always be an ounce of gold, and it will never pay you with dividend. You can go a little bit further and you can buy equities and operating mining companies or junior development companies. Those will provide deleverage to the metal, but they will also give you exposure to operating costs and capital costs and the risks associated with those. So I'm going to turn to Slide 8 here, and I'll spend a few minutes just talking about optionality, efficiency and our portfolio in general. And Slide 8 here shows really the key to our model, and that is providing optionality to reserve and resource growth. I've got 2 assets shown here, 2 kind of simple studies. We've got PV, Pueblo Viejo and Wassa. And those are both investments we made in 2015. And in both cases, total reserves and resources today are higher than at the time of the initial acquisition of those stream interests. And that's in addition to production that's allowed us to recover 70% of our interest at PV and 110% of our interest at Wassa. I shouldn't say interest, I should say, initial investment. So 70% of PV and 110% at Wassa. But there are growth projects underway at both assets. The PV, Newmont and Barrick, the operators are looking to complete an expansion to maintain gold production levels and extend the mine life to the mid-2040s. At Wassa, there's a new resource that's been outlined that could extend the mine life an additional 11 years beyond the existing reserve life. So the interesting thing here is that in neither case is Royal Gold required to fund the capital or invest any further to get exposure to this upside. We've already made our investments, and this is growth that we don't have to pay for. So the exploration and production upside that's really important and key when we look at new investment opportunities, and it's the key feature of our business model. So turning to Slide 9 here, the efficiency of our business model. We have 31 employees, as I said. Last year, we produced $650 million of revenue, and we have a market cap of about $7 billion. So on a per employee basis, you can see how efficient our business model is. We compare very well to other large mining companies but also other more generally well-known companies in the marketplace. And on Slide 10, you can see how that -- you see some of the metrics around that. Our low employee count really means that we have a low fixed cash G&A, which further contributes to our efficiency. Our EBITDA margin in 2021 was 80%. And our cash G&A was 4% of revenue. Our G&A is low, and is mostly made up of fixed costs. So cost inflation month-by-month should not be a significant risk to our margins. And in fact, in the first quarter of this year, we maintained our margin, and actually grew it slightly. We were at 81% versus 80% for the full year of 2021. Now on Slide 11 here, this shows cost structures of us and the average gold producer. And you can see that we're insulated from cost inflation compared to the average gold producer, and gold producers are exposed to inflation in their input costs. So labor, energy, consumables and other site costs are really what make up there their cost structure. And many of the things that they're exposed to are -- their costs increase when commodity prices increase. So obviously, when the oil price goes up, energy costs go up for the mining companies. Whereas our G&A costs are mostly steady. They're made up of salaries, services, office rents, things that are typically not subject to short-term increases. So our margins are a lot less exposed to inflation pressures because we're not directly exposed to operating capital costs. So I'll turn to Slide 12 and just talk briefly about our portfolio. And you can see on this map that our portfolio is weighted towards lower risk and more mining-friendly jurisdictions. We have a number of properties, we call our principal properties, as I've shown on the right-hand side here. And those are the larger portfolio assets within the company that provide the bulk of our revenue. And if you look at our portfolio on Slide 13 here, just looking at diversification. It is a well-diversified portfolio. So that provides stability to our financials. And if you look at the different metrics here that I've shown, you've got breakdown by geography. So our revenue is highest from Canada, the Dominican Republic, Chile and the USA. So those are minor friendly jurisdictions. Moving across, if you look at the revenue contribution by mine, you can see that we've got 41 recent mines, as I said, in the opening comments. And that portfolio breadth really compares well to mining companies, and revenue diversification across those assets really means that we reduce our exposure to any single asset underperformance. And then finally, on the right-hand side, you can see that the revenue-by-mine type is a bit different than some of our competitors. Our underlying assets are approximately 80% precious metals assets and about 20% will be base metals assets. And that's important when you think about base metals fundamentals and how important that is to our business model. It's not an issue right now, but it has been in the past when copper prices, for example, jeopardized, continued operations. On Slide 14, you can see our portfolio here, and how it spans the stages of mining project development. We have 144 assets that are not producing today, and those are at various stages of exploration, evaluation and development. And we would expect there to be potential for organic growth from any assets that advance through the development pipeline to production. King of the Hills and Bellevue Gold are 2 good examples of organic growth from projects that have been in the pipeline for a long time. They've advanced over time, and we're expecting revenue from both of those in the very near term, and they've been in the portfolio for well over a decade. So things that are quietly advancing in the portfolio can provide organic growth to us. Now on Slide 15, you can see that -- to continue on the theme of organic growth, you can see some of the key catalysts that we see from various assets in the portfolio. In the blue, you can see assets that are producing today. And we see potential for mine life extensions and production increases at several assets. Khoemacau is our newest producer, and we expect revenue to grow from that asset as the operation ramps up to full production. Mount Milligan, we're expecting an updated life of mine plan any day now really. -- That we'll talk about the longer-term production profile for that asset. I've already mentioned Wassa and PV where there are projects underway to extend mine life. So there is good organic growth from within the producing assets. But then if you look at some of the other assets in the portfolio that are not yet producing, they are -- we're expecting to see some first contributions from revenue from a few of those. King of the Hills is the most near term and actually King of the Hills is in Australia, where we have a 1.5% royalty. They produced their first gold in June. So just a few weeks ago, and they're ramping up to full production over the next several months. And then looking down the track a little bit further, we're expecting to see first revenue from Bellevue, Cote and Manh Choh, which are development projects where we have significant royalty exposure. And then further down the track still, we see Mara Rosa, another project in Brazil where we have a royalty. They've got a new owner who has talked about getting that project in production in 2024. And then Back River, which is a little bit further down the track, Sabina Gold and Silver, the operator there has recently announced a construction funding package. So all of these things are expected to start producing over the next several years. And for every 1 of them, we've already made our investments, and any revenue that comes in will be further organic growth to our portfolio. So on Slide 16 here, I'll go through very quickly, 4 assets. We've added to the portfolio recently that have attractive potential for revenue growth. The first on the left here is Khoemacau in Botswana. I've already mentioned that we got involved in 2019. We own a 100% silver stream here. It's a copper, silver project in Botswana. We are involved at the beginning of development, and we help fund development of the project. The project has started delivering silver, and it's ramping up to full production by the fourth quarter this year. This has got a 20-year mine life, and total silver production to our account at full production will be somewhere between 1.8 million, 2 million ounces a year. Moving over to the right to the next one, Red Chris. This is an operating mine in Northern British Columbia. We acquired a 1% net smelter return royalty on this mine last year. The operator is Newcrest, and they're doing a lot of work to transition the mine from a relatively small open pit to a large bulk tonnage underground operation in the next 5 to 6 years. And we're receiving royalty revenue from this today while Newcrest is advancing on developing the multi-decade potential. Moving one over to NX Gold. This is a project in Brazil as a producing mine, and we have a 25% gold stream. The operator is a Ero Copper. And Ero has been doing a lot of work on exploration, and further defining the upside of this mine. And so they had excellent exploration results at the mine, near the mine and then a little bit further away, but within our area of interest. And the mill here is running at about 60% capacity, and they're looking at ways to fill that mill and increase gold production in the short term. So that's -- again, it's -- we're receiving gold revenue from this asset today while the operator is working on developing the exploration potential. And finally, on the right is Cote Gold. We have a 1% net smelter return royalty on this. We acquired it last year, and this is on a project that's being developed in Northern Ontario. It's -- it will be an open pit mine, and the operator is IAMGOLD. They're estimating gold production of about 500,000 ounces a year for the first 5 years and a mine life of at least 18 years. Project is about 49% complete, and they're targeting first production in late 2023. And what this does is it provides us exposure to [indiscernible]. So 3 of these 4 are providing revenue to us today and they still have -- they will provide, we expect further exposure of production and exploration upside. Now I'm going to turn to Slide 17 here, and I've got 3 slides on a transaction that we announced this week, actually on Monday. So I just want to walk through with you. We announced the acquisition of a company called Great Bear Royalties Corporation, and that company really has 1 asset, and that is a 2% net smelter return royalty on the Great Bear project in Northern Ontario, is being operated by Kinross. And this transaction squarely means what we're looking for when we look at new investments. And that is -- we think about things in terms of the 3 Ps, we call them. It's people, place and project. So in terms of the people, this is a mine or a project that's operator by Kinross, who's a well-capitalized and experienced gold producer. And we know them well. We did -- when we sold a property to them in the last couple of years, which is now called Manh Choh. And so we know them well. And we're very comfortable with the way they approach projects and development. So that we check the box there on people. Move to place, this is located in Ontario in Canada. It's near a town called Red Lake, which is an established mining jurisdiction. It's a very mining-friendly area, and it's a low-risk jurisdiction when it comes to developing mining projects. So clearly a check mark in that box. And then finally, when we look at the project, this is one of the most interesting gold projects that's been discovered globally in the past several years. And Kinross is talking about a production level here of 500,000 ounces per year plus, and that could be for multi decades. This is an extremely interesting exploration project. It's early stage, but it's got some very interesting characteristics. And if you look at Slide 18, this shows -- this map shows the extent of the property and the proximity of the project to the town of Red Lake as well as power and road infrastructure. The royalty itself, the royalty ground, it covers the entire 91 square kilometer property package. And it's a life of mine royalty. So it has no step downs or caps that affect the royalty rate. But it is worth noting that at closing, we will provide Kinross the option to acquire 25% of the royalty at the cost that we were acquiring this. And this is compensation for a fairly unique arrangement with Kinross. Normally, in a third-party royalty acquisition, we would never have access to the operator to be able to do our due diligence. But in this case, we did, we had an agreement with Kinross to review certain nonpublic technical data and have access to their technical staff. And that allowed us to independently validate their assumptions and understand how they think about the project. And for us, that significantly derisks the project, and it was a unique feature of this transaction. We think it will be allowing them to buy down the royalty by 25% is a good compensation for us derisking in our view, the project. On Slide 19, there's a lot of wording on here, but this is the key transaction terms. So I'll summarize it by saying this is a cash offer. We'll fund it using cash on hand. So there will be no dilution to shareholders, and our shareholders will be able to experience a full upside on a per share basis and exposure to this project. It's worth noting that the Directors and officers of Great Bear have also signed support agreements, and we have the typical deal protections in place, and there is a break fee associated with this transaction. Transaction is expected to close in the third quarter of this year, maybe the early in the fourth quarter. And we're very pleased with this. It will layer in long-term growth scale and optionality to our portfolio. And we think in the next several years, it's going to be something that is a real standout in the portfolio. Now on Slide 20 here, I'll switch gears altogether and just talk about ESG. And our business model does not allow direct operating control, but ESG is definitely a core part of our business. And we invest for the long term. So ensuring the sustainability of our investments is very important. When we do our due diligence of new transactions as well as when we do our ongoing monitoring and management of assets that are in the portfolio. We build language into our transactions to ensure that operations are managed to the highest standards. And where it makes sense, we're always looking for ways to help operators fund initiatives around their assets or where invested that could have a positive impact on communities. We've done a lot over the last several years to improve the transparency to the market of what we do with respect to ESG. And we're pleased to see a material improvement in the perception and recognition of those practices. And I've got MSCI and Sustainalytics shown here because they are 2 influential ratings providers in our sector. And we're top rated vice Sustainalytics, and we're AA rated by MSCI. We initiated -- or sorry, we published or issued our inaugural ESG report in April this year and is available on our website. So we're very proud of this document. It provides a lot of background on our ESG strategy, and it provides a foundation for further reporting in this area, which we think is quite important to our business model. Now Slide 21 here just shows what we've done in each of the ES and G areas. We are an engaged corporate citizen. We're very active in sponsoring innovation and best practices in the mining business. We donate to charities where we live and work. And when it comes to governance, those who have followed Royal Gold will know this. We've got a long record commitment to corporate governance with best practices. We have a very strong and independent Board, and that Board has relevant industry experience, which I think is a differentiator for us. On Slide 22, I'll talk about the background of the market for our financing product. And since 2004, when stream financing started, most stream investments have been allocated to balance sheet restructuring and project development, and a smaller proportion has been allocated towards M&A activity. And on the time line, you can see that stream financing is quite lumpy. And while the uses of stream financing depend on the state of the mining industry, mining is a capital-intensive business, and there's always a need for new capital in this business, which provides us a consistent opportunity flow. Those opportunities are not always the same size, but we always see opportunities. So it really depends on the state of the markets at any given time. On Slide 23, you can see our activity on the same time line. And while we're always busy looking at opportunities, not all opportunities make it through to completion. We do have an extensive due diligence process and we're very disciplined in the way that we deploy our capital. If we see any risks that we don't like for the project, they could be technical, environmental, social governance for legal or what have you, if we see risk that we don't like, and there's no -- in our mind, if there's no good mitigation strategy to deal with those risks, we'll walk away from transactions. And we have done that for all sorts of different reasons. We don't feel any pressure to do transactions. We've got a big portfolio that produces robust cash flow. If we can't find the right opportunities to invest today, we'll collect our revenue from the portfolio, we'll build our balance sheet and we'll wait because we know that in the mining business, a very cyclical business, there will be opportunities that come to us if we're patient and disciplined. So on Slide 24 here, I'll just talk about our liquidity for a second because that is an important part of being patient. We have to maintain liquidity on hand to easily finance opportunities as they arise. So often, we don't know where -- sitting here today, we may say, things look quiet but then in a week or maybe this afternoon, we'll get a call and somebody will say "we're looking to raise financing for something." So we often get opportunities coming to us of the blue, and we always have to be ready to fund those. At the end of March, as I said before, we have no debt, we have about $1.2 billion available between capacity available between our working capital and our undrawn revolver capacity, which does position us well. We have 2 remaining or 2 current near-term commitments. We have a $6.8 million success-based commitment at NX Gold. That depends on adding resource and exploration success. And then we have the Great Bear acquisition that I just walked you through, which would be -- it's a CAD 200 million acquisition, so about USD 155 million, which would be paying cash upon closing later this year. We're very focused on maintaining a strong balance sheet, and we prioritize our use of cash towards debt repayment and dividends. And then after that, new business opportunities. Slide 25 shows a good -- it's a good rendering of our 20-year history of capital allocation and growth and how we have actually allocated our capital. And it's really driven around providing accretive growth for our shareholders. And you can see at the top here, since 2000, revenue and cash flow growth has been significant. But there are 3 things about this growth that I want to just flag. I mean the first is the revenue growth that we've experienced exceeds the increase in our G&A expense. So the growth, obviously, in revenue has been much higher. And that's because we have this high margin and scalable business. When we add a new asset, we don't need to add new people. It's just -- simplistically, it's a line on the spreadsheet, so we can scale this business very easily. The second is revenue growth is not dependent on metal prices. We added volume during this time. So the gold price has not increased as much as our revenue has. It's because we've been in the market doing what we think are good deals at the right times. And then thirdly, we've completed most of our finance, most of the growth in the portfolio without issuing shares. So our share count has not increased significantly. We're one of the founding members of the GDX Index, and we have the lowest share count in the index. We want to avoid shareholder dilution. And if we can fund our business with internal resources to provide per share growth to shareholders, then that meets one of our core objectives. I'll finish on Slide 26 here, and this is our dividend. And we do consider returning capital to shareholders to be a key strategic objective. And one of the attributes that makes us unique amongst other gold investments. We have paid a growing sustainable dividend since 2000, and we've increased the dividend every year despite volatility in the gold price. In total, over that period, we've paid out about $700 million of dividends. And we're the only company in the GDX that has paid an increasing dividend since the index was formed in 2006. So we have a long track record. And we're the only precious metals company in the S&P High Yield Dividend Aristocrats Index, which I obviously mentioned at the very beginning of this presentation. So the dividend is an important thing for us, and we're very committed to it. So with that, Karina, I have come to the end of my presentation. I'd be happy to turn it back to you and see if there are any questions from the audience.

Great. Thank you, Alistair, for your presentation, and we will launch the Q&A. Your first question here is a financial question. A viewer is asking you, how is the current gold price affecting your overall financial projections? And has that slide and gold price caused you to reevaluate your revenue projections?

Well, the gold price, obviously, we're very affected by it. It does -- any wobble in the gold price in the near term will show up in our revenue. So that's very clear. However, we -- as we think about the longer term, we do think conditions are favorable for the gold price to be strong over the longer term. I think you have to really separate near term versus long term. And near term, there's all sorts of noise in the markets today. The gold price has gone down. As I said, while I was mentioning the gold as an asset class. Gold, I think, has done -- has been hit by commodity sell-off. And so does that make sense in this environment? Probably not. But a lot of strong commodities get dragged down when there is weakness in others. But we do believe that the gold price over the long term will be strong. And you look at things like the amount of money supply there is in the world. I mean, hard assets will hold value, whereas fiat currencies won't if they continue to be printed at the rate that they are. And gold is -- the amount of gold production every year is relatively small compared to how much there is in the ground. So it's certainly -- the gold supply is not increasing at the same rate as fiat currencies. We also think interest rates, we're going through a period of rising interest rates today, but our economy is strong enough to withstand high interest rates for the long period and long term, probably not. So we think that there will be a period over which the gold price is going to be weak in today's market. But longer term, we are quite positive on the outlook for gold.

And moving on to next question. What will be the annual cash flow from the Great Bear royalty?

So we expected a 500,000 ounce per year production level, the 2% royalty, assuming Kinross does not exercise their option, then we got 10,000 ounces to our accounts. So depending on the gold price, use that as your basis. But to put into context, 10,000 ounces per year contribution without royalty compared to our last year, 361,000 gold equivalent ounce volume. It's not a huge -- it's not going to be a huge contributor to us, but it will be a high-quality contributor to us over an extended period of time. So yes, we would estimate probably 1% to 2% increase in revenue based on last year's revenue.

The next question is in regards to quarter 2 numbers. Do the second quarter numbers put you on track to meet or exceed guidance?

We have not put out our second quarter, yes. So I can't comment on that.

No problem. We'll move to next question then. An operations question here. A $7 billion market cap with 31 employees is spread over 4 offices is nothing short of spectacular. How do you manage to remain so lean despite these trying times?

Well, thanks for that. I appreciate the compliment. We work hard, to be completely honest with you. We have to wear different hats. And so when we do something like the transaction we just announced this week. I mean there are a lot of people involved, and we just have to all kind of pull together. I mean the great thing about our business for the small number of employees is it's easy to get people to work together. We have a strong team. We get along well, and we're very focused on what we're trying to do. And we will go that extra mile when it was required, so everybody pitches in. So it's really around that. I mean we just have a good culture. I think that's something that's allowed to keep our headcount down because people really -- they do work hard and pitch in when it's required.

Perfect. Similar to that question, you were also commenting, with over 118 properties scattered across the globe, how do you ensure operations run safely and smoothly at each project?

So we are not actively involved in managing these projects. So that allows us to not have to have daily -- we don't have to be on top of these things daily. But we do manage. We watch the portfolio very carefully. We've been doing this for a long time. So we have a very structured approach to monitoring our portfolio, and we use other tools. So there are lots of very good tools available for tracking the portfolio. And so we do keep an eye on it. We stay in touch with our operators. We do visit when we can. We'll visit properties. And so we have a very good feeling of how things are going, but we don't have the ability to directly get involved in operations. So it's more a monitoring exercise for us. And when we see issues developing, we'll often talk to the operators, and we'll give them perhaps advice or we may arrange for them to speak to a consultant that we've dealt with in the past who could be helpful to them if there's an issue. So there's a good 2-way communication at many of the assets that we have in the portfolio.

Thank you for elaborating on that. Next question is in regards to royalties and streams. As the company's strategy to focus more on royalties or streams. If that is the case, why does the company prefer a royalty?

We don't really have a preference. We find that if you're putting development capital to work, if you're helping somebody develop a project, so they need money to go into the development directly. The stream financing is more tax efficient for them and for us. So we can offer a better cost of capital. And it's not something that is taxed on day 1 for that operator. So it's a very efficient way to fund new project development. But whether we look at royalties or streams, to us, it's really -- it's the same kind of exposure to mining assets. So we don't really have a preference. The last transactions that we have done, we've done 4 in the past year. 3 of them have been royalty transactions. And we're quite happy to own royalty transactions. They're very simple. You own a royalty, and you get a percentage of what is produced. And generally, the royalties are very -- they rank very favorably when it comes to security. When you do a stream transaction, there's a lot more thought that has to go into looking at how you protect yourself if things go wrong. So stream contracts can actually be quite large and relatively complicated compared to royalty contracts. But we really don't have a preference. I mean it's -- whatever is available if it's the right kind of asset, it fits our 3Ps; people, place, project. We're happy to deploy capital in whatever structure the operator is looking for.

Thanks for explaining that, Alistair. And we're coming up on your last 2 questions. An ESG question. Based on your 2021 ESG report, Royal Gold stated that water resrouce management, for example availability risk consumption intensity tailing management and climate change were areas of concern. What actions were made in 2022 to reduce these risks?

Well, we are -- so the -- again, we don't have direct operating control. So what we did in our 2021 ESG report was really the first step in trying to figure out how to deal with these issues. We wanted to do a good baseline review of our portfolio to see how the portfolio -- what it actually looks like on different metrics. So we looked at GHG, emissions, emissions intensity and water usage as well. And so now we have that baseline. This is the point at which we are thinking about, okay, what are the ways that we can -- if we see risks, what are the ways that we can address those risks. And we're going through that thinking right now. And I think you'll see in our next ESG report, you'll see some more disclosure as to how do we think, we can deal with these risks. But because we are not an operator, it does -- it is a bit more challenging for us because we can't roll up our sleeves and get involved where we see an issue at an asset that we're invested in. It will have to be a more consultative or collaborative approach with operators. But one of the advantages we have is that we have a big portfolio. We've seen a lot of things within that portfolio. So perhaps 1 operator somewhere has found a solution to something that another operator isn't where it exists. And perhaps we can put those 2 together, and we can help in that regard. But is that kind of thing that I think that we will be looking to do is helping spread back best practices throughout the portfolio. But it is going to be a relationship-driven kind of exercise rather than us getting involved directly.

Thank you for that, Alistair. And your final question, which I'm sure you've got quite a lot of in the recent times, your comments saying inflation hits a record high, yet gold prices go down. How can we make any sense in this market?

That's a very good question. And I don't know if I can make any sense of it. But I think what I can say is you've got a few things that are all pulling in different directions right now. And I think it's the summer time. So you have relatively low volumes in the markets to begin with. So you end up a little bit more volatility in the summer. But the high inflation is really causing concern around higher interest rates. So I think that is the thing that is hitting gold the most. But as I said, I think it's hard to see how higher interest rates will stick around for a long time because I don't think economic fundamentals are all that strong. So we can't see higher rates over the long period because that's going to really affect economies. So we think that there will likely be some reduced pressure from the Fed over the next little while. But then the other thing that happens in the short term is you have selling of winners and gold has actually done pretty well. So you have seen some selling as people are looking to absorb losses elsewhere in their portfolios, they'll sell the winners and gold has been a winner. So I think there's some near-term trading that is perhaps divorced from the long-term fundamentals. And it's unfortunate, you see the gold price doing what it's doing, but it is hanging in pretty well. You think about what it did over the first part of the year. It wasn't a great amount, but it actually -- it held in while the general markets were off 20-plus percent.

And lastly, thank you for that question. We have concluded the Q&A for today's presentation. Alistair, thank you for taking all the questions once again and to the viewers who submitted them. If you have any more questions, you can always contact your account manager at Renmark. Now Alistair, I'll hand the floor back over to you once again for your final remarks.

Thanks, Karina, and thanks, everybody, for dialing. And I apologize for not being able to see you on the screen, but it is some gremlin somewhere and my camera is making it difficult. So next time I do this, hopefully, we'll have that problem resolved. But certainly, if there is anything you'd like to ask in the meantime, please get a hold of Renmark, they know where to find me. I'd be happy to talk to you directly if there's -- if there are any questions that I didn't answer property or if you want to go into any more details. So thank you very much. Appreciate it.

And once again, this was Royal Gold trading on the NASDAQ under ticker symbol RGLD. Thank you again, everyone in Boston and surrounding areas for joining us today. Stay tuned for future presentations in your area, and we'll see you next time.