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

Good morning, everyone, and welcome to today's Virtual Non-Deal Roadshow. My name is Danielle Sol, virtual event moderator here at Renmark Financial Communications. And on behalf of our team, we want to thank you, especially those of you in New York and surrounding areas, for joining us today for the presentation of Royal Gold. Royal Gold is currently trading on the NASDAQ under ticker symbol RGLD. Presenting today is VP, Investor Relations and Business Development, Alistair Baker. Presentation will last roughly 25 minutes and will then be followed by a question-and-answer session. We do encourage you to participate in this Q&A by using the chat function located on the top right corner of your screen. Now without further ado, Alistair, I'll hand over the floor to you.

Great. Well, thank you, Danielle, and thanks to Renmark for the opportunity to present today. I certainly appreciate your support and thank you for the audience to attend. It's been about a year I think since I was in front of you, so happy to be back in front of you in New York City. So I will start with a quick housekeeping note. I will be making forward-looking statements during this presentation. So please make yourselves familiar with and aware of the language on this page. So on Slide 3 here, I will explain Royal Gold at a very high level. We are a high margin business that generates consistent cash flows from precious metals. We've been in the business since the mid-1980s. We've been on the NASDAQ for over 40 years. Our [ model ] produces or provides exposure to precious metals without many of the risks that come with operating mining company investments. We have 2 main operating segments to our business. We have Streams that provide about 70% of our revenue and Royalties provide about 30% of revenue, but both really provide us the same thing, which is the opportunity to invest in top line production for mining assets. We have a diverse portfolio of about 200 properties, 41 of which are in production today and about 85% of our revenue comes from precious metals and about 75% comes from gold. Our market cap today is just over $6 billion, we have 31 employees, so it's a very efficient business. And our business has been performing very well over the past couple of years, and since the last time I spoke to you, I can say that our performance, operating wise and financial wise, has been very good. Our margins have remained pretty consistent at about 78% to 80% of adjusted EBITDA and that's despite inflationary pressures that we've seen in the marketplace. We've also in the past several months transitioned to a calendar year end reporting cycle. So those of us -- those of you who have followed us knew that we used to have a June 30th calendar year end or fiscal year end. It's now a calendar year end. So that makes it easier to compare us against peers and others in the sector. And with that change, we also provided this year for 2022 our inaugural full-year guidance on production. We had never given long-term guidance before, but we are now giving guidance on a 1-year basis, so the market certainly appreciated that. We also raised our dividend in November, as we typically generally do at that time of year. And we're now paying $1.40 a share per year. And in January of this year, we were added to the S&P High Yield Dividend Aristocrats Index in recognition of our dividends and dividend history. So all very good developments. And then finally, the most important thing is we've been very busy adding new assets to our portfolio. So we've added some significant growth assets to the portfolio that I'll touch on in a few more minutes. So if I move to Slide 4 here and show the core attributes of Royal Gold, there are 3 things that I really want to drive home during this presentation. The first is that our model is designed to provide optionality to metal prices and reserve growth, and that's without ongoing capital commitments. When we look at new investments, we're always looking for those that can provide upside over the longer term. Second is, we think about our business in terms of per share metrics. We aim to fund our growth using cash on hand, operating cash flow, and our revolving credit facility in that order, and equity is the least favored method or choice for financing our growth. We really do want to provide accretive per share growth to our shareholders. And then finally, we're very committed to our dividends. We've paid a dividend since 2000, and we've been increased it every year since, and that's unique in the precious metals sector. Now slide 5 here shows why we think we're a good alternative for investors who are looking for conservative exposure in precious metals. On the left-hand side, you can see our beta. A beta of 1.9 shows excellent leverage to gold. On the right-hand side, you can see our share price performance over a longer period of time. We've got this shown from the formation of the GDX in 2006, and you can see that our share price performance has really been excellent compared to gold, the GDX Index itself, as well as general market indices. So over a long-term time horizon, we've actually performed very, very well. Now I'll just talk for a moment about gold, and on Slide 6 you can see some graphs that I've pulled from some World Gold Council publications. The World Gold Council, if you don't have much background in gold, they do a lot of very good research and a lot of it's very easy to read and understand and it's on their website, gold.org, and I suggest you have a look at it if you'd like to go into any more detail. The gold really is a unique strategic portfolio asset. Within a portfolio, it provides diversification that can act as a hedge against market risk, currency depreciation, inflation or geopolitical risks. It's highly liquid and it has provided pretty competitive returns over time compared to other asset classes, but it's done that with lower volatility. And if you look at this year, in particular, the general markets have not done well, the gold has been one of the best performing assets through the end of the first half of this year, and it's held in very well compared to other asset classes. Gold tends to perform well in high-inflation environments, and historically gold tends to outperform after the first hike in a Fed rate tightening cycle, if you look at the last 4 tightening cycles. Gold, over the past several years, has done extremely well in this period of low interest rates, but it's over the very recent term that it's fallen, and it's been really based on U.S. dollar strength and rising interest rates. And also, I think it's been dragged down by the general market weakness that we've been seeing as well. But if you look forward, I think with high inflation, with continued increases in the money supply that we're seeing around the world, as well as heightened geopolitical risks, it's probably not a bad idea to consider gold as part of your portfolio when you're thinking about investing. So on Slide 7 here, there are different ways to invest in gold and this slide really intends to show how we're positioned relative to those other investments. We provide exposure to gold and optionality and that while reducing risk associated with having -- because we have a diverse and large portfolio that doesn't have direct exposure to operating and capital cost risks. And that's very important in today's inflationary environment. Now there are other ways you can hold gold and you can buy physical gold, for example. But an ounce will always be an ounce. It won't provide you upside, and it won't provide you a dividend. You could be more aggressive, and you can invest in operating mining companies or development companies, but they come along with some risks around operating costs and capital costs. So those are important factors to keep in mind. Now I'll spend a few minutes in the next slides just talking about optionality within our portfolio, the efficiency of our business model, and our portfolio itself. Slide 8 here really shows the key to our business model, and that is to provide optionality to reserve and resource growth. And I've got 2 examples shown on this slide. PV or Pueblo Viejo and Wassa, these are both investments -- Stream investments that we made in 2015. And in both cases, total reserves and resources today are higher than at the time that we made our additional acquisitions. And that's in addition to 7 years of production that allowed us to recover about 70% of our investment in PV and over 100% of our investment so far at Wassa. And there are growth projects underway of both of these assets. At PV, there is a plant expansion underway to maintain high production levels as well as extend the mine life into the mid-2040s. And at Wassa, there's been a new resource that's being progressed that could extend the mine life by another 11 years beyond the existing 5 or 6 year reserve life. And in both of these cases, Royal Gold is not required to fund the capital or invest any further to get exposure to this upside. So this is the growth -- this is the optionality that we don't have to pay for. And this exploration and production upside is really important when we look at new opportunities. It's the most important thing that we're looking for and the most important part of our business model. Now I'll talk about efficiency because that's also part of our business model. And on Slide 9 here you can see we have 31 employees. Last year we produced over $650 million of revenue, and we have a market cap of just over $6 billion. So on a per employee basis, we compare well to just about any company you can find. Other large mining companies, precious metals companies, but also other companies that are in the general markets. So it's a very efficient business model. And on Slide 10, you get a sense of our cash G&A, and our low employee count really means that we have a low fixed cash G&A, which further contributes to our efficiency. Last year our margins or adjusted EBITDA margin was about 80% in 2021, and our cash G&A was about 4% of revenue. Our G&A was made-up of -- it was low to begin with, but it's mostly fixed costs, so inflation should not be a significant risk to our margins going forward. And we actually maintained in the second quarter of this year our adjusted EBITDA margin at 78%. So it's in line with where we were for all of last year. Slide 11 gives you a little bit more detail on our cost structure compared to the average gold producer. As you can see, we're somewhat insulated from cost inflation compared to the average gold producer. The producers are exposed to inflation and input costs, so labor, energy, consumables, and other site costs that generally tend to increase when commodity prices increase. In our case, G&A costs are mostly steady, so we have salaries, services, office rents, and things that typically don't move with short-term increases. So our margins are much less exposed to inflation pressures and that's simply because we're not exposed to operating and capital costs like some of the peers. Now I'll talk a bit about our portfolio. And Slide 12 shows our portfolio on a map of the world, and you can see that our portfolio is really weighted towards lower-risk and more mining-friendly jurisdictions. Our principal properties provide the bulk of the revenue to our portfolio and those are shown on the right-hand side. And Slide 13 here shows some comments about diversity -- sorry, the diversification within our portfolio and you can see our portfolio is well diversified, and that really does provide stability to us. On a jurisdictional basis, our largest country exposures are to Canada, the Dominican Republic, Chile, and the USA. And all of those are arguably mining-friendly jurisdictions. We're also -- we have revenue from 41 producing mines. And so that portfolio breadth really does compare well to any producing mining company. And that revenue diversification means we have reduced exposure to any single asset underperformance. And then finally our portfolio, the underlying assets are mostly precious metals, and about 80% of those are precious metals and 20% are base metals. So when you think about base metals fundamentals, they don't necessarily impact our revenue viability in the same way that perhaps they may affect some of our peers. And then just looking at our portfolio itself on slide 14, our portfolio does span the various stages of mining project development. So we have 144 assets that are not producing today, and they're in various stages of exploration, evaluation, or development. And we expect the potential for organic growth from any assets that advance through this pipeline to production. And King of the Hills and Bellevue Gold are 2 very good examples of organic growth from within the portfolio. They are projects that have been in the portfolio for over 10 years and they are just about to start providing first revenue to us as those projects have advanced. Now on Slide 15, just to continue on this theme of organic growth from within the portfolio. This slide shows some of the key catalysts that we see from various assets. And the blue arrows show some of the producing assets in the portfolio where we see the potential for mine life extensions or production increases from various assets. In the gold color, you can see potential new revenue from development assets in the portfolio. I've already mentioned King of the Hills where they've produced their first gold in June of this year, and they're ramping up to full production. But in the next couple of years, we expect to see first revenue from Bellevue, Cote, Khoemacau, all those projects are in development right now. And then further along construction is progressing or has just recently started at Mara Rosa and Back River, so we expect to see revenue from them as well in the longer term. The current metal price environments, despite the drop in the gold price recently, it actually does continue to support new mine developments and many operators with promising projects are pushing hard to try and get their projects across the line and start producing to take advantage of metal prices today. So we do see some organic growth from within our portfolio. But organic growth isn't the only source of growth to us. We've also been very active in adding to the portfolio. And Slide 16 here shows a summary of what we've done over the past 12 to 14, 15 months. And in summary, what we have done is we've deployed about $1 billion capital in 5 transactions that provide gold exposure to assets with upside potential and safe jurisdictions. And we funded these transactions using cash on hand and our revolving credit facility, and we haven't issued any shares or any equity, so our shareholders are able to benefit fully from these transactions. I'll spend a couple minutes in the next slides just talking about the 2 newest of these, Cortez and Great Bear, and give you a sense of how they fit in our strategy of strengthening and diversifying our portfolio. So on Slide 17, our largest recent transaction was the acquisition of 1.2% royalty on the Cortez Complex in Nevada for $525 million, and we completed this in early August. This transaction fits our investment criteria in our strategy, which we really loosely call the 3-Ps, that's people, place, and Project. And Cortez clearly checks all of those boxes. So it's a world-class gold-producing complex, so the project is great. It's a mining-friendly jurisdiction, Nevada, so the place is great. And it's operated by one of the best companies there are in the mining business, and that's the Nevada Gold Mines, which is a partnership between Barrick and Newmont, so the people. So it checks all those boxes very clearly. And we know Cortez very well, had a long history at Cortez. We were a founding partner in the original Cortez joint venture in the mid-1980s and the Crossroads and Pipelines royalties have been significant contributors to our revenue for many years. Slide 18 shows a little bit of detail on the royalty and the coverage area. And the royalty itself is a sliding scale gross royalty with an effective rate of 1.2% above a gold price of $900 an ounce. Royalties life of mine, it has no step-downs or caps, and it covers a large area within the Cortez joint venture area of interest. Royalty covers the operating Crossroads, Pipeline, and Cortez Hills mines, as well as the Goldrush and Fourmile development projects, as well as other exploration targets that have been identified by Nevada Gold Mines. We acquired the royalty from Rio Tinto, and they created the royalty in 2008 when they sold their 40% interest in the joint venture to Barrick. Deductions to the royalty are limited to only the royalties that existed at that time in 2008, which include our existing Crossroads, Pipeline, and Goldrush royalties. The royalties payable after a cumulative production figure of 15 million ounces from Cortez started in January 2008. We expect that 15 million ounce threshold to be reached in the third or fourth quarter of this year, so royalty revenue to us we're expecting to see in the very near term. Now slide 19 shows some of the exploration upside potential here, which is the royalty really does enhance our exposure to the Cortez district, but it's the expiration upside which is key to understanding the potential of this royalty. The Cortez land package, for those who've followed Nevada Gold Mines and Barrick and [ Placer Dome ] and predecessors, you'll know that it's been prolific in hosting large gold deposits. And modern mining and processing started in about 1969 at Cortez. The first Tier 1 deposit discovered was Pipeline and that was discovered in 1991, but then it was followed by the discovery of a couple of other Tier 1 deposits. So Cortez Hills was discovered in 2002 and then Goldrush, Fourmile was discovered in 2009. And as Barrick and Nevada Gold Mines have furthered their experience and their orebody knowledge through operations as well as exploration, they've really developed a pretty systematic approach to exploration on this land package. And history has shown that they've been able to find a new greenfield discovery on this land package about every 10 years since initial large-scale mining operations began. And as Nevada Gold Mine talked about at their last Investor Day, which was just over a year ago, there's excellent exploration potential at the Cortez Complex still. And so in addition to the conversion of existing reserves -- sorry, resources to reserves, there are opportunities from near-mine extensions, brownfield discoveries, and new greenfield discoveries on this land package. Nevada Gold Mines estimates current mineral resources to be about 25 million ounces, and we expect this to grow over time as exploration targets are advanced. So with the production growth and reserve replacement history at Cortez, we think this is one of the most respected gold mining projects or areas in the world, and we certainly expect this royalty to be a key contributor to Royal Gold over the next few decades. Now on Slide 20, I'll talk about another recent transaction which we've completed, and that was the acquisition of Great Bear royalties for $152 million, and this transaction actually closed last week. With the acquisition of this company and this royalty, we now own a 2% NSR royalty on the emerging Great Bear project, which is operated by Kinross. And like the Cortez transaction, this thoroughly meets our 3-Ps, so people, place and project. So the people would be Kinross. It's operated by Kinross. It's a well-capitalized and experienced senior producer, and we've got good relationships with them in other places. Place is located in Ontario, Canada near Red Lake. It's a very mining-friendly and low-risk jurisdiction. And lastly, project, it's one of the most interesting gold projects that have been discovered globally in the past several years. And Kinross is expecting production levels of about 500,000 ounces a year for at least a couple of decades from this project. And Slide 21 gives you a sense of the extent of the property and the proximity of the project to the town of Red Lake. The royalty covers the entire 91 square kilometer land package of the project and it's a life of mine royalty, again, without step-downs or caps. And we did provide Kinross the option to acquire 25% of the royalty at our cost of acquisition, but this was in -- this was compensation for a very unique arrangement that we had with Kinross. Normally in a third-party royalty acquisition where we acquire royalty from somebody who's not the operator, we don't have access to the operators. But in this case, we had an agreement with Kinross to be able to review their nonpublic technical data, and that allowed us to independently validate their assumptions and really understand how they think about the project. And it really did derisk the transaction for us. Kinross is working very hard on this project. It is one of their strategic objectives to advance, and the royalty does layer in long-term growth, scale and optionality to our portfolio. So we're very pleased to have it in the portfolio. Now slide 22, I'll make some brief comments on 4 other recent additions to the portfolio that will we think provide some near-term revenue growth as well. The first on the left-hand side is Khoemacau in Botswana. We got involved here in 2019. We earned a 100% silver stream over a 3-year development period. The project has been producing silver to our account since the middle of last year, and it's ramping up to full production towards the end of this year. The mine life is about 20 years or 20 years plus with [ silver stream ] production at full run rate levels of about 1.8 million to 2 million ounces per year payable to us. So very pleased with the progress that's being made here. Red Chris, the second from the left, we have a 1% NSR royalty on this operating mine in northern British Columbia. We acquired it last August, just over a year ago. Newcrest, who is the operator here, is transitioning the mine from a small open pit to a large bulk tonnage operation -- underground operation in the next 5 to 6 years. And they've done a tremendous amount of exploration here to define a world-class deposit that contains so far 15 million ounces of gold and 4.3 million tons of copper. We've been receiving royalty revenue from this royalty as the small open pit is producing, but the multidecade potential that's coming, we expect us obviously to receive higher royalty revenue in the future, but we're getting paid today to wait for that potential to be defined. The third from the left here is the NX Gold Mine where we have a 25% gold stream on this project in Brazil. And the operator, Ero Copper, they continue to report excellent exploration results at the mine, near the mine, and on the larger land package, but they're all covered within our area of interest for our stream. The mill here is operating at about 60% capacity and Ero has started a project called NX 60 to sustain longer-term production levels of about 60,000 ounces a year. And like Red Chris, we're receiving gold revenue today from an asset with excellent exploration potential as well as production increase potential. So we're looking forward to continuing revenue growth from this project in the future. And then finally on this slide I show the Cote gold project. We have a 1% NSR here which covers about 70% of the reserve, and IAMGOLD is developing this project in Northern Ontario. Cote will be an open-pit mine and IAMGOLD is estimating production levels for the first 5 years of about 500,000 ounces a year and mine life of at least 18 years. The project is about 57% complete. And IAMGOLD is targeting first production in early 2024. So this provides us exposure to a large and long-life productive project in a very interesting Tier 1 jurisdiction. And I guess the one thing I'd make -- one comment I'd make about these 4 projects is, 3 of these are producing revenue today for precious metals, and we expect that revenue to grow in the future. So there's quite a bit of growth hopefully from these assets in the future. Now I'll turn to Slide 23 and mention ESG and how important it is to us. We invest for the long term when we make any investments. So ensuring the sustainability of those investments is really important to our due diligence process. And we also try to build language into our Stream contracts to ensure that operations are managed to the best and highest standards. And where it makes sense, we're always looking for initiatives to help fund our operators at those operations. We've done a lot in the last couple of years to really improve our transparency around the way we think about ESG. We're very pleased to see material improvements in the perception and recognition of our practices by some of the leading ratings agencies. And MSCI and Sustainalytics are 2 pretty influential ratings providers in our sector. We're top ranked by Sustainalytics. We're ranked as AA by MSCI. And then the final comment I'd make about this is we issued our inaugural ESG report in April of this year, and it's available on our website. We're very proud of this document because it really does provide us a good background on the way we think about ESG but also a foundation for further reporting in this area in the future, so I encourage you to have a look at that if you haven't already seen it. Slide 24 here just shows what we've done in each of the E, the S, and the G areas, and we consider ourselves to be a fairly engaged corporate citizen, and we're very active in sponsoring innovation and best practices in the mining business. We also donate to charities where we live and where we work. And on governance, those of you who have followed Royal Gold for a long time, you know that we've got a long record of real commitment to corporate governance best practices. We have a strong independent Board. And that Board has relevant industry experience. On Slide 25. I will talk briefly about the products that we provide to the mining industry. And in 2004 when stream financing started, most stream investments have been allocated towards balance sheet restructuring and project development and a smaller portion towards M&A activity. And as you can see on the timeline, stream financing has been a bit lumpy overtime. And while the uses of stream financing depend on the state of the mining industry and the point in the cycle, mining is a pretty capital-intensive business, and there always seems to be a need for new capital, whether it's at the top of the cycle when projects are being developed or at the bottom of the cycle when balance sheets are being restructured. And so what that does is it provides us a pretty consistent opportunity flow for new business. And you can see our activity on the same timeline here. And while we are always busy looking at new opportunities, not all opportunities make it through to completion. We have a very extensive due diligence process, and we're very disciplined in the way that we deploy our capital. If we see risks that we don't like, so they could be technical, they could be environmental, social, legal, or anything, if we see risks that we don't think that the operator has a plan to mitigate effectively, then we're happy to walk away from transactions. We don't feel the pressure to do transactions. And if we can't find the right opportunities, we'll collect our revenue, build our balance sheet, and we'll wait for those right opportunities because we know that they will come eventually. And Slide 27 here shows our liquidity and a snapshot of our liquidity because part of being patient and waiting for the right opportunities means that you have to maintain liquidity on hand to be able to finance opportunities as they arise. At the end of June, we had no debt, and we had about $1.3 billion available under our working capital and undrawn revolver capacity. But we have drawn -- since then we drew $500 million on the revolver in late July and that was to fund the Cortez royalty acquisition that I just mentioned. But we aim to repay that revolver balance over the next coming quarters as cash flow allows. We're very focused on our balance sheet and maintaining a strong balance sheet, and we prioritize the uses of our cash towards debt repayments and dividends and new business after that. Slide 28 gives you a 20-year snapshot of capital allocation, the way we approach it, which is really driven by providing accretive growth to our shareholders. Since 2000, our revenue and cash flow growth has been -- both of them have been very significant. There are 3 aspects of this growth that I just want to highlight. The first is revenue growth has exceeded the increase in our G&A expense. So it shows you that we have a high margin and scalable business. Second is that revenue growth is not solely dependent on metal prices. During this period, we added volume, which obviously helped us on the revenue side as well. And then thirdly, we have financed our growth largely through internal sources without a significant increase in our share count. We're one of the original members of the GDX Index. We've got the lowest share count in the index. We want to avoid shareholder dilution and funding our business with internal resources to provide per share growth to our shareholders is really important to us and it's a core objective and certainly a core strategic objective. And finally, I'll end on our dividends. We consider return of capital to shareholders to be a key strategic objective. And one of the attributes that we think that makes us very unique when we look at other gold investments, we've paid a growing and sustainable dividend since 2000, and we've increased the dividends every year despite volatility in the gold price. Since we started paying dividend, we've paid out almost $750 million in dividends. We're the only company in the GDX which has paid an increasing dividend since the index was started or formed in 2006, and we're the only precious metals company in the S&P High Yield Dividend Aristocrats Index. So our dividend history and the way that we allocate capital really do, in our view, separate us from some of the alternatives you can consider in the precious metal sector. So with that, Danielle, I've come to the end of the formal portion of my remarks. I'd be happy to open it up to questions.

Thank you very much, Alistair. We'll now move on to the question-and-answer session. I will begin here with your first questions. They're more market and stock related. The first one here being when was the last time RGLD issued shares to the market?

2012. So we've been almost 10 years since we've got an equity offering.

Thank you very much. Now the next question we have here is you have a great track record of increasing the dividend. Can we expect that to continue?

Well, I can't make promises because it's really a Board decision to increase the dividend, but I will tell you that every November that's when the dividend is considered for changes. And we are very committed to paying a growing and sustainable dividend. When we do the analysis in November, we look forward not just 1 year, but we look forward several years to see what we think our portfolio is going to do, and we'll make a decision based on what we think is sustainable raise because we don't want to raise for 1 year and then next year have to think about pulling that back or leaving it flat. We want to be able to continue raising our dividends. So it is certainly an objective of ours to continue that path of growing our dividend but in a sustainable way. But I can't give you any firm commitments. We don't have a dividend policy necessarily that says there's a formula to our dividend approach, but we certainly want to be able to continue growing our dividend and that's, as I said, is a core strategic objective for the company.

Thank you very much for your answer. Now the next question we have here is, have the analysts covering RGLD increased their targets after the recently announced transaction?

No, I think the average target price is around $137 the last time I looked. So it's quite a bit north of where we're trading today. I think the transactions, as we went around and talked to various analysts, I think the commentary we got back was Cortez and Great Bear are extremely high-quality transactions. They were happy to see us get involved in those. We may have seen some tweaking of target prices around them, but at the current level, the average is about $137. I think over the past little while you've seen weakness in the gold sector as well, and so some analysts have adjusted their targets as a result of looking at the gold price and what they expect is going to happen during the next several quarters. So I think it's hard to isolate exactly what the impact of those transactions may have been on target prices.

Thank you very much for that answer. The next question here is, Royal Gold's year-to-date share price performance has done significantly better relative to its peers. What does RGLD attribute to this?

I think a couple of things. I think in 2021, we seemed to lag. And so at the beginning of 2022, I think there was a bit of a catch-up trade and so we did very, very well in 2022 at the very beginning of the year. I think we also, as I mentioned during my remarks, in January, we got to added to the S&P High Yield Dividend Aristocrats Index, and we still see a little bit of buying -- we saw a lot of buying when we got announced as a member of that index. But then we have seen buying throughout the year as other passive holders. They may be rejigging their own holdings depending on membership of that index. So we have seen some additional buying. And so that has provided us some support. I think we've also, as I said in the remarks, we've added some growth to the portfolio and really worked on trying to diversify and strengthen our portfolio. Mine life being one of the things that we're really focused on is adding to the portfolio, and some of the transactions that we've added, so you think about Great Bear, that's a long life project, Cortez definitely long life, Red Chris, that's going to take 35-plus years. So by adding those assets to the portfolio, I think what we've done is we've also increased the NAV of our company. And so that has helped with the share price. Now we've seen the share price has done poorly recently, but you're right, we have relatively well -- we performed relatively well compared to our peers, and I think it is a combination of factors, as I just mentioned.

Thank you very much. The next question we have here is how does your share make up over 80% institutional holders compared to your peer group?

We have a higher institutional holding than our peers, and I think some of that has to do with our domicile. We are a U.S. company -- U.S. domiciled company. And so if you're an institution in the U.S. and you have a mandate to invest in only U.S. companies, then you don't have too many choices in the gold sector. You've got Newmont or you've got us. And so, I think we tend to attract a lot of institutional investing or investor dollars in the U.S. Our retail component would be that 20%, and we don't have that much of a retail following relative to our peers. I don't know why that is, and I'm obviously trying to improve that alongside Renmark and these VNDRs, we want to get the story out more, and make sure people understand what we're doing because I think if we're a good investment for institutions, we should be good for retail as well.

Great answer. Now the next question we have here is, does the company intend to maintain an aggressive acquisition strategy? How is this affected by long-term gold pricing, inflationary pressures, market volatility, and U.S. dollar strength?

That's a very good question. A lot of things to talk about in there. I think we -- so we, looking forward, we think the gold price will be strong. There has been short-term weakness that has been driven by obviously a lot of things in the macroenvironment. We think that will sort itself out. The gold price will be strong long-term. So we are very bullish on our business in the long-term. Will we be aggressive? It really depends on the acquisitions that we see ahead of us today or at any time. We will be aggressive on those acquisitions or those transactions that we think really add to our portfolio and add quality. We're not going to be aggressive on things that aren't going to make a big difference, but we certainly will be aggressive on things that we think will be cornerstones in the future. So I think if you think about Great Bear and Cortez and Red Chris, those are 3 assets that are high-quality, long-life assets, and we were aggressive on those, but we think over long term, the aggressive pricing that we may have paid will more than offset -- be offset by the optionality that those assets bring to our portfolio. So we will be aggressive, but it really depends on the quality of the assets that we're looking at.

Thank you very much for your answer. Now the next question here is, is this the bottom for gold and silver prices?

I wish I could answer that question with authority. I don't know. I don't think anybody who follows gold and silver would be able to give you a very good answer. They tend to move for all sorts of different reasons. The gold price is influenced by various different things at various different times. I think personally that while interest rates are continuing to rise, I think there will be continued pressure on the gold price, but we do have some offsets and inflation being one of them. And as I said in my remarks, gold tends to perform under higher inflation environment. So perhaps the bad news for gold is priced in and this is the bottom, but I really -- I wish I had a crystal ball to be able to answer that in more detail.

Thank you very much, Alistair. Now someone here says your company fundamentals are unbelievable. The market understands the beauty of your business model. Talk to us about where the upside potential is going to come moving forward.

Thank you very much for that comment. We think there's upside potential within the portfolio and it's really on an asset-by-asset basis. You have to peel the onion and you can see each of the things in our portfolio, some of them are mature and they may be declining, but there are some very interesting growth projects within the portfolio. So the things that we've added recently, I don't need to go into detail, and we are very keen on those. Things like PV. The expansion -- the plant expansion and the tailings facility expansion there should extend that my life until the mid-2040s. So that is -- we're very, very excited about that. Continued growth at Wassa. We've recovered our initial investment. So any further growth at Wassa, and Wassa really is a world-class asset. We think that will provide us tremendous growth in the future as well. And if you look at Khoemacau, we are invested in a small portion of the known mineralization at Khoemacau. There may be opportunities in the future for us to get exposure to further parts of the exploration story there. There are expansion potential opportunities in Khoemacau. So that for us we've got a very good relationship with the operator. Perhaps we can parlay that into future expansion potential as well. So I think it really is based on the assets in the portfolio. We've been very careful and very considerate about adding those assets that we think have a very good potential to the portfolio. We're not investing -- we don't like to invest in short-term or short-duration assets that have a finite life. That's not something of interest to us. It's really about getting exposure to the optionality over the longer term. And if you invest with the right people in the right places and the right projects that should, hopefully, provide optionality and upside in the future to our shareholders.

Thank you very much, Alistair. We'll now move on to a different set of questions here, a bit more financial. First one being which geographical area do you get the most of your revenues?

That would be Canada. Canada followed by the Dominican Republic, and then Chile and the U.S.

Thank you very much for answering that. Now the next question here is does Royal Gold have a budget for ESG and how do you distribute amongst your partners?

So we do have a budget for ESG, and so the way it works is we have a portion allocated towards helping our partners and then we have a portion allocated towards donations. And so donations we look after ourselves. We make our decisions what we want to donate to. But when it comes to the operating partners, it's more of a one-off kind of approach where if we see something or an operator comes to us and says we have a project we'd like you to fund alongside, then we will look at funding, and it'll depend on really the parameters of that project. In some cases, more recently, like in the NX Gold stream transaction, we actually allocated $5 an ounce to an ESG fund that NX Gold will manage. So we've already -- and we haven't budgeted necessarily, but it's in our forecast for what we think that asset will produce. So it'll be a mix of things. I think it'll be a mix of operators coming to us asking for funding for things that they're working on, but also be a mix of us being proactive and saying we'll give you a certain dollar amount for accredited projects. And so I think that's how it will evolve over time, but look for more investments as we move forward.

Thank you very much for that. Now the next question we have here is what is the all-in investment that Royal Gold has for their current portfolio?

I think the book value of our portfolio is about $2.3 billion, but that is off the top of my head. I can't confirm that, but I believe that is the amount that we have got on our books. We actually -- I hate to say this, to answer that question, if you go to our Investor Day presentation from April of this year, we have a slide that talks to that. And I cannot right now remember the number, but if you let me know who you are, I can get through Renmark. Give your email address to Renmark and I can get you that number after this presentation.

Thank you very much. Another question here for you. Is there an average acquisition cost the company tries to use when acquiring royalties?

No, we don't think about it that way. We do look at acquisition costs, but that's not the driver. We tend to look at returns. So we'll do a model of what we think the cash flow stream will be, and we'll look at returns, and that's how we will price our investments. We have a fairly good idea of what an average acquisition cost should be and that is a screening tool that we use, but it is not the driver of our decision making.

Thank you. And now another question here. If we get higher gold prices, let's say, it holds above the $2,500 level, what type of dividend policy would we be looking at?

Well, that's, like I said in the formal part of the presentation, the Board makes a decision every November on the dividends. I think if we see a $2,500 an ounce gold environment that would be fantastic. Obviously, that will be very good for our business. I don't know what the Board would say at that point. I think we would take the same approach that we take now, which is we would look forward in our portfolio and try and understand what kind of revenue and cash flow the portfolio generates. And it would all go into a decision-making process to decide what to do with the dividends. I think that's a big step change in gold price. So I think it would potentially mean that we approach things differently, but I can't say. It's a very hypothetical thing. But what I can say is that I think our approach would likely be similar, so we look forward to try and map out what we think is going to happen and react accordingly.

Thank you very much, Alistair. We'll move on to operational questions. Someone here is asking, as the mining producers face higher costs, will that translate into more deals for Royal Gold?

It may do. It may do. So if the producers see higher costs, it means their free cash flow is going to be lower. So it may mean that if somebody's looking at a development project and funding that from free cash flow and suddenly higher operating costs, which means free cash flow is going to be lower, then they may come to us for additional funding. So it is a very interesting and dynamic market, and we are seeing big cost increases from some of the operators. I wouldn't say yet that we've seen necessarily a big increase in operators coming to us looking for additional financing, but it could happen. So it may be helpful to us.

Thank you very much for your answer. The next question we have here is, has the recent downturn in commodity prices made the M&A environment easier or more challenging to get deals completed?

It's interesting because when you see a fairly short-term move in metal prices, it means that you suddenly got a disconnect between what a buyer and a seller are thinking about. When you see a drop in metals prices, as a buyer, we like to think about being aggressive and using a lower price, whereas a seller may be stuck with well the gold price 3 months ago was $1,800-plus. So there may be a disconnect there. And so often when you have these short-term moves in pricing, that disconnects does make it more difficult for deals to get done. Ideally what we have is a nice, relatively stable metal price environment or something that maybe grows slowly over time. And that will mean that buyers and sellers have very similar approaches to transaction pricing. But I think recently, yes, it has caused some concern because some of the sellers are not really thinking about lower prices as they look forward.

Thank you very much. Your next question here is, does the company plan to divest from assets where there is a base metal exposure?

No, we don't. So I think we have always thought about our portfolio and there is a bit of base metals in our portfolio, and it's something that we like to have because those assets also provide optionality to us. And so splitting the company up or doing something that would separate precious from base, it would reduce somewhat our portfolio optionality. So it's not something -- we've considered it in the past. I just don't think -- it's not something that really is all that attractive when you think about how you may be giving up some of the optionality in the portfolio because the optionality is, as I said, is really key to our business and our valuation.

Thank you very much, Alistair. Next question here is, with such a small management team and over 180 assets, how does Royal Gold conduct their due diligence on each asset?

So we have technical people within the company. We have 3 mining engineers, metallurgists, a couple of geologists. So we have a technical group. So they're very involved in due diligence, obviously, because we look at things from a fundamental perspective. But then within the rest of the company, we have others who are -- they come from technical backgrounds like me or they've got technical and commercial or legal backgrounds that are very specific to the mining sector. We will do our own due diligence, and it's managed internally, and accountability is internal. But we will use external help when it's required. If we don't have the expertise for a specific kind of project, we will hire a consultant who can help us. And in many cases, we end up using the same consultants on different due diligence activities. So they're almost like they're extensions of our company. They know how we work, they know the standards at which we look at things, and so we're able to hire them to help us out and they just become part of a team. But any due diligence or any recommendations or investment decisions are always made by internal [ metallurgical ] people rather than recommendations from a consultant. We don't do that. So there is accountability within the company for any decisions that are made.

Thank you very much for your answer. We're coming up on your last 2 questions here. A viewer is asking, of your 185 properties, how many are expected to move into production within the next 3 to 5 years?

So we have, I think, it was about 19 projects are in the development stage. And so when we think about our portfolio, we've got production. So, obviously, those are producing revenue today. Development would be the next closest thing to production, and there's evaluation and then there's expiration. And it's hard to say. Some things go from exploration through to development very quickly depending on circumstances. Other things take a long, long time. But I think if you look at the development projects within the portfolio, 19 or so, those have a higher likelihood of becoming producing assets in the relatively near term. But that's not to say some of the evaluation projects won't. So it really does depend on the projects and the jurisdiction and some of the technical challenges that those projects have.

Thank you very much. And now your final question here. How should we expect September 30 total debt and cash balances? For example, would that be 750 mm, I'm guessing the person is saying million, with good investments in cash [ fall ] near to 100 mm, which I would also guess is million.

So, we, as I said at the end of June, we had zero debt. In June, we had $280 million in cash. Since then, we have drawn on the revolving credit facility that was $500 million. So we have it -- in August, we talked about this with our quarterly results on August 4th. So we have a $500 million draw that we've made on the revolving credit facility, and we've done 2 transactions, Great Bear, $152 million and the Cortez royalty transaction, which is $525 million. We tend to -- we like to have a minimum of about $100 million of cash on hand. That's the level that we just conservatively have on the balance sheet. And what we'll do with the $500 million revolving credit facility balance is we're going to pay it down over time. And so that will be every quarter we would expect to see some reduction in that balance depending on cash flows. So I can't give you a forecast for what's going to happen at the end of September, but I can just give you those data points as to what we had in June, what we spent our money on, and what we'd like to have as a minimum cash balance of $100 million. But our focus is always to maintain a strong balance sheet. So we certainly will be allocating any free cash flow towards debt repayment and dividends, and those will be the focus for us, and then new business opportunities as well. But we do have $500 million of undrawn revolver capacity available to us as well. So it doesn't mean that we're [ hands down ] on business development.

Thank you very much for answering that, Alistair. Now this concludes our question-and-answer session. If you did not get a chance to participate in this Q&A, do not worry. You can still do so by contacting the appropriate account manager here at Renmark. Alistair, before we go, I'll leave you on for final remarks.

Okay. Well, thank you very much. I appreciate your attention. I certainly appreciate the questions, some very good questions in there. So if you do have any further questions or if there's anything that I didn't answer -- anything that you asked, I didn't answer the way you were expecting or fully answer your question, please contact Renmark and I'd be happy to try and address those questions in more detail offline. So thank you very much, and I appreciate your attention, and look forward to seeing you soon.

Thank you very much, Alistair, for your final remarks. Once again, this was Royal Gold currently trading on the NASDAQ under ticker symbol RGLD. On behalf of Renmark, I want to thank everyone in New York and surrounding areas for joining us for today's presentation. We do hope that you stay tuned for future presentations in your area. And until we meet next time, stay safe and be well. Bye, bye.