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

Hello, everyone, and welcome to today's Virtual Non-Deal Roadshow. My name is Karina Tatarinova, a virtual event moderator here at Renmark. On behalf of our team, we'd like to thank all of you for joining us, especially those of you in Atlanta and surrounding areas -- for the presentation of Royal Gold, trading on the NASDAQ under ticker symbol RGLD. [Operator Instructions] And now with that, I present to you Alistair Baker, Vice President of Investor Relations and Business Development.

Well, thanks, Karina, and thanks for Renmark for hosting us today. We really appreciate the opportunity to speak to you. So before I start with the presentation, please make yourselves familiar with the language on this page. I will be making forward-looking statements. These are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are all discussed with our recent filings and our 10-K filing with the SEC. So in this presentation, I want to give you the investment thesis for Royal Gold and what we provide to investors, which really is precious metals exposure with consistent financial performance and a focus on our share metrics. The presentation is focused on how we provide this, and this is really through leverage to gold -- low-risk leverage to gold, a long history of successful execution, and that's financial performance as well as capital allocation, the unique nature of our business model which is efficient, but also provides a lot of optionality to shareholders, our portfolio which is deep and broad and has lots of organic growth potential embedded within it, and then finally, our valuation, which I think, as we'll see, is fairly attractive relative to where we have been historically. So let me start with an overview of Royal Gold, and this slide really tells the story at a high level. We're a high-margin business that generates consistent cash flows from precious metals. We've been in the business since the 1980s. We've been on the NASDAQ for over 41 years now. We have 2 main operating segments. We got [ streamers ] that produce about 70% of our revenue, and royalties produce about 30% of our revenue. But both are the same in that they provide top line exposure to mining assets and production. We have a diverse portfolio of almost 200 properties, 41 of which we're producing today, and about 85% of our revenue comes from precious metals, 75% comes from gold. Our market cap today is around $7.3 billion, $7.4 billion. We have 31 employees. So it's a very efficient business and a very efficient model. I'll spend a few minutes just talking about our leverage to gold and the low-risk nature of that leverage. When you look at gold investments, there are many different ways you can invest, and many different options. This slide intends to show how we're positioned relative to some of those options. Our model is really designed to provide exposure to precious metals without many of the risks that come with investing in operating companies, and we provide exposure to gold and property optionality, while reducing the downside risk by holding a diverse portfolio that does not have direct exposure to operating capital costs, and that's a very important feature in today's high inflation environment. There are other ways you can hold gold. You can be conservative and you can buy physical gold by an ounce today. But that ounce will always be an ounce. You'll never get any upside because you'll never get any dividend from that ounce. You can be more aggressive and you can buy development companies or operating mining companies. But with those, you're also getting exposure to operating and capital cost risk. So, if you think about our performance and what we offer, we think the slide really sums it up nicely why we provide a good alternative for investors who are looking for conservative exposure to gold. On the left-hand side, you can see we've got a beta of about 1.9. So that's excellent leverage to gold. On the right-hand side, you can see our share price performance over a long period of time. I've gone back in this graph to the beginning of the GDX index. And since that time in 2006, Royal Gold share price has outperformed the gold price, has performed the GDX index itself, but it's also outperformed the general market indices. So that gives you a sense of how we've done over time. Now I'll talk a little bit in the next section just about our history of execution. We do have a long record of consistent and disciplined performance, and hopefully, I'll highlight that in the next few slides. The Slide 9 here shows our 20-year history of capital allocation and growth. And it's really -- the whole idea here is to provide accretive growth to our shareholders on a per share basis. And since 2000, you can see that our revenue and operating cash flow have grown pretty materially. But there are 3 aspects of this growth that I want to touch on and highlight specifically. The first is, our revenue growth far exceeds the increase of our G&A expense. So that shows you that we have a high margin and also a very scalable business. Every time we add a new asset to the portfolio, we can deal with it using the existing staff on hand. We don't need to hire additional people to manage that asset. The second thing is, our revenue growth is not dependent on metal prices alone. We have added volume over this 20-year period, and that's why doing transactions when we see value in those transactions. So we have actually grown our business independent of metal price. Then thirdly, we financed our growth internally without a significant rise in our share count. And we are -- as I said, we are an original number of the GDX index, and we have the lowest share count in the index. We want to avoid shareholder dilution if we can. If we fund our business using internal resources to provide that per share growth, then we're meeting our core strategic objective of providing shareholders growth on a per share basis. So looking at our liquidity on Slide 10, this gives you a snapshot of where we are. We have to be patient. We're looking at opportunities. Not everything makes the great -- but we often find that new opportunities come to us from different directions, sometimes unexpectedly. And so, what that means is we have to maintain a strong balance sheet and liquidity on hand to be able to finance opportunities as they arise. And at the end of September, we did have a debt position of $450 million, but it's relatively minor. If you look at it compared to EBITDA, it was about 0.7x our trailing 12-month EBITDA. But more importantly, we have about $670 million of liquidity available today between our working capital and our undrawn revolving credit facility balance. When we did draw on our credit facility in July, we did that -- we drew $50 million to fund the Cortez royalty acquisition, which I'll talk about in a few more minutes. And we said at the time, and we have always done this, we will aim to repay that balance over the coming quarters as cash flow allowance. And in fact, a few weeks after we made that draw, we repaid $50 million. And so, that ended the quarter at $450 million of drawn revolver. We're very focused on our balance sheet, and we prioritize the use of our cash towards debt repayment and dividends followed by new business activity. So Slide 11 here shows our history of capital returns. The return of capital is a key strategic objective for us and one of the attributes that makes us unique when you consider other gold investments. We have paid a growing and sustainable dividend since 2000, and we've increased the dividend every year despite volatility in the gold price. And we raised our dividend again about a month ago by 7%. That was our 22nd consecutive annual increase in the dividend. In total, we've paid out about $770 million of dividends to shareholders since we started paying a dividend. And we're the only company in the GDX that has paid an increasing dividend since the index was formed in 2006. And we're the only precious metals company in the S&P high-yield dividend Aristocrats index. So that is a clear differentiator for us as a precious metals investment. Now another differentiator is due diligence as a core competency. And good due diligence is very important to make sure that we get the right assets added to the portfolio, and we don't include assets that may not be good quality. We're always busy looking at opportunities, but not all opportunities make them through our filter process. And it's 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, whether they be technical, legal, social, environmental, it doesn't matter. But if we see risks that we don't like, we will walk away from transactions. There's no pressure to do transactions. And if we can't find the right opportunities, we're happy to build -- to collect our revenue for the portfolio, build our balance sheet and wait for the right opportunities to come along, because history has shown us that the -- there will be a good opportunity coming up at some point. Now, our business model does not provide us direct operating control, but ESG has always been an important part of our business. We invest for the long term, so making sure that we invest in sustainable assets is very important. It's something that we very much focus on when we do our due diligence. We also build language into our transaction contracts to ensure that operations are managed to the highest standards, and where it makes sense, we're always looking for opportunity to help our counterparties with ESG initiatives around the assets where we do have investments. We've done a lot over the past several years to improve the transparency around these processes. We didn't really used to talk about this. It's just kind of second nature to us as just a core part of our business but we're starting to talk about it more. We have done a lot more disclosure on it. And as a result, we've seen pretty material improvements in the perception and recognition of our practices in ESG as an area. And MSCI and Sustainalytics are 2 very influential ratings providers in our sector, and I've shown the ratings here for us. We're top rated by Sustainalytics and we're AA rated by MSCI. So we're very proud of that. Now I'll spend a few minutes talking about our business model. And really, the key to our model is optionality, and that's optionality to reserve resource growth without having to fund further investment. And I've got 2 examples shown on this slide here. We've got PV and we've got Wassa. Both of these investments were made in 2015, and in both cases today, total reserves and resources are higher than at the time of the original acquisitions, and that's in addition to the production and the cash flow that has allowed us to recover over 74% of our investment in PV and over 100% of our investment today at Wassa. And there are growth projects underway at both of these assets. PV is looking to -- they're actually in the final stages of completing an expansion to maintain gold production, but they're also looking to expand their tailings facility capacity, which would bring additional resources into the mine plan and extend the mine [ lines ] to the mid-2040s. At Wassa, the operators outlined a new resource that could extend the mine life by an additional 11 years beyond the existing reserve length. In both of these cases, Royal Gold does not require to fund the capital or invest any further to get exposure to this upside. So this is growth that we don't have to pay for. This is the optionality that we provide to our shareholders. Exploration and production upside is really important. And when we look at assets, we do our due diligence and that optionality is the most important feature of our business model. Now another important feature is efficiency. As I said, we have 31 employees. Last year, we produced $650 million of revenue, and our market cap is over $7 billion today. So on a per employee basis, you can compare us against anybody, whether the mining sector outside, and we compare very, very well. It's a very efficient business. And that low employee count means that we have a low fixed cash G&A, which obviously further contributes to our efficiency. Our EBITDA margin last year was 80%. Our cash G&A was 4% of revenue. Our G&A is low and we mostly made up a fixed cost. So cost inflation should not be something that impacts our margins. And in fact, our EBITDA margin last quarter was 77%, so in line with where we were last year despite inflation. And if you look at our cost structure relative to a producing mining company, you can see that we are insulated from cost inflation compared to the average producer. The producers are exposed to inflation and input costs, the cost that they use to run their operations, so things like labor, energy, consumables, other site costs. And many of those, actually -- those costs increase when commodity prices increase or when you see inflation. And so, margins are actually impacted. Our G&A costs, on the other hand, are pretty steady. So it's things like salaries, services, office rents, things that don't move in a short-term manner. And so, our margins are a lot less exposed to inflation pressures than some of the operating peers, and it's simple because we are not directly exposed to operating and capital costs. I'll talk a bit about our portfolio which has breadth and depth and organic growth potential in it. Our portfolio is shown on this map here. It's a global portfolio, but we're weighted pretty heavily towards lower risk and more mining-friendly jurisdictions. On the right-hand side, I've called out the principal properties which are the larger portfolio assets that really do provide the bulk of the revenue. But our portfolio is well diversified. So that provides stability to our cash flows. Our largest country exposures are to Canada, the Dominican Republic, Chile and the U.S.A. So all of those are pretty mining friendly. And our revenue is -- it comes from 41 mines, as I said previously. That portfolio breadth compares very well to any mining company out there, and that revenue diversification really means that it reduces our exposure to a single asset underperformance in single asset risk. The other interesting thing about our portfolio is that the underlying assets are predominantly precious metals assets. So that means that we're not dependent on base metals, fundamentals or base metals prices for the viability of our revenues. So that's an important point when base metals are going through a poor period. Now, our portfolio does span in the various stages of mining project development. We have 145 assets that are not producing today. They are in various stages of exploration, evaluation and development, and we would expect the potential for organic growth from any asset that moves to the right across this page, and advances through the pipeline to production, which is where we get our revenue. A couple of very good examples of these are King of the Hills and Bellevue Gold, and those are assets that have been in our portfolio for well over 10 years. We have royalties on those. And there are new management teams behind those assets and have rethought those assets, and actually they're redeveloping those assets to put into production within the next several months. So we would expect to see revenue from King of the Hills in this quarter and Bellevue in the middle of next year. And these are assets that have been in our portfolio for, as I said, over 10 years, with 0 book value. So this is extremely high-margin revenue. When these assets start producing, those royalties start paying. That will be very high-margin revenue to us. And to continue on the theme of organic growth, this slide shows some of the key catalysts that we see today from various assets within the portfolio. At the top in the blue, you can see we've got potential for mine life extensions and production increases and some of the assets that are already producing, and they are contributing cash flow and revenue to us today. But further down the page, we have some new development assets which are advancing as well. I've already talked about King of the Hills and Bellevue Gold. But after that, we have the Cote Gold project, the Manh Choh project, Mara Rosa, Back River. All of those are in various stages of construction and development today. And the important thing to note is that this is optionality that's free to us. We do not need to fund or have an obligation to fund any of the growth in these assets. The developers are moving these along, and we will benefit when they start producing. So organic growth is very important, but we're also always looking for additions to our portfolio by doing new business development. And we have been very busy over the past 1.5 years. And this slide really summarizes what we've done. We've deployed over $1 billion in 5 transactions that provide gold exposure on assets with upside potential in safe jurisdictions. We funded this grouping of assets. We funded all of these transactions using cash on hand and our revolving credit facility, and we did not dilute shareholders by issuing any equity to add this growth to our portfolio. Now I'm going to spend a few minutes on a couple of these, Cortez and Great Bear, just give you a sense of how they fit our strategy of strengthening and diversifying the portfolio. So the first of these is Cortez and it's the largest recent transaction we've done. We acquired 1.2% royalty on the Cortez complex in Nevada in early August. And when we think about our strategy for adding new assets, we loosely use the term 3P, so people, place and project, and Cortez checks these boxes very, very well. It's a world-class gold complex and a mining-friendly jurisdiction operated by a joint venture that is owned by the 2 biggest and best mining companies -- gold mining companies in the business. So people, place, and project already checked. This royalty is life of mine. There are no step downs or caps, and it covers a very large area within the Cortez joint venture area of interest. This includes 3 operating mines: Crossroads, Pipeline and Cortez Hills; as well as 2 advanced development projects, Goldrush and Fourmile; as well as other exploration targets that have been discovered or have been advanced by the operator. We are expecting our first full quarter of royalty revenue this quarter from this transaction, and we're expecting that to be about 3,000 ounces to our accounts. Royal Gold has a long history at Cortez. We know it very well. And the Crossroads and Pipeline royalties have been significant contributors to us for quite a long time. And with the production growth and reserve replacement history at Cortez, we think it's one of the most prospective gold mining complexes anywhere, and we think this royalty will be a big contributor for us for many years to come. Now moving on to the next large transaction we did this summer. It was the acquisition of Great Bear Royalties Corporation. We announced it in July, and this is the acquisition of the company which is really -- the only asset was a 2% net smelter return on the Great Bear project in Northern Ontario. Unlike Cortez, this transaction meets our 3Ps. It checks those boxes very clearly. It's operated by Kinross who is a well-capitalized and experienced [ senior ] producer. It's located in a very mining-friendly jurisdiction in Northern Ontario. There's a town nearby with a labor pool. There's great infrastructure, and it's relatively easy to move projects forward in Ontario. And then finally, as a project, it's one of the most interesting gold projects that's been discovered globally in the past several years. Kinross is expecting about 500,000 ounces per year of production from this asset when it starts producing, and potentially for a multi-decade life. The royalty covers the 91 square kilometer land package, its life of mine, and has no step downs or caps. Now a unique feature in this is that we actually -- during this transaction, we provided Kinross, the ability to acquire 25% of the royalty at our cost plus inflation. We provided this during the negotiation -- the transaction, and this was really a compensation for a unique arrangement we had with Kinross. Normally, when we acquire a royalty from a third party like Great Bear Royalties Corporation, we would never have access to the operator. And so, we would have to do our own due diligence based on limited information. But in this case, because it's a relatively early stage project, we had an agreement with Kinross to be able to review their information and really just confirm what was in the public domain that allowed us to really validate their assumptions and how they think about the project, which obviously de-risked it quite significantly for us. So we provided them an option to acquire 25% of this royalty if they choose to -- they elect to choose. Kinross is working very hard to move this project forward, and this royalty layers in long-term growth, scale and optionalities of our portfolio. Now we do have some other recent additions that have the potential for near-term revenue growth, and I'll very quickly mention these. The Khoemacau and Botswana, and that would be left to right across this page. Khoemacau and Botswana, this project is delivering silver and is ramping up the full production today as we speak. The Red Chris in Northern British Columbia, Newcrest, is advancing studies to transition this mine from an open pit to a large pulp tonnage underground operation in 2026. The NX Gold Mine in Brazil, [ Ero Copper ] is doing exploration work with a target of filling the mill and sustaining gold production of 60,000 ounces per year. It's currently about 40,000 ounces per year. And the Cote Gold project in Ontario, construction is about 64% complete, and commercial production is targeted for early 2024. There's a common theme with all of these projects. They're all precious metals for us. 3 of these 4 are producing revenue to us today, so near-term revenue contributions to the portfolio. And finally, all of them provide further exposure to production and exploration upside, which we think is relatively significant at each. I'm going to end the presentation talking about our valuation, which I think is pretty attractive when you look back historically. Royal Gold has performed quite well year-to-date in 2022. And I think that's because we have -- the company has performed well. The portfolio has been performing well. So the stock price performance does reflect that strong performance. However, I don't think the multiples necessarily are reflective of that performance. We are trading at historic cash flow levels that are relatively low and certainly towards the low end of our peer group, and I don't believe that reflects the quality of the cash flow that we actually receive from our diversified set of assets and high-quality assets. I think the reason why we have this valuation disconnect perhaps is that the market has not yet given us credit for some of the transactions that I just walked you through. The value of the long life assets and the optionality that just hasn't been recognized in the marketplace yet in the multiples. So hopefully, that will occur as time goes on. So with that, I have come to the end of my formal remarks. I hope that will give you a sense of our record -- how the business is performing today. The assets in the portfolio where we see organic growth are valuation and also our liquidity for continuing -- to continue our business development activities and continue to hopefully add to the portfolio over time. So we do believe Royal Gold is very well positioned today. And with that, Karina, I've come to the end of the formal remarks. I'll be happy to turn it over to you to fill some Q&A for me.

Great, Alistair. Thank you very much for your presentation. And we'll now begin the Q&A. Your first question here is, how do you typically deal with assets that don't necessarily perform to expectations?

Well, we -- so we don't have operating control. That is something that -- it does restrict our ability to deal with assets that may not be performing relative to our expectations. But the way we try and deal with our counterparties is through the strength of our relationship, and it's really about that relationship that allows us to have a good dialogue with operators. If we see things that are happening, that we think may be problematic at a particular asset, one of the benefits that we bring is that we actually have a portfolio and a lot of assets -- we may have seen in the past some of the similar issues at another asset. And so we can provide, I wouldn't say advice necessarily, but we can provide some thoughts on how to address issues with assets. So that is probably the best way for us to do it, but that is obviously very contingent or very -- relies very much on the relationships that we have with the operators.

And the next question is at your comment of saying the battery metal space is and has been heating up the last couple of years. Is there any planned adjustments to the asset base to meet this growing demand?

We will look at certain other commodities if we think they are really high-quality assets. But when you get away from the exchange traded metals, you start to get into various specialty metals, and it's not a core -- there's some narrative competency for us really. Some of these metals are -- the marketing is very, very different. You need long-term contracts. Metallurgy may be very different. You need to understand these metals very well. Some of these emerging metals -- [ trevor ] metals, we don't have much experience in, and it would be difficult for us to really add much value by getting exposure to those assets. So it's not a core -- it's not a focus for us to be out there looking to diversify our commodity mix. We're very comfortable with gold, silver, PGMs, coppers in our portfolio. And there are other base metals as well that we will look at, but we don't want to stray too far from that. And so, some of the more exotic battery metals that we've seen, obviously, they're very important in the marketplace where the evolution of technology is taking us, but we don't understand them as well as we understand our [ 4 ] metals. .

And my apologies for the delay. I was just reading at the next question that came in. Next one here, your comment is saying, is -- the secret sauce of the business, Royal Gold's investment team and approach to making and monitoring investments. What is the tenure of the team? And has there been any turnover in the team? Has there been any change to Royal Gold's investment philosophy? So there's a few questions in one tier.. Let me know if you want me to repeat any of them.

No, I think I got it, but obviously, if I don't answer please ask the question again. But I think the secret sauce, that was a very good way to put it. We have a very well-established technical team, and we look at assets from a fundamental perspective. So we have to have an experienced technical team on staff to be able to look at assets. There's no point making a commercial deal if the asset fundamentally is not a high-quality asset. So we look at things from the asset first, and then a commercial transaction . We have a very well-established team. Our -- the person who leads our technical -- the technical side of our business is a 35-plus year mining engineer who has worked in operations and capital projects all over the world for different companies, majors and juniors. And so he has – underneath him, we have a couple of engineers, we have a metallurgist, we have a couple of geologists on staff. So we do have quite a bit of technical capability within the company. We will also -- depending on what we're looking at, we will also bring in consultants who we worked with in the past, who we have good relationships with and who we trust, will help -- we'll use them to build our team out further. So if we're looking at something that has a very specific technical risk or some kind of technical characteristic, we don't have that expertise in-house. We will bring in a consultant to help us provide an opinion on that area. And -- but the important thing to note is that when we go to our investment committee after due diligence has been completed -- after the technical work has been completed, when we go to our investment committee and to the board for approval of transactions, it's always championed by internal people. We don't leave that. We don't subcontract that out. There are no consultants who will be leading a due diligence for us. We lead everything in-house, and those recommendations are made by internal people. So you have that accountability over the long term if something is presented, and if it doesn't proceed as expected, there is somebody within the company who can answer to it. With respect to duration or tenure of the team, most of the people who have been at Royal Gold are long term employees. I've been with the company for almost 8 years, and I feel like I'm still a new guy. There are quite a number of people who've got 10 years with the company and to go 15-plus years. And our technical team, we have added to it over time. So they don't all have that same tenure. But we don't typically see high turnover within the company. We see turnover when people retire. People come to Royal Gold after having a career somewhere else, after having established the technical -- or some of the specialty and they apply it within the Royal Gold team, and then they tend to stick around for quite a long time. And then when it's time to retire, then you'll see new blood coming up, but usually from within the organization. We actually -- on our website, you can have a look at our senior management team, and you can get a sense of backgrounds and tenure from that information. So I hope I answered everything. Did I miss anything, Karina?

I don't think so. There is also a question saying, has there been any change to Royal Gold's investment philosophy?

No. We are pretty consistent with the way that we have -- that we look at things over time. It's always fundamentally asset driven. That is the first thing as far as our philosophy. We're always looking at -- those 3 things that I mentioned, people, place and project. We always look at the counterparties. We want to make sure that we have counterparties and our responsible actors, well financed. And just, you know, they know how to do things that reduces a lot of risks. Place is always important. There are certain places that we won't go. If you don't have a rule of law or if there's personal security issues, we're not comfortable investing in those jurisdictions. And then project, and as I said, fundamentally, we have to have good projects to invest in, but it's pretty simple. But that's our investment philosophy, and that has not changed.

And there's a few more that we have here. The next question is, Royal Gold's development projects, have there been any significant challenges at any of the projects?

There are always challenges when it comes to development projects. I think when you start building a mine and developing a mine, you run into all sorts of different issues. I wouldn't say there's one particular issue that every project has to deal with. And yes, sure, we've had a few issues. I think with Khoemacau, over the last 1.5 years, we've seen -- they've had equipment issues. When you have a brand-new mine, you've got brand new equipment and new team operating that equipment. Sometimes you have things that don't go as well as you hope, things like maintenance. I mean your availability is lower. Your efficiency is not as high as what you expected. But those things tend to get sorted out over time, and the Khoemacau team, as an example, has done a very good job of doing that. Cote Gold is an asset owned by a company that does have some liquidity challenges. So that is something that -- in the current development pipeline, it is somewhat of a risk. I think the fact that we own a royalty on a very attractive project insulates us from that risk. If the current operator has to raise additional financing, it won't affect us. It won't affect our royalty. If the current operator decides that they would like to do M&A to try and build their balance sheet or what -- have you, again -- because we own the royalty that should not impact our investment. Those are just 2 examples of things that can go wrong. And I think it would be unfair to say that we've never had issues at development projects. But right now, fortunately, I think the projects that are in the development pipeline are all proceeding quite well. I guess the other wildcard perhaps, if you like, is just permitting. And so permitting often during development projects, that can cause delays. And so as a royalty holder or streamer holder, it doesn't mean that your ounces are going to get cut out of mine plans. It just means that your revenue gets pushed out. So we do see that occasionally as well.

And the next question here is, which of your development properties you expect to see going to production in 2023?

So as I said in the presentation that King of the Hills, we would expect to see first revenue from them this quarter. So that's 2022. Within 2023, we're expecting to see a full run rate from Khoemacau at their 10,000 tons per day mining level, which they're ramping up to right now. We would also expect Bellevue Gold to start producing somewhere around the middle of the year. And Cote will be a little bit later in early 2024. So those are the big ones that we see. Now that the other one, which is an important one, is PV, Pueblo Viejo, which is undergoing this plant expansion right now to maintain production levels at -- gold production levels by increasing the throughput through the plant. We see -- we expect to see some positive news from PV as they complete that expansion early in 2023, but also potentially get the new tailings facility permits out of the way and bring in some additional resources to the mine plan. That's why it can affect our revenue in 2023, but what it will do is extend our revenue for that asset is the mid-2040s.

And with that, we have a few financial questions here. The first one is, when do you expect to start paying down your debt?

Well, we are -- we started doing it as soon as we drew. So as I said in our presentation, we drew -- in July, we drew $500 million on our revolving credit facility. And a few weeks later, we repaid $50 million. And as cash flow comes in, we expect to continue paying it down. We've done that consistently. If you look back over time, you'll see that any debt that we draw from our revolving credit facility, we just chunk it down quarter-over-quarter and deal with it as cash flow for the portfolio comes in. Now the only caveat is, if we see new business development opportunities that we think are really attractive, that will obviously impact debt repayment because we need funds to execute on those transactions. But generally speaking, we look to -- on a quarterly basis just to pay things down. And we said in our last quarterly conference call, we said that the outstanding revolver balance, we would expect to have repaid within 12 to 15 months.

And one more financial question. What is the smallest deal size you will look at? And do you find out the valuation for earlier-stage projects are still too inflated?

So the smallest deal that we have done recently was an $8 million royalty transaction in British Columbia earlier this year on a project called [indiscernible] . So, $8 million may seem like a relatively small investment for us, but we're not afraid to do small things if we think the potential is high. So much smaller than that. You can't get much more than that practically speaking, but we're always interested in interesting projects. We don't really have a size filter necessarily. And sorry, what was the second part of the question, Karina?

The second part of the question was, do you find at valuation for earlier stage projects are still too inflated?

We're actually finding that valuations have come down significantly as a result of there being a scarcity of capital. And so when somebody comes to us looking for royalty financing, because there are no alternatives or junior companies, equity is not available and debt certainly is not and you don't have cash flow, we're finding that companies are a lot more reasonable when it comes to their expectations for the cost of our financing. So it is a competitive business still, but we are seeing that pricing has moved in our favor, especially on the smaller end because there is no alternative for some of these companies.

And with that Alistair we're coming up on your last 2 questions. The next question is, is there any stock from the previous transactions that Royal Gold plans to convert?

I'm not sure I understand the question. We don't have any -- we don't have any other convertible securities or anything like that outstanding. When we acquired -- when we make a transaction or execute on transaction, we usually use cash. So it's not like we're issuing equity. I think -- I don't understand the question. So if I didn't answer properly, please send a follow-up questions to Renmark and I'll be happy to take out the answer with whoever asked.

Yes, for sure. So if you –- [ whoever ] sent the question, if you just want to reward that, if you don't feel the question was answered, we'll ask it if you do send in the next few minutes or we'll forward it to Alistair later on. And with that, Alistair, that's your last question. Are you able to speak to the growth pipeline for 2023 and how will that translate to shareholder value?

Well, the growth pipeline, I think I outlined it already with -- we've added new assets. Cortez will see a full year of royalty contribution from the new royalty that we acquired. Bellevue coming on. We've got Khoemacau at full production levels. We got the expanded production of PV. What that means is just top line revenue to us. I mean it does -- it will increase the revenue, obviously, from any additional or incremental ounce that is produced from any of those projects. I guess the one thing I didn't do is quantify some of the things I -- and my one slide where I showed some of the growth catalysts. The Khoemacau transaction, we expect it to add between 23,000 to 25,000 GEOs, gold equivalent ounces, to our account. And so, if you sum up the smaller assets that I highlighted in that slide, they add up to about 25,000 to 28,000 gold equivalent ounces. That's not all in 1 year, but you can get a sense of the growth that Khoemacau will give to us, and then that package of assets is equivalent to another Khoemacau. And at the time of the Khoemacau transaction, we said it would increase our gold equivalent ounce production by about 5% to 6%. So we do believe there is good growth from within the portfolio, but we're always looking to add more by doing additional transactions as well.

Perfect, Alistair. Thank you for taking all of the questions. With that, this concludes the Q&A for today's presentation. And to the viewers watching, if you have any more questions for Alistair, you can always send over your questions here to Renmark and we'll forward the questions. Now before we go Alistair, the floor is yours once again for your final remarks.

I just want to say thank you to everybody. I appreciate your questions and be happy to follow up with anybody who's got any specific questions I didn't answer properly, and/or at least didn't answer to the satisfaction of whomever asked me. So let Renmark know. And if I don't hear from you, I guess I will look forward to speaking to you again. And in the meantime, happy holidays, and all the best for 2023.

And once again, this was Royal Gold trading on the NASDAQ under ticker symbol RGLD. Thank you again, everyone in Atlanta and surrounding areas, for joining us today and stay tuned for future presentations in your area.