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

Hello, and good afternoon, ladies and gentlemen. Welcome to today's virtual non-deal roadshow. My name is Noella Alexander-Young, virtual event moderator here for Renmark Financial Communications. On behalf of our team, we want to thank everyone in Boston and surrounding areas for joining us today for the presentation of Royal Gold trading on the NASDAQ under the ticker symbol RGLD. Presenting today is Alistair Baker, Vice President of Investor Relations and Business Development. The presentation will last around 25 minutes and will be followed by a Q&A session, which we can participate using the chat box on the top right-hand corner of your screen. With that being said, I will now hand the floor over to Alistair.

Well, thank you, Noella, and thanks to Renmark for the invitation to present today. I will be making forward-looking statements during this presentation. This obviously, I'll be making statements will be subject to risks and uncertainties that could cause actual results to differ materially from these statements. All of these risks and uncertainties are discussed in our recent filings with the SEC. So during this presentation, I'll give you an overview of the investment thesis for Royal Gold and what we provide to investors, which is precious metals exposure with consistent financial performance and a focus on per share metrics. I'll walk you through how we do this and talk to you about our all leverage or low risk leverage to the gold price. Our long history of execution of a fairly simple business strategy, our unique business model and our portfolio, which has brought deep with good organic growth potential as well as our valuation, which I'll end off on and talking about that relative to historical levels. So Slide 4 talks about Royal Gold at a high level. We're a high-margin business. We generate consistent cash flows from precious metals. And we've been in the business since the mid-1980s. We've been on the NASDAQ for over 41 years, so a very long history. We reported our 2022 results last week. And our spring segment's revenue was about 69% of total, and our royalty segment was about 31%. Royalties tend to provide higher margins to us, but both give us the same thing, and they give us exposure to top line production from mining assets. Our operating and financial results were very, very strong. We had production volume of 335,000 gold equivalent ounces. So that was in the top half of our guidance range. So we're very pleased with that. And then financially, we termed in $603 million of revenue, $417 million of operating cash flow and earnings for the year of $3.63 a share. So a very strong year for us, both in terms of operations and financial metrics. So now I'll talk to you about our low-risk leverage to gold. And this slide shows other goal investments and how we're positioned relative to those investments. Our model provides exposure to precious metals without many of the risks that come with investing in operated companies. So we provide exposure to gold and optionality, but with a reduced risk profile. So we don't have that same downside risk. We have a diverse portfolio, and we don't have direct exposure to operating and capital costs. And that last point is very important in a high inflationary environment. Our margins generally do not be compressed like our operating peers may do. Now there are different ways you can invest in gold. You can invest in the fiscal metal, but announce will always be announced. You won't get any upside from it, and you won't get a dividend. You can be more aggressive and you can invest in mining companies or development companies. But with that, you also had exposure to operating cost and capital cost risk. Now this next slide shows our historic performance and how we think we're a good alternative to get it conservative exposure to gold. Our beta of 1.9 shows excellent leverage to gold, and that's a 10-year beta. So a very strong leverage to gold. And then on the right-hand side, you can see that our share price performance is the start of the GDX Index, the mid-2000s, we have beaten the gold price GDX index as well as general market indices. So the S&P 500 and the Dow. It's a very strong share price performance. And I'll talk to you about our history of execution. And as I said at the outset, we do have a long history with consistent and disciplined performance. We've been in this business for a long time. We know it well. And this slide, Slide 9, gives you a 20-plus year history of our capital allocation and growth, which has really been focused on providing accretive growth to shareholders. Since 2000, our revenue and cash flow growth have both been very significant. The 3 aspects of this growth that I want to drive home on this slide. The first is our business is high margin and scalable. So our revenue growth has far exceeded the increase in the G&A expense growth over time. And secondly is our revenue growth is not dependent on metal prices. We have added volume during this period. So we've been able to build our business while we've also delivered these results. And then thirdly, we financed our growth internally and that's without a significant rise in our share count. We're one of the founding members or original members of the GDX Index, and we have the lowest share count on that index. We want to avoid shareholder dilution. And if we can fund our business using internal resources, that provides per share growth to our shareholders. And that's one of the key things that we're trying to achieve. Now Slide 10 gives you a snapshot of our liquidity. We have to be patient. We are an investor who reinvest throughout the cycle, but we need to maintain a strong balance sheet and liquidity on hand because sometimes opportunities come to us out of left field and we're not exactly -- we can't predict with too much certainty where those are going to come from or when they're going to come. So we always want to make sure that we have a strong balance sheet and the ability to do transactions. And so our approach to funding, as I said on the previous slide, is really to use cash on hand, operating cash flow and our revolving credit facility really in that order. And we use equity that's the least preferred or at least favored source of financing for our growth. Our revolving credit facility provides us cheap as well as flexible financing -- and currently, we have about $575 million outstanding on that facility. We drew on it last year in July and December, and that was to fund 2 royalty acquisitions that we did last year, and I'll talk to you about both of those in a minute. But right now, our leverage is pretty manageable. It's about 0.96x trailing 12 months EBITDA. So pretty moderate for a company of our size and with our cash flow. We aim to repay this revolver balance by about mid-2024. And that's assuming current metal prices and no major additions to our portfolio throughout that time. And our total liquidity today, if you take the undrawn amounts on our revolving credit facility of $425 million, and you add the working capital amount, we have about $550 million of liquidity. So we think we're pretty well placed for the opportunity set that we see ahead of us in the marketplace today. Now return of capital is also a very important objective for us. And it's one of the things that makes us unique amongst gold investments. We've paid a growing and sustainable dividend since 2000, and we've increased the dividend every year despite volatility in the gold price. We raised our dividend in November 2022 for the 22nd consecutive annual year, and we raised it by 7% over the previous year. Since we started paying a dividend, we paid about $815 million out to our shareholders in the form of dividends. And we're the only company in the GDX index that has paid an increasing dividend since the index was formed in 2006. And we're the only company -- the only precious metals company in the S&P high-yield dividend Aristocrats index. So that is a differentiator for us for sure. When you look across the precious metals sector. I want to talk on this slide about due diligence, and it's a real core competency for Royal Gold. Good due diligence is very important because we want to make sure that we get invested in the right assets and don't invest in the wrong assets. While we're always busy looking at opportunities, not all opportunities make it through to final completion. And our due diligence process is pretty expensive. If we see risks that we don't like, they could be technical, environmental, social, any risks that we don't think can be mitigated effectively, well, then we're not interested in doing that transaction. We're very disciplined in the way that we deploy our capital, and we don't feel pressured to do transactions. And if we can't find the right opportunities, we'll collect revenue, build our balance sheet and wait for the right opportunities because history has shown us that opportunities will present themselves that meet our criteria. I'll mention ESG on this slide. And our business model does not provide direct operating control, but ESG has always been very important to us in the way that we execute our business. We invest for the long term in the assets that we invest in. So we need to make sure those assets are sustainable, and it's a very important part of our due diligence. When we're financing new opportunities, we also build language into those transactions to ensure that the operations are managed to the highest possible standards. And where it makes sense, we're always looking to help our counterparties with any ESG initiatives around their mine sites. If we can help them around their mine sites, we're investing where we are invested. And obviously, that is a win-win for both sides. We've done a lot of work over the past several years to improve the transparency of our ESG practices. And we're very pleased to see that there have been material improvements in the ratings that we have I've got 2 shown on this slide here, MSCI and Sustainalytics, who are probably the most influential in our sector. And we're top rated by Sustainalytics and AA ranked by MSCI. I'll spend a few minutes in the next section, talking about our business model. And this slide shows the key to our model, and that's optionality to reserve and resource growth without us having to fund any further to get exposure to that optionality. There are 2 transactions or 2 assets shown on this slide. We got PV and we've got Wassa, and we made both of these investments in 2015. In both cases, total reserves and resources today are higher than at the time we made our initial acquisitions. And that's in addition to production that's allowed us to recover about 75% of our investment in PV and well over 100% of our investment at Wassa. But there are growth projects underway at both of these assets today. PV, there's a plant expansion and commissioning right now, and there's a new tailings facility in permitting as well. So that should increase production as well. It's extended to the mid-2040s. At Wassa, there's a new resource that's been outlined that could add 11 years to the existing reserve life. So what's consistent about both of these are the same in both cases is that we do not have to add or put in any more money to get exposure to these expansions. So this is growth that we don't have to pay for. This is the optionality that our shareholders benefit from. And when we look at new transactions, we're always looking for any assets that could provide exploration or production upside over the longer term. Now looking at the efficiency of our business model on a per employee basis, -- you can see we've got 31 employees, so a very small group, our revenue and our market cap were both very high relative to that indicator of size. On a per employee basis, we compare very well to any large company. So that's within the mining sector or within the economy more generally. And that low employee count really means that we have very low fixed cash G&A costs, which obviously further contributes to our efficiency. Our EBITDA margin last year was about 79%, and our cash G&A was about 4% of revenue. Our G&A is low and mostly made up of fixed cost. So inflation should not be something that really causes significant risk to our margins. And you can see that on this slide, where we are compared to the average gold producer -- our cost structure is pretty insulated from cost inflation. On the left-hand side, you can see the bars and the high bar there, the large bar is a producer of the average cost structure at the average producer. And you can see that there's -- there are a lot of components in that, that are exposed to commodity price increases. So labor, energy, consumables and other site costs often increase when you've got inflationary of vires or when you've got commodity prices increasing. But as you look at our G&A costs, they're mostly steady. They're made up of salaries, services and office rents. Things that don't tend to move in the short term by large amounts. So our margins are a lot less exposed to inflation pressures. And that's simply because we're not directly exposed to operating and capital costs. I'll spend a couple of minutes talking about our portfolio, and this slide here shows our global portfolio, which is weighted towards lower risk and more mining-friendly jurisdictions. On the right-hand side, you can see what we call our principal properties, and we have 6 of them, which are the largest assets in the portfolio that contribute the largest share of our revenue. And if you look at the diversification of our portfolio on this slide, you can see it's very well diversified, and that provides stability of cash flow to us and our shareholders. Our largest country exposures are to Canada, the Dominican Republic, the U.S.A. and Chile. So all of those are pretty mining-friendly jurisdictions, and our revenue comes from 40 producing assets today. And that portfolio breadth really does compare well to any mining company. And that revenue diversification reduces our exposure to single asset underperformance. Then finally, our underlying assets are predominantly precious metals assets by revenue. So we're not tied to or were not dependent on base metals fundamentals for the viability of our rev. Now our portfolio spans the various stages of mining project development, and we have 142 assets in the portfolio that are in various stages of either exploration, valuation or development. And we would expect there to be the potential for organic growth as assets advance through this pipeline. So really from the left-hand side of the slide to the right, on the right-hand side, when there are production, that's where we get our revenue. But we've got examples of organic growth from within the portfolio, King of the Hills and Bellevue gold 2 assets in Australia are very good examples of organic growth in the portfolio. Both of those assets are moving through the pipeline. King of the Hills actually started production last quarter or last year in the second half of last year. But both of them had been in the portfolio for well over a decade. We've got no book value assigned to them. And with new management teams taking over these assets and pushing them forward, they're getting close to revenue today. And so that's the organic growth that I'm referring to. And if you look at our portfolio as a whole and to continue on the theme of organic growth, this slide really does show some of the key catalysts or key things that we expect from various assets in the portfolio. On the top half of the slide in the blue arrows, those are assets that are in production today. And we see the potential for mine life increases and production increases at several of those assets. And some of those assets are the biggest assets we have in our portfolio. If you move down to the second part of the slide, in the gold color arrows, you can see we're expecting potential new revenue from several development assets within the portfolio. So the Gold Rush project at Cortez. Barrick and Nevada Gold lines is expecting a record decision, a key permit by the second -- by the start of the second half of this year. We're also expecting to see new revenue from Bellevue Gold later this year, as I've already mentioned. But also next year, we would expect to see new royalty revenue from Côté, Manh Choh and Mara Rosa. And then further down, you can see Back River and Great Bear. All of these assets, all of this growth that we see in the portfolio is fully funded. It's free optionality to our shareholders. We don't need to pay any more to get exposure to this growth. Now in addition to organic growth, we're also very active all the time, looking for new opportunities and new additions to the portfolio. And this slide summarizes what we've done really over the past 1.5 years to 2 years. We've been very active adding to the portfolio, and we've deployed $1.2 billion of capital on 6 large transactions to provide gold exposure to assets and safe jurisdictions. We funded these transactions using cash on hand and our revolving credit facility, and we haven't diluted our shareholders by issuing any equity. I'll spend a couple of minutes on the newest of these Cortez and great Barrick, which gives you a sense of how they fit into our strategy of strengthening and diversifying the portfolio. So on Slide 25, a lot on the slide to digest. But one of the largest transactions we've done recently were additional royalties on the Cortez complex in Nevada, and we added those in August and December. And these transactions, they fit our strategy and our investment criteria, which we loosely call a 3P so as people place and project. And Cortez checks all of these boxes. It's a world-class gold complex in a mining friendly jurisdiction and it's operated by Nevada Goldmines. So that's the joint venture between Newmont and Barrick, 2 big companies in our sector. And Royal Gold has got a long history in Cortez. We've been involved in Cortez since mid-1980s, and we own several royalty interests. Some of these overlap. We've added new trends -- these new transactions, we've added further exposure to this property and they consolidate our royalty interests across the project and complex. And these are the Rio Tinto royalty and the IO royalty, and those are shown in the columns on the right-hand side in gray. But the middle column is really where I want to focus. And this is the important part of this slide is it shows you the overall royalty exposure we have to the various deposits within the Côté's complex. So you can see the pipeline in Crossroads mines, we have a 9.4% gross smelter equivalent royalty. At the Cortez Hills, Gold Rush and 4 mall projects, we have a 1.6% equivalent royalty. And at the Robertson project, we have 0.45%. Barrick is expecting that Cortez will produce around 1 million ounces this year, rising to about 1.35 million ounces in 2027. So with these production levels and royalty rates, we expect Cortez to become one of the top 3 revenue contributors in our portfolio. And with production growth and reserve replacement history that we've seen at Cortez over the past couple of decades, we think this is one of the most prospective gold mining projects anywhere globally. And we expect these royalties to contribute for years to come. Now a -- great Bear transaction and the royalty there is another recent transaction that we've done good which is, we think, going to add significant scale and longevity to our portfolio. With this acquisition, we acquired 2% net smelter return royalty, and it's an emerging project in Northern Ontario, operated by Kinross. And like the Cortez transaction, this very easily checks the boxes for the 3 Ps. It's operated by Kinross is well-capitalized, experienced developer. It's located near Red Lake, Ontario, so a very mining jurisdiction. And it's also one of the most interesting projects to be discovered in the past several years. Kinross is expecting this project to produce about 500,000 ounces a year and potentially for a multi-decade mine life. The royalty year covers the entire 91 square kilometer land package and its life of mine without step-downs for caps. Now we did something unique with this transaction, and we provided Kinross an option to acquire 25% of the royalty at our cost adjusted for inflation. But this was for very unique arrangement with Kinross. We acquired this royalty from a third party. So we didn't acquire this directly from Kinross. And normally, when you acquire a third-party royalty, you don't have access to the operator. You don't have access to nonpublic technical information. But in this case, we have a very good relationship with Kinross, and we approached them and we asked them if we would be able to have access to nonpublic technical information. They provided that access, and it really allowed us to validate the assumptions they had made and how they think about the project, and it really derisks the project for us and allowed us to make this investment at this stage in the project life. Kinross is working very hard on this project. And last week, they announced a 5 million ounce initial reserve. And in 2023, they expect to continue doing further drilling at depth, on strike and unparalleled structures to add to this resource over the next several years. Kinross is targeting 2029 as a first year of full production. And as I said, this will be a royalty that really adds long-term growth, scale and optionality to our portfolio. On Slide 27, I'll go 4 of the recent additions to the portfolio here that I'll mention very briefly Khoemacau Botswana on the left-hand side, the project achieved full ramp-up to full production in December, January, and we're expecting 2023 to be a full year of production from this asset. So we're very pleased to see that. At Red Chris Northern Mish Columbia, Red Chris is advancing studies to transition the mine from an open pit to a large bulk tonnage underground operation in 2026. At Xavantina in Brazil, Euro is continuing to do exploration to fill the mill and sustain production levels at about 60,000 ounces of gold per year. Last year, they produced just over 40,000 ounces of the significant production outside Europe, they can achieve that target. And then finally, Côté Gold and Ontario is a project that's under construction. As of last week, Royal Gold announced is 73% complete, and it's on target for commercial production in early 2024. So this common theme here on all of these projects, they're all precious metals to us. 3 of these 4 are producing revenue today, and they all have exposure to production and exploration upside. I'll finish the presentation on valuation and just looking at our valuation metrics over the past 10 years or so. Royal Gold did very well in 2022, and our stock price did well to beat all of our large cap peers in terms of performance. And I think that reflects the strong underlying fundamental performance of the company. However, I think the multiples are still lagging somewhat. If you look at the cash flow multiple in particular, we're trading at the bottom half of the peer group range. And I don't think that reflects the quality of the cash flow that we're sourcing from our diversified and high-quality portfolio. The market seems to be giving us credit slowly for some of the transactions that we've done recently. But I don't think the market recognizes yet the value of the long life assets and the optionality and that's certainly not coming through in the multiples. So with that, I've come to the end of the formal part of the presentation. Our record is strong. Our business is performing well. We've added high-quality assets to the portfolio. We see good organic growth potential from within the portfolio. Our valuation is attractive. We have lots of liquidity to fund our -- continue growing our business. And we think that Royal Gold is very well positioned today. So hopefully, those messages have come through clearly, but I'd be very happy to answer any questions. I'll turn it back to you, Noella right now to open the floor to Q&A.

Thank you, Alistair, for the excellent presentation. As said, we'll now take some questions. The first set of questions are related to operations. If you were asked, there seems to be an increasing number of companies joining the royalty space over the past few years. Are there any that may fit into your portfolio that could be considered accretive?

So I guess the question is around M&A in our sector and whether we would be interested in doing M&A. We have found that we're better off adding assets one by one to the portfolio. We're able to look at those assets in more detail and more carefully, and we can pay usually around 1x NAV for those assets. Whereas if you look at a portfolio, it's owned by another company, you tend to -- when you buy a portfolio, you always get a few things you don't really want, but you have to pay for them to get everything. And you also have to pay a market premium to get that portfolio. If you're acquiring a company, shareholders aren't going to sell it for -- without a premium. So we find that there's better value for our shareholders in acquiring assets one by one and individual transactions. Now that said, we do look at our competitors all the time. We keep a fairly close eye on what other folks are doing. And valuation levels got to the point where it made sense for us to look at the corporate transaction would consider it for sure. But it's not our preferred way to grow. So that's hopefully an answer to that question. But I'll be happy to go into more detail if I didn't cover it as properly.

Next question is, what is the average mine life of your producing royalties? And do you see it changing as miners update their reserves?

So we haven't put out an average of 1 number average for our portfolio. On our website, we have mine lives based on reserves for the assets in the portfolio. We do think if you go back to reserves and what's happening to reserves, it appears that those companies who have already put out the reserve stages for this year are using higher gold prices than they have in the past. So that brings more resources and reserves into their statements. So that, on its own, probably won't mean that there is an additional -- and there's going to be some growth in reserves and resources purely it's a function of metal price. But we also find and it's a very typical thing that we see within our portfolio. Some assets, the operators will do further exploration. They're looking to extend mine lives we're looking to do other things to optimize the assets. And they will often bring in additional resources, they'll upgrade those to reserves. And it's around this time of the year that they published those new reserves. We often do see that there are increases to reserves over time.

Next, a viewer says, what a raise in the price of gold health a royalty and streaming company indirectly?

An increase in the price of gold Yes, absolutely, it would help us. It would help our stock price for sure. I think we our beta to goal, any increase in the gold price. You would see our stock price do well also. It also brings in new business as well when you have a higher gold price assets that may not be economic at lower price, those are pushed forward by management teams. And there's always a need to fund those projects. So as a provider of financing, a higher gold price environment will bring new projects to the 4, which means that we probably have more opportunities ahead of us. So a rising gold price environment is very helpful to us, both in terms directly in terms of stock price and revenues and things like that, but also indirectly because it increases the business development that we look at.

Next question is, are you looking to venture more outside of North America?

We don't necessarily have a focus on North America. We'd like North America because it tends to be a pretty safe place to invest. But we will look at other jurisdictions as well. There are certain places we won't go. But we will go to new countries, we will do the work if we need to, if we see very good opportunities. Botswana is a good example. We -- until we invested in Khoemacau, in 2019, we had never done any business in Botswana. But when the opportunity was being evaluated, we did a lot of work on the country of Botswana got very comfortable with it as it plays to invest. So that's a new place for us. And we are always looking to invest in the best assets. And sometimes those assets are located in places where we've never done business. It just means that we have to do some more work to get comfortable with those jurisdictions. But we're open to many places. Now there are some places that we won't go. We're not going to go to Russia for obvious reasons. China is very difficult. Venezuela, in countries like that, we're not very comfortable with. So that means that we invest more in North America, that's great, but we'll look at other jurisdictions as well.

Next question is Khoemacau looks to be running close to target. What attributable production to oil gold will we see for 2023?

So Khoemacau on average, over the 20 -- just kind of 21 or so year mine life. On average, we own 100% of the silver, the payable silver that's going to be produced, we have the right to. So on average, that's going to be between 1.8 million to 2 million ounces a year. Almost a year ago at our investor presentation, our Investor Day presentation, we put in a slide that showed the approximate silver production from Khoemacau. In the next couple of years, we're expecting it to be 1.5 million to 1.7 million ounces. And the reason is because they're -- as they go deeper in the ore body where they are today is lower grade in one of the sectors of the mine. So they'll be -- as they get deeper, then they'll get into that steady state, that 1.8 million to 2 million ounces in silver a year. But right now, they're still in a little bit of a lower grade area on average.

Excellent. Next is, do you feel there is an ample amount of large potential deals? Or do you see more mid- to smaller deals in the next few years?

It's hard to predict what is going to come down the pipe. I think if you had asked me a year ago, would we see a $525 million royalty transaction midyear, I would have said, I don't see it. I'd be surprised to see that. But we did want to -- we did that at Cortez in August. It's -- right now, what we see is relatively small transactions. So we see royalty transactions, exploration stage or early stage projects, and those are in the tens of millions. And then we see other financing alternatives. It could be between $100 million to $300 million. That doesn't mean though that we won't see a large transaction come up for whatever reason. It could be that an operator needs funding for something or we're happy that it comes -- these large transactions come up for many different reasons and sometimes they're hard to predict. But right now, we see a smaller deal environment. And we're happy with a smaller deal environment as well as the largest of the big 3 royalty and streaming companies, we can do small transactions, and they still add material growth to our portfolio. So we're quite happy to do them, and they're lower risk and they often have lots of other benefits. And so just because the deal pipeline today does not look as big as it has in the past. That's part -- we're busy. We're looking at lots of different things.

Next question for you is your PCF multiple chart appeared to show well road at the low end since 2015, not just the last year. Why is the chronic low multiple in your mind?

I think a lot of it has to do with the perception of our portfolio life. But we tend to -- when we talk about our portfolio of life, we talk in terms of reserves and reserves are operated shorter than reserves plus resources. Our peers often talk about their portfolios, including resources. And I think as a result, our PNAV multiple was probably reflective of that. But what it -- the follows through is that the near-term cash flow was disproportionate being higher. So if you look at our I think the market in our sector tends to overweight a much lower fee cash flow multiple. And what we've been trying to do over the past couple of years at price comes the market, that there's a lot of growth in our portfolio. And even though on a reserve basis, you may see in lines are relatively short. But with changes to, they like PV with this expansion, extending the mine like to the 2040s, getting additional revenue exposure to Cortez, which has a mine life for multiple decades. Great Bear as well. Hopefully, what we're doing is we're going to expand. We're going to increase the NAV, which will push up our -- the P and they'll bring the P to cash flow P/CF multiple closer in line with where it should be and where we think it should be based on the quality of the cash flow that we produce.

And now we have some financial questions. The first one is, is your intent to keep the revenue split as is with gold roughly at 75%?

We like to be gold-focused for sure, and we're very comfortable with this level. We think there is scope for us to see lower gold revenue in our total portfolio, but it's not something we're actively looking to do. So precious metals is our main focus. So that's gold. Obviously, silver, we consider PGMs number metals to be precious. We will look at other alternative other metals, but we're not going to stray too far into things that we don't understand. And we're certainly not out there looking to diversify actively. So gold and precious metals is where we want to be. We're very comfortable with the revenue mix right now. If a great copper opportunity walked in the door tomorrow, yes, sure, we have a look at it, but we're not out there actively hunting for those.

Next question is, is there any concern that over 50% has been drawn from the credit facility?

No, no. I think we have a pretty modest level of leverage. So if you look at -- as I said in our presentation, we're about 1x trailing 12 months EBITDA to leverage. And we -- with the business development environment that we see ahead of us, as I said, $100 million to $300 million max would be the transaction sizes that we see. We have -- if you combine our undrawn amounts with our working capital, we've got lots of liquidity to be able to continue adding to the portfolio. We're also producing cash flow. So last quarter, we had $101 million of cash flow. So we have lots of cash flow to pay that down quickly and replenish the balance sheet. And we've often used the revolving credit facility in exactly this way. So we'll draw on it and we'll pay it down as quickly as we can is to be able to replenish that capacity to make sure that we've got enough to be able to fund some large transactions if they come through the door in the future.

Next viewer says, do you anticipate a reversal in the U.S. dollar? And how would that affect your financials?

A reversal in the U.S. dollar, not a macroeconomic expert, but I think the U.S. dollar probably at pretty high levels. And if there's anywhere that it could go, it's probably going to be down. I think the risk is skewed to the downside in terms of the U.S. dollar valuation. And a lot has to do with what the Fed does and interest rates. And if they slow down on their rate hiking or if they start to back off rates, I think you'll see the U.S. dollar come down. I think what that -- the biggest impact on our financials is going to be on our -- it's going to be on the gold price really. I think if you see the U.S. dollar come down, rates come down or at least flatten. I think you'll see the gold price do better because that's been the biggest headwind for gold price over the last little while. It's a combination of those 2 things. There's rate increases in the U.S. dollar strength. As a business, we are -- our costs are mostly in U.S. dollars, our revenues in U.S. dollars. So I don't think you'd see much of an impact there.

Thank you. Next is, has your G&A remained fairly flat versus last year and what activities would increase your G&A going forward?

Our G&A has been pretty flat. We have seen some increases over the last little while. I mean we're not -- like everybody else, we're not immune to increases in just general inflationary costs. So as I said, we've got salaries, office rents, services are the biggest components of our G&A. And when it comes around to annual adjustments to salaries, we have to factor in the cost of living adjustments, office rents and costs of running offices, they do increase as well. So we do see some pressure. But because our base is low, that increase is relatively small and relatively minor compared to our revenue. I guess the -- I kind of lost my train of thought there. The trend, though, has been fairly flat and consistent on. We have seen an increase in our G&A expenses more recently, simply because we've done more work on ESG as well. We have a charitable giving budget, and we have been deploying that year-on-year. And that's increased a little bit. And we're deploying that capital around mine sites where we are invested. So we see that as kind of a -- it is more expensive. It does increase our G&A, but it also improves the environments around the assets where we invest in, and hopefully, it protects the sustainability of those assets.

And next, we just have some stock market questions. The first one is, has there been some moderate pressure on the stock over the last couple of weeks to what do you attribute that to?

I think everybody in the market, I think there's an uncertainty in the market today. We saw a quite strong consumer price as well as producer price numbers last week, which I think makes a lot of the market concern that rate increases are going to continue. And so that has caused some pressure on our stock. I think what it's also done is cause pressure on the gold price. And so that has amplified that pressure somewhat. I think the market is a little bit -- I don't think there's a consensus yet on direction. I think the market, it feels like the market wants to continue going higher and be strong, but every so often you get these low unemployment numbers or high CPI or high PPI or whatever the case may be that make people a little bit nervous about what's going to happen. And it's really around rates. It's going to be what is the Fed going to do? Are they going to continue raising rates if they are, then maybe there's going to be a little bit of pressure in the stock market generally, but certainly aren't gold. And so that has caused some pressure to us, I think, over the last couple of weeks.

Next question is, has Royal Gold seen an increase of institutional interest in the precious metals space?

Yes, we have. And a lot of -- we're always out there looking for the generalist investor. The investor who wants to have us as a core holding as their portfolio insurance. And we've seen quite a bit of interest over the past several months in that I think the as a lot of generals look to gold as maybe historic value that they didn't look at before, if they think the U.S. dollar may start to weaken, and they think that there's going to be a recession, and some exposure to gold is good. And we've seen that there has been more interest in Royal Gold from large generalist institutional investors. Now that said, we have a lot of large generalist investors on our register, and they've been there for a long time. So they -- I think they see us as a way to get some of that portfolio insurance. Our business model is more risk. They don't have to worry about cost overruns on projects and things like that. So we have been kind of a target or a preferred holding for many generalist investors over the last several years. We expect that to continue.

We're coming up on your last 2 questions. The first one is, is Gold resuming its traditional role as an insurance policy for equity portfolios or as a store value.

I think both. I think the gold price has done quite well regardless of what the Fed is doing. I think last year, when you saw the gold price get down to its lows, it didn't plummet. There was a lot of pressure from rising interest rates in the gold price didn't fall to where a lot of people thought it was going to. So I think there's a floor there. And I think that floor is based on the fact that gold is a stored value. And so there is a part of the market that sees gold is very important. So all is at historical value. Central Bank buying last year was the highest it's ever been. So that is a very interesting thing to look out. If you think about central banks and the way they allocate the portfolios most currencies and other things. If a lot of these central banks are buying gold, that there should tell you that there is a store value function in gold that perhaps people had written off a few years ago, but it's certainly a big part of what central banks are doing today. So I think gold is a very relevant asset class today. I think from an HR perspective, but also just a historic value. I think gold is something that is perhaps with the meltdown in cryptocurrencies, I think gold has come back to the floor in terms of what it offers to investors.

And your last question is a bit more general. You were asked how much does the gold price determined if deals are made or not?

That's a very good question because the gold price can have a huge impact. If you see what we like to see to get deals done at a nice level, steady gold price. If you see these wild swings, then there's always a disconnect between what we're willing to pay and what a seller is willing to sell that. And so it makes it difficult to get transactions completed if you see a lot of volatility in prices. Thankfully, we haven't seen that. I think the gold price has done fairly well and it's kind of traded within a reasonable range. So it's been a lot easier for us to get transactions done because it was just kind of unified for you from a seller's perspective and the buyers perspective as to what value is. But when you see that volatility, that can cause problems. So hopefully, we don't enter a period where we see massive volatility because that could cause some of the transactions we're working on to some of go away.

Excellent. Well, thank you, Alistair for clarifying that and for all your responses. And thank you to everyone who submitted questions. If you did not get a chance to submit your questions, you can reach out to the appropriate account manager here at Renmark. That concludes our presentation for today. But before we go, I will turn back the floor to Alistair for final remarks.

Well, thanks very much, everyone. I really appreciate you dialing in. Thanks for those questions. If there's anything that I didn't answer to your satisfaction, please get a hold of Renmark and they will direct the questions to me or I'd be happy to talk to you directly if you'd like. So thanks very much. Enjoy the rest of your day, and we look forward to talking to you soon. Thanks. Bye-bye.

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