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 at Renmark Financial Communications. On behalf of our team, we want to thank everyone in New York 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 you can participate using the chat box on the top right-hand corner of the screen. With that being said, I will now hand the floor over to Alistair.

Thanks very much, Noella, and thanks, Renmark, for the opportunity and invitation to present today. Before I start, I will be making forward-looking statements. So these -- there are risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties are discussed in our most recent Form 10-K filing on the -- with the SEC. So I encourage you to have one of those. So during this presentation, I am going to give you the investment thesis for owning Royal Gold and what we provide to investors. And that really is precious metals exposure with consistent financial performance and a focus on per-share metrics. During the presentation, I have focused it to provide you a sense of the low-risk leverage to gold that Royal Gold provides, long history of successful execution of a simple strategy, the unique major department of -- the unique nature of our business model, our broad and deep portfolio and our valuation, which I think is pretty attractive to where it has been over the past several years. So on this slide, it really shows Royal Gold at a 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, and we've been listed on the NASDAQ for over 41 years. We reported our 2022 results in mid-February, so just a few weeks ago. And in 2022, we saw that our stream segment contributed about 69% of our revenue and our royalty was about 31%. Royalties are a bit higher margin than streams, but generally, they provide the same thing which is really top line exposure to mining assets and production. And our operating and financial results in 2022 were very strong. We had volume of about 335,000 gold equivalent ounces. So that fell squarely within our 2022 guidance range, and we had revenue of $603 million, operating cash flow of $417 million and earnings per share of $3.63, So a very strong year for Royal Gold in 2022. I'm going to talk now about our low-risk leverage to gold and investments you can make in the gold sector and how Royal Gold is positioned. Our model provides exposure to precious metals without many of the risks come with investing in operating companies. We provide exposure to gold and to optionality, and that's why we reduced risk -- downside risk by following a diverse portfolio that does not have direct exposure to operating and capital costs. And that's a very important point in today's high inflation environment. There are other ways you can hold gold. If you can buy physical gold, if you want to be really conservative, but physical gold will never give you upside and it will certainly never pay your dividend. You can be more aggressive and you can buy operating companies or development companies in the gold sector. But with those investments, you're also getting exposure to operating and capital cost risks. Now on Slide 7, you can see our historic performance and why we think we're a good alternative for those who are looking conservative exposure to gold. On the left-hand side of the slide, you can see our beta to about 1.9 to the gold price, which is excellent leverage. On the right-hand side, you can see our share price performance since 2006, and I've chosen 2006 as a starting point because that's when the GDX index was started. And the GDX index is the index of our peers. But over that time period, since 2006, we've outperformed the gold price, we've outperformed the GDX index, we've also outperformed general market indices as well. So that's a very important thing to note. Now I'll talk a bit about our history of execution. We have a long and consistent record of disciplined performance. And Slide 9 here shows our 20-plus year of capital allocation -- or 20-plus year history of capital allocation and growth, which is really driven by providing accretive growth to our shareholders. Since 2000, we have seen significant revenue and cash flow growth. And there are key -- the 3 key things really to note about this growth. The first is our business is high margin and scalable. So our revenue growth is much, much higher than our G&A expense growth. So that's important. Second is our revenue growth is not dependent only on rentals prices. We've added volume during this period. So we're able to grow our business as time goes on. And then thirdly, we've largely financed our growth internally, and that's without a significant rise in our share count. We're one of the original members of the GDX Index, and we have the lowest share count in the index. We want to avoid shareholder dilution if we can, and we can fund our business using internal methods or internal resources that provides per-share growth to our shareholders, and that's really a core objective of Royal Gold. Slide 10 shows a snapshot of our liquidity. And in our business, we have to be patient. We need to have -- we need to maintain a strong balance sheet and have to maintain liquidity because opportunities often come up with very little warning. So we have to be able to finance those opportunities as they arise. And as I said, our approach to financing has been using -- has been to use internal resources. So cash on hand, operating cash flow and our revolving credit facility in that order and equity is the least preferred method financing our growth. Our revolving credit facility has been like a credit card. It allows us to have cheap and flexible financing available to us. Right now, we have $575 million drawn on the revolving credit facility, total $1 billion facility. And we drew in 2022 in 2 instances, and that was to fund some of the acquisitions that I'll talk about in a minute. While we do have leverage on our balance sheet, we think it's pretty modest, is about 0.96x our trailing 12-month EBITDA as of the end of December. And we expect to repay this balance from cash flow, and at current metal prices and absent any further business development opportunities, we expect to have this repaid and be debt free by the middle of 2024. And today, we have liquidity about $550. That includes our working capital. So there's lots of liquidity available to us and certainly enough to be able to remain active in the business development environment that we set ourselves in today. Now return of capital is a key strategic objective for Royal Gold. And one of the attributes that makes us unique amongst gold investments. We paid a growing and sustainable dividend since 2000 and we've increased the dividend every year despite volatility in the gold price. In November of 2022, we raised the dividend by 7% over the prior year and that was our 22nd consecutive annual increase in the dividend. Since we started paying a dividend, we paid over $800 million out to shareholders, and we're the only company in the GDX has paid an increasing dividend since the indexes form in 2006 and we're the only precious metals company in the S&P High Yield Dividend Aristocrats Index. So that is a differentiating factor for Royal Gold when you compare us to our peers. I'll talk for a moment about due diligence and its importance to us. It really is a core competency of Royal Gold and good due diligence is important because it makes sure that we add the right assets to our portfolio. And while we're always busy looking to deploy capital and add assets, not all opportunities make it through to completion. And that's really as a result of our due diligence process. We're very disciplined in the way that we deploy our capital. So if we start looking at opportunities that have risks that we don't like so they could be technical, they could be environmental, legal, social, you name it. If there's a risk that we don't like that could fundamentally affect the investments over time, we're happy to walk away from transactions. We don't feel pressure to do transactions. If we can't find the right opportunities, we're happy to collect revenue, build our balance sheet and wait because experience has shown us that the right opportunities will present themselves when we give them time. Now in our business, we do not have direct operating control of assets, but ESG has always been a very important part of our business. We invest for the long term, so ensuring sustainability of our investment is a very important part of our due diligence on new transactions. We also, when we can, when we're financing projects directly, we try to build language into our transactions to ensure that operations are managed to the highest possible standards. And where it makes sense, we're always looking for opportunities to fund initiatives around the assets where we're invested. The -- and is our counterparts may have in place because we think that making those assets in social situations around those assets stronger benefits us and our shareholders as well. Now we've done a lot over the past several years to improve our transparency around these processes and we are very pleased to see that we've had some material improvements in the perception and recognition of our ESG practices. MSCI and Sustainalytics are due influential ratings providers in our sector. As you can see on this slide, we're top rated by Sustainalytics and we're AA ranked by an MSCI. Now, I'll move on to our business model and the unique nature of that business model. And one of the key things to our model is optionality, and that optionality to reserve and resource growth without having to fund further investment to get exposure to that optionality. On this slide, I've got 2 examples shown. I got PV on the left, Wassa on the right. And both of these are Stream investments we made in 2015. In both cases, total reserves and resources today are higher than at the time we made our initial acquisitions. But that's in addition to production over the past 7 years, that has allowed us to recover 76% of our investment in PV and 124% of our investment in Wassa. And there are growth projects underway at both of these assets. At PV, there's an expansion project that's currently in completion to maintain gold production levels, and there's a tailings facility expansion that's also in process that would spend the mine life to the mid-2040s. At Wassa, there's a new resource that's been outlined that could extend the mine life by an additional 11 years on top of the existing reserve life. And in both of these cases, Royal Gold is not required to fund any further capital or invest any further to get exposure to this upside. So this is growth that we have -- we don't have to pay for is growth and optionality that our shareholders benefit from. And the exploration upside, the exploration and production upside that I've just talked about is really important when you think about our business and business model. And when we look at new opportunities we're always looking for those that can probably provide the long-term optionality to our shareholders. Now we also have a very efficient business model, and we have 31 employees in the company. Last year, we produced about $600 million of revenue, and our market capital is just a shade under $8 billion. So on a per employee basis, we compare very well to just about any company you want to compare us to inside and outside of the gold sector. And the low employee counts really does mean our G&A costs are low, and they're relatively fixed, which further contributes to our efficiency. Last year, we had a 79% EBITDA margin and our cash G&A was about 4% of our total revenue. Our G&A is low and mostly made-up of fixed cost. So inflation should not be significant for us to our margins. And on that point, on Slide 18, you can see if you look at the left-hand side of this slide, you can see our cost structure compared to the average gold producer. And you can see that we're relatively insulated from cost inflation. Producers are exposed to inflation and input costs to their operations. So labor costs, energy, consumables and other site costs. A lot of those things actually do increase when commodity prices increase. When you have inflation, those costs also increase. Our G&A costs are relatively steady. So they're longer term in nature. So they're salaries, services, office rents, things like that, that typically don't change or move on a short-term basis. So our margins were a lot less exposed to inflation pressures, and that's simply because we're not directly exposed to operating capital costs. I'll talk a bit about our portfolio and the depth and the breadth of that portfolio and some of the organic growth in the portfolio. On Slide 20 here, you can see a map or global portfolio. The portfolio is weighted toward lower risk and more mining-friendly jurisdictions. And on the right-hand side, you see our principal properties are called out. Those are the larger portfolio assets that provide the bulk of our revenue. But our portfolio is pretty well diversified, and that provides stability. Our largest country exposures are to Canada, U.S.A., the Dominican Republic and Chile. So all of those are pretty mining-friendly jurisdictions and our revenue comes from about 40 producing mines. So if you think about that portfolio breadth, it compares very well to any mining company in the business. And that revenue diversification really reduces our exposure to single asset underperformance. Now the other thing that's unique about our portfolio is that many of the underlying assets in our portfolio are price metals assets. So we're less reliant on base metals fundamentals for our revenue than perhaps some of our peers. Now our portfolio spans the various stages of mining project development, and we have 142 assets in the portfolio that are not producing today that are in various stages of exploration, evaluation and development. We would expect there to be the potential for organic growth from any assets that move from the left-hand side of the slide to the right and King of the Hills and Bellevue Gold are 2 very good examples of organic growth. We've had these royalties in the portfolio for well over 10 years, 0 book value assigned to both of these. But over the last several years, new management teams have come into these assets, and they've taken different approaches, and they pushed forward production plans for these assets. King of the Hills actually started producing last year and Bellevue is expected to start producing this year. So that's a good example. Those are good examples of organic growth within the portfolio. And to continue on that theme of organic growth, this slide shows some of the key catalysts that we see today for various assets within the portfolio. The top half of the slide in blue shows some of the potential for mine life extensions and production increases at producing assets and portfolio. And some of these are the largest producers in our portfolio. And the gold color below that, you can see potential new revenue from development assets within the portfolio. And we've got Gold Rush and Cortez, a record of decision, which is a key permit is expected by midyear of this year. As I said, we've got -- we're expecting to see revenue from Bellevue Gold later this year. And then next year, we should see revenue from Côté, Manh Choh and Mara Rosa. And beyond that, we have a couple of other things that should add some revenue as well over the following years. All of this growth is free optionality. All of these assets are funded. We own these royalties with streams and we do not need to pay for further exposure to this growth. Now while we do have organic growth within the portfolio, we're always active at looking to add growth to the portfolio by acquiring for the royalty and stream interests. And this slide summarizes what we've done over the past couple of years. We've deployed about $1.2 billion of capital on 6 large transactions that all provide gold exposure to assets with upside potential and safe jurisdictions. We funded these transactions using cash on hand and our revolving credit facility, and we haven't our shareholders by issuing equity to finance these transactions. Now I'll spend a couple of minutes on the newest of these Cortez in great bearing just to give you a sense of how they fit our strategy of strength and diversifying our portfolio. So on Slide 25, our largest recent transactions have both been at the Cortez Complex in Nevada. We've acquired 2 royalties here over the past several months. And we announced the first in August last year, and the last, we announced in early January. And this -- these transactions, they fit our strategy very neatly and our investment criteria. We loosely call the criteria the 3P. So there's people, place and project. And Cortez checks all of those boxes. It's a world-class gold complex in a mining friendly jurisdiction in Nevada, operated by Nevada Gold Mines, which is a joint venture between the 2 largest gold companies in our business. Royal Gold has a long history at Cortez, and we've owned several royalties at Cortez since the beginning of the company. And these royalties further consolidate our position and ownership that covers the entirety of the Cortez Complex. These 2 new royalties are on the right-hand side of this table, the Rio Tinto royalty and the Idaho royalty. But the middle column is really where I want to focus you because we own now royalties that cover all of Cortez, as I said. But if you look at the royalty rates, we've approximated the royalty rates. So you can see that we have a 9.4% gross royalty on the pipeline and Crossroads mines. We have 1.6% gross royalty on Cortez Hills as well as the Gold Rush and Fourmile development projects, and we have a 0.45% gross royalty on the Robertson project. Barrick has said that they expect the Cortez Complex to produce about 1 million ounces a year in '24, 1 million ounces this year in 2023, rising to about 1.35 million ounces in 2027. So if you think about those production levels and the royalty rates that I just mentioned, we expect Cortez to become really top 3 revenue producers in the Royal Gold portfolio. And with the production growth and the reserve replacement history at Cortez, we expect that this will be one of the best assets in our portfolio, and it is certainly one of the most prospective gold mining areas in the world. Now on Slide 26. I want to cover another recent transaction, which was Great Bear Royalties Corporation. With this acquisition, which we completed midyear last year, we owned a 2% net sell-to return royalty on the emerging Great Bear project. And like Cortez, this transaction meets our 3Ps for people, place and project. It's operated by Kinross, which is a well-capitalized senior gold producer. The project is located in Ontario, Canada, near Red Lake. So that's a very mining friendly and low-risk jurisdiction. And finally, it's one of the most interesting gold projects that's been discovered globally in the past several years. Kinross is targeting around 500,000 ounces year of production from this asset, and they're expecting it to be for potentially several decades of production. Our royalty here covers the entire 91 square kilometer land package, and its life of mine without step-downs or any caps. Now one unique feature of this transaction was that we provided Kinross, we acquired this royalty from a third-party owner. And we gave Kinross the option to acquire 25% of this royalty at our cost. And this was a compensation to Kinross for a very unique arrangement. Normally, in the third-party royalty transaction, we would never have access to the operator. But in this case, we had an agreement with Kinross that allowed us to review nonpublic technical information. And it really allowed us to independently validate their assumptions and understand how they think about the project. So that derisked an early-stage project very significantly for us. Kinross is working very hard to progress this project today. And they announced earlier in February, they made a 5 million-ounce resource. And so they're completing work later this year and in the subsequent years to continue to add to that resource. We would expect that resource to grow over the next several years. Kinross is targeting 2029 for first production and this is the kind of asset that really does build on long-term growth scale and optionality to our portfolio. Now Slide 27 just gives you a summary of 4 other new addition or newer additions to the portfolio that should provide near-term revenue growth. Starting on the left-hand side of the slide, at Khoemacau in Botswana, production has ramped up to full production levels. It happened in December last year. We're expecting this year to be the full -- first full year of production. At Red Chris in Northern British Columbia, Newcrest is advancing studies and continuing to show good exploration results. As they transition the mining from the -- an open pit to a large bulk tonnage operation starting in 2026. At Xavantina in Brazil, which we used to call NX Gold, Ero Copper is continuing to do explorational work to fill the mill and sustain production levels at around 60,000 ounces a year. And finally, at the Côté Gold project in Ontario, construction is about 73% complete as of the end of December and commercial production is targeted for early 2024. If I was to say there's a common theme on this slide and all the other things I've talked about the last few minutes, I'd say all of these are precious metals assets and all provide further exposure to production and exploration upside. And 3 of the assets shown on this page are producing revenue to us today. So immediate contributors our portfolio. Now I'll make my final comments on valuation. And I think we are trading at pretty attractive historic multiples. Royal Gold did perform very well in 2022 in terms of our stock price. We outperformed all of our large cap peers and I think that was a reflection of strong company performance across the board. However, I think multiples are lagging. So our valuation multiples are lagging. I think that if you look at the cash flow multiple on the right-hand side, especially, we are trading at the bottom half of the peer group. I don't think the market is fully giving us benefit for the quality of the cash flow that we are receiving from our diversified suite of assets. And I don't think the market has given us credit yet for a lot of the recent transactions that we've done. There's a lot of value in the long life assets and the optionality that we have acquired and added to the portfolio. And I don't think that's been reflected or recognized yet in the training multiples. So with that, I have come to the end. I hope I've given you a good sense of our strong record and how our business is performing, how we added to high-quality assets portfolio, and we still see organic growth potential from some of the other assets within the portfolio. And hopefully, you'll agree that our valuation is pretty attractive and we're in a very good position to continue adding to the portfolio liquidity that we have today on hand. So with that, Noella, I've come to the end of the formal part of the presentation. I'll be happy to turn it back to you for Q&A.

Thank you, Alistair, for the great presentation. So as you said, we'll now start the Q&A. The first set of questions are related to operations. As you said, how to reserve updates at your assets -- are you able to hear me? Alistair, are you hearing me? It seems we're having some technical difficulties during the Q&A. So just give us a moment as we fix our difficulties.

Well, unfortunately, it looks like I have lost Noella. So unfortunately, I guess I won't be able to answer any questions. I think if there are any questions, you can send them through to Renmark and they would, let me know what those questions are we going to get back to you with my responses to those. So apologies for that, and look forward to connecting you again. Thanks.

Thanks, everyone, for your patience. We will now do the Q&A with Alistair. So your first question, Alistair, is how the reserve updates at your assets favorable?

Yes, we've had some pretty good news at some of the assets. I think the one that I would point to as being the most favorable would be PV, Sao Paolo, and the Dominican Republic with the additional tailings capacity that Barrick is working on getting permanent that allows them to bring in on their basis, which is what our stream is based on. It was 6.5 million ounces into reserves from resources. So that was a very positive change. And that's the change that will allow the mine life to extend to the mid-2040s. So that was a very positive change. There were other incremental improvements as well during 2022 in the portfolio, but that would be the one that I would point to as being the most successful.

Excellent. Next question is, how are things going at Khoemacau?

Things are going well at Khoemacau. So as I said during the presentation, they reached their full production level in late December. And so the -- in January, if you saw our results, we talked about them and maintaining that mining and milling production level. And we're expecting that they will be, at this point, roughly steady state for this first year of operations. I think it's fair to assume that there may be some vision from month to month, but on balance is looking very good. We're very pleased with the way things have gone there. And I think -- if you think about what they have done at Khoemacau, they've been building an asset in Botswana. They started in 2019. COVID was 2 years, 3-year build at that time. They've done an excellent job of getting the asset up and running at full production levels in the time that they have done it. So it's been very, very good for us to see. We're very pleased that our due diligence when we initially made our investments, a lot of the assumptions that we made have been proven. And so we're very pleased to see how things have unfolded at Khoemacau.

Excellent. Next, if you were asked, has there been anything significant to have happened to any development properties in South America?

Anything significant development properties in South America. We don't have that many development projects in South America. We have some smaller royalty assets like Mara Rosa would be the one that I would say would be the nearest term development project, and that is how [indiscernible] the owner of Peruvian company that are developing that project. And as I said during the presentation, we're expecting to see some royalty revenue from that in 2024. We have other larger development projects. The biggest one would be Pascua-Lama in Chile, Argentina. But that project itself has -- Barrick is the operator that kind of gone back to first principles, back to the drawing board to think about that project. I don't think there's any news on that, that I would point to as saying there's any near-term potential contribution to Royal Gold from that project. There's still, obviously, a large gold resource. There's a lot of optionality in that ore body. And so it's something that we're always looking at. But I think any potential from that asset will be in the longer term rather than short term.

Thank you for that response. Next question is, would the company have an interest in increasing its exposure to cobalt or other minerals?

It's not something that we target. We are a precious metals company when it comes to our focus. What we're looking for is to add precious metals assets in the portfolio. So that would really be gold, silver and PGM. So it's the way that we think about precious metals. We will look at other opportunities that they are -- they're good quality projects and run by good people in good jurisdictions. So we will -- and we never rule it out, but we don't go out there looking to diversify our metals. We also have to be careful that we staying in all the metals that we understand. The metals that I've mentioned, gold, silver, PGMs, copper, those are all exchange-traded metals. There's an easy market for selling those assets, selling those metals. If you get involved in some of the more industrial metals or various specialty metals, you often need a long-term contract, and we just don't have that expertise. We don't have the marketing expertise that allows us to place lithium, for example. So it's -- that is a consideration that we have to think about carefully is if we get involved in something, is it something that we understand, is it something we don't how to market and actually turn it into dollars.

Next question is, would Royal Gold be open to acquiring a smaller player in the royalty streaming space?

Never say never. We've done it. We acquired International Royalties Corporation a few years ago. We don't -- we prefer to see growth on an asset-by-asset basis. And the reason for that is because when we look at adding to our portfolio, one asset at a time, we could go into real detail on that asset, and we can understand it very well. When you acquire a much -- when you acquire a company or a portfolio that somebody else has built, you often don't have the same access to information that you would if you're looking at adding assets one at the time directly from the operators. And it's something that in a portfolio, you often find there are one or two things that you really want, and then there may be a lot of things that you don't really want. You have to pay for it all. So it's something that we prefer not to do. Now of course, if valuations get to the point where competitors look very cheap, and it's a good way for us to add to our portfolio, we'll consider it. We do maintain models on all of our competitors, but it really has to be based on valuations rather than just bulking up.

Excellent. Next is at what stage of development is La Fortuna in Chile?

It's pretty in early stage. So that would be -- if you think about a development project in South America, like the previous question, that would be a very early-stage asset. I think the fact that there's a resource there that's got very serious operators who own the asset, those are all very good things, but I don't think it's going to enter our portfolio anytime soon. There's a lot of work to be done.

Next, we have some financial questions. First one is Royal Gold has been around a long time and has done extremely well. How have you managed to mitigate risks while increasing profits and shareholder value?

I think it's a philosophical approach to discipline. We are very, very thoughtful when it comes to capital allocation. So we will invest in good quality assets, but they have to be very good quality assets. If we don't see assets that we'd like, we won't make investments. So that means that we get to build our balance sheet, we got to make sure that our company is stronger. So there's a discipline around the capital allocation aspect of growing our business, which is very important. The other is a dividend. We have paid a dividend for a long time. And that kind of in our mind, it's like a debt obligation. So it's -- we always want to make sure that we have the capital available to pay our dividend, pay our shareholders. And that factors very much into the capital allocation discussion. And by nature, we're a very conservative bunch. So I think if you think about the discipline, the conservative nature, paying back our shareholders, those are the things that will -- have allowed us to be successful over time. And there've been simple concepts, we just have to be disciplined to make sure that we stay focused on those things.

Next, you were asked, are all of your royalties for the life of mine? Or do any of your assets come with a specific term?

The producing assets that we have today are all life of mine. We may have some smaller royalties in other parts of the portfolio where there are caps and other kind of strange in the agreements. But we don't have anything today that is producing that is capped and will fall away. So that is a key part of what we look for in opportunities. When I said during the presentation, we're always looking for optionality over the long term. So that's optionality to resource growth and production increases. If we have caps or if we have something that allows that agreement to terminate, we don't get exposure to that upside that optionality, and that's a very important part of our business model. So we always try and structure our investments in such a way that we don't have investments to fall away because of an artificial cap.

The next question is, what's the company's current debt? And is there any -- or is -- let me read that again. What's the company's current debt? And is there a stringent plan to pay it down?

Yes. So we have $575 million drawn on our revolving credit facility as of the end of December. And that is the only debt that we have outstanding. We certainly do intend to pay that down. And the way that we have dealt with our revolving credit facility in the past is that we've always paid down the debt as cash flow has come in the door. So I think you're going to expect us to do something similar at this time. And as I said during the presentation, we would expect that current metal prices and absent any further deployment on business development opportunities that may come in the door, we would expect to have that debt repaid by the middle of 2024.

Next up is what is your annual spend for ESG initiatives?

I don't know if I have an answer off the top of my head to that one, but it would be -- we have a budget for donations about $1.5 million a year. And that would include ESG initiatives at mine sites, but it also includes corporate donations around the offices where we have presence. So that would be in Denver, Toronto, Vancouver, and Lucerne Switzerland. We do spend additional money on ESG. We have somebody within the company who is focused on ESG. So for salary, it would be part of that bucket. We do an ESG reports. We did our first last year. We work in our second now. So there's going to be a budget for that as well. But it would probably be in total, I would guess, it would be in the $2 million to $3 million range would be the number for all ESG.

Next is you have an enviable cash position. Why such a large credit facility?

It's really because we want to make sure that we have the ability to act when we see opportunities and opportunities can be big and they can be small. We've learned in the past that big opportunities can come up very quickly. You always want to make sure that you have the capacity to be able to execute on those transactions. The last thing you wanted to do is to do due diligence on something you can find that this is the world's best opportunity. And then you have to go out and raise money to finance it because not often much doubt in the mind of the seller as to whether or out we're a serious counterparty. So if we have the credit facility, we have the amount available to us. We can basically agree to any transaction without a financing commitment. And that's important from a competitive perspective. That's very important. So we always want to make sure that we have the capacity there.

Next, we're going to move on to some stock market questions. we have seen some good upward price action on commodities, can you share your outlook for the royalty and streaming space?

I think we're not gold bugs necessarily within Royal Gold, but we are pretty positive on the gold price. I think if you look at the macro environment, there are a lot of things that are concerning. So when we see recession risk or you see inflation, you see these other things that are causing the market problems, often gold is a beneficiary. And so we're feeling pretty positive about the long term for gold. Same as silver. If you look at silver, did often with the other interesting thing about silver has also got a lot of industrial applications and a lot of those industrial applications are advanced or they're more of them as a result of energy transition because of silver's role as a conductor. Copper, exactly the same thing. We have about 13%, 14% of our revenue was cooper. So that, again, the transition economy is a very valuable metal. So we're feeling pretty confident about the future in metal prices.

Excellent. The next question is gold is holding the $1,900 level. Which metals do you feel have the biggest upside potential for your future projects?

That's a very interesting question. I think they all have upside potential for different reasons. As I said, gold in today's macro environment, I think, has -- it's a very interesting asset class. I think silver and copper for their exposure to the transition economy or the transition -- energy transition, I think they also have a lot of upside potential as well. I wouldn't care to handicap which has more potential than the other. These are different reasons behind those. But I think there is definitely upside potential in all of those metals.

Next, we're starting to see low-risk M&A activity. Are you expecting more mega-mergers in 2023? And could Royal Gold potentially be in play?

It's really hard to predict what will happen with M&A, especially on the top of the sector. It is something that when you see something like Newmont and Newcrest together, perhaps that will spur some additional M&A that filters down. But it's hard to really handicap it. I don't know whether we're a target or a buyer, that it really does depend on valuation. I think where we benefit, though, when it comes to M&A in the sector, generally is have companies like Newcrest and Newmont, when they get together, they're going to have a huge portfolio. And so that portfolio, they will likely decide that certain assets are core and other assets are not core and they'll try and sell those. And so if we are -- one of the new business opportunities for us is to help smaller companies acquire assets that may be spun off for these larger companies. And so that may be an opportunity for us to grow our portfolio. If we can help a small company acquire an asset, they can't quite afford on their own using -- we do that using stream financing exactly a very interesting way for us to grow our business. So M&A does have an impact on our business in the way that we think about opportunities.

Next question is, how does your valuation compare to WPM and FNV historically?

I think if you look historically, Franco at FNV has always had the premium valuation, and that's for a number of reasons. They've been around for a long time. It's a very large company. So the market cap certainly helps when it comes to valuation. Wheaton and Royal Gold tend to swap places when it comes to valuation, sometimes we trade ahead of them, sometimes they'll trade ahead of us. Right now, as I said in the presentation, I think that we are especially on a cash flow basis, I think that our valuation looks pretty attractive relative to our peers. But it is -- over time, you can't see periods when we've traded at richer multiples than where we are today.

And we're coming up on your last 2 questions. These will do a bit more general. The first one is do you feel you may -- do you feel you may look at more risky geographic areas down the road?

It's not something that we seek out. We don't look at our portfolio and say we can't afford to invest in a more risky jurisdiction. That's not the way that we think about it. The way we think about opportunities on a stand-alone basis. And so they've got the criteria that I said, people, place, project. And place is very important. If we get involved in risky jurisdictions, then that can cause problems for the sustainability of our investments, and that's not what we want. We're also very careful about due diligence. We'd like to go to places in person. So we're not going to send our people to places that are dangerous. And so if we're not going to send our people to those places, we certainly wouldn't want to invest in those places either. So jurisdictional risk is something that we have to think about carefully and we think about assets on a one-by-one basis. We will go to new jurisdictions just because we're not invested in some -- in any jurisdiction or something that we will not invest in there. Wassa is a good example. We until coming we didn't have an investment Wassa. We've never done business there, but we did a lot of work during the due diligence to get comfortable with Wassa as a jurisdiction, and we're very happy to be there. So we will look at new places, but we're not seeking risky places.

Thank you for clarifying. And your last question today is, can you speak to increased competition in the space and Royal Gold to be on that?

There's certainly -- there's a perception that there is increased competition in the space. And I think if you look at the number of companies in the royalty and streaming segment, there are certainly more now in the smaller than there have been for quite a long time. But I think the -- if you look at the top end of the spectrum and that's where we play, the competition hasn't changed. We've still got Franco. We still got Wheaton, started out roll. We may have some other better funded smaller companies as well, but that you really only need a couple to have competition in this sector, and we had competition from those same players for quite a long time. So while it may look like there's a lot of competition in the space, we don't really feel this more. Larger transactions are not immediately screens out along the smaller player. They just can't participate. So we're completing the base the same people again for quite a long time.

Thank you, Alistair, and thank you to everyone who sent in questions. If you did not get a chance to send your question, 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, everybody. I certainly appreciate your questions, and apologies for the technical difficulties. Hopefully, you all manage to continue through it. And I look forward to talking to you again next time. So thanks very much. Enjoy the rest of your day.

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