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'd like to thank everyone in Dallas 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 approximately 25 minutes and will be followed by a Q&A session, which you can participate using the chat box in the top right-hand corner of your screen. With that being said, I will now hand the floor over to Alistair.

Thanks, Noella. Thanks, Renmark, for the opportunity to present today. Gold reached a record high this morning. So it's very timely to give you an update on Royal Gold as 75% of our revenue comes from gold. So hopefully, you find today's presentation to be interesting and current. So I'll make a few mentions about forward-looking statements to start with. I will be making forward-looking statements during the presentation. There are risks and uncertainties that could cause actual results to differ materially from these statements. And all of these risks and uncertainties are discussed on our most recent form 10-K filings with the SEC. So during this presentation, I'm going to give you the investment thesis for Royal Gold and what we provide to our investors. And in a sentence, it really is precious metals exposure with consistent financial performance and a focus on per share metrics. And the presentation is divided up in the sections to help explain this. So I'm going to talk about our low-risk leverage to gold, our long history of successfully executing a very simple business strategy, our unique business model itself, the organic growth within a diversified portfolio, and then finally, some comments on valuation. So this slide shows Royal Gold at a high level. We are a high-margin business that generates consistent cash flows for precious metals. We've been in the business since in 1980s. We've been on the NASDAQ for well over 40 years now. And in 2023, our stream segment contributed about 69% of our revenue. Our royalty segment was about 31%. Royalties do tend to be higher margin than streams, but they both provide the same things, royalties and streams provide top line exposure to mining assets and metal production. In 2023, we are very focused on our balance sheet. We repaid $325 million of debt. And as we have done so for 23 consecutive years, we raised our dividend again by 7% last year. We reported our Q1 results in May, so we have very good results for the first quarter of the year. And as I said, we had 75% of our revenue came from gold and over 50% of our revenue came from Canada and the U.S. and Australia. We report our Q2 results in 3 weeks on August 7, so please tune in to our conference call for any further updates. So to set the table, I'm going to talk a little bit first about how we compare to our peers. And we sit in a very interesting position. We are, as you can see on this graph, we are the third of the big 3 royalty streaming companies. But we are big enough to compete for the largest transactions. We have significant cash flow. We have access to low-cost capital. And -- but we are also small enough to show growth. And so a small traction can add meaningful growth and meaningful value to our company. And that's an important differentiator. When you think about the business development environment that we operate in, being the size that we are, being able to show growth by doing small transactions, that's actually quite an important strategic consideration. So I'm now going to talk about our low-risk leverage to gold, and this slide shows different ways you can invest in golds and how Royal Gold is positioned. Our model is designed to provide exposure to precious metals without many of the risks that come with operating in -- we're divesting in operating companies. We provide upside exposure to gold and optionality while reducing downside risk by holding a diverse portfolio that does not have direct exposure to operating and capital cost risk. And that's very important when you think about margin erosion and you think about inflation, we see a lot of inflation over the past several years in input costs. There are other ways to invest in gold. If you want to be very conservative, you can buy the physical metal. But if you buy an ounce, it will always be an ounce. We will never pay you a dividend, in fact, it will cost you to store that ounce. You can be more aggressive and you can buy equities in operating companies or exploration companies. But with that, you're also taking on the risk of cost exposure. Royal Gold operates somewhere in the middle. So our historical performance on this slide shows why we think we're a good alternative for those who are looking for conservative exposure to gold. On the left-hand side, you can see we have a strong data to the gold price. We got good leverage to gold. On the right-hand side, you can see our share price performance over the past several years. This graph goes back to the beginning of the GDX. The GDX is the index of our peers, is the group that we compare ourselves against. So it's quite a relative relevant comparison. But the -- over this time period, we've beaten the gold price, we've beaten the GDX index, and we've also done very well relative to the general market indices. Obviously, the markets have done very, very well recently as a result of AI and some of the large-cap tech companies. But over time, you can see that our performance has been very strong relative to just about any of those metrics. I'm going to talk about our history of execution. And as I said in my opening comments, we do have a long record of consistent and disciplined financial performance. And this slide shows a 20-plus year history of capital allocation and growth for Royal Gold. And it's really one of the founding or one of the most important strategic tenets of the company is to provide accretive growth to our shareholders. And this slide shows that quite well. Since 2000, you can see that we've had significant revenue and cash flow growth from within the portfolio. But there's 3 aspects of this growth that are worth highlighting. The first is our business is high margin and is scalable. Our revenue growth has far exceeded the growth in G&A. And when we acquire a new asset, it doesn't take an additional workforce to look after that asset. We can roll it into our existing procedures, and we don't need to hire any more people. So the business is very scalable. The second is our revenue growth is not dependent on metal price appreciation. Metal prices have done well over this time period, but we have also added volume, so we've been opportunistic in adding assets to the portfolio. And thirdly, we have financed our growth internally, and that's without a significant rise in our share count. So we're one of the original members of the GDX Index. We have the lowest share count in that index. We want to avoid shareholder dilution if we can. If we could fund our business using internal resources, then that provides [ percent ] growth to our shareholders, and that's what we're really trying to do. I'm going to talk a bit on the slide about liquidity. Liquidity is very important in our business. We have to be patient in our business. So that means we have to maintain a strong balance sheet and liquidity to be able to fund transactions easily as they arise. And so having a strong balance sheet is very important. You may not see ahead of you lots of opportunity, but you never know when something is coming so you want to make sure you've got a strong balance sheet and liquidity to be able to finance transactions. And as I said, we look to equity as the least preferred way of financing transactions. So we'll use cash on hand. We'll use our operating cash flow. We'll use our revolving credit facility as the ways to finance transactions. Waterfall on the left shows how we allocated our capital in 2023. We use our operating cash flow to repay debt and to pay our dividends. And we ended the first quarter of this year with total liquidity of $166 million. That includes our undrawn revolver capacity as well as our working capital. So we have lost some liquidity for what we see ahead of ourselves today in the business development market. Now to talk a little bit further about our credit facility. This slide shows how we have used it in the past and you can see that it's a $1 billion revolver. And you can see that it provides very cheap and flexible financing to us. We have 8 top-tier banks in the facility. And the way we use it is much the same way that you would use your own personal credit card. When you acquire something, when you buy something, you use your credit card and you pay that balance off. That's how we do it. We draw the facility to fund acquisitions and we pay back the drawings from cash flow that comes from the portfolio. 2022 was a very big year for us when it came to the acquisitions we bore in the third and fourth quarter of that year to acquire long-life assets. We required royalties on the Cortez and Great Bear projects. And since then, we've repaid most of that. We've repaid, since the end of 2022 to our last reported period, we repaid $500 million of that drawing. So as of the end of -- sorry, as in early May, we only had $75 million remaining on the revolving credit facility balance, and we expect to repay that sometime early in the current quarter that we're in today. That rapid pay down really does -- it shows you how the cash flow generation potential of our portfolio. While there is an interest cost in drawing on the revolver and having a revolving balance outstanding, the short-term interest expense is a worthy trade-off when you consider if you're adding a multi-decade asset to the portfolio, you pay interest for a handful of quarters then you've got that asset on the books, and you have -- shareholders and your interest costs are relatively low. So it's a very strategic finance deal for us. I'm going to talk on the slide about dividends and return of capital is a key strategic objective for Royal Gold, and it's one of the attributes that makes us unique amongst other precious metals or gold investments. We've paid a growing and sustainable dividend. Since 2000, we've increased the dividend every year despite volatility and ups and downs in the gold price. We paid out almost $1 billion of dividends since we started paying dividends. So we're the only company in the GDX that's paid an increasing dividend every year since the index was formed in 2006. And we're the only precious company in the S&P High Yield Dividend Aristocrats Index. And that is a big and important differentiator for us when we're talking to a generalist audience who wants to understand how we thinking about capital allocation. Now our business is really around the acquisition and management of stream and royalty interest, so due diligence is a very important part of our business. It's an important core competency for us. Good due diligence practices are important to make sure that we have the right assets in the portfolio, and we avoid adding the wrong assets. And while we look at many opportunities at any one time, not all opportunities make it through our due diligence process. The process is very extensive and we're disciplined in the way that we deploy our capital. And if we see risks that we don't like and an opportunity, we are comfortable walking away from that opportunity and waiting. We don't feel pressured to do transactions. We're not compensated by doing a certain number of transactions in a given time period. So if we can't find the right opportunities, then we're happy to harvest revenue from the portfolio, build the balance sheet and wait for the right opportunities. We've always found that opportunities do present themselves, so it is always -- we're quite comfortable not acting on everything that we see. And 2023 really is a good case in point. We were busy in 2022, added to the portfolio. In 2023, we just didn't see the right opportunities. So we took the opportunity to pay down our debt and build up our liquidity. So that explains how we thought about 2023 and what we did there. I'm going to talk for a moment about ESG. Our business model is passive. We do not have direct operating control of the assets that we invest in, but ESG has always been a very important part of our business. We invest for the long term. So ensuring the sustainability of the assets that we invest in is a very important part of our due diligence for new transactions. I've got -- on this slide, you can see we've got MSCI and Sustainalytics ratings over time. They are 2 influential ratings providers in our sector, and we are toperated by Sustainalytics and we're AA rating by MSCI. Now we have not always -- in the longer past, we've never really talked about ESG. It was always just a part of what we did, it was just bread and butter for us. But we've done a lot more to improve the transparency of our practices and our processes, and we're very pleased to see that our ratings have improved as a result of us giving more information to the market. I'm going to talk in this next section about our business model. And the key to our model really is optionality, and that's what shown on this slide here. And that's optionality to reserve and resource growth without having to make further investments. I've got 2 assets shown on this slide. We've got PV and Wassa. We did stream investments on both in 2015. And in both cases, today, total reserves and resources are higher than at the time of the initial acquisition of our interests. And that's in addition to the production that's allowed us to recover over 85% of our investment in PV and over 140% of our investment at Wassa. And there were growth projects underway at both assets. In Wassa, there's a potential for a deep extension to the ore body to extend mine life by another decade or so. And our PV, Barrick has just finished a plant expansion, and they're looking at a tailings facility expansion that will extend the mine life to 2045 or so. Now in both cases, Royal Gold is not required to fund any other capital or invest anything further to get exposure to this upside. So this is growth that we don't have to pay for. And the exploration and production growth, whenever we look at a new opportunity, that's always a key focus because that optionality to any growth is the most important feature of our business model. It gives our shareholders that extra return. Now our business model is very efficient. We have 30 employees in the company. Last year, we produced just over $600 million of revenue. And today, we're just over $90 million in terms of market cap. So on a per employee basis, we compare to very well compared to any company, large or small, both inside and outside of the gold sector. And the low employee count means that we have a low fixed cash G&A which further contributes to our efficiency. We have -- last year, we had 79% adjusted EBITDA margin, which is pretty consistent over the past several years. Our cash G&A is about 5% of revenue. Our G&A is low and made up mostly of fix cost, so inflation should not be a risk or a significant risk on our margins. You can see that more clearly on this slide. As you see on the left-hand side, our cost structure versus the average gold producers' cost structure. And you can see that our costs are a lot more insulated from cost inflation. Producers are exposed to inflation and input costs. So things like labor, energy or other consumables that they require to run the mines, those often -- those prices will increase whenever we see commodity prices increase. So often, producer margins don't expand as you see higher gold prices. Whereas our G&A costs are mostly steady. We have salaries, services, office rent, things like that, that are not typically subject to short-term increases. So our margins are a lot less exposed to inflation pressures and it's simply because we're not directly exposed to operating and capital costs. I'm going to talk a little bit in this section about our portfolio, which is quite large and has lots of good organic growth potential for a minute. On Slide 22 here, you can see our global portfolio on the map. And our portfolio is weighted towards lower risk and more mining-friendly jurisdictions. And our principal property is those called on the right-hand side, those are the largest assets that provide the book from our revenue. About 70% -- 70% to 75% of our revenue comes from those 6 assets. We are -- as you can see on this map, if you were to focus on some of the areas where we have the most interest, we are very focused -- we have exposure to some of the more established mining camps in the world. We have about 50% of our revenue comes from Nevada, British Columbia and Western Australia. These are all historic mining areas that have excellent prospectivity and have supportive regulatory environments and they have access to people and expertise to be able to run these assets. So that's a very important consideration. And we have significant exposure to earlier-stage projects in these regions. So we think that we're very well situated from a geographic perspective. Now thinking about diversification of the portfolio. Our portfolio is well diversified and that provides stability to us. Our operators are best-in-class. Most of our operators are the largest and most well-capitalized and experienced companies in the mining sector. We have a large portfolio that contributes revenue of about 37 producing assets in our portfolio right now. That portfolio breadth compares very well to other mining companies. And our underlying assets are about 50% primary precious metals and about 50% from a mix of copper gold and base metal assets. Our largest country exposures are to Canada and the U.S.A., the Dominican Republic and Chile. So all of these are arguably mining-friendly jurisdictions. And that portfolio diversification, when you think about all those different factors, and that really does reduce our exposure to single asset operator and jurisdictional risk. Now if we're going to bucket our portfolio into the various stages of project development, you see that our portfolio does have groupings that have properties that span in various stages of project development. We have 141 assets that are not producing today, that are in various stages of exploration, evaluation and development, and we would expect them to be the potential for organic growth for any assets that advance through this pipeline to production. King of the Hills and Bellevue Gold are great examples of this organic growth from projects that have been in the portfolio and relatively dormant for many years. Both of these assets we acquired over a decade ago. Not much was happening until the last couple of years. And in the last year, both of these assets have started to produce revenue to us as new management teams have come into these assets and rethought them and redeveloped these assets. Now to continue on the theme of organic growth, this slide shows some of the key catalysts that we see from various assets within the portfolio today. At the top of the slide, in the blue arrows, you can see some of the producing assets. Some of the -- these are the largest assets in our portfolio. But there are potential for -- there is a potential for mine life extensions as well as production increases at several of these assets. And as you move further down the slide, you can see that we have the potential for new revenue in some of the assets that are shown in the gold color. We've actually, in fact, seen first gold port at Mara Rosa in Brazil, Cote Gold in Canada and Ontario as well as Manh Choh most recently, just a week ago, just over a week ago. In addition, the Goldrush mine, the Cortez complex was officially opened in the first quarter of this year. And if you look a little bit further down the time line, you can see that Back River, we're expecting to see first production from that sometime in the second half of next year as well as Great Bear, which we should see coming into the portfolio sometime towards the end of this decade. All of the growth that's shown on this slide is free optionality to my previous point, is all fully funded. We do not need to pay it any more to get exposure to this growth. So as a shareholder, you benefit from any optionality that's discovered or realized through these expansions. Now we are always very focused on adding to the portfolio as well. We can't rely on our organic growth to growth companies. So we're always looking at adding new assets to the portfolio. This slide shows what we've done since 2021. We deployed $1.2 billion of capital in 6 large transactions on 5 assets that provide gold exposure on assets with upside potential in safe jurisdictions and we funded all of these transactions using cash on hand on our revolving credit facility, and we have not issued any shares that dilute our shareholder exposure to these assets. And if I was just to give you a very quick summary of these assets, these acquisitions. The Cortez mine in Nevada, the Cortez complex, we acquired -- we've owned royalty interest at Cortez since beginning of the company. And we expanded, we had an opportunity to expand our royalty interest in 2022, and we now have coverage of the entire Cortez complex. This is a world-class gold producing complex in a mining-friendly jurisdiction is operated by Barrick and Newmont who were the 2 largest gold producers in the world. As I said, the new gold mine -- the new Goldrush mine that was just opened in the first quarter of this year. And there are other projects underway. There's a 4-mile project, which looks very interesting. And the Roberson project as well, which will provide significant growth towards the end of this decade. So very happy with our investment at Cortez, at Red Chris in Northern British Columbia. Newmont is continuing to plan at Newcrest to put in place to transition the mine from an open pit to a large underground tonnage operation. The current expected mine life here as well over 36 years, and that does not include additional resources that have been found since the original scoping study was released. In Xavantina in Brazil, Ero Copper had great success with an exploration there, and now they're targeting sustained gold production of 60,000 ounces a year. And the Cote project in Canada, as I mentioned, one of their first goals, they're targeting commercial production in the third quarter of this year. And finally, the Great Bear project in Ontario, Kinross has now outlined at least 6 million ounces of resources, and they're continuing exploration to add to that resource base over the next several years. And they're targeting first production sometime in the 2029 time period. Now there's one consistent theme with all of these acquisitions. They are all consistent with our strategy, to provide precious metals exposure to assets with significant exploration and production upside. And my final topic here is this valuation. And I just want to show you 2 metrics that most companies in our sector are evaluated on, which is price to NAV and price to cash flow. If you look back far enough, you can see that we're trading at historically attractive multiples today compared to our peers. Our business is performing very well. We've got strong cash flow. We're very disciplined with the capital we allocate, and we've got good organic growth from within the portfolio. However, multiples do seem to be lagging a little bit, especially when it comes to price to cash flow. We are trading on a price to cash flow basis in the bottom half of our peer group. I don't think the market is reflecting -- prices is not reflecting the quality of the cash flow that we're receiving from our high-quality set of assets. I don't think the value of the long life assets that we've added and the optionality of those assets has yet been recognized by the market. And then there's a second overlay as well. And that's, I think, today, in the markets, the higher, long-term gold price has not been factored in. Investors have not yet come to terms on a higher -- the potential for a higher long-term gold price. So I think that is holding back valuation somewhat. So it may be quite an interesting time to consider gold equities. Now I've come to the end of the formal remarks. As I said, I think we're very well positioned today. Our record is strong. Our business is performing very well. We've got high-quality assets in a well-diversified portfolio with good organic growth. We have an attractive valuation. We have a strong balance sheet and we have ample liquidity to continue growing in the business development market that we see ahead of ourselves today. So Noella, I've come to the end of the formal remarks that we have, and turn it back to you for Q&A.

Thank you very much, Alistair, for the presentation. As you said, we will now begin the Q&A. Your first question for today is, which nations or continents are off limits to Royal Gold in order to reduce political risks? Does Royal Gold have a percentage limit on collective exposure to third world nations or outside of NAFTA and Australia?

We think about it more in terms of countries that we just do not want to invest in. And so there are some countries that -- clearly Russia, we will not go to. China, we will not go to. Venezuela, we're not -- we don't like South Africa, a lot of risk there. A lot of Africa is off limits for us. If you don't have security of title, if you don't have physical security as well, if it's a place where rule of law is challenged, then we don't want to be there. If we can't send our own people to go see an asset, we don't want to invest there. So there are certain countries that we will not invest in. In terms of a percentage allocation, we don't think about it that way. It's kind of a binary risk. When you think about political risk or geopolitical risk, it's binary. Either there is risk that you're happy with or not. And so we don't say we'll allocate 5% of our portfolio with some higher risk areas because it will be offset with others. That's not the way we think about it. We'd rather make sure that any investment we make is going to be sound and not subject to risks that could cause it to be jeopardized.

Thank you for that response. Next question, what did you pay for the NSR on Cote? And what do you expect as a payback period?

So on that asset, I believe it was around $70 million was the royalty price, give or take more than $2 million. I can't remember the exact figure. Our payback on that, if I remember correctly, was -- it will be less than 10 years, but there is a little bit of a wild card there, and that is we do not have royalty coverage of 100% of the deposit. So depending on where mining occurs, there may be -- we may find that we are receiving more than 70% of the production or perhaps less. So that -- the number I gave you, the time I gave you is an estimate based on what we think their mine time will be. I'm expecting that IAMGOLD will be talking more about their plans for Cote as they get through the ramp-up and into commercial production, will start talking with more detail about any changes they made to the mine plan over the next several quarters. And obviously, we'll be talking about that with our investors as well.

Thank you for clarifying. The next [ reviewer ] says, very happy to see the stock hitting new highs. Do you see metal prices remaining strong through the fall?

Yes, I think so. I think the -- we're not necessarily [ gold bugs ] at Royal Gold. But we do -- I think it's a pretty consistent sentiment within the company that we think that metal prices will stay strong over the long term. I think if you look at what's happened, the gold price has been surprisingly driven by Central Bank purchases. Large, large central bank purchases over the past several quarters. And while you've seen some of those central bank purchases perhaps being paused, there's a trend in Central Bank gold holdings to de-dollarization. And a couple of reasons for that. Some of it is geopolitical risk. Some of it is also just a view on the value of the U.S. dollar. I think that is something that is going to continue and is going to be something that's a longer-term event. But then on top of that, you've got now more speculation about rate cuts in the U.S. And if that occurs, that should be a very strong tailwind to the gold price. So I think we're thinking that the gold price will be strong for the midterm at least. And I think long term, it's just the amount of debt in the world, government debt is not sustainable. So gold is one of those assets that is a real store of value. And so we think that the future of the gold prices is quite good.

Thank you, Alistair. Next question. Kinross' Manh Choh recently have their first [ pour ]. Can you go over your royalty and perhaps explain the 28% NSR on the silver produced?

Yes. So we actually -- we had a direct asset interest. There's a very unusual structure. We actually were the operator of the Contango project at the time, Peak Gold, that project. And we sold out to Kinross and they became -- they took our position when they became the operator. And we retained royalty interests. Now it's a very large property package. We have a couple of different royalty interests on the original, on the area where there's mining today and then we have a royalty interest over a larger area as well. And we also have a 28% silver NSR. And silver is not -- it's not the driver of the economics there. It's a large royalty, but it was just a way for us to make up some additional value when we sold it to Kinross. That asset itself we expect to produce for -- currently, the plan is about 4.5 years. It's about 900,000 ounces over that 4.5 years, and our royalty should end up providing to us, if memory serves, it will be about 8,500 GEOs to our account every year for the next 4.5 years. So I'm quite pleased to see that asset moving forward.

Thank you for your response. Next question. Q2 stream segment sales news release mentions gold and silver and inventory. Do you generally like to keep a certain amount in inventory always? Or will it be sold in Q3?

We -- so inventory is a function of timing. We do not manage our inventory levels. What happens is with our streams, we receive physical metal. And so when we receive that metal, we have a plan to sell it over the next -- over the time period and even increments to the next delivery from that same asset. So say we had 100 ounces from Mount Milligan today. We're expecting to get 100 ounces in 10 days. Second delivery, we'll sell 10 ounces a day between now and when we expect that next delivery to occur. And so inventory is just a function of what is unsold over that time period. At the end of the quarter, we will have some amount that's outstanding and not -- it has not been sold. We still own it, and we will sell that. So inventory is not something that we manage. It is just a -- it's a function of our sales and it varies from quarter-to-quarter. But generally, over time, it's relatively consistent.

Thank you, Alistair. Next question. How does the company perform due diligence on potential new acquisitions with just 30 employees?

So we have -- probably about 1/3 of the employees in the company are technical. So we do have a good technical bench strength within the company. We have a couple of mining engineers, metallurgists, geologists, the resource modeler. But then what we do is we will also hire consultants to help us. And these are generally people we've worked with in the past. They understand how we look at things. If we're looking at a certain opportunity that may have certain current characteristics, we'll find a consultant if he's got experience looking at those characteristics if we don't have the expertise in-house. So we will use external resources to bolster our team. And it's very much a horses for courses kind of approach, where we just -- we find the right person to help us with a specific opportunity. That's how we do it. But all of the due diligence is done under the direction of somebody from within Royal Gold and when we go to the Board to talk about any acquisition, we talk about our due diligence findings, it's always a Royal Gold person who is the champion or the accountable person to the Board for those due diligence findings. So we don't farm out our due diligence to somebody and just take their results and use those. We will actually manage it internally. And there's direct accountability as well internally.

The next question is, what sort of safeguards does Royal Gold implement to protect against partners who run into cash flow generation issues down the road?

So there are a number of different things we can do within our contracts to try and limit further borrowings or if a company starts to get into financial distress, then want to do certain things. We will put in covenants so we'll try and limit the ability for those companies to use certain things that may actually cause further problems. But generally, what happens is we have a -- we think about ourselves as a partner. And if there is an issue, a counterpart is having, we will, if they approach us, and obviously, it's got a mutual arrangement. But the -- if they come to us and say, we're having trouble, we need some help or some relief for something, we will -- we'll always listen. And so I can't guarantee that if a circumstance were to come up with a solution that makes sense for the counterparties having trouble, but we'll try and find a way for us to work with that counterparty to fix the issue or at least address it. And we're not in the business of giving up value, but we'll certainly do what we can to help because it's in nobody's best interested if a mine stops working. The mine stops working, obviously, the operator doesn't have any -- there's no benefit to the operator, there's no benefit to us. So we'll work with counterparties if it comes to it.

Thank you for that response. Next question, which asset has seen the most production growth recently?

We're seeing, I guess -- we've had a lot of growth in production from several assets. I think one of the assets that obviously our royalty coverage is much larger now than it was, Cortez, there's so much optionality in that land package that I think we'll see significant opportunity within Cortez just because we have exposure now to several lines in that area. The client expansion [indiscernible] vehicle will give us exposure to much higher production levels as well. Mount Milligan, it's a relatively stable per user, but there's a lot of work going on right now to try and optimize recoveries as well as extend the mine life. So there's a lot of -- I can't point to one specific example that's going to necessarily be the one to hang your hat on, but there's a lot of stuff happening within the portfolio where we see good potential for growth. And we've actually seen a good historical growth as well. And I think that if I was to point to one specific asset, maybe Ero Copper, Xavantina. When we got involved in that, the production level was just over 30,000 ounces a year. Now they're expecting to sustain 60,000 ounces of gold per year. That's a pretty significant increase, and that's purely driven by grade and exploration success. So that's one that's been fantastic for us.

Thank you for your insight, Alistair. Next question. How does the interest rate on your credit facility compare to peers?