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

We're very pleased and honored to host Jason Hynes, the Senior Vice President, Corporate Strategy for Royal Gold, the third largest royalty streaming company, historic entity. You have a press release this morning, Jason, why don't you get right into it and tell us the story.

Sure. Yes, John. In our press release -- first of all, thanks for having us again. We always appreciate doing this presentation. Our press release this morning was just providing, as we do ahead of every -- about a month ahead of every quarterly release. We just provide our stream sales. It gives the investment community opportunity to see how the bulk of our business, which is kind of 70-ish percent of our revenue, how that's looking. And then obviously, we'll put out our Q3 results here in just after the first week of November, which will fold in the royalty business and all the other ancestry things and costs and whatnot so. I've been with Royal Gold since 2013 in various business development and strategy roles. I started in our Denver office, and I spent many years in our Swiss office, and I'm located in Vancouver right now. Happy to be here to give an overview and update on our business. Our portfolio of assets is in really good shape and the gold prices have been performing well. So it's a good time to give your listeners an update here. Assuming everybody can see my screen here. Just quickly, we -- during the presentation, I will be making forward-looking statements. Risks and uncertainties could cause actual results to differ materially from these statements, and these risks and uncertainties are discussed in our Form 10-K filings with the SEC. So I think you probably had a couple of streaming presentations already, John, but I will talk a little bit about the business model as well as I weave it into the -- talk about Royal Gold specifically. But what Royal Gold attempts to provide to investors is precious metals exposure with consistent financial performance and really a focus on per share metrics. I'm going to try to focus on how we provide this in this presentation and hopefully get across how we provide lower risk leverage to gold compared to operating companies. We have a long history of executing on a fairly straightforward strategy. We provide unique exposure to the precious metals royalty and streaming model specifically through a combination of size and liquidity and being a U.S. company. We have pretty significant organic growth embedded in the portfolio right now that comes at no additional cost to the company or to our shareholders. And I'll close off by touching on our valuation, which despite the strong gold price is at pretty attractive levels relative to history. So Royal Gold at a high level, it's a high-margin business to generate consistent cash flows from precious metals. We've been in business since the mid-80s and on the NASDAQ for well over 40 years. In 2023, our last calendar year, we generated revenue of just over $600 million in a year where the gold price averaged just under $2,000 an ounce, compared to $2,600 or so today. Our stream segment generated 69% of that revenue and the royalty segment is the balance. We're pretty agnostic between the 2 products. They both provide exposure to top line production at mining asset. There's some structural differences, structural considerations when we're deciding what type of investment to make on our side and on our counterparty side. In November 23, we increased the dividend for 2024 by 7%. This was our 23rd consecutive annual dividend increase. And as I mentioned, we're currently finalizing our Q2 results for next month. But in Q2, it was another quarter of strong financials with $174 million in revenue, $81 million in earnings and strong EBITDA margins. And again, 74% of our revenue was from gold. Around half of our revenue comes from Canada and the U.S. and geopolitics is something we put a lot of focus on, and we're very comfortable with our current exposure. And this slide is a little out of date, but since the closing of the last quarter, we now have a clean balance sheet and no debt. So how do we compare to our peers? We really think we sit in the Goldilocks position in the industry. We're big enough to compete for the largest transactions with significant cash flow and access to capital. We're not too big as to where growth becomes challenged, because the average size transactions and acquisition opportunities that are out there, still move the needle for us. This is an important differentiator when you add that to our organic growth and the types of acquisition opportunities we see today. And as I mentioned, we are the only American company of any size in the specific sector. So why would investors want to get their precious metals exposure from us. Like I said, we are gold focused. We are lower risk than mine operators, and we do maintain significant leverage to the gold price. The business model provides exposure to precious metals and mitigates many of the risks that come with investing in operating companies. The exposure we provide is direct exposure to metals prices, given that the vast majority of our interests are tied to the top line production at mine, but the optionality that's in our portfolio really leverages that exposure, and I'll talk a little bit more about that later on. Our portfolio is also diversified that reduces volatility and we're very much insulated from direct exposure to operating and capital costs through the business model. And this last point is what insulates our margins, which is important when considering how inflation erodes operator margins in rising price environments like the one we're in right now. Our historic performance shows we're a good alternative for conservative exposure to gold. Our share price is strongly correlated to the gold price and our share price performance has beaten both the gold price and the GDX, this is going back here since the index was formed in 2006. More generally, we've performed well against general market indices over this time, not just precious metals or mining specific ones. I'll speak briefly to our disciplined and really long-term approach to how we run the business here at Royal Gold. We have a 20-plus year history of accretive growth for shareholders. Looking back since 2000, revenue and cash flow have grown dramatically. And there are really 3 key aspects to this growth. First, the business is high margin and scalable. Revenue growth far exceeds increases in our G&A. Second, the revenue growth is not just dependent on metals prices, although we do provide that exposure. We actually added volume in an accretive way, volume of metal. And lastly, we have largely financed our growth internally without a significant increase in the share count. We're an original member of the GDX, and we actually have the lowest share count in the index. So we really look to minimize shareholder dilution when we fund our business with cash flow and low cost debt. And this often translates to higher per share growth for shareholders. And I'll talk a little bit about this as well. Just a quick snapshot of where we are on the liquidity front, just to be ready for new acquisition opportunities, because we really have to be patient. We need to maintain a strong balance sheet and liquidity in order to finance opportunities as they arise and they can arise in a lumpy fashion. As I mentioned, our approach to funding growth is to use cash generated from existing operations and our revolving credit facility. Equity financing is always an option for us, but it is our least preferred. This waterfall chart on the left here shows how we allocated our cash flows in 2023 after a very busy 2022 on the acquisition front. We used operating cash flow to repay debt and pay the dividend basically. And we're now debt free and that leaves us with over $1 billion available under the revolving credit facility, so over $1 billion of liquidity, which is ample liquidity to consider new acquisition opportunities. A little bit of more history about our use of short-term debt to grow the business in this chart here. So a quick overview of our facility. We have 8 top-tier banks in the $1 billion revolving credit. This provides reliable, low-cost and flexible financing. You can see our playbook at work in this chart several times over the years. We draw on the facility to fund new acquisitions and then we pay it down quickly using cash flow. Like I said, our acquisition activity can be lumpy. 2022 was a big year when we borrowed in Q3 and Q4 to acquire Cortez Complex royalties in Nevada and a Great Bear Royalty in Red Lake, which is the only royalty that exists on Kinross' flagship development project. The debt that we borrowed to pay for those acquisitions was fully repaid in the subsequent quarters. And that rapid paydown really showcases the cash flow generation potential of our portfolio. We're not blind to interest costs, but we believe that short-term interest expense is a worthy trade-off to acquire multi-decade assets without equity dilution. Turning to the dividend. I mentioned this in the intro, but return of capital is a core strategic objective of ours, and it's one of the attributes that makes us unique among gold investments. We've paid a dividend since 2000, and we've increased it every year despite volatility in the gold price. The goal here is to grow the dividend, but grow it in a sustainable way. And as you can see from the fairly consistent payout ratios on this chart, we've been able to achieve that. If you put it all together since we launched the dividend policy almost 25 years ago, we paid out almost $1 billion in dividends. And we're the only company in the GDX that's paid an annually increasing dividend since the index was formed in 2006, nearly 20 years ago. And this track record has got us into -- be the only precious metals company in the S&P High Yield Dividend Aristocrats Index, which is something that we're proud of. One of the most important activities that we do as a management team is making new investment decisions. And while we have a dedicated business development group and we're always looking at opportunities, most of these opportunities don't make it through our rigorous review process. If we see technical, environmental, legal, other risks that we can't mitigate through contracts and negotiations, we walk away. We don't feel any pressure to do transaction. And if we can't find the right opportunities, we'll collect revenue, build up the balance sheet while continuing to return capital to shareholders and wait for the right opportunities to surface. You can see from the chart on this slide that there are years we committed close to $1 billion, and there's others where we've done no transactions at all, and we're just fine with that. We're just waiting for the right opportunities. And one certainty over the medium term is that the mining industry always needs capital. That's whether it's to fund internal growth or M&A or to manage balance sheets. Touching very briefly on ESG. It's important to note that our business model does not provide operating control over mines, but investment stewardship has always been a core part of our business. We need to ensure that the underlying operations that we're investing in, can be operated in a sustainable way, and that's a key part of our due diligence process, because if an operation isn't being run sustainably and that includes environmental and social considerations, then it won't operate for very long. When we write new contracts, we often incorporate language to ensure that operations are managed to the highest standards. And we also work with our partners to fund initiatives that can have a positive impact on the near mine communities. And those positive impacts on communities, improve social license to operate and allow our operators to run their business in a more fulsome way. We've really worked to increase our transparency around these various processes. We now publish investment, stewardship and climate reports and we're pleased to see material improvements in the perception and recognition of our practices along these lines and MSCI and Sustainalytics here, they're 2 influential ratings providers, and we have very good scores with both of them. Move to Slide 17 here, just to dig into the business model a bit more. One of the keys to our business being highly valued is exposure to reserve and resource growth without requiring further investment from us. Picking a couple of examples here, Pueblo Viejo and Wassa. These are 2 assets that have been in our portfolio for close to a decade, so we can sort of look back on them and see how they've done. In both cases, the total reserves and resources today are higher than they were at the time of the acquisition. And this is in addition to the production that we've received to date that's allowed us to recover over 85% of our $610 million investment at PV and over 140% of our $145 million investment at Wassa in Ghana. And 10 years later, there are growth projects going on at both these assets, at PV in the Dominican Republic. Barrick's expansion is in its final stages. And their goal there is to maintain gold production levels and extend the mine life to the mid-2040s. And at Wassa in Ghana, West Africa, resources have been outlined in the southern extension zone that could extend the mine life by another 11 years beyond the existing reserve life without -- and they had execution options under evaluation by the operator there. And like I said, in both those cases, Royal Gold is not required to make any further investment to benefit from this upside. Resource conversion, exploration upside, production expansion potential. These are key factors that drive outsized returns in our business. And that's why identifying these attributes during due diligence of new opportunities is so critical. Quick -- the efficiency of our business model. We have 30 employees. Like I said, we produced over $600 million of annual revenue, and we have around a $9 billion market cap, and it really shows the scalability of our business model. And our efficiency is also shown in our low cash G&A, which is only around 5% of revenue in 2023, which contributed to another year of strong EBITDA margins. Cost inflation, which we hear about a lot in the industry is not really a significant risk to our margins because we aren't directly exposed to combined operating and capital costs. And just continuing on this topic. You can see here in our cost structure comparison against the average gold producer. Producers are exposed to inflation and input costs, labor, energy, consumables, other site costs, many of which increase when commodity prices increase. And our G&A -- while our G&A costs are mostly steady, salaries, services, office rents and not typically subject to short-term variability. And regardless, they are a very small fraction of our revenue. The cost of sales of our streams is the largest contributor to our per ounce cost that we report, but it is a direct percentage of the metal price we're streaming. It has nothing to do with the cost structure at the mines themselves. So we're not exposed to that. So we've covered the business model a little bit, and maybe now I'll give you an overview of our asset portfolio, a little update on the asset portfolio. Our portfolio is global, but it is weighted towards lower risk and mining-friendly jurisdictions, and that's a strategic focus for us. Our producing investments are shown here on this map, and the principal properties listed on the right in no particular order. These are the larger portfolio investments that provide the bulk of our revenue, like I said, that [indiscernible]. The best place to find a mine is near a mine, and we have exposure to a globally significant very well-established mining camps around half of our revenue comes from Nevada, British Columbia, Western Australia. And these are historical mining areas with great prospectivity, supportive regulatory environments and access to the people and expertise necessary to advance projects. And on top of revenue-generating assets in these camps, we also have significant exposure to earlier stage projects. So they're great areas to be exposed to generate that optionality. Our portfolio is gold-focused, but well diversified and that provides stability. Our operating partners, they're best-in-class. They're well capitalized to finance existing operations and growth opportunities, and they're experienced to effectively manage operations and crystallize upside. Right now, I believe we have 37 mines contributing to revenue. The breadth of that portfolio compares favorably even to much larger mining companies, but we don't have the need to manage the operations on a day-to-day basis, but we still get that exposure. Sometimes we take exposure to the primary commodity online and sometimes only to the byproduct metal and generally, the primary commodities at the mines in which we're invested are about half precious metals gold mines and half copper or copper gold mine. I've said a little bit about our country exposures, but our largest ones are Canada, the U.S., the Dominican Republic and Chile through some of our larger assets. And these are jurisdictions that really understand the value that mining brings to their economies and affords a certain level of stability. Portfolio, this diversification really reduces our exposure to single asset operator and jurisdictional risk that can surface from time to time. For example, in the chart on the far right there, Mexico is usually a bit higher, but this slide is based on 2Q revenue. And as some listeners might know, Newmont's Peñasquito mine had a lengthy work stoppage during that period that has since been resolved. So that -- we still are exposed to some of those risks, but the portfolio diversification really kind of minimizes the impact on our portfolio on any given quarter or year. The portfolio spans the different stages of mining project development. Over 130 of our interests are in assets that are not yet producing being in various stages of exploration, evaluation and development. This provides us with really a pipeline of organic growth potential as assets are advanced through the development pipeline to production by the operators with their dollars. Our King of the Hills and Bellevue Gold mine royalties in Australia are a couple of examples of organic growth from projects that have moved through the pipeline. Those royalties were added to the portfolio well over a decade ago, and it's just over the last few years that they entered production now contributing meaningful revenue. To continue on the theme of organic growth. This slide here gives you some visibility on key catalysts that we see in the portfolio today. There is potential for mine life extensions and production increases at several assets that are already producing shown here in blue, including Mount Milligan, our largest asset, where a mine life extension PEA is underway by Centerra, slated for release next year. We have new revenue producers this year and others expected to come online in the near future. We had first gold in H1 of this year from Hochschild's Mara Rosa mine in Brazil and IAMGOLD Cote mine in Ontario. At NGM's Cortez Complex in Nevada, the Goldrush mine is ramping up production from 130,000 ounces this year to 400,000 ounces per year by 2028. First gold was also poured at Kinross' Manh Choh mine in Alaska in July. This is a high-grade satellite deposit being processed at the Fort Knox operation that we have a sizable royalty on. B2Gold is expecting first gold production from Back River next year. I'll talk a little bit more about that later on. And then lastly, Kinross's -- another Kinross project, our flagship Great Bear project is currently expected to start up around 2029 according to their current forecast. And again, just to reiterate, this growth requires no additional capital from Royal Gold. It's all fully funded. While we don't feel pressure to make acquisitions, we have been actively adding to the portfolio, and this slide summarizes what we've done over the past 3 or so years. We deployed $1.2 billion in 7 transactions covering 6 different operations that meet our investment criteria, where we funded these again without equity dilution by using cash on hand and the revolving credit facility, which has since all been repaid. Summarizing the long-term potential of these acquisitions. So starting at Cortez in Nevada, we own several royalty interests, and prior to 2022, when we expanded our royalty position in 2022 to give us exposure to the entire complex, a world-class multi-mine gold complex in Nevada, which some would argue is the most mining-friendly jurisdiction in the world. And it's owned by 2 of the biggest gold produce -- the 2 biggest gold producer in the world, Barrick and Newmont. The new Goldrush mine is now operating, and they are really pushing forward growth potential at the Fourmile and Robertson projects as well, which we have royalty coverage over. At the Red Chris Copper Gold mine in Northern British Columbia, formerly owned by new -- operated by Newcrest, now Newmont, who are advancing underground development and feasibility studies that should see a transition from open pit to a large bulk tonnage underground operation. The current expected mine life is north of 35 years, and that doesn't include additional resources from continued exploration success, and they've already defined exploration targets and size of potential resources on some of those targets and quite material relative to the current mine life. Xavantina in Brazil, Ero Copper has had a lot of exploration success there, and it's allowed them to target a sustained high-margin gold production of 60,000 ounces a year for the foreseeable future. That's been a great investment for us just in the couple of years since we've acquired it. At Côté Gold in Ontario, this is IAMGOLD. They poured first gold in March, and they announced commercial production in August. And also in Ontario at Great Bear, which I mentioned a few times, Kinross has already delineated 6.6 million ounces of resources to date. They released a PEA earlier this year, which forecasts an average of 500,000 ounces of gold per year in the first 8 years of operation. And really drilling at depth via an exploration ramp is expected to add to this profile over the next several years as they advance that project. This is an ore body that's going to take years before we understand its ultimate potential, but Kinross are off to a really great start in our view. At Back River in Nunavut, which is up in the Canadian Arctic. This is our most recent investment. We spent $51 million to acquire 2 royalties, which together are equivalent to about a 1.1% gross royalty. This added to a previously held royalty interest, and we now have a consolidated long-term royalty rate of over 3% exposure to that project. Construction is underway and B2Gold's initial view is for 3.3 million ounces over a 15-year mine life, which is expected to start up in mid-2025. They are making material investments in exploration on what we expect will ultimately be a multigenerational mine. You have a very positive view of the geology up there. There's really common themes across all of these recent investments, and they're consistent with our strategy. It's precious metals production with exploration upside, it's safe jurisdictions, and it's managed by experienced operators. [ I will go ] a little peak at our valuation, we are trading at historically attractive multiples. I mean the company has been performing well. We have strong cash flow. We've been allocating capital on a disciplined basis. We're showing good organic growth. We don't believe the shares are pricing in the strong gold price outlook and our cash flow multiple is in the bottom half of the peer group. We believe that the value of our long-life assets that we've added over the past several years and then the optionality in our portfolio is not being recognized in those current multiples. And if these higher long-term gold prices have staying power, this should get reflected in the fundamentals of our business and hopefully, our valuation. And really just to conclude, John, Royal Gold -- we're well positioned today. Our financial record is strong. Our business is performing well. high-quality assets, a diversified portfolio. We're showing organic growth. We're sitting at attractive valuations, and we have the balance sheet and liquidity to continue to grow that business accretively. So that's the end of my prepared remarks, John. So I'm happy to answer any questions you might have, which I'm sure you've got a few.

We welcome questions from people, we appreciate on the webcast, the audience through the question box. Jason, I'm looking at a couple of your recent good investments, I hope assuming the buyback to 1.5%, the recent prices in the current technical study, Great Bear would be about a 13.5% pretax return. At last year's lower silver price, Khoemacau was about a 16% pretax return. Are those indicative returns or how would you describe the potential returns on other projects like simple and easy to understand that you can communicate?

I'd say, John, if those were our target returns out of the box at the gold price environment that we're in on the day we make them, based on what we -- what the market knows of the asset at that time, we wouldn't get very many deals done. We really have to take a long-term view on these assets, because a lot of them take -- it takes time. It's already taken a few years for Great Bear. I mean, we bought Great Bear before there was any resource, right? And we entered into an agreement with Kinross in order for them to share their people and their data with us, so that we can come up with our own views, and that was the quid pro quo for allowing them to buy back 0.5% of it to buy down from 2% to 1.5%. But our goal is always out of the gates transaction is generally in the low to mid-single digits for high-quality assets, but our view is to grow those returns to well into the double digits over time. And we've been fortunate on Greater that we bought that really before the run-up in gold. So the gold price has helped. But -- so as the so is our view of the asset, and that's really coming to fruition a lot more quickly. I think at Khoemacau, we always love the geology there. We should keep in mind that when we bought that, the silver price was probably $16 or $17 an ounce, so it's close to double that. But that's what we're trying to do. I mean, we're trying to get our shareholders' exposure to high-quality projects, so that they can have exposure to production in precious metals, and we expect those prices to go up over time. And so we expect those returns to accrete to our shareholders. But our goal really isn't just to get strong returns on the back of precious metals prices. We get strong returns on the back of the fundamentals of the assets. And I think those 2 are off to great starts.

Let me just check the question box from the audience. Your share price fell to the mid-20s in 2016, what did you learn from that [ bear ] period to incorporate into your strategies going forward?

Yes. That was a very interesting time of Royal Gold. It's probably the understatement of the year. And the reason for its falling at that time, our largest investment at the time and still is was it the Mount Milligan project. And it was owned by Thompson Creek at the time, and there was market chatter that Thompson Creek might go bankrupt because they had taken on too much debt. The reality is our position was secured. We were very close to the top of the capital structure. So the value of assets that was in the company at the time far exceeded the liabilities that sat above us. So if that has ended up in a bankruptcy situation, we do believe we would have recovered our investment fully, but the market didn't fully realize that. But that -- it just goes to show that you -- I mean the lesson learned there is you need to make sure you understand credit risk. You need to make sure you understand -- and you need to make sure you have the balance sheet to weather the storm. And if we had to bring our balance sheet to bear to try to help fix that solution, we were able to do it at the time, because we did have that strong balance sheet. We took an active role in fixing the situation by selling down some of the -- trading some of the gold stream at Mount Milligan for some copper in order to entice gold companies to come in and consider this as an acquisition opportunity. And that's really what allowed Centerra to come to the table and Centerra has been doing a pretty good job with the asset ever since. And like I mentioned, we renegotiated that stream a little bit last year in order to provide them a little bit more of the long-term exposure to the asset to really incentivize them to invest and extend the mine life of that asset, and that's what they're doing right now with this PEA, which will hopefully extend the mine life significantly as they advance it.

Maybe I can elaborate on the questioner's question. In that era, in addition to Centerra, Mount Milligan or the former Thompson Creek having trouble in Mali. You have the investment in Rubicon Minerals where the initial mine, the grade didn't pan out.

Yes. Yes, that's very true, John.

In hindsight, going 8 years without a big mistake is pretty good in the aftermath of Cobre Panama or Victoria Gold, some of the other companies have had a bump in the road.

Yes. Listen, we're all exposed to the mining business, and we're not completely separated from it. We are exposed to it. And I'd say one thing, and that was a $75 million write-down. And we're very proud of our history of...

Rubicon was $75 million.

Yes, it was a $75 million write-down, which we kind of joke cost us about $600 million in market cap at the time. But I understand where shareholders are coming from and shareholders can -- if they see you make poor decisions on the technical front, they can cause them to question some of the other decisions you've made. One of the technical learnings we got from that experience. And we really did look back on it and dissect what went wrong, and it was really a structural geology issue that we didn't -- it turns out I didn't fully understand. So what we now do when there's complex situations that assets that we're doing due diligence on and really areas that could really make or break an asset we will usually bring in a secondary or even a third expert to give us their view on it so that we really understand that. And at the time, we hadn't done that on the structural geology side at Rubicon.

In the first half of this year, the cash flow of Royal Gold was about month $1.3 million a day after-tax cash flow, not EBITDA. With the higher gold price, is it reasonable to expect it to be 10%, 15% more in the second half?

I mean you'll see our Q3 results will be out in about a month, John, and we'll see what it looks like then. But it's not hard to calculate. I mean, we're not hedging gold. So we're getting exposure to the gold price on a daily basis as we sell our gold and receive our royalty payments. So it's pretty -- you can look at how we've done in the past at different gold prices and how the gold price has performed in the most recent quarter and kind of figured it out pretty easily.

How will the global alternative minimum tax effect Royal Gold?

The global alternative minimum tax won't have any effect on Royal Gold at all. When the U.S. did tax reform back, whenever that was, getting on several years now, they instituted something called the GILTI tax, G-I-L-T-I, and that is basically their version of the global minimum tax. So we're already paying the U.S. version of the global minimum tax, which is in the 13% to 16% range. We do expect it to level the playing field amongst the competition the Francos and Wheaton's of the world, whose offshore subsidiaries are set up in low tax jurisdictions. So that should be helpful to Royal Gold and leveling the playing field now that they have to put sort of a real tax number in their models.

Will Royal Gold ever do a share buyback?

We always look at different ways to return capital. Traditionally speaking, we've just stuck with the growing a sustainable dividend. As I mentioned, as we've done for over 20 years, increasing it every year. We sometimes struggle with the math on share buybacks. When you're a company like us that trades at a premium to NAV or high cash flow multiples relative to other businesses, we struggle a little bit with the math of that. We haven't really -- we have memos on share buybacks and special dividends that we have to pull out every now and then when cash starts to really grow, but it hasn't been a problem for us. Every time our cash pile has kind of grown to a large level, acquisition opportunities have come out, and we've been able to find accretive places to put that money. And really, I think that grows our shareholder value that way. And we don't -- we haven't issued shares. I've been with the company since 2013. I think the last time we issued shares was 2012, we've done inside there with the company, we've done billions and billions of dollars of acquisitions and our share count has only gone up by a tiny amount based on employee share positions. So we don't -- it's not a priority for us, but it's definitely something that we have in the playbook if we need it.

Jason, roughly how many submittals propositions does Royal Gold get per month? How do you determine, which ones make the first cut to be considered and the ones that made the final cut to be invested?

I don't have those numbers right in front of me, John. It varies a lot. I'd say we there's both inbound calls that we receive, whether it's from companies or financial advisers that have been hired by companies in order to do something and whether that's to raise money for a company through a new royalty or stream or whether it's somebody that owns a royalty, a third-party royalty already kind of looking to sell it. I'd say we probably get between 1 and 5 kind of coming in a month. And whether that's coming in directly to us or us reaching out to companies. When there's an asset that we don't know our first is to look at the technical side of things. So let's look at the state of the project, let's look at the geology, let's look at the engineering possibilities and when it might be able to become a mine. So our first test is that. And then from then on, we get into -- if it passes that first test, then we start really digging into the data and building models and really digging into the geology in a lot more detail after that first pass. And I'd say we probably drop 80% of them of the things that we look at, though, after during that first pass.

So just to take an example, Franco and Osisko Gold Royalties partner to make a $750 million commitment on Cascabel in Ecuador. Would that project be investable for Royal Gold, the country, the tech studies and time frame?

Listen, the technical studies and time frame, I'll put that aside for a bit. We are very focused on geopolitics and Ecuador right now is not a country that we have invested in before. We have studied it in the past. There's a lot of potential there, so we'll have to continue to study it in the future because there's likely to be opportunities there. At this time, we don't believe it's investable. One of the things that we look at is really personnel safety, and we kind of look at each other around the room and said, "Well, do you want to go down there right now? Or do you want to go down there right now? And if the answer is no, then we shouldn't be putting technical teams together and sending them down there. From a time frame perspective, it looks like a very attractive ore body. And I don't know it's going to take a lot of capital and probably some very big mining companies to get it done. I suspect that you'll see the conditions to that $600-plus million that hasn't already been put into it by Osisko and Franco comes with many, many, many conditions that will need to be met by whether it's the current operator or a future operator of that project. So likely a long time frame. But sometimes, these long time frame assets can work out really well, but just didn't quite fit the Royal Gold strategy.

When Chile proposed the constitutional reform twice, finally staying with the old one. The first proposal has something in it called quasi nationalism or a state or government within a state or if you would, indigenous regions with their own laws and permits and rules and budgets and taxes. In fact, Ecuador and Bolivia have that in their constitutions. So Lundin Gold has been very successful. They're not in a zone that is indigenous property. But apparently, the turf varies a great deal. And the rules are different based on this quasi nationalism.

Okay.

I learned about new things, trying to figure out these countries, Jason?

Well, I mean, John, I mean, this not a few years back, but if you asked me 10 years ago, hey, would you ever have qualms about investing in Peru or Chile. I would have kind of laugh. I said, well, no, if you're in the mining business, you've got to invest in Peru and Chile. And obviously, -- it just goes to show you, you got to really take a long-term view on these things and really, but I think places like Chile, places like Peru. I mean if you want to be in the long mine life business, you got to be able to look at those countries. And everything is situational as well. I mean there's national politics, but then there's local politics and local social considerations to consider as well.