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

Hello, and good afternoon, everyone. 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 Boston and surrounding areas for joining us today for the presentation of Royal Gold trading on the NASDAQ under the ticker symbol RGLD. Presenting today is Alistair Baker, Senior Vice President of Investor Relations and Business Development. The presentation will last approximately 25 minutes and will be followed by a Q&A session for 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.

Well, thanks, Noella. I appreciate the invitation to present today. We've had a lot of news at Royal Gold over the past several months and the past year really. And it's also a great time to be thinking about gold as an asset class as an investment. So it's very timely for me to give you an update today. So as I always start off with, I will be making forward-looking statements during this presentation. There are risks and uncertainties that could cause actual results to differ materially from these statements. All of these risks and uncertainties are discussed in our most recent Form 10-K filing with the SEC. So during today's presentation, I am going to give you an overview of the investment thesis for Royal Gold, really the pitch, which is we are a high-margin business. We generate consistent cash flows from precious metals. And as I said at the very outset, it has been a transformative period for Royal Gold. In 2025, we did a lot we've really transformed the company. We did a couple of corporate acquisitions, Sandstorm Gold and Horizon Copper. Those acquisitions closed in late October of 2025. We acquired a couple of new royalty and stream interests. We have a stream on the Kansanshi Gold Mine or copper mine in Zambia, and we have a stream or a royalty on the Warintza development project in Ecuador. And we saw some very positive developments at other assets inside the portfolio. So things like the Mount Milligan mine life extension, the exploration success at Fourmile, the Khoemacau expansion. So a lot of good news for us at Royal Gold over the past year or so. Now we will be releasing our 2025 financial results in 2 weeks, 2 weeks today, actually. And so as I go through this presentation, you'll see that there are a number of things that are referenced to 2024, simply because we don't have full year 2025 numbers available yet. We will have those available in a couple of weeks. But I don't think any of the themes change. So just bear with me on that, please. Now this presentation will go through the key attributes of Royal Gold and our business model. And I'll start talking about our gold exposure, which is obviously the focus for us, Royal Gold, it's in our name. Gold is the focus. Our model, and I'll talk about our high-margin business and the way we think about shareholders and return to shareholders. Talk about our portfolio, which is the biggest in our sector in terms of the number of assets that we have exposure to, which really does help with the consistency of our financial performance. I'll talk about our business model and the way that we are somewhat insulated from direct operating risks. And so we have steady margins that provide nice consistency to our results. And our position in terms of market size is kind of the Goldilocks when we think about where we are relative to our large and small cap peers. And then finally, I'll talk about some of the optionality that's embedded in the portfolio with having such a large portfolio. So to start with that, I'll focus on gold and our portfolio and its performance with respect to gold. We've been around the business for now 40-plus years. And we started in the mid-1980s with one royalty asset at Cortez mine in Nevada. We've been listed on the NASDAQ for that entire period. So we've got lots of history to look at when you try and understand what we've been doing and whether it's consistent. But I will say that our strategy has been consistent with the founding principle since day 1. And that is really to find gold-focused revenue on good assets in good jurisdictions. Our revenue has grown consistently over time as we become a bigger company, but the metal mix has not changed significantly over time. And the graph on this slide here, they don't show the new assets that we've added, but we expect to have a pretty consistent percentage of gold revenue compared to all metals going forward. And we really do try to provide our shareholders with gold exposure in a conservatively managed vehicle. So if we look at our performance over time, you can see how that has manifested itself, and why we think we're a good alternative for those who want conservative exposure to a pretty volatile commodity. On the left-hand side, you can see our beta versus the gold price, 1.6. That's pretty high. On the right-hand side, you can see our share price performance going back to the beginning of the GDX index, which is almost 20 years ago now. Over that time period, we've beaten the gold price, we've beaten the GDX index itself, but we've also beaten the S&P 500. So that shows hopefully, why we think we're a good alternative for those who are looking to invest in a pretty volatile commodity, but also get good returns along the way. Now our business is high margin, and we do pay dividends. And if you look at our margin, it is -- we have consistently over time, it's been about an 80% EBITDA margin. And our business is very unique. It is high margin, obviously, but it's also very scalable. And when you look at our 2024 EBITDA numbers, [ it was about ] 81% EBITDA margin. Our cash G&A was about 4% of revenue. Now if you look at our last reported quarterly results in Q3, that G&A expense was about 3% of revenue. And that -- the delta is due to the gold price change. Our costs are low and fixed. So we don't see cost inflation in our business. And so our margins actually expand when metal prices rise because our cost base is pretty fixed and it is low. And you can see that more -- you can see the efficiency of our business on this next slide here, where we do have a very efficient business, which allows us to keep our costs low. We have 39 employees in our company. Our market cap today is over $22 billion. So on a per employee basis, you can compare us against any business in any sector, and we are probably one of the most efficient on a per employee basis. Now return of capital, as I mentioned, is something that we focus on, and it's a key strategic objective for us at Royal Gold, and it's something that makes us unique when you think about other gold investments. We've paid a growing and sustainable dividend since 2000. We've increased the dividend every single year since, and that's despite volatility in the gold price. We increased our dividend last -- we announced in November, just a few months ago, it was a 6% increase for 2026 over our 2025 level. And that's the 25th consecutive annual increase to the dividend. We've now paid out over $1 billion of dividends to our shareholders, and we're the only company in the GDX index that has paid an increasing dividend every year since the GDX was formed in 2006. And we're the only precious metals company in the S&P High Yield Dividend Aristocrats Index, which is absolutely unique for Royal Gold. I'm going to talk a bit in this next section about our diversified portfolio. We have a global portfolio and it's weighted towards lower risk and mining-friendly jurisdictions. And our portfolio spans the various stages of project developments in the mining business. So we have over 360 assets in the portfolio and about 80 of those are producing revenue today, about 30 are in development. So we expect them to start producing revenue in the near term. And then the remainder, over 250 are in earlier stages. So that could be various stages of exploration. And organic growth comes from within the portfolio from the development and exploration assets that move forward and they get to production and they start producing revenue. So that's a really important part of our business and having a larger portfolio means that there's more of that optionality within the portfolio. Now having a diversified portfolio also reduces single asset and counterparty risks. We have a number of very good Tier 1 operators in our counterparty list, and we think they're best-in-class. They're generally large, well-capitalized and experienced mining companies, and we've recently added to that list. So we added First Quantum, Rio Tinto and Glencore as counterparties over the past several months as we've added to the portfolio. On an NAV basis, if you look at the value of the assets in our portfolio, we have the most diversified portfolio in our sector. And our largest asset remains in Mount Milligan mine in British Columbia, but it's about 12% of our net asset value. So that is much less than some of our peers who have their largest assets could be as high as 40% of their net asset value. Mount Milligan used to be criticized as a relatively short mine life, but recently, Centerra has extended the mine life and they're talking about 2045 with potential to go beyond that by a couple of decades. So it's the largest asset in our portfolio, but it's also a multi-decade asset in the portfolio. So that's a very important thing to note. Our portfolio diversification reduces our exposure to single-asset operator and jurisdictional risks. And that's an important thing for a generalist investor who wants to know or doesn't want to know the details of each specific asset. They just want to know you've got consistent cash flows, if something goes wrong in an asset, it's not going to impact the company in a material way. So we think that diversification is very helpful from that respect. Now we also have limited operating risk in our business model. So I'll talk about our model a bit in the next few slides. We -- if you think about the ways to invest in gold, we provide gold exposure with reduced risk. And on this slide, you can see the different ways you can invest in gold. What we try to provide our shareholders is exposure to gold, optionality of the projects that we invest in and the dividend, while also reducing downside risk by holding a diversified portfolio doesn't have direct exposure to operating and capital costs. There are other ways to hold gold. If you want to be very conservative, you buy an ounce of gold. But that ounce of gold will cost you to keep it, to keep it safe somewhere, but it's also not going to pay your dividend and it's not going to grow. If you buy an ounce today, it's always going to be an ounce. You can be more aggressive and you can buy shares in operating mining companies or even exploration companies. And if you know what you're doing, you know those assets, you can do very well. But at the same time, you can be surprised. You can be exposed to all sorts of cost risks and other factors that can impact the ability of companies to move those projects forward. So by investing in a company like ours, you're getting exposure to a myriad, a large portfolio that where if things do go wrong, they don't necessarily impact Royal Gold as a whole. And there is a perception in the marketplace, and I'll hit this head on that our business model and the royalty streaming companies don't provide leverage to the commodity price the same way that operators do. I don't think that's true. You look at our financial results, and we've done very well as gold prices and metal prices have improved. So I think that is incorrect to say. And on that point, I think when you look at margins in our sector, we and producers have very different cost structures. So our costs, as I said at the beginning, are low, we have 39 employees. They're relatively fixed. So our margins actually expand as metal prices increase, whereas operator costs are often subject to inflation increases and their margins may not increase as quickly or at all in some cases. And you can see that more clearly on this next slide. Producers, and this shows our cost structure relative to the average producer. Producers are exposed to inflation and input costs. So labor, energy, consumables. As prices rise, they have higher taxes, they have higher royalty rates to pay. So there are a lot of things in their cost structures that actually increase as metal prices rise. Our G&A costs are pretty safe. So we have salaries to pay. We have services to buy, and we have office rents to pay as well. And they're typically not things that change on a month-to-month basis. They're not really impacted by inflation in the short term. So because our margins are much less exposed to inflation pressures, we do better. We're able to pass that on to our shareholders because we're simply not exposed to the largest cost factors in the sector. I'll talk about our strategic positioning in the sector. And we think we have the optimal size in a small sector. This shows where we are relative to our peers on a market cap basis. And you can see that we're right in the middle between the 2 big guys and then the 2 next largest players. We're kind of in that sweet spot right in the middle. Our sector is built on small transactions. And if you look back over the years, most transactions in our sector are around that -- they're smaller than $300 million per transaction. And on average, they're actually just over $100 million per transaction. So we sit in an interesting position. We've got lots of cash flow. We've got access to low-cost capital, so we can compete against our largest peers for the largest transactions. And we just showed that last August when we announced the $1 billion gold stream on the Kansanshi mine. Yet we're also small enough to be able to show growth. So we can do small transactions, and I always like to point to the Khoemacau silver stream, $265 million, relatively small transaction, but it actually does show up meaningfully in our results. We're not aiming to be the biggest in our sector. We think that's a bit of a [ fool's ]. We would rather be the best and have the best valuation and have the best portfolio. And so this Goldilocks position that we're in, it does provide us a good platform to be able to grow and execute our strategy of growth in gold. So I'm going to talk now a little bit about embedded growth and optionality. And this slide shows how we have allocated our capital over the past 20-plus years. And really, what we're trying to do is provide accretive growth to our shareholders. And since 2000, we can see that our revenue and our operating cash flow have both grown significantly. And we'll provide further updates on this slide and then incorporate the Sandstorm transaction and the other things I've talked about, but this is a good snapshot to be able to tell you what we've done prior to 2020 -- prior to 2025. Our G&A -- so we've seen massive growth in revenue and operating cash flow, but our G&A hasn't grown very much. And it's because we have that scalable business. We don't need to add people. We don't need to add additional infrastructure when we grow our business because it's fairly simple to add to our portfolio without growing our need to have additional people to help manage that portfolio. Our business is very scalable. The second is -- the second important thing is our revenue growth is not solely dependent on metal prices. The gold price has been a great tailwind for us over the past several years, but we've also been able to add volume to our portfolio over that period. And so that allows us to capture or enjoy the benefits of rising gold prices as well if we got that additional volume that just multiplies that effect. And we also have organic growth coming from within the portfolio. So that is also very helpful. And then finally, the final point I'd like to make is just we've been able to finance our growth mostly from internal sources, and we haven't increased our share count significantly. Now we did issue almost 19 million shares in October last year to complete the Sandstorm transaction. And that was the first equity issue we had done since 2012. So a long period of not issuing any equity. But even with these new shares that we've issued, we have -- we remain at the lowest end of the GDX. We have the lowest share count in the GDX index. And we really do want to provide accretive growth for our shareholders and avoid shareholder dilution. So anything we add to the portfolio, you as a shareholder can benefit from directly. Now I'm going to talk on this next slide about embedded optionality. And that really is the key to our model. It's exposure to assets that have the potential to grow reserves and resources without having us fund any of that growth within the cost of that growth. And this shows -- this case study shows Mulatos. So it was a royalty that we acquired in 2005. It was capped. We don't like capped royalties. We want royalties and streams that have a life of mine exposure. So you get that additional optionality and upside in the future. But this one was capped. It was just a feature of the agreement when we acquired it. But this is helpful for us, though, is because it's capped, we know exactly how much we put in, we know exactly how much we got out, and we can dissect those returns. And so it's a very helpful case study. At the time we acquired this royalty in 2005, there were 3 million ounces in reserves and resources at the mine and the mine life was a 7-year mine life. The royalty produced for a period of 14 years, so double that initial expectation of mine life. And when the cap was reached, reserves and resources were actually 4.3 million ounces. So they had grown despite the depletion that occurred over that 14 years of mining. And so what that meant was our initial 8% expectation of return actually grew to about 36%. And the extended mine life really, it provides a double benefit when you think about it. There's more production, which means more revenue, that's easy to understand. But the longer the mine life, the more you're exposed to the gold prices and volatility, and that's where you get really big value is an additional exposure to a commodity that is quite volatile. So in this case and in most of the cases we have in our portfolio, we don't have to fund the capital to get exposure to this upside and growth. It's growth that we don't have to pay for. It's free optionality. And it's really important when we look at new opportunities that we identify those that have the potential for exploration and resource growth and that future optionality because that's the thing that allows you as a shareholder to enjoy that additional return in the future if we can identify properties that can grow. So speaking of growth, we have -- now after the Sandstorm transaction, we have a very -- we're in a very good position when it looks -- when we look forward and look at catalysts within the portfolio. And I've shown on this slide here some of the assets that we see that will be brand-new producers to us over the next several years. And we're going to do an Investor Day in March, at the end of March, and this will be a main focus for us to try and make sure that we articulate to the marketplace what all of these mean to us in the longer term. But this is a snapshot, and I'll walk through this very quickly because there is a lot to talk about on this slide. We do have a lot of -- there's significant organic growth within the portfolio that comes from what we had before Sandstorm and actually what Sandstorm brought, put them together, and we've got catalysts almost every year now for the next several. Back River is the first one. They started commercial production in October last year. So this is producing, and we are starting to see revenue from this. Platreef is the next one, which is currently -- they just started milling and mining ore. And we haven't seen any revenue from this one yet, but we're expecting that revenue to come in early this year. The next asset is Robertson. This is part of the Cortez complex in Nevada. We're expecting first production in about 2027. And then as you go around this curve, you look at Hod Maden, Great Bear, Cactus, we're expecting those to come in before the end of this decade. And then shortly after the turn of the decade, we should see Mara, Oyu Tolgoi, Warintza and Fourmile. And all of these are long-life assets. So once they start producing, they should produce for quite a long period of time to sustain our portfolio into the future. We think we have one of the best organic growth profiles in the industry. And this does not include some of the assets in the portfolio that are producing today that have expansion or extension potential. So things like the Mount Milligan mine life extension, the extension at Khoemacau, these are not included in this growth. So that's additional growth. And as I said, we'll be focusing on this during our Investor Day in March. So we'll give the market more clarity at that point. So I'm going to end now or I'll make one more -- I'll talk about one more slide, and then I'll turn it back to Noella for Q&A. But I do want to touch on this. This is our trading multiples. Our business is performing well, as you can imagine, in this gold price environment. We've got lots of cash flow, good organic growth. We're executing on our priorities. Our share price has done very well. So we've actually -- we've reached all-time highs recently. But that's driven by -- I think it's the gold price environment. It's also a recognition of the larger portfolio that we have now. But as we think about how we're valued and our valuation multiples, we are still -- we still think there's a disconnect between what we think we should be receiving in the marketplace and what the marketplace is actually paying for. If you look at our NAV multiple, I'd say that we're a little bit below our large cap peers. But -- and so that's okay. But on the cash flow multiple, there is a huge disconnect there. We're trading at the bottom end of our peer group, and we just don't think that makes any sense. I think there are a few reasons why these multiples haven't -- they haven't converged to where we think they should. And that's -- the first is we just issued a bunch of shares for Sandstorm. So I think there's been a bit of churn in our register and hopefully, that's settling down now. Another is debt. We do have some debt. We're repaying that diligently. So hopefully, that won't be an issue for the long term. And then thirdly, I think it's just a lack of clarity and lack of understanding as to what our portfolio can do over the longer term and what the growth potential is within the portfolio. So we are doing our best to get out in front of people these days to try and make sure they understand what's in the portfolio and what potentially could be coming because there's the scale and the growth potential in the portfolio is really something we think is worthy of note. So I'll just -- I'll close there. And I guess we have strengthened our business. We've added a lot to it in the past couple of years. And obviously, the timing was fortuitous because the gold price is doing what it's doing. And it just means that all the work that we've done, we should be able to see the benefits of that work as the higher gold price feeds through our results. We've had a lot of scale. We've diversified the portfolio. We've added growth to it. We have a very strong balance sheet, and we have very strong cash flow in this environment as well. And we have been patient over time, and we've been very good at executing our strategy, and we have a commitment to that long-term strategy, and we think it's just a question of time before the market rewards us with the valuation that we think that all of what we've done should end up with. So with that, Noella, I will turn it back to you to start the Q&A session.

Thank you very much, Alistair, for the presentation. We'll now begin the Q&A. Your first question is, was Royal Gold management pleased with the technical report from SSR Mining on the Hod Maden project?

Yes, I think we were. I mean it's obviously -- it's a data point that's in the marketplace now that it makes it easier for us to talk about it. The last information that was in the marketplace is pretty dated. It was from 2021. So this is helpful to us. We weren't surprised. I mean when we did our due diligence of the Sandstorm transaction, one of the assets that we looked at in a lot of detail was Hod Maden. And so we weren't surprised by anything that was in those numbers. We are a partner. So we saw those numbers prior to the release of the press release. But we weren't surprised. I think it's something that we needed to get -- we need to see that in the marketplace because we made it very clear that our interest in Hod Maden and the ownership structure is not something we want to continue with. We want to try and convert that to something that's more in line with our core business of owning a royalty or a stream. We don't want to have a direct joint venture interest in a mining asset. So it's important for those numbers we had in the marketplace for the market to understand what the project looks like. And it's really -- it was kind of the very first thing that we needed to see before we can start that process of trying to convert that interest. So yes, on balance, we're pleased with what's in the marketplace. We're not surprised, and it will be hopefully the thing that allows us to focus on that restructuring in the near term.

Thank you for shedding some light on that. The next question is. Beyond near-term contributions from Mount Milligan, Pueblo Viejo and Cortez, which assets are realistically expected to drive material NAV growth over the next 5 to 10 years?

Well, I think the ones that will materially drive the growth will be the assets that I just pointed to on that one slide with the catalysts. So some of the bigger chunkier assets in there would be things like Platreef, Mara, Great Bear, Fourmile. Those are things that as those get developed, I think they will add a lot of value to us as it becomes clear to the market what the impact will be to Royal Gold. So we're looking forward to that. We don't want to rush things, of course, but it gives us a nice profile over the next several years of catalysts. And we think that is where a lot of value will come from. Now we've also got some other assets within the portfolio that are going through extensions and extensions and things like that, that will add incremental value. But really the biggest step change value will be from new assets that come into production.

Thank you for clarifying that. The next question is, which assets are expected to show the largest year-over-year GEO increase in 2026?

Well, we haven't done our -- we haven't given any guidance yet. So it's kind of hard for me to answer that question at this point in the year. Companies are coming out with our 2026 guidance as we speak. Barrick is going to be reporting tomorrow. We're looking forward to seeing what they're going to say on Cortez and PV and Fourmile and so on. But I think it's a little early for me to be able to answer that question simply because we haven't seen or are not able to talk about what some of the operators have put forward for 2026 guidance.

Thank you for your comments, nonetheless. Your next question is, what percent of revenue will come from silver, assuming $100 ounce silver?

That's a very good question. We haven't done the math on $100 silver. Typically, silver for us is somewhere between 10% to 15% of revenue on a quarterly basis. I think the run-up in the silver prices for this current quarter will distort that a little bit. So we may see additional silver revenue than we have in the past simply because it's just run-up so quickly. But we haven't done the sensitivities on -- I can't tell you what the $100 silver will mean for us long term. If it stays at that level, obviously, it's going to be a bigger impact to us. But it's been a quick run-up from a much lower level in a short period of time. So I don't think -- I can't give you that number off the top of my head. I haven't done that. I just have to probably work on it.

Thank you for your response nonetheless, Alistair. Your next question is, how many development stage royalties are still contingent on permitting, financing or operator decisions?

Well, a number of them. I mean when you think about mining projects, there's a whole sequence of things that need to get done. You need to do your preliminary engineering, when you do your permitting, when you do your final engineering and final permits. And then once you get all of that and financing and investment decisions, all of the assets in the portfolio are at different stages because there are just various points in that continuum. I would say most of the things that are in development still have a lot of work ahead of them. But if you look at the operators and who those counterparties are, these are companies that know how to do these things. They've done these projects before. So we don't look at permitting or engineering or anything like that as something that's a real risk because generally, the companies are moving these projects forward, have done it multiple times before. They know how to do it. The only delay -- the only risk is really delays because if a project is good enough, generally, what will happen is that people do the work before going to that next stage. And so it will be generally well engineered or the permit will be advanced. There may be questions where those companies have to go back and they perhaps refine whatever is being questioned. But delay is probably the biggest risk, not project shutdown, if that's where the question was going.

Thank you for clarifying that. Your next question is, are there additional noncore assets within the Sandstorm legacy portfolio that could be monetized or restructured over the next 12 to 24 months?

Well, the biggest one [ Hod Maden on ] the restructure interest. So that is a restructuring project for us. So that is number one. There are a few other equity and other financial investments within the portfolio that they're not core to us. It's not our business to own equity or debt instruments. And so we will be looking to monetize those. We're also going to be patient. We don't want to -- we're not interested in selling things at fire sell prices. So we will look for the right opportunities to sell things. I think you've seen some evidence of that already. We sold the Versamet shares in a block in November. And then in late December, we announced that we had restructured some ownership at the Bear Creek mining some equity and some debt insurance there as well. And so we will deal with these things as opportunities present themselves for us to get full value. And that's the way that we're going to approach this. But I think having sold the Versamet shares, that was probably one of the biggest assets that was noncore. And the Bear Creek stuff was smaller. Hod Maden, that joint venture ownership structure, we want to deal with that relatively soon. That's a priority for us in 2026. And the remainder of the things are relatively small, and we'll deal with them as opportunities present themselves.

Thank you, Alistair, for that response. Next to you is asking, what are your plans for the formerly Sandstorm Abu Marawat development in Egypt? Or more generally, when will AM be reviewed to determine its core value?

Sorry, I missed the name of that one. Will you please repeat the question.

Certainly. Of course. So they're asking for the Abu Marawat development.

Okay. So yes, anything that's in the portfolio as a royalty stream is going to be -- we'll keep it and we'll just let it run its course naturally. I can't really offer any specific comments on that, but I'm not that familiar with it, to be honest with you. But we're not going to do anything with these assets that our royalties to the stream in the portfolio because it just add to the optionality within the portfolio as a whole.

Thank you, Alistair. Next question. How much do you expect to pay down on the credit facility in 2026? And how will payments be paced through the year?

So we have said -- the most recent comment we've made about debt repayment is in November when we put out our third quarter results. We said that we expect it to be debt-free by 0 debt by the middle of 2027. We will likely be updating that because a lot has changed since then. Metal prices have improved. We've also made very good progress on repaying debt. So stay tuned in the next couple of weeks, we'll be talking about that in more detail. But our payment schedule for the revolver is really we can make payments on a frequent basis whenever we want it. And so what we've done in the past is we've had cash flow coming from the portfolio. If we don't see new business opportunities that we like, then we'll take that cash flow and we'll apply it to revolver repayments. And I expect that will be the same procedure that we'll follow in 2026. But I'm going to reserve the right to defer that question for a couple of weeks until we put out our results.

Thank you, Alistair. We'll see tuned in a couple of weeks for the results. Your next question is, just to understand how you manage acquisitions, what percentage of the Sandstorm Gold streams are still with Royal Gold?

All of them. We haven't sold any streams from Sandstorm. So anything that was within the Sandstorm portfolio that's a royalty or stream, we will keep, and we haven't sold any of those.

Thank you for clarifying. Next question. Now with a large acquisition complete, how do you avoid becoming a victim of scale where future deals are either too small to matter or too expensive to be accretive?

Well, we have to look at everything on its merits. I think size-wise, we're not scared of doing small transactions. A small transaction takes as much effort as a large transaction from a due diligence and all the internal processes that we follow. But as we have found that some of the smaller transactions are some of the highest returning transactions. And some small things, if you get in at the right time, could grow to be very big things. So we're not afraid of doing small transactions. We have to be careful, though, we always have to keep our eye on the upside. And we don't want to be investing in small assets that will never really become meaningful because that's not a good allocation of resources. With respect to paying for transaction prices paid, we always have to be careful. We have to watch the markets carefully. We have to have a view on longer term, the return hurdles and the things that we're looking for out of the projects. We just have to be -- we have to adjust constantly because the biggest variable is metal prices. So that changes on a day-to-day basis. So we're always cognizant of that. It's not something that we can predict where things are going to go. But we also have to be careful like in a price environment like today, prices have run up so quickly, we got to be careful about paying spot prices for things because if things roll over quickly and even if they go down 5% or 10%, they can erode your returns pretty quickly. So we have to be careful and we have to be -- use a lot of judgment. And that's hopefully one of the things that we bring to the table, [ we have been in ] the business for 40-odd years. We've been able to do this generally pretty well. And so we factor all that into our decision-making. At some points in the cycle, you just have to sit back and say, things are moving too quickly for us to be able to make intelligent decisions. So maybe it's time for us to take a pause. We're lucky because we've just added a lot of things to the portfolio. So we feel no pressure to do anything in this price environment, but we are very cognizant that things are moving quickly and valuations can change from one day to the next.

Thank you for your insight, Alistair. Next of you is asking, how do you assess long-term credit risk and renegotiation risk as mines age or change ownership?

So we always look at counterparty. When we're looking at a stream, the royalty is a bit different because royalties generally they're not -- they'll often run with the property. So they're not something that is subject to risk when it comes to the balance sheet of a counterparty. But when we look at streams, we look at credit very carefully because we're signing contracts with these people. And so you want to make sure that they're going to be in business over the long term to be able to honor those contracts. And so we do our own credit analysis of companies look at balance sheets, we look at their upcoming commitments and we look at -- we'll flex metal prices, and we'll look at operational things that could occur that may not be helpful. So we try to get a good sense of credit capacity. When we look at assets change in hands, which I think is where the question was going, then we do look at our -- the acquirer of assets in the same way. If it's somebody that we're comfortable with, then we're not going to cause a problem for the transaction. But if it's somebody that we're prohibited from doing business with or it's [ somebody ] doesn't have the wherewithal or the financial capacity to be able to operate the asset that they may be looking to acquire, then we can actually object to that transaction occurring. So there is some protection in our transactions from that kind of scenario where somebody may own something, they decide they're going to sell it to somebody who can't properly operate it.

Thank you, Alistair, for offering some insight on that. The next question is, what are you expecting from your partners' reserve updates?

Well, that's a very good question. I think we're expecting positive news most likely. And it would mostly be driven by metal price appreciation. I think most companies will likely start using higher reserve and resource pricing. And so that should mean that they're able to mine lower-grade material and that material comes into the mine plans and extends mine lives. However, I think it's unlikely that we're going to see huge step changes in the prices that people use for the reserves and resources. They're generally pretty conservative assumptions that go into those pricing decisions. And so we may not see reserve and resource pricing that's anywhere close to spot. And so that will be a little disappointing because if you ran your reserves and resources at prices that are even 20% lower than spot today, you will probably see a lot of potential, especially at low-grade open pit assets. You see those mine lives get extended, I think, pretty significantly. But I don't think, based on what we've seen so far, that operators are going to be increasing their reserve and resource pricing significantly. It's still -- I think the business is still being run quite conservatively, which is good. The last time the metal prices really did well, 10, 15 years ago, you saw an extension in pricing for reserves and people started mining a lot more low-grade ore. And so that caused costs to go up and it cost the entire sector, it costs quite a lot for the sector as margins compressed despite the rising gold prices. So I think it's interesting. It will be interesting to see what happens. And we haven't seen many of these come out yet. It's still early in the new year. I'd expect in the next 2 to 3 weeks, you'll start seeing those come out, but don't expect there to be big changes in reserve pricing.

Thank you for your comments, Alistair. Your next question. Are there any jurisdictions across the portfolio that are subject to political risks?

Well, every single jurisdiction is subject to political risk. I don't think there's one anywhere. You can look at first world Tier 1 countries can have tax increases that are driven by politics. You can have all sorts of things that can cause businesses to be less confident about the future. In terms of big political risks where you see expropriation or anything like that, we don't see anything in our portfolio that concerns us. There are some places that are more risky than others, but we're not -- we don't look at our portfolio and say we think there are a handful of places that are going to be risks to our business over the longer term. That's not something we see as we look forward. So -- but we've been very careful about avoiding some places that have a lot of risk. We're not going to go into places that have -- there's civil conflict or there's no rule of law or safety at mine sites is an issue. So we've been careful over the past to avoid those places. And hopefully, that puts us in a good position for the future.

Thank you for clarifying that, Alistair. Coming up on your last 2 questions. The first one is, any comments on the precious metal price drop last Friday? Recovery seems to be at hand, but curious to hear what the causes were.

Well, I think if I knew the answer, I'd probably be on TV telling everybody because I haven't heard any good explanations from anybody as to what happened, except for kind of the obvious, which is prices ran so fast that there was a lot of profit taking. And so what that catalyst was not 100% sure. But you're quite right. I mean it looks like prices have stabilized. And if you kind of look at the trend over the month of January there's a nice continuous trend. If you ignore what happened the last 2 weeks where we saw this big run-up and then big correction, the trend is still continuing if you were to take that peak out. So I think the way we think about it is the fundamentals for metals prices are still in place. I think it's probably the market got a little ahead of itself in the correction, which is probably a healthy thing to have occurred. But I haven't heard of one specific reason for what the catalyst was.

Thank you for your comments, Alistair. And your last question is, with Royal Gold's market cap now at $22 billion, is it eligible for S&P 500 Index inclusion? If yes, can you comment on the next steps and timing?

So the minimum market cap for the S&P 500 is $22.7 billion, and we're just a shade below that now. We traded above that last week. So we are around the minimum. So I think we are -- we check all of the boxes. We have a U.S. domicile. We're traded on -- our primary exchange is a U.S. exchange. We've got quarterly earnings that are positive, market cap threshold we meet. So it's now a question of whether the Index Inclusion Committee is interested in seeing another gold stock get added to the S&P 500. So the way they do their analysis is it's completely -- you can't lobby. We can't have any contact with them. There's nobody to talk to. They do it all secretly, which is by design. They don't want market moving commentary to be out there influencing pricing. But they will update for every quarter, the S&P gets rebalanced, and that's when you see additions and deletions. And that's at quarter end, so calendar quarter end, so the end of March. But they'll issue a press release about 3 weeks prior saying what the companies are that they'll add, which ones they'll delete. And so the earliest possible date for us, we think, is going to be this coming March, so in a few weeks. But it could be in June or it could be in September. We're not sure, and it's a complete black box. We'll find out at the same time the market finds out there will be a press release that said that Royal Gold has been added to the S&P 500, and that will be news to us when we read it. So I can't really offer much more except to say that we meet the criteria. It just is now a question of whether the Inclusion Committee wants to think about us as a candidate.

Excellent. Well, thank you very much, Alistair, for all of your insight today, and thank you to everyone who submitted questions. If you did not get a chance 0to submit 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, everyone. Happy to speak with you today. And if I didn't answer any questions the way they were intended to be answered, please get back to Renmark and we can square the loop afterwards. So thanks very much. Look forward to chatting again.

Thank you, Alistair. And once again, this was Royal Gold trading on the NASDAQ under the ticker symbol RGLD. Thank you to everyone in Boston and surrounding areas for joining us today. The playback of this virtual non-deal roadshow will be available on our website 24 to 48 hours after this presentation under the VNDR Library tab. Please stay tuned for other presentations in your area and see you next time.