AGM 2020

Nov 18, 2020

Good morning, everyone. It is my pleasure to welcome you to Royal Gold's 2020 Annual Stockholders Meeting. It is shortly after 9 a. M. Mountain Time on November 18, 2020, and the meeting is officially called to order. I am Bill Hayes, Chairman of the Board of Directors, and I will serve as Chairman of this meeting. We are excited to be hosting our 1st virtual stockholders meeting. As is our custom, we will first conduct the formal business portion of the meeting. We will then provide a brief commentary on our fiscal 2020 results, followed by a question and answer session. Validated stockholders may submit written questions at any time during the meeting in the designated field on your screen. Out of consideration for others, please limit yourself to one question. On the right side of your screen, you will see the agenda for the meeting. In addition, you can find our rules of conduct for the meeting by clicking on the link towards the bottom of your screen. The rules of conduct set forth the procedures that we will follow during the meeting. Please note that this webcast is being recorded, but no attendee is permitted to use any recording device. My fellow directors and members of Royal Gold's senior management team have joined us on today's webcast. Let me begin by introducing the other current members of our Bill Heisenbuttel, our President and CEO Kevin MacArthur Jamie Sotkowski Chris Thompson Ron Vance and Sybil Wiedemann. As previously disclosed, Chris has decided to retire from the Board effective as of the end of today's meeting. The Board has nominated Barriana Jugs, who is also present on today's webcast, as a new Director standing for election at this meeting. We thank Chris for his significant contributions to Royal Gold. He has always been willing to share his vast experience with his colleagues, and we wish him the very best. I would also like to introduce the members of the senior management team who are on the webcast today. In addition to Bill Heisenbuttel, we welcome Mark Isto, Executive Vice President and Chief Operating Officer Paul Livner, Chief Financial Officer and Treasurer Dan Breeze, Vice President, Corporate Development Randy Sheffman, Vice President, General Counsel Alastair Baker, Vice President, Investor Relations and Business Development Jason Hines, Vice President, Business Development and Strategy and Margaret McCandless, Assistant General Counsel, Chief Compliance Officer and Corporate Secretary. Ms. McCandless will serve as secretary of the meeting. We also have representatives from Ernst and Young, our independent registered public accounting firm on the webcast today. Brent Papek of Ernst and Young is available to respond to appropriate questions. Broadridge has provided a written affidavit confirming that the notice the meeting and proxy statement were sent or made available to stockholders of record as of September 21, 2020, beginning on or about October 5, 2020. Christine Amerin, a representative of American Election Services LLC, has been appointed to act as our Inspector of Election and advises that for the purpose of voting, the number of stockholders present on this webcast or represented by proxy is greater than a majority of the outstanding shares entitled to vote as of the record date, thereby constituting a forum. The polls are currently open. Any stockholder who has not yet voted or wishes to change their vote may do so by clicking on the voting button on the screen and following instructions. If you previously voted by mail, telephone or the Internet and do not wish to change your vote, you do not need to take any further action. There are 3 proposals to 4 stockholders at this meeting. The first order of business is the election of Class III directors. The Board has nominated Fabiana Chubbs, Kevin MacArthur and Sybil Beeman for election as Class III Directors to serve a 3 year term expiring in 2023. The second order of business is the approval on an advisory basis of the compensation of our named executive officers as presented in the proxy statement. The 3rd order of business is the ratification of the appointment of Ernst and Young as Royal Gold's independent registered public accounting firm for the fiscal year ending June 30, 2021. The polls are about to close. If you have not yet voted, please do so now. It is now approximately 905 and the polls are closed. Based on the Inspector of Elections preliminary report, each Class III director nominee has been duly elected. The proposal to approve on an advisory basis the compensation of our named executive officers has been duly approved and the proposal to ratify the appointment of Ernst and Young as our independent registered public accounting firm for the fiscal year ending June 30, 2021 has been duly approved. We will report the final meeting results on Form 8 ks filed with the Securities and Exchange Commission within 4 business days of this meeting in accordance with applicable law. This concludes the formal portion of our 2020 Annual Meeting of Stockholders. I hereby adjourn the meeting. I will now turn over the webcast to Alastair Baker for some introductory comments and then Bill Heisenbuttel for a commentary on fiscal 2020 results. Thank you. Thank you, Mr. Chairman. We will now move into the informal part of the meeting. During the next few minutes, Bill Heisenbuttel, President and CEO, will provide a short overview of Royal Gold's fiscal 2020 performance. We will then open the floor to questions and we have several other members of the management team available and standing by. Please submit your question using the Q and A function on the webcast page. Please note that only shareholders who have included a valid control number will be able to submit questions. During this portion of the meeting, we will make forward looking statements, including statements about our projections or expectations for the future. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties are discussed in our filings with the SEC. We will also refer to certain non GAAP financial measures, including adjusted net income, adjusted net income per share, net debt, net cash and free cash flow. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP measures are available in our press releases regarding our financial results, which can be found on our website. Now, I will turn the meeting over to Bill. Good morning, and thank you for joining us for our 1st virtual annual stockholders meeting. We hope to return to our regular practice of holding this meeting in person as soon as conditions allow. Although 2020 has been a challenging year for many businesses around the world, Royal Gold's commitment to a long term strategy allowed us to produce record financial results for fiscal 2020. We maintained our focus on gold, remained disciplined with our allocation of capital, managed our balance sheet prudently and continued to return capital to shareholders. This allowed us to navigate an uncertain operating environment during the year. We benefited directly as precious metal prices increased and our fiscal 2020 financial performance was exceptional. We recognized records for revenue of $499,000,000 operating cash flow of $341,000,000 and earnings of $199,000,000 the latter 2 of which continue to demonstrate the high margin nature of our operations. This performance provided significant free cash flow that allowed us to strengthen the balance sheet and reduce net debt by $115,000,000 fund $136,000,000 in advance payments towards our silver stream at the Khoemacau project, which we expect will contribute to the portfolio starting later in calendar 2021 and maintain our commitment to paying a growing and sustainable dividend. We raised the dividend to $1.12 per share for calendar year 2020 with a total of $71,500,000 paid back to shareholders in fiscal 2020. I'll note we raised the dividend again by 7% yesterday to $1.20 per share per calendar year, which is our 20th annual increase to the dividend. We are alone in the precious metals sector in terms of the consistency of this record. We continued to build on this performance in our 1st fiscal quarter of 2021 with record quarterly revenue of $147,000,000 and we ended September with available liquidity of $1,100,000,000 which positions us to act on new business opportunities as they arise. Our large and diversified portfolio of producing precious metal assets contributed gold equivalent volume of 320,000 ounces, which is simply the result of dividing our revenue by the average realized gold price for the period. The portfolio also includes a pipeline of earlier stage assets that are not yet cash flowing and higher metal prices may support production and reserve increases that will provide organic revenue growth in the future without any significant investment on our part, which is a key attribute of our business model. In keeping with our commitment to provide our shareholders with as much exposure to our business as possible, we remain focused on measuring success on a per share basis and limiting equity dilution. While renewed interest in precious metals has seen many other companies in our sector take advantage of renewed interest in the sector by the equity markets, we have avoided dilutive equity issuances and our share count increased by less than 0.2% during fiscal 2020. Our last equity raise was completed in 2012. With respect to COVID-nineteen, we have been working remotely for the most part at all of our offices since March and we are following the guidelines set by local health authorities in each location. The health and safety of our employees is paramount and we are fortunate that our colleagues remain healthy during the year. I would like to thank the employees of Royal Gold who have successfully navigated the personal and corporate challenges of working in a COVID-nineteen environment have ensured the smooth operation of our business even in these trying times. We understand that others have not been so fortunate and in keeping with our practice of supporting the communities where we live and work, we made donations to charities in each of Denver, Toronto, Vancouver and Lucerne to help each of those communities deal with unique issues caused by the pandemic, including the sourcing of PPE, care for the elderly and food assistance. We look forward to expanding our environmental and social impact on our communities and looking for opportunities to support our operators in their local jurisdictions. Our operating partners have been able to respond effectively to the pandemic and despite some temporary interruptions in April May, most of the assets in our portfolio returned to normal operating levels fairly quickly. I would like to commend our operating partners for taking decisive actions protect their workforces and surrounding communities and manage through new operating challenges caused by the pandemic. While on the topic of responsible business practices, I want to mention Royal Gold's commitment to the promotion of ethical and sustainable resource development. As a member of the World Gold Council, Royal Gold has an active role in the implementation of the responsible gold mining principles, which were launched early in fiscal 2020. This is in addition to our continued endorsement of the International Council on Mining and Metals 10 Principles of Sustainable Development. These principles are integrated into our own business planning and we see them as being fundamentally important to the long term sustainability of our business. With respect to leadership within Royal Gold, a significant strategic achievement during the year was our transition to a new generation of senior management. I became CEO on January 2. And in addition to my appointment, Paul Livner, Chief Financial Officer and Treasurer and Randy Sheffman, Vice President and General Counsel were promoted from within as we implemented long standing succession planning strategies. Additionally, Mark Istow was promoted to Executive Vice President and Chief Operating Officer in recognition of his contribution to our long standing commitment to technical excellence in our due diligence and asset monitoring efforts. These appointments resulted from the retirements of our previous President and CEO, Tony Jensen and Vice President, General Counsel and Corporate Secretary, Bruce Kirchhoff, both after long and successful careers with Royal Gold. I believe I speak for everyone at Royal Gold as I thank them for their dedicated service over the years and I am confident the new team has the energy and drive push the company to the next stage in its development. I would also like to thank Chris Thompson for his service as a Director of Royal Gold. Chris is retiring from the Board as of today's meeting. He joined the Board in 2014 and his considerable insights and experience will be missed. We welcome Fabiana Chubbs as a new Director and she will replace Chris on our Audit and Finance Committee. Fabiana has an extensive background in accounting, finance and tax, and she most recently held the position of CFO at Eldorado Gold. I and the rest of the Board look forward to working with her. In conclusion, fiscal 2020 was an excellent year for Royal Gold and the strength of our organization and business model were clear as we managed to turn in record financial results against a very challenging backdrop. We built on the fiscal year success with our Q1 of fiscal 2021. The continued strength in metal prices is a great tailwind and at the end of the quarter, our balance sheet was in a net cash position of $138,000,000 and we had total available liquidity of $1,100,000,000 We remain focused on growing our portfolio and we are in a strong position to act on new opportunities. But our strong position also means that we can be patient to wait for the right opportunities and we will remain disciplined and carefully consider long term returns with respect to new acquisitions. Disciplined capital allocation is a key attribute of our approach to the business and you can expect that this will not change. We have built our business to appeal to investors who want exposure to precious metals through a conservatively managed vehicle and our recent success demonstrates that this approach continues to work. I appreciate the opportunity to leave Royal Gold in its next phase of development and I value the continued support of the Board and management team. I look forward to continuing to earn your support into the future. Thank you. And that concludes my remarks. I would be pleased to answer any questions that have been submitted through the virtual meeting site at this time. Thanks, Bill. I do see a couple of questions coming through on the system. The first is with respect to the dividend. It reads, congratulations on continuing your record of increasing the dividend. With the increased gold price and Royal Gold performing well with a strong balance sheet, can you please provide some color on your thinking as to how you arrived at the increase you announced? Yes. Thanks, Alistair. And look, I'd just like to say that I'm really pleased that the Board approved a 20th consecutive annual dividend increase. I think that's an outstanding record. I will note that this is the largest percentage increase we've had since 2014, I believe. And so it's very much reflective of the very positive metal price environment that we're in and our strong financial performance. But I think anybody who's really followed our company knows that there are two sides to this approach. Increasing the dividend is 1, but we don't just look to where we are today, but we also look into the future and in assessing the sustainability of that dividend increase. So I think the increase yesterday really reflects the continuation of both of these goals of paying and increasing and sustainable dividend. Okay. Thank you. Another question here with respect to portfolio growth. What is your expectation of near term growth in the portfolio? Are there any mines coming online that may provide revenue in the next couple of years? Yes, Bill or Alistair, this is Mark Isto. I can take that question. As most of the people on the phone will know, we've got a pretty vast portfolio of properties, 188 of those, 40 are producing. We've got approximately 131 properties in what we call either a valuation or exploration phase through the owner of the property. Two properties really represent some very substantial organic growth, I think, from the portfolio. Both occur in Western Australia, very prolific gold producing area. King of the Hills property, which is owned by a company Red5 Limited, has developed a project and published a reserve of 2,400,000 ounces. It will be both mined by open pit and underground activities. We hold a 1.5% NSR royalty on King of the Hills. So that was certainly a project that until recently had a very, very small underground reserve and has substantially grown and that was really goes along with Bill's comment about the gold price and opportunities coming out of our portfolio based on an improved gold price. The second project I think that's really worth mentioning is again Western Australia property. Bellevue Gold is the name of the property and it's also the name of the company, Bellevue Gold Limited. They've been exploring historic producing property where we hold a 2% NSR and they've been very fortunate to identify on an inferred resource basis 2,300,000 ounces of gold that would be potentially underground mineable. The grade is 10 grams per ton. So we're following that project very closely and we expect that's going to advance. We would hope to see that advance very quickly to a feasibility study and then hopefully into a development stage opportunity. But I think perhaps both of those are very good examples of opportunities that have organically been developed within the 188 property portfolio. I'll turn it back over to you, Alistair. Okay. Thank you, Mark. At this time, we have no other questions showing. So I think operator, we will now conclude the 20 20 Annual Stockholders Meeting. I'll turn it back over to you, Michelle. Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.