M&A Announcement

Feb 25, 2019

Good day, everyone, and welcome to the acquisition of Solar Stream Oncomacao Copper Project Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. And please note that today's event is being recorded. I would now like to turn the conference over to Alastair Baker. Please go ahead. Thank you, operator. Good morning and welcome to our discussion of Royal Gold's acquisition of Silverstream on the Khoemacau project. This event is being webcast live and you will be able to access a replay of this call on our website. Participating on the call today are Tony Jensen, President and CEO Mark Istow, Vice President, Operations and Bruce Kirchhoff, Vice President, General Counsel and Secretary. This discussion falls under the Safe Harbor provision of the Private Securities Litigation Reform Act. A discussion of the company's current risks and uncertainties is included in the Safe Harbor and cautionary statement in today's press release and slide presentation and is presented in greater detail in our filings with the SEC. Tony will explain the key terms of the transaction, Mark will provide an overview of the Khoemacau project, and Tony will close out with some commentary on our partner in this transaction as well as Botswana as a new country for Royal Gold and the impact of this transaction to Royal Gold. We'll then open the lines for Q and A session. Now, I will turn the call over to Tony. Thanks, Alistair. Good morning, everyone, and thank you for joining the call. I'll begin on Slide 3. We are pleased to announce today that we have reached an agreement with Cupric Canyon Capital to provide stream financing in a cost overrun facility for the development of the Komokau project in Botswana. This is a high grade and long lived copper development project with significant silver credits and the Silver Stream will fit nicely into our production profile. With the financings announced today, the project is now fully funded and development activity can accelerate with first production expected in the first half of calendar 2021. We have been working on this transaction for about a year with Kufrick, a private company principally owned by funds managed by Global Natural Resource Investments or GNRI. And we are very pleased to discuss this transaction with you today. Because Cupric is a private company, the details of the Khoemacau project are not widely known. So during this call, we'll give you an overview of the transaction, the Khoemacau project and our partner, and explain why we think this transaction is a great addition to the Royal Gold portfolio. Turning to slide 4, I'll explain the key commercial terms. The transaction consists of 3 components, including a stream, an option stream and an overrun facility in the form of subordinated debt. In total, our investment could range from $212,000,000 to $265,000,000 for the stream, an additional $25,000,000 for the overrun facility. Cupric has been very thoughtful about financing the project and has arranged funding from various sources in excess the presentation. With respect to our stream investment, we will make an advance payment of $212,000,000 for the stream for 80% of the project's silver production and we'll pay a cash price of 20% of the spot silver price for every ounce delivered. Our stream will drop to 40% after 32,000,000 ounces have been delivered. At Cupric's option, we would increase the advance payment by up to additional $53,000,000 for up to an additional 20% of the Project Silver production. If we complete the full amount of the additional investment, our 100 percent silver stream would decrease to 50% after the delivery of 40,000,000 ounces of silver. Our stream will be secured by liens against the assets of the Khumacau project And we have subsidiary guarantees up the ownership structure. Our stream will be subordinated only to the $275,000,000 project financing debt. With respect to the overrun facility, at Cupric's option, we will make an additional $25,000,000 investment in the form of subordinated debt. This debt facility would have a 7 year term and pay interest at LIBOR plus 11%. The graphic at the bottom of this slide shows the expected timing of the funds of these various components. We will fund on a quarterly basis as the project spending progresses and subject to an agreed formula for contributions from the other sources of capital. We expect that our first contribution will be around $60,000,000 in the second half of calendar twenty nineteen with approximately $125,000,000 required during the course of 2020 and the remaining $27,000,000 to $105,000,000 paid in calendar 2021. Our expectation is to fund our contributions through cash on hand and our $1,000,000,000 revolving credit facility, which is currently undrawn. We do not anticipate issuing any shares to fund this transaction, so we'll be immediately accretive on a per share metric. This transaction does not change our strategy with respect to the redemption of our currently outstanding convertible notes in June of this year. With our undrawn revolver, strong cash flow and the attractive funding schedule for this acquisition, liquidity will not be an issue. Turning to Slide 5, I'd like to provide an overview of the Komakau project. Komakau is located in Northwest Botswana on the Kalahari Copper Belt, about 90 kilometers from the town of Maon, which is the 5th largest town in Botswana. It is a semi arid flat lying area with small trees and scrubby vegetation and a sparsely populated area. The project consists of over 4,000 square kilometers of concessions with several high grade copper discoveries identified on the concessions, with the most advanced of these being the Zone 5 deposit. Zone 5 was identified in 2012 by Hanna Mining, the previous owner, but it was not a focus of activity until Cupric acquired Hanna in 2013. After Cupric took over the project, they completed extensive drilling feasibility study on Zone 5 and applied for and received a 20 year mining license in 2015. In the same year, Cupric acquired Discovery Metals out of receivership, which included an additional mining license, infrastructure in the Voceto Mill, which had been built in 2012 to process ore from the low grade open pit Poseto mine. Bassetto operations ran from 2012 to 2015 and have since been shut down, but the infrastructure remains in place. With the addition of the Bassetto Mill, which is about 35 kilometers away from Zone 5, Cupric then revised the development plan and feasibility study to incorporate the Bassetto Mill. The Zone 5 project today has a total resource of approximately 92,000,000 tons and an average copper grade of 2.1 percent and a silver grade of 21.9 grams per tonne. Will turn the call over to Mark, who will give you an overview of the Khoemacau project and the development plan. Yes. Thanks, Tony. I'll start on Slide 6 with an overview and give a bit more detail on the main aspects of the project in the following slides. As Tony has already described, the Zone 5 minutee will be an underground operation with ore trucked approximately 35 kilometers to the existing Peseto Mill, which will be upgraded as part of the project scope. Power is close by and a grid connection is being constructed to the Botswana Power Corporation's line approximately 22 kilometers from the Bassettol plant. The main source of BPC power is a 600 Megawatt Coal Plant. So grid power is reliable, relatively cheap and generated in country. It is also worth mentioning that the previous operation was run using diesel power generation and the generation system will remain in place providing a backup power source and construction power. Water is also nearby and the plan is to draw from the existing Bassettia well field, the Hakka well field under development, which will supply Zone 5 and mine dewatering production, with the fully permitted Khoemacau well field as a backup water supply. Concentrate will be bagged and trucked to Durban, South Africa for delivery international smelters. Although there are other potential ports and off takers for the concentrate, the Port of Durban makes the most economic sense as the base case because of the potential to backhaul consumables. The project schedule consists of 27 months of construction starting from January 2019 with 1st concentrate expected to ship in the Q2 of 2021. Moving to Slide 7, I'll give a high level description of the deposit. The Zone 5 deposit is a sediment hosted structurally controlled strataformcoppersilver deposit on the Kalahari copper belt with very consistent mineralization over a strike length of about 4 kilometers. As shown in the cross section on the slide, the high grade mineralization dips about 60 degrees and has a fairly consistent thickness of about 9 meters. The Zone 5 deposit is not typical of lower grade copper deposits elsewhere in the Kalahari Belt. Cupric has completed about 225,000 meters of drilling on the Zone 5 deposit and the resource dimensions cover approximately 4,200 meters of strike length to a depth of about 1200 meters from the surface. As you can see in the long section on the slide, the resources are open on strike and at depth. The area of interest for Royal Gold Silver Stream is approximately 8 kilometers by 22 kilometers, allowing for the potential resource additions along strike and down dip of the known mineralization. Mineral resources and reserves included in the Zone 5 minutee plan 74,000,000 tons of 1.98 percent copper and 21.9 grams per ton silver consists of 30,000,000 tons of 2P reserves plus approximately 44,000,000 tonnes of measured indicated and inferred resources. Currently 90% of the 1st 5 years of production is classified as measured and indicated, and 76% of the 1st 10 years is classified as measured and indicated resources. Infill drilling, like Cupric, has typically converted high percentages of the inferred resources to indicated with flat to slightly increasing grade. Turning to Slide 8, you can see the production profile and the high level Zone 5 project parameters. The mine is expected to feed the mill at a rate of 10,000 tons per day. The project will produce an average of 62,000 tons of copper and 1,900,000 ounces of silver per year over the currently defined 21 year mine life. Recovery expectations are high at 89% for copper and 86% for silver. The average C1 plus sustaining cost, including byproduct credits, but before the stream, is expected to be about $1.71 a pound using current spot silver price, which places Khoemacau at about the 50th percentile on the copper cost curve for primary copper producers. The production profile over the mine life is fairly consistent for both copper and silver, mainly due to good continuity of mineralization along strike and at depth. The ore body offers the potential for expansion by adding new declines along strike or increasing the mining rate from the planned declines. A pre feasibility study for the expansion has been completed, but the main focus of the Cupric team today is to meet the Zone 5 project to get the Zone 5 project up and running at 10,000 tonnes per day. Turning to Slide 9, I'll give a bit more detail on the mining plan at Zone 5. As you can see at the bottom of the slide, the Zone 5 complex actually consists of 3 independent, but interconnected mines along 3,000 meters of the ore body strike. The South, Central and North mines, each of which will operate along approximately 1,000 meters of the strike length. Each mine will have its own box cut and ramp access and each is designed to mine at a rate up to 2,000,000 tons per year, which will keep the mill full at 10,000 tons per day. Twin declines will maximize the efficiency over long strike length of the deposit and the mining method is conventional sublevelopen stoping. As Tony mentioned, the deposit is very consistent and homogeneous and the design with 3 separate mines allows a lot of operational flexibility. Open stoping with pillar support will be used in the upper portion of the mines. Below about 450 meters, pace backfill will be introduced for support. Mine ore will be trucked in tractor trailer units with payloads of 100 to 150 tons over the 35 kilometer haul road to the Bassetto mill, which I'll discuss in the next slide. On Slide 10, you can see the photo of the existing Voceto plant as well as the upgraded flow sheet. The mill was designed and built by Sedgeman and commissioned in 2012 to process 1% copper sulfide ore and the plant operated at spec from feed produced from the original Bassetto mine. The mill will require some upgrading for the higher throughput and higher grade Zone 5 ore. The feasibility study for the upgrade was completed in 2015 by Sedgeman and Cupric, which Flor Daniel confirmed and optimized in 2017 2018. The copper and concentrate grade is expected to be high at about 40%, which is driven by the attractive mineralogy of the deposit, having high percentages of boronite and chalcocite copper mineralization. There are some minor penalty elements, but high grade concentrate should make it attractive smelters as a good concentrate for blending. Thickened tailings will be pumped to the existing tailings storage facility, which is visible in the top right of the photo on the slide. Once backfill is required at Zone 5, filter tailings will be used for a portion of the paste backfill aggregate and backhauled in the empty ore transport trucks. On Slide 11, I'll discuss the current state of the project readiness and then hand over to Tony to talk about the sources and uses of capital for the project. I just got back from Botswana over the weekend after spending the last week with the project team completing a readiness review with John Ferreira, the CEO of Cupric. I can report that the project development is underway. All the required permits to start construction are in hand and there are no critical permits or land access approvals outstanding. Detailed engineering is more than 60% complete and early works at the site have started, including clearing at the Zone 5 box cuts and lay down area, clearing of the Bassetto to Zone 5 haul road and upgrades to the Bassetto Camp facilities. An MOU with the Botswana Power Corporation for the new power line and sub station for connection to the grid has been signed and a long term power supply agreement is being negotiated. Both the owners team and the EPCM team are largely in place with field work initiated. Flor Daniel of Johannesburg was engaged in 2017 as the EPCM contractor for the surface facilities and process plant upgrades and has worked alongside Cupric management throughout the front end engineering design or FEED process. The FEED Phase 2 was delivered in Q1 2018 and a Phase 2 was completed in Q3 2018, which included detailed project execution plans. Cupric is currently in the tendering process for the mine development contract The Cupric team will manage the mining, but a decision was made to bring in a contractor to complete all underground development and early operations and transition to owner mining as skills are transferred over to the Cupric workforce. Training is a key component of the underground contractor scope. I will also mention that Cooper has developed good relationships with local people in the project area. When Discovery Metals shut down operations, all employees were terminated and there were many local residents who are supportive of the economic activity that Cooper Group will bring to the area. In all, I'm very impressed with the project team Cooper Group has put in place, the project execution planning since my last visit mid last year and the initial field activities. I'll now turn the call back over to Tony to discuss the funding for the project. Thanks, Mark. I'll close off the comments on the project execution by reviewing the capital available. Kupferick has done an excellent job of pulling together capital from different sources to address funding risk during construction. In addition to the contribution from Royal Gold, Red Kite Mine Finance will be providing a $275,000,000 project finance facility and Cupric has agreed to provide $75,000,000 of additional equity as a condition to our funding, which could be provided from GNRI funds or another investor. The project capital requirements are $480,000,000 including project financing and $100,000,000 for the repayment of the existing debt facility from Red Kite, which will be repaid from the new project finance facility. As shown on the graphic, the equity contribution, the project finance in Royal Gold Stream at 100% will be more than sufficient to fund the project and refinance the existing debt. We are pleased to provide a commitment for an overrun facility, but if the project stands stays on budget and schedule, the entire stream option, an overrun facility may not be required. Nonetheless, we felt it prudent to address other potential cost scenarios at this early financing stage rather than cobble together remedies later when options and timing will be more limited. On Slide 12, I'll give some background to our partners in this transaction, Cupric Capital and GNRI. Cupric Canyon Capital is a group of individuals who have a wealth of experience in the copper mining business, mostly from careers with Freeport McMoran and its predecessor company Phelps Dodge. You can see from the experience listed on this slide that most of the founders came from the highest levels of the Phelps Dodge organization in various complementary roles. They have increased the depth of their team by adding some very accomplished individuals who have experience in the African operating environment. Specifically, Yohan Ferra, the CEO previously ran Newmont's operations in Ghana and prior to that had 26 years with AngloGold Ashanti in various operational roles. Johan is complemented his operating experience is complemented by strong commercial experience of John Munro, who was previously the CEO of Rand Uranium and prior to that on the Executive Committee for Gold Fields Limited for a number of years. Johan and John are complemented by BK Paya. BK was formerly the permanent secretary of the Botswana Ministry of Minerals Energy and Water Resources. He brings a lot of local experience to the project. At the Board level, there is representation from Global Natural Resource Investments, the London based private equity firm that manages funds and owns the majority of Cupric. GRNI was formed in 2015 through the management buyout of Barclays Private Equity Business and is focused on investing in the energy and mining businesses. Their model is to back projects identified by technically experienced management teams and have committed more than $3,000,000,000 since 2006. Over the last year, we have strengthened our relationship with GNRI and Kuprik to the point where we have developed partnership we're announcing today. We look forward to further developing this partnership over the coming years. On slide 13, I'll make some comments in Botswana. When we started our initial due diligence on this project, one of the major focus areas was the country as an investable destination. Although Botswana is known as one of the top mining countries in the diamond mining countries in the world, we do not have direct experience with the country. We have been pleased with what we have seen and learned since, with that, which is that Botswana is a peaceful and stable country with well established rule of law. Botswana is the oldest democracy on the continent. It is a relatively small population of 2,000,000 people with an economy that is very dependent on the mining diamond mining business. However, the current government is pushing to diversify the economy. Encouraging new projects like Komakau is a priority. And as an example of the type of support they are willing to provide, the government has streamlined the process to bring in foreign expertise to develop the project and help transfer skills to the people of Botswana. The country ranks very well on foreign investment surveys such as the Fraser Institute Annual Survey and the Mining Journal World Risk Report, both of which are benchmarks for the mining industry. In 2017, the last year of the survey available, Botswana ranked as the highest of all African countries and policy factors and 3rd in terms of investment attractiveness behind Ghana and Mali according to Fraser. The World Risk Report ranks Botswana best in Africa in 3 of 5 measures, namely governance, social and fiscal. Botswana is also a member of various organizations including the World Bank, the United Nations, the World Trade Organization and the International Monetary Fund to name a few. The country is ranked A2 stable by Moody's and I was most impressed with their literary rate, which was in the 80% range, high 80% range in fact depending on some the various sources that we read. During our due diligence, we engaged with the U. S. Embassy as well as the previous senior management of Debswana Diamond Company, a joint venture between the government and De Beers and other business experience in the country. It was very helpful to have Chris Thompson on our Board who is quite familiar with Africa. We've also spent time in the country with the Cupric team at the project and our experience confirmed everything we learned about Botswana being an attractive investment destination. On slide 14, I'll make some comments on this what this transaction does for Royal Gold. Depending on the ultimate size of the silver stream, we expect that this transaction will add between 1,500,000 and 1,900,000 ounces of silver per year to our account. Using the metal prices observed over the past quarter, this represents a contribution of between 18,000 22,000 GEOs or 5.5% to 6.5 percent contribution compared to our annual actual results reported for our most recent quarter ended December 31. Again, comparing this to the December 2018 quarter, we expect silver will increase from about 10% to 15% of total revenue and our revenue from precious metals will increase slightly to just over 85%. While we're not in the business to speculate on metal prices, we do think this is a good time to add silver to our portfolio as the current silver price relative to gold is lower than we've seen it over most of the past 20 years. I'll conclude on Slide 15 with some wrap up comments. We always talk about new investment opportunities in terms of people, place and project. And the Kumakao project meets all of those criteria very well. We and the way that they have approached the development. We are impressed with the management and project team that Cupric has put in place and the way that they have approached the development. We're very comfortable with what we saw and learned about our visits to Botswana and believe this is a good jurisdiction for investment. Finally, we think the Khoemacau project is an excellent high quality and lower risk development project and adds another long life asset to our portfolio. In addition, the structure in terms of the Khoemacau stream are consistent with our objectives for acquisitions, which are to maintain our precious metal focus, to provide accretive growth to our shareholders by using cash flow to the greatest extent possible and to make disciplined approaches to take a disciplined approach to investments that depends on solid due diligence that allocates capital to what we believe are quality opportunities that can provide metal price optionality and resource to reserve upside, And that's are secured in a way that to provide us the greatest amount of protection possible to minimize risk. Operator, that concludes our prepared remarks and we'll open the line for questions. Thank you. And we will now begin the question and answer session. And the first questioner today will be Cosmos Chiu with CIBC. Please go ahead. Hi. Thanks, Tony and team for a very detailed presentation, which is great because to be honest with you, I don't really know much about this asset here. But maybe on that, my first question is, I think Mark sort of mentioned that he spent some good time in Botswana. But can you just walk through the process with me in terms of the due diligence that you performed on this asset to get you comfortable to this point where you've made a pretty substantial investment? Absolutely. Yes. This is I'll turn it to Park and have him address it. Thank you. Yes. Thanks, Tony. We did our initial due diligence or detailed due diligence back early in the summer in 2018, where we really we took team of about a half a dozen people, subject matter experts and really looked at all of the important areas. We dissected the resource model and confirmed that it was a very solid model. We had mining folks and geological folks and mineral processing people all contribute independently to the due diligence. And although we as we usually do, we always have some opinion that may differ from the owner. We see a very solid project. We recently just followed up with this readiness review, which we just wanted to confirm that the team was in place to execute the project. And what we found was they've got an excellent team and relationship with Flor Daniel out of Johannesburg. And they've effectively filled all of the important team positions to execute the projects. So they've got floor construction folks in country. Their owners team is full. So they've got their project controls in place. They've done excellent work on project planning and execution planning. So we this is one of the I would have to say one of the better projects that we've looked at with respect to how these guys have pulled their information and their plans together. And I'm sure, Mark, doing your due diligence, you identify certain risk. What's some of the key risk here that you've identified, be it is it underground mining, is it the mill, where could it be? Well, I'll tell you, one of the important things that we went in, it's a very arid area. Water supply was a significant concern to us originally. And we've subsequently through additional work completed by Cupric have become very comfortable with the water supply. Obviously, underground mining, geotechnical risk is a concern. They aren't underground at this point. So until they start developing underground, there's going to be some inherent underground risk that can't really be reduced until that development starts. But they've done a lot of geotechnical drilling and analysis and a lot of mine planning and optimization. So we're pretty comfortable with that. I'd say we're very comfortable with that. We other things like dilution is always an area to everyone has an opinion on it. We think they've done a reasonable job on dilution planning. But in our analysis, we always are a little bit more conservative. I mean, they looked at having a half a meter on hanging wall and footwall for dilution. We considered that it could be an additional half a meter. So we've we always take a little bit more conservative view in many cases in the owner, but those were some of the areas that come to mind for me right now. Cosmos, I would just add to that. One of the things we really liked about the project was the fact that it is brownfields in a number of facets with the Tomacao sorry, the Posetta Mill already in place. And you see a picture of that in the presentation that we put together and that it operated quite successfully in the past. So there's upgrading that, yes, there's some issues associated with that. They look very, very manageable. And then on the mining side, I guess that's the rather the most new development that will be done on this project. So Mark's accurately identified that as the area that we're going to be watching closely. But from Comacao's perspective, the redundancy that they've designed into that mill into essentially 5 different ramps going into 3 different mines. And it is just a lot of flexibility once they get into operations to operate that mine. So very pleased with the methodical approach they've come up with there. Yes. And it's maybe switching gears a little bit here. You talk about the cost of the asset here being sort of the 50th percentile in terms of copper cost, which is good. But I'm just wondering if you have would have preferred to invest into something that could potentially be lower cost on the cost curve. And then the second part of my question is, how does silver sort of factor into the revenue mix at the asset and now you're taking 80% of silver, like how does that how could that potentially impact the cash costs? Let me start with the latter first Cosmos and just say that silver is about 7% of the overall revenue. So it's not a huge component of the project. And then when we look at the cash cost of the project, that's a very, very important piece for us. We often look at our investments very, very critically from the operator's point of view, because we don't want to be pushing our investment into the new project and causing the project to move up into a 4th quartile type position. And here we're very pleased to see that number 1, the silver isn't that large of a component, but it also is on the base of a mid unit cost producer. So plenty of room here I think on the margin side. That's the reason one of the primary reasons we are attracted to the business opportunity. And just going in a more global sense, we said repetitively into the marketplace for years now that we are not interested investing in any asset that pushes us pushes the operation up into the 4th quartile of the worldwide production firm. Curve. We very much would rather have projects that we're not invested in suffer in the first instance if metal price drops. And if we come down through 25% of the world's copper production, I'm sure there'll be a price response. So we think we're in pretty good shape here. And then finally, to address the rest of your question, obviously, we always want to invest in the highest quality assets we can. But today, the opportunity to get into 1st year copper projects is somewhat limited. We think this a good margin project for us in this environment. Of course. Maybe, again, switching gears a little bit here. Cupric Canyon Capital, to be honest with you, up until today, I really haven't heard of that outfit. But you gave us a good slide in terms of pointing out the pedigree behind the people at Cupric. But I'm just wondering how much confidence do you have in terms of the Cupric outfit building a mine? And from that perspective, have they built any mines in the past as a team? Well, the Cupric folks as a team have not done that. This is a team that's been pulled together. Although I would emphasize that Johan Ferreira has just a tremendous pedigree of operations. He's a very systematic individual. He's got his team well in place thinking along those lines. And that's that very readiness for the project to make sure that everything was in the right direction. Now I will say that with regard to building projects, the floor team has built projects together. I think, Mark, if I'm correct, they built 2 projects in Botswana here in the last few years, 3 I guess it's been 3 projects in Botswana over the last several years. So, whilst the team hasn't been together and done it before, collectively, they've done it individually. And again, I think the project risk here is a little bit lower with the Paceto Mill already largely in place. Yes. And then one last question, if I may. I'm just wondering about the structure of the stream here. Are you protected against any kind of delay in terms of delivery, in terms of production? And then second part is, where is your security on the stream? Yes. So with regard to protection, one of the things that we really like about this investment is our money is really back end loaded. So there's a lot of other money that goes in front of ours Cosmos. And in all of our stream financings, we put money in on a pro rata basis. So once we do start attributing, it's going to be on a pro rata basis. So we get to continually look at the project. In every investment that is asked of us, we have an independent engineer that is going to be looking at the project and Cupric will have to certify that they the advance of the project is at such a level they have sufficient funds to complete it. So I think we're very systematic in how we approach those investments and it's been very successful in the past. With regard to security, we have a second security behind the $275,000,000 red kite facility on all of the Komakao project assets. And then Komakao is now owned by a few different companies as it goes all the way up to Cupric and we go up to the entity just below Cupric, it's called Cupris, as far as our what we call a ring fence. So we have guarantees up and down the ownership structure on Cupric Canyon. So very, very good position, I think, from what we've done in the past as far as secured security on our project assets. Great. Thanks, Tony. That's all I have. Thank you. Those are good questions. And our next questioner will be Dan Rollins with RBC Capital Markets. Please go ahead. Yes. Thanks very much, Tony. Just filling in for Stephen who got pulled off onto some large M and A transaction that's been announced today. Just some quick questions. Just on the structures, going back to how you did the deal, was this a process run for the asset or is this sort of more of a 1 on 1 negotiation you've had with the vendors through the last couple of years? Thanks for the question, Dan. Let me just make sure I understand the question. Are you saying is this a new style of investment for us or? No, no, no. I'm just wondering if there was a formal process run to vent that sell the stream or were you sort of in 1 on 1 negotiations from day 1? No, sorry, I misunderstood your question. I believe there were certainly some other competitors in here. I don't know exactly what flavor or what type or how many other streamers, any, were here. And I guess that would be a question you probably would bought a direct to Cooper Capital people. But certainly we're competing against other sources of capital in this whole overall capital funding project. Okay. And then just some quick just some sort of housekeeping. The payable level on the silver, is it fixed or does it flow with the payable levels in the con? No. So the if there's one understanding your question there too. So we have a fixed rate of 90% of the metal that's in the con that we get paid on. So we're not going to be floating with whatever the percentage is at the smelter. Okay, perfect. Okay, so you're basically fixed 90% payable and recovery on the grade going to the mill? Now recovery, we're not fixed on. We have we float with recovery. Okay. Ore goes into the mill and the recovery is what the recovery is. But then once that We get 90% favorable of that. You got it. Once that goes into the con, we get 90% of that so that we're not at the negotiating table with the smelter. Okay, perfect. And then just to also confirm, you are not responsible for any of the refining charges on the silver? No, we're not. No, that's all part of the 90% payable. And then timing lag between production and sales typical about 3 months to assume for the modeling purposes? Yes, I think it's probably a 3 mama type of for modeling purposes to start with. I can tell you that we do have a clause in the agreement like we do in other contracts where if we don't receive payment by the 150th day, there's a deemed delivery requirement. So that continues to put pressure to settle those things out. But here we get paid on the provisional as well. So we'll get some provisional. Usually that's about 90% of the metal and cons right when it ships out of the gate. So the extent that Cupric gets a provisional payment, we'll get paid on that provisional and trued up after the 150th day. Okay. And then just on the stage payments, when you mean pro rata basis, you're referring to capital going into the project based on the current CapEx assumption? Right. So you'll see the spread of capital requirements that we generally forecast today. Now those are going to move around a bit. But there's going to be $200,000,000 that are invested ahead of us. And then there's a certain draw that is required on the Red Kite facility and then we'll supplement that for a period of time. And then we'll go pro rata and that is the with the red kite facility that will go pro rata. But generally a bit more back weighted on this investment, which we like than what many of our other investments have been. Okay. And just when you're doing the negotiations here with a private company and given the amount of debt that's going to be put on this to fund it with RedKite and the need to repay that, was any of these sort of built into the implied cost that wanted to pay? Does that take into account the fact that there may be limited exploration over the 1st few years of this asset, given when it's also a 21 year mine life? Because one of the benefits of the royalty streams is to have this ongoing basically free call on reserve replenishment. Do you see that as a risk over the 1st few years or do you expect this company to continue to put money back into the ground through exploration? Look, let me be clear. What I really want the company to do is to focus and build this project first and get this project up and running so that we get a steady stream of revenue associated with it. And it's fine for me if they start turning their attention to exploration once the cash flow starts coming. But in this case, Cupric has got some very, very interesting ideas where they would are already studying, I think we had in our prepared remarks, already studying the possibility of expanding throughput. And they have plans to do exploration outside and inside our area of interest. So I think they've got great targets in the area. This is going to be I think a very prolific exploration area for quite some period of time. So we saw those very elements that we like in a transaction, and I mentioned in my prepared remarks. A long enough mine life to give you metal price optionality and also very prolific exploration potential along strike and down dip. They're still open, certainly down dip and we're excited for them to continue to explore along strike. And we've you can see that we've been cognizant of that in that green area of interest that we put around Zone 5, you'll see a down dip. There's plenty of room to expand that direction in that that green rectangle. And then along strike, I think we have 22 kilometers along strike, if memory serves, 8 kilometers down dip. So that's a very good exploration footprint for us to take part in the future. Great. Thanks very much. Appreciate the color. Thanks, Dan. And this will conclude our question and answer session. I would now like to turn the conference back over to Tony Jensen for any closing remarks. Thanks very much for joining us today. We're very excited about this opportunity and putting another long lived low what we think is a high quality asset into the portfolio. And we'll continue to look forward to updating you how the development goes as project start project construction starts to pick up with vigor. Thank you for joining us today. The conference has now concluded. Thank you for attending today's presentation and you may now disconnect your lines.