Thanks very much for joining us today for Royal Gold's 2024 investor update. My name is Alistair Baker. I'm the SVP, Investor Relations and Business Development, and I'm joined by several colleagues throughout the room. During today's session, we'll give you an update on Royal Gold's business and how we see it today. Before we start... Oops, there we go. Sorry, we will be making forward-looking statements during today's presentation, so those statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties are all discussed in our most recent Form 10-K filing with the SEC. Today's session will be 2 hours. Formal remarks will run for most of that time, and we'll leave a few minutes at the end for questions.
We'll start with our President and CEO, Bill Heissenbuttel, who will give an overview of Royal Gold and some of the attributes that make us unique as a precious metals investment. Jason Hynes, Senior Vice President of Business Development and Strategy, will then speak to our portfolio, our approach to business development, and our position in today's market. Kevin Chiew, Manager of Investor Relations and Business Development, will talk about our Asset Handbook, which we launched this morning. Then Martin Raffield, our Senior Vice President of Operations, will talk about our 2024 guidance, which we also issued this morning, and a handful of portfolio assets. Now, I have a few guest speakers who will join us today as well. So we have Paul Chawrun from Centerra, the Chief Operating Officer, who will talk about the PEA and other projects underway at Mount Milligan.
Patrick Godin, CEO of New Gold, will talk about the transition to underground mining and exploration at Rainy River. Will Dunford, Senior Vice President of Technical Services at Kinross, will talk about recent exploration and the path to production at Great Bear, and we'll have a couple of virtual presentations from Ero Copper. Makko DeFilippo will talk about the NX60 project at Xavantina, and Darren Stralow, the Managing Director and CEO of Bellevue Gold, will give an update on one of Australia's newest gold mines. After that, we'll open the floor to questions, so please hold your questions until the end of the prepared remarks. With that, I'll turn the presentation over to Bill.
Thank you, Alistair. Good morning. Thanks to all of you for joining us today. Here, there we go. We're pleased to take the opportunity today to brief you on our inaugural Asset Handbook, which we made available today on our website. I'd really like to recognize the efforts of those involved within Royal Gold. I think this was no small task, and I think that the product quality is excellent. It represents another attempt on our part to reduce the differences in the types of reporting between us and our competition. We changed our fiscal year end. We've issued comprehensive ESG reports. We've offered guidance, even if it's just short term, and now we have further closed the gap on the information put out by other royalty and streaming companies.
As we get in today, I also want to thank those in our shop who have put together today's events and presentations, and I'd really like to express deep appreciation for the involvement of some of the operators in this event. Representatives, as Alistair said, from Centerra, Kinross, New Gold, Ero Copper, and Bellevue Gold, have graciously offered their time to give you views on some important assets in our portfolio. So we don't typically dwell much on our vision, mission, and core values, but I thought I would start here, and our vision is really to be the gold standard, and that is whether that's as an employer, a business partner, a gold investment.
We sometimes get calls from people who seek us out as, as business partners because of our reputation for fair dealings. We have people who have been with the company for a decade plus because of the work environment we provide. Our largest shareholders, they don't change very often, because I, I believe we offer a simple long-term investment strategy and capital return approach. Our mission is defined in a way so that we don't get lumped into the operating company sector when we talk about environmental and social issues. We are providers of finance, and streaming is a relatively new capital source. It's not debt, it's not equity, and I believe it has advantages over both of those capital sources that are attractive to the mining sector.
Each structure is unique and really provides us with a chance to provide creative solutions to operating companies. Our core values are limited in number, maybe, mainly because I wanted people to remember them, but these values are very much tied to our vision, because you can't be the gold standard in anything, if you're not conducting yourself with these concepts in mind. Most of you know us well. I thought I'd point out a couple of things on the slide. Our revenue remains dominated by stream revenue, even though most of our recent business development activity has involved royalties. We don't have a preference between streams and royalties, but as you know, streams are a better financing tool. They have a...
Therefore, have a greater probability of being larger in size, and this can result in a skewing of the revenue. Our revenue was 76% gold last year. No other major large cap streaming and royalty company had gold revenue in excess of 65% last year. We generated 55% of our revenue from Canada and the US. That doesn't mean we're immune to jurisdictional issues, but only one of our competitors has a higher percentage of revenue from those two countries. And finally, I'll just note the improvement in our liquidity. At the beginning of 2023, we had debt outstanding of $575 million. With our announcement this morning, the debt level is now $125 million.
Our liquidity was $550 million at the beginning of 2023, and $845 million at the end of the year. So one of the things we try to be is consistent. Consistent in messaging, consistent in investment criteria, consistent in capital allocation. With today's presentation, you'll, you'll hopefully get a feel for the upside we see in certain assets, which really speaks to a consistent focus on, on long-life assets with good upside. You'll see how we've used our revolving credit, not equity, to finance recent growth. You'll see temporary higher levels of leverage with subsequent de-leveraging periods, and you'll see a history of dividend payments that, that is unmatched in our industry. Now, that does not mean we won't consider non-precious metal investments. It doesn't mean we won't consider higher-risk jurisdictions.
It doesn't mean we won't issue equity, but we do try very hard to remain true to a very simple approach to the business. The steady and high margins of our business, I think, are well understood. Our adjusted EBITDA margin was at some of the highest levels in this five-year snapshot during the periods of high inflation. Our cash G&A remains about 5% of revenue, or just under $100 per GEO. Now, that's not to say inflation doesn't appear in our salary COLA adjustments or the fees we pay for professional services or travel. It just means these expenses are not significant enough to change our margins.
The lower net operating cash flow margin, relative to the Adjusted EBITDA margin, reflective primarily the fact that we paid a bit more interest in 2023 due to higher, higher borrowing amounts, and the fact that we pay taxes. Also, just comment on our employee and office count. We don't see the need currently to expand our, our staffing levels much beyond what you see today. We have long-standing relationships with technical and legal consultants that can quickly add resources as opportunities or issues arise, and this really allows us to stay with a low headcount. Nor do we see a need to add office locations.
It may seem a little excessive to have multiple office locations with a group of 30, but we think being spread across time zones and jurisdictions, it's actually an advantage from a business development perspective, so we can cover markets with local relationships. The company really benefits from a small but experienced board and management team. Our board members bring technical, legal, finance, accounting, business development experience acquired through their careers with large operating companies like Barrick, Placer, Teck, and Goldcorp. Their time on our board ranges from 4 to 16 years, so there's plenty of institutional knowledge within the group. The management team also has significant experience within the company. My 18-year anniversary with Royal Gold was last week.
And when you consider that Royal Gold initiated its gold strategy 40 years ago, the fact that I'm the third CEO, I think speaks to a level of consistency. That, however, does not mean we can't plan for or deal with succession, identify new needs. Martin Raffield, who you will hear from a bit later, joined us almost two full years before the planned retirement of Mark Isto last September, and that transition has been very smooth. We've added experience on environmental and social issues with the hiring of Allison Forrest in 2022, and she's made a great impact on those areas. So we're the only major royalty and streaming company, domiciled in the U.S. And what does that mean? It makes our share register a bit different than others in the sector.
We have high-quality institutional investors on the register, and during 2023, our top 10 shareholders all remained on the register, and the average holding period of our institutional investors is over 15 years. A plurality of our register is represented by passive investors, which can make our shares move a bit more in line with the, with the general market than others, and I think you'd find our competition might have half that level of passive investors in their register. So as a U.S. company, we benefit from being part of a number of equity indices, being really one of two major options in terms of gold exposure with Newmont, and really being a potential go-to investment when U.S. generalists develop an interest in, in gold.
Our sector really is one that gives an investor exposure to or provides risk avoidance over a number of areas that might be of interest. I would say, of all the categories, I find myself talking to generalists about the ETF for us. Our portfolio comes with risk. Revenue is generated from mining operations, but we also offer upside that comes from exploration through our broad portfolio, and we pay a dividend. If you invest in the ETF, that ounce will always be an ounce, and you won't receive any interest on that investment.
So in gold markets such as this, I totally acknowledge that higher cost operating companies may be more of interest, but I think if higher prices are sustainable, we may benefit from reserve and resource additions. So the fact that we have a higher beta to gold should not really come as much of a surprise, although I think the relationship has broken down a bit in the past few months. I find it interesting that we still have a positive beta relative to the market, and that's a fact I would attribute to our passive investors and the impact the general market can have on our shares. As I mentioned earlier, revenue is gold-focused, so this is, again, not surprising.
We have a larger revenue sensitivity to a change in the gold price than silver or copper. I'll just note that that analysis was done based on a 10% move in the gold price for 2023, and we are now over 20% higher than the average gold price last year of $1,940 an ounce. Despite some recent headwinds in our portfolio, we've had water issues at Andacollo, expansion challenges at Pueblo Viejo, and the strike at Peñasquito. We still show growth over a longer period of time in terms of both revenue and operating cash flow. Higher metal prices have certainly aided these results, but that's what we offer. It's exposure to gold and other metal price appreciation.
As the metal prices rise, the efficiency of the business is shown in the higher growth rate for operating cash flow than revenue. And it's really a reflection of the fact that except for production taxes and the cash price that we pay on streams that are tied to spot, our operating expenses don't track the metal price or have exposure to input prices like steel or oil. So this is one of my favorite slides because it takes a very long-term view. The analysis is done over 23 years. It again shows the efficiency of the business with a large growth in operating cash flow, much smaller increase in overhead, and it also shows growth without reliance on the metal price and without a significant increase in our share count.
So I'll just note, in fiscal 2000, our operating cash flow per share was $0.24. In 2023, it was $6.33. And I think that's indicative of accretive growth over the long term. Sorry. Sorry. This is... this slide was done... I'm sorry, I'm a little out of order here. One of the things we went back—so we haven't issued equity since 2012, but between 2006 and 2012, we actually were quite active, so I wanted to sort of go back, and this goes back 30 years.
and it basically says, if you look at the amount of equity that we raised, and that could be for corporate acquisitions or for cash, and then look at the dividends that have been returned, we've almost returned 50% of the capital that we raised over that 30-year period. And we've created an equity value of about $7 billion. And I'll just note, if we continue with our history of how we pay dividends, the company will pay out its billionth dividend dollar in early 2025. What? Wait a minute. So I've mentioned the revolving credit a number of times as a key financing tool.
We had a very active 2022, with over $900 million invested and had $575 million in debt outstanding under our $1 billion revolving credit. So we weren't as active in 2023, and we were able to lower the debt level to $250 million by the end of the year and increase our liquidity by $300 million. And as it was disclosed in the press release today, we reduced debt outstanding by $100 million in March from cash flows and $25 million additional when we received repayment of the Khoemacau loan upon completion of the acquisition of the mine by MMG. So we're well-positioned. Sorry, it's moving on me.
So we, we're well-positioned to repay the amount outstanding over the next few months, assuming no new investments are made. Okay. So I know many of the analysts in the, in the room work for institutions that, that support us through the extension of credit, and, and I'd really like to express our, our appreciation for that support. This slide provides you with, with longer-term evidence of our strategic use of our revolving credit. Historically, what we found is that the size and the frequency of attractive business opportunities varies sufficiently to allow us time to repay any advances made, and therefore, avoid the need to, to issue equity.
So while there is an interest cost for these borrowings, if we can repay our borrowings quickly, I view this as sort of a worthy trade-off, when you consider the long-duration assets that we acquired, by using these borrowings. During 2023, we did extend the revolving credit maturity to 2028, so we're well-positioned to continue to use our borrow-repay strategy as and when opportunities arise. So I'll end my remarks, on our strong track record of paying an annually increased dividend rate, to our shareholders. Our capital allocation strategy is simple: It's invest, repay, return, in that order, when we see new investments and/or have debt outstanding. We've seen companies come up with many types of more exciting, dynamic dividend payout mechanism, most of which lead to some sort of volatility in that payout.
We seek to be boring, and we want to be consistent, and we're still the only precious metals company in the S&P High Yield Dividend Aristocrats Index. So I hope you enjoyed the presentation today. Look forward to the Q&A a bit later. With that, let me turn the podium over to Jason to give you an overview of our portfolio and strategic position in the market. Thank you. Sticky.
Thanks, Bill, and good morning. My name is Jason Hynes, and I'm the Senior Vice President of Business Development and Strategy. I've been with Royal Gold for 11 years and have spent time in our U.S., Swiss, and Canadian offices. Bill provided a high-level overview of our straightforward, consistent strategy, and I'm gonna use the next several slides to discuss how the application of that strategy has allowed us to build a high-quality, long-life portfolio with organic growth potential, we believe. The old adage holds that the... Sorry, here. Over the course of our history, we've built a large portfolio of royalty and stream interests. When making investment decisions, we try to simplify our criteria to the three Ps: people, project, and place.
On the place criteria, as you can see on this slide, our principal producing properties, and in fact, the vast majority of our interests, are in jurisdictions where mining is an important economic contributor with well-established mining codes and a democratic rule of law. This is critical in order to ensure that our partners are able to explore, develop, and operate under a consistent set of regulations without concern for arbitrary political decisions. There are many challenges in the mining industry, but we can be selective on where we invest our shareholders' capital.
So zooming in and believing that the best place to find a mine is next to a mine, you can see the exposure our portfolio has to some of the major mining regions in the world, including Nevada, which is underpinned by our interests in the gold-rich Cortez Complex, upon which our company was founded and which we have continued to add to over the years. In British Columbia, which is long-life porphyry territory, where we have our largest revenue contributor, Mount Milligan, as well as our royalty interest in Red Chris, a potential multi-decade block cave producer under Newmont operatorship, and in greenstone belts around the world with long histories of gold mining, such as Red Lake, the Abitibi, and in Western Australia. Our success depends on our partners' skills in exploration, mine development, and operation.
It's also important for them to have strong community and social engagement practices and a good record on environmental management, which helps ensure the sustainability of operations underlying our interests. Therefore, we look to partner with experienced mining companies, which can be seen in our revenue distribution by counterparty shown on this slide. Good assets are sought after by high-quality mining companies, and many of the projects underlying our interests have been acquired by more established operators over the years, including, most recently, MMG's acquisition of the Khoemacau copper-silver mine in Botswana. M&A usually places projects in the hands of companies with greater experience and more financial resources, resulting in more consistent operations, increased investment and growth, and the ability to weather downturns. So we have a portfolio of 177 interests, and they span the life cycle from exploration to production.
Ultimately, production is the goal, so we prioritize the acquisition of these types of interests when we can. But we also evaluate earlier-stage opportunities that we expect will deliver revenue growth in the future. Earlier-stage interests can often generate greater returns, as the risk of development is factored into the price that we pay. Hochschild's Mara Rosa mine and IAMGOLD's Côté mine are recent examples of interests that have graduated from development to production. We anticipate B2Gold's Back River project and Kinross's Manh Choh project, which is a high-grade satellite operation to their Fort Knox mine, joining that group soon, as the construction of both mines is well underway. Kinross' Great Bear project and the development of the block cave at Newmont's Red Chris mine are also expected to become revenue contributors in the coming years.
While the recent issues at Cobre Panamá have drawn attention to country risk, it is also a reminder of the risk that comes from having a concentrated portfolio. The mining business is complex, and even the best operators can encounter problems, whether at the mine or at the corporate level, and we are not insulated from all of them. We strive to build a portfolio that, while gold-focused, is diverse in terms of counterparty, asset, and geography. Diversification is embedded in our strategic goals. Ideally, we'd like to have no asset contributing more than 20% of revenue, and we still have a bit of work to do to get Milligan below that level. A diversified portfolio provides our shareholders with more predictable and sustainable cash flow.
This is one of the investment highlights that is touted across the royalty and streaming sector, but realizing it takes a measured approach to new investments and the management of existing interests. We are in the extractive industry, and our reserves are depleted every year. We keep a close eye on reserves and resources as a way to gauge whether our production profile has both staying power and growth potential. Our reserves are heavily weighted to principal and other producing properties, as you would expect. In the chart on the right, you see our evaluation portfolio contributing meaningfully to exclusive M&I resources, which is a positive sign for the future. Our expectation is that assets from our exploration portfolio will mature and contribute to resources as they are advanced.
Another benefit of our investment model is exposure to future increases in reserves and resources, which come at no cost to us. You can tie this to both project and people in our three Ps investment criteria. The exploration potential of a particular project is an important part of our evaluation process when we make new investments. But exploration is expensive and often comes with a long return on investment period. So having counterparties with the technical and financial capability to make the investment and find new resources at their assets is critical. Generating high returns depends on servicing optionality. And optionality is a term I'll use several times, and in our view, it refers to the potential for reserve and resource growth and for throughput expansion, which not only accelerates revenues, but also unlocks less profitable resources through economies of scale.
Metal price appreciation overlays all of this, as it's a direct input into our revenue line and a factor which can make lower-grade resources economic for our partners to exploit. To capture excess returns, we need to invest in assets where our due diligence process has identified undervalued optionality. Our investment horizon is long, and it can take time to surface the embedded optionality that will drive higher returns. The time it takes is gonna vary as our partners advance projects at different rates based on factors that are unique to the asset, the commodity cycle, and their strategy and financial position. When we announce new transactions, we sometimes get criticism for the market perception of IRR, but our view on returns incorporates detailed information gleaned from our evaluation process that isn't necessarily available to the market.
The numbers in this table are published quarterly by Scotia, and we have a track record of increasing returns as assets spend more time in our portfolio, because that time allows upside potential to be surfaced. While The Street needs benchmarks to evaluate acquisitions on day one, and it usually settles on NAV or IRR at flat commodity prices, these are not always the best metrics for long-life assets that provide exposure to multiple commodity cycles. Multiples of payback is another metric that we track, as it oftentimes better reflects the potential of high-quality, long-life assets. On Red Chris, for example, we continue to be pleasantly surprised by the pace at which our investment thesis is bearing out, and we expect to watch that return climb as Newmont moves through the feasibility study for the Block Cave.
This chart of our principal properties shows that net revenue to date, plus forward consensus NAVs, exceed capital invested, which means we're on track to or well into generating positive returns. Our goal is to demonstrate growth in NAV, even as an asset is depleted, i.e., growing both the blue and the gold bars on this chart. The more time a project spends in our portfolio, the more optionality can be surfaced as operators invest in the mines. This increases the remaining NAV, sometimes at a rate which outpaces depletion. It's important to note that Street NAV estimates don't always factor in resource conversion and other upside potential that we have identified.
At our youngest principal property, Khoemacau in Botswana, which we acquired in 2019, when silver was $16 an ounce, MMG has signaled plans to expand the mine as it looks to deliver on its $2 billion investment. Mining is a capital-intensive business, and you see the risks reflected in the impairments that are occurred across the sector frequently. In Royal Gold's history, less than $400 million in impairments have been recognized on close to $5 billion in investments. The majority of that impairment is associated with Pascua-Lama, where while there's a significant uncertainty on future development, there is still a large gold and silver endowment, and our NSR royalty remains intact. I'll speak a little bit about the business development environment, both historical and looking forward.
This slide shows the history of stream transactions in dollar value over time, as well as by use of proceeds. Streaming has become an accepted and common form of financing, and one certainty is that the mining sector always needs capital. Streaming is a flexible product that can be applied to project development, strengthening the balance sheet, or M&A. This broad application provides our sector with a consistent pipeline of opportunities to review, no matter where we are in the cycle. You can see the large spike in 2015, which was largely driven by the need to shore up balance sheets among the large operators following a significant decline in the price of copper, gold, and other metals. The likes of Barrick, Teck, and Glencore came to market with large transactions, of which we were a beneficiary.
The past five years have seen project development as the main driver of stream opportunities, as developers have had a hard time accessing the equity markets and as the cost of debt has increased. The state of the current business development market is interesting. We are still seeing project development as the source of most opportunities by volume of transaction, but we see select opportunities of producing assets as well. Just to note that M&A, while always talked about as a potential area of growth for our sector, has not really provided the streaming industry with that many opportunities. Just quickly on transaction size, the very large $500 million-plus stream transactions are relatively infrequent, with on average, less than one per year since the product was formed.
Most of the volume is made up by much smaller transactions, with the average stream size being less than $200 million and with about half of all of them being less than $100 million. The good news for Royal Gold is that, unlike our competitors, we do not need $500 million deals to move the needle on growth, but we do have ample liquidity and a low cost of capital to compete at pretty much any size. We still consider our sweet spot to be in the $200 million-$500 million range. Transactions in this range provide meaningful growth without raising concentration risk.
While I've spoken mostly about streaming over the past few slides, as Bill mentioned, over the past few years, we've been most active in the acquisition of third-party royalties, which is a part of the market that is more difficult to forecast. Lastly, I just, this slide is in here just to touch briefly on commodity prices. Streaming opportunities surface when operators and developers are in need of capital. This means the timing of stream deals is largely out of our control. Royalty transactions, as I just mentioned, are even harder to predict because there's a much broader group of sellers, and the factors driving their decision to sell are more varied. Our job is to get into the best assets at the lowest value possible.
Value negotiations are more challenging in steeply rising or dropping price environments, as the buyer and seller's expectations on long-term prices can be further apart.... We're in one of those environments now, and as such, it may take longer to agree commercial terms until price volatility decreases. I'll pass things over to Kevin to introduce our inaugural Asset Handbook.
Thank you, Jason. Good morning, everyone, and thank you for joining us today. For those of you who don't know me, my name is Kevin Chiew, and I'm the Manager of Investor Relations and Business Development for Royal Gold. I've been with the company since 2020, and previously spent over a decade in mining equity research. I'd like to spend a few minutes this morning sharing with you our inaugural asset handbook, which we published today. This is a new piece of disclosure for Royal Gold and one I'm very proud of. The asset handbook is a culmination of a lot of hard work with contributions from across all disciplines within the firm. Besides being a sizable document, you may ask, what is the purpose of the asset handbook?
Simply put, the Asset Handbook was designed with the intent to be a reference to help investors understand, evaluate, and model Royal Gold's portfolio. Although most of the information contained in the book is already available in different sources and places, the handbook brings it all together in one document and hopefully provides enough detail to understand the most significant assets in the portfolio. Being environmentally conscious, we have chosen not to provide printed copies of this document, but it is accessible and downloadable via our website, royalgold.com. There's a link on the homepage, roughly centered over the animated graphic of a gold coin. It is also found on the Portfolio at a Glance page, replacing our previous portfolio summary table. I would like to briefly describe the different sections of the Asset Handbook. The first three sections being the attributable...
or the attributes of our business, the portfolio overview, and expected performance and growth. These provide a sense for Royal Gold when you look at the portfolio in aggregate. There are a few pages in the attribute, attributes of our business section that may be helpful to an investor who is not familiar with our business. They explain the accounting treatment of streams and royalties, the timing differences between production at a mine site and sale of metal by Royal Gold, and the difference between metal produced at a mine and payable to Royal Gold. A few other pages to highlight from these three sections include, one, the discussion on attributable gold equivalent ounces. This is a measure we use to understand the portion of resources and reserves attributable to Royal Gold for all of the properties where we have stream or royalty interests.
We walk through the methodology behind the calculation of this metric and provide a summary table based on property stage and geography. Two, exposure to important mining regions. Here, we look at our stream and royalty interest in important mining regions that we have identified, including Nevada, British Columbia, the Abitibi, Red Lake, and Western Australia. Three, our portfolio asset mine life. In this section, we provide a table with the current mine lives of the underlying assets of our portfolio, where available and as disclosed by the operator. We also provide a graph that illustrates our attributable gold reserves as they have changed over the past 20 years. And four, our organic growth pipeline. This is a visual representation of potential production expansions or mine life extensions and some of the assets expected to contribute new revenue to Royal Gold in the near term.
Then you get into the portfolio details, which is the bulkiest part of the Asset Handbook. This is where you'll find the detailed pages on most of the individual assets in the portfolio. We have tried to provide some structure to the pages to make them easier to use, and I'd like to highlight a few key areas as shown on this slide. The area of interest map. They say that a picture is worth a thousand words. This is our best efforts to provide readers a general idea of our stream and royalty interest in relations to the deposits and other physical properties of each of the assets. 2024 operator guidance and longer term operator outlook. Here, we've reiterated operator commentary on guidance for this year and anything for the years beyond 2024. Developments and potential.
This section details what is happening at the property and where the operator may see upside. We have generally tried to provide context relative to Royal Gold's interests. Financial and operating results. Here, we try to pull together some interesting financial and operating metrics. For example, we have included revenue since inception of our interest, metals delivered under our streams, and investment recovered. Mineral resources and reserves. Here, we highlight the mineral resources and reserves of the property subject to our interests, as well as the gold equivalent ounces attributable to Royal Gold's interests. Note, we also provide a complete mineral resources and reserves table later in the document, including metallurgical recoveries and other important footnotes that provides details to explain the resources and reserves.
All that being said, I'm confident that, confident that our readers will each find something of interest in this Asset Handbook, and I invite you all to have a look at your convenience.... We intend to update this handbook annually, and we would be interested in hearing any feedback on additional content that we could consider, including for next year's edition. With that, I'll pass the time to Martin Raffield, our Senior Vice President of Operations.
Thanks, Kevin. Just before I get started on my presentation, just a word of thanks to a few people who worked really hard on this. First of all, Kevin spent a lot of time over the past six months putting this together. He was assisted by Matt Bidwell and Thomas Matthews in the operations group, and Katie Geiger and Jessica Burlak in the legal team. They all spent a huge amount of effort, and I really think came up with a good document. I think this will be an extremely useful reference document, both within our company and in the wider analyst and investor community, and I really encourage you all to take a look at it. Okay, moving on. I'd like to start my discussion today talking about our 2024 guidance. We build up our guidance asset by asset from first principles.
Where possible, we use confidential production forecasts direct from our partners as the basis for these internal forecasts. When confidential information is not available, we use public forecasts or our own view of production. We adjust the operator's forecast to reflect our own assessment of achievability, based on both historical performance and our knowledge of the future asset's potential. This is the same approach that we apply to our internal budgeting and has proven to work well over time. This process was successful last year, but we fell outside our guidance range because of two significant and unpredictable events, namely the strike at Peñasquito and issues with the PV expansion. We've changed the way we provide our guidance this year. We want to get away from using GEOs, because it's a metric that can be confusing and gets significantly distorted by commodity price moves.
Instead of GEOs, we're providing sales volume guidance in units for the metals that generate the bulk of our revenue. This should make it easier for you to track our performance, as you won't need to convert revenue into GEOs and then adjust for commodity price changes to compare to our original guidance. Our quarterly disclosure already includes the actual metal sold under our streams, and we will provide the metal units for royalties by dividing royalty revenue by the appropriate metal price. We think this will provide additional transparency and simplify how you track our performance during the year. Moving on to the sales guidance ranges, gold is expected to be the dominant revenue source for us, followed by silver and copper, and a small portion of revenue from other metals like lead, zinc, and nickel.
Compared to last year, we're expecting higher contributions from silver and other metals, roughly similar copper and lower gold. I'll talk to Cortez, Pueblo Viejo, and Peñasquito in a few minutes, but a few notable items to keep in mind with respect to our 2024 expectations include: Mount Milligan and Andacollo stream sales are generally subject to an approximate 5-month lag from mine site production to metal delivery, and an additional month lag for sales. At Mount Milligan, this means that the higher 2024 gold production expected by Centerra won't impact us until the second half of 2024 and the first half of 2025. At Andacollo, drought conditions have been restricting water supply and tons milled over the past several months. This will impact our gold sales in 2024.
Teck expects a solution to be in place in 2025, and production is expected to be higher in 2025, with higher throughput and higher-grade ore. We're expecting new and increasing royalty revenue throughout the year as King of the Hills, Bellevue, Mara Rosa, and Côté Gold continue to ramp up, and Manh Choh starts producing in the second half of the year. And finally, from a guidance—production guidance, we expect our H1 and H2 sales to be roughly equivalent. With respect to DD&A, we expect this to decrease from $165 million in 2023 to between $141 million and $157 million in 2024.
The estimated decrease is due to the lower sales volume expected in 2024 and lower DD&A rates at some of our streaming interests as a result of reserve increases, mainly at Mount Milligan, Rainy River, and Xavantina. And finally, with respect to our effective tax rate, we expect this to be in line with 2023 guidance and to range from 17%-22%. This assumes no unusual or discrete tax items, and we are not anticipating changes in laws or regulations in jurisdictions where we will pay taxes in 2024. In keeping with our past practice, we are only providing 1-year guidance. This is not because we don't have confidence in our portfolio, but rather because we don't control the assets, and we recognize that operators often change their longer-term plans as they adjust to changing circumstances.
We've heard from several of our shareholders that they don't put much weight on multi-year guidance, and we don't think it is helpful if we issue guidance ranges that are either so wide as to be meaningless, subject to changes that we can't anticipate, or include production from assets with uncertain development timelines.... Instead of long-range guidance, we prefer to highlight the assets where we see interesting developments that may affect the portfolio beyond 2024. You can find additional detail in our new Asset Handbook, but this slide shows several of those developments at producing assets. The list is long, but it's worth calling out the production profile or the growing production profile at SSR's Marigold mine, the extension of KGHM's Robinson mine life to 2036, and the PEA expected to come out shortly at i-80's Ruby Hill project.
This slide shows a similar list at some of our development and evaluation assets. There are a number of assets where studies are advancing, and several where production is expected in the near term. It's worth mentioning, first production is expected from Back River in Q1 2025. Côté Gold poured their first gold three weeks ago, and more generally, PEAs, feasibility studies, and permitting are expected in the near term from several assets on the list. We think there is a lot of production upside and optionality within the portfolio, and we'll continue to report on interesting developments as they occur. In this section, I'd like to provide more detail on some of the assets in the portfolio. We have almost 180 assets, so we've selected a small handful where there are developments of note.
I'll cover off Cortez, Pueblo Viejo, and Peñasquito, and then I'll hand over to our guest speakers to talk about specific assets, including Mount Milligan, Rainy River, Great Bear, Xavantina, and Bellevue. Turning to Cortez, this has been a major growth engine for Royal Gold since the beginning of the company. It continues to evolve as a mining complex, and some of the new developments are expected to contribute for decades to come. Okay. I'll remind you that following our most recent acquisitions in 2022, we have royalty coverage over the entire Cortez complex. And because we own multiple royalty interests across the complex, many of which overlap, we have different royalty rates over the various areas.
For example, at Crossroads Pipeline, our overlapping royalties create an approximate 9.4% gross royalty rate, and at Goldrush Four Mile, our interests create an approximate 1.6% gross royalty rate. The variable rates across the complex are important to note because Barrick doesn't generally break out production forecasts for each of these producing areas. Barrick's production guidance for the Cortez Complex is shown on this slide. Barrick is expecting a decline in production in 2024 compared to 2023, and it's largely a result of lower production from Crossroads, offset partially by increased production from Goldrush as it ramps up during the year. After 2024, production at Cortez is expected to grow as Goldrush continues to ramp up and new production starts from Robertson in 2027, with further potential from Four Mile in the future.
You'll remember that in their Q4 results, Barrick described a change to the resource model at Crossroads that is expected to reduce oxide mill feed from this area. I visited Cortez in March, and while this model change results in a decrease to reserve ounces, NGM is looking at near-pit exploration potential that may reverse this decrease as time goes on. The upshot for Royal Gold is that we expect about a third of the total production from Cortez to come from Crossroads in 2024, and 25%-30% in both 2025 and 2026. We expect Cortez to produce for decades, and we continue to expect variability in where those ounces are produced from as NGM optimizes its overall production schedule. Cortez is remarkable in terms of the opportunities for upside, and this chart slide shows the recent exploration progress described by Barrick.
Exploration drilling in 2023 exceeded 30 kilometers, which is significant and shows the scale of the opportunities. The current focus is on conversion of existing resources and finding new ounces in the vicinity of the producing mines. There is a notable potential to add ounces at the producing Cortez Hills and Goldrush underground mines, as well as the Robertson open-pit project. Four Mile is particularly exciting, and Barrick is working to advance studies and to add new mineral resources by the end of the year. Four Mile could end up as the next major producer at Cortez, and Barrick has described it as the highest-grade, undeveloped gold asset in North America. While Four Mile is not yet part of the NGM JV, it falls within our 1.6% gross royalty interest.
You can see from the map that we have royalty coverage over all of the upside identified by N GM, and we expect to see continued growth at the Cortez Complex over the coming years. Moving on now to Pueblo Viejo, which we visited in June 2023. The plant expansion had some unexpected delays last year due to mechanical equipment issues, but we understand that those issues are now largely resolved. Barrick is expecting gold production to increase steadily over the next several years once the plant expansion is running at full capacity. While the plant ramp up has been slower than expected, this is a short-term issue for an asset that is expected to produce a minimum of 800,000 ounces per year until the mid-2040s. One issue that has affected Royal Gold during the expansion is silver recovery.
Recall that we have a silver stream at PV on 75% of the payable silver. The silver circuit is complex, and during the construction of the plant expansion, Barrick was focused on maintaining gold recovery because that is the main revenue source. As a result, silver recovery has been low and variable for the past several quarters. We identified silver recovery as a risk during our due diligence, and we negotiated a fixed silver recovery for the stream of 70%, and a mechanism to make us whole if that recovery cannot be maintained. When the plant is operating at design, this is not an issue, but over the past several quarters, this mechanism has come into play. In summary, if silver recovery drops below 70%, Barrick delivers from its 25% share of unstreamed silver to satisfy the stream delivery obligation.
This works to maintain our deliveries until silver recoveries falls below 52.5%, at which point Barrick does not have the silver available to satisfy the delivery obligation. If this occurs, stream deliveries are deferred, and Barrick delivers those ounces in the future when recoveries increase above 52.5%. When deliveries are deferred, we also pay a lower cash price for any ounces that are delivered, and this offsets the value of the deferred ounces. This value is repaid in the future when deferred ounces are delivered. Barrick has recently been campaigning all through the plant at the expanded throughput rate, but this means that the ore feed has not been consistent and silver recoveries have been low and variable. Barrick expects to optimize plant recoveries after achieving consistent throughput at the expanded rate, and that should begin in the very near term.
Barrick's longer-term expectation is that silver recoveries will be significantly higher than the 52.5% level, and we continue to expect the delivery of deferred ounces in the future. As of the end of December, there were 845,000 ounces of silver deferred, and the value of the reduced cash price related to these deferred ounces was approximately $7.4 million. That equates to $8.63 per ounce on average. When those ounces are delivered, we'll pay the 30% cash price plus the deferred amount for each of those ounces. We'll provide more information on this topic in the future once these ounces start being delivered. We were pleased to see that Newmont has identified Peñasquito as a core asset in the new portfolio following the Newcrest acquisition.
2023 was a disappointing year at Peñasquito, as it was shut down for 4 months due to the labor strike. The strike was resolved in October, and Peñasquito returned to full operation by the end of the year. Newmont is expecting a full year of production in 2024, with higher silver, lead, and zinc production from the Chile Colorado pit. Our interest in Peñasquito is a 2% NSR royalty, so we have exposure to all these metals. The strike also impacted stripping at the Peñasco Pit, which has the higher-grade gold ore, and stripping is expected to continue throughout the year. As a result, according to the December 31st, 2023 technical report, Newmont expects production in 2025 to increase significantly. Newmont has also identified several opportunities to extend the mine life at Peñasquito.
They use conservative metal price assumptions and have commented that reserve growth and resource conversion could occur with changes in those metal prices. There is also the potential to bring back the Peñasco Cutback 10 into the mine plan with further infill drilling, and they're evaluating the Chile Colorado Cutback 3 project on top of other near mine and regional opportunities. Moving on to Mount Milligan. I'll start with a few comments about the additional agreement with Centerra and then hand it over to Paul to talk about what's happening at the mine. As we announced in February, we entered into an additional agreement with Centerra that creates the potential to extend the life of the mine. We've been involved at Mount Milligan since the beginning, and we made our first investment in 2010, just as development was starting.
If you recall, the mine construction occurred during a period of very high CapEx inflation in Canada, mainly due to the scarcity of materials and people during the boom in the oil sands development. Thompson Creek, the operator at the time, asked us to put in more funding in 2011 and 2012 to help with CapEx overruns, and we ended up with a significant gold stream. We restructured this stream in 2016 to reduce gold and increase copper when Centerra took over. A feature of the original agreement is that there is no reduction to the stream rate or increase to the cash price. Reductions over time are typical features designed in agreements to incentivize operators to reinvest in operations as they mature....
Centerra approached us last year with a plan to extend the mine life, and we spent a few months with them reviewing options. We ended up with agreement, with the agreement we announced, which essentially provides Centerra a reduced longer-term obligation to encourage that reinvestment. The structure of the agreement appears complicated, but it is relatively simple if you break it down into its components. We agreed to pay additional amounts in future periods for gold and copper deliveries, and Centerra agreed to pay cash immediately, gold ounces in the medium term, and a free cash flow interest royalty in the longer term. The end result is NAV neutral to Royal Gold through 2035, and it could create significant value beyond 2035 if Centerra can extend the mine life further. We will discuss the accounting treatment of this new agreement on our upcoming Q1 conference call.
I'd now like to hand over to Paul Chawrun, Chief Operating Officer of Centerra Gold, to talk in more detail about the work underway at Mount Milligan.
Thank you. I'll first say that I'm thrilled to be here, and we felt that this arrangement was transformational for our company. This is a win-win agreement, and so we're off to the races. I'm gonna explain on how we're gonna extend the mine life at Mount Milligan. First, though, I have to figure this out, and secondly, I need to provide some caution. I will be doing some forward-looking statements, and I do suggest that you read this to be able to understand some of the risks that we have inherent within mining. So just for those that are not as familiar, although we've been talking about a fair amount, the Mount Milligan mine is a very large huge mineral endowment, significantly larger than what we have on our reserves.
You can see our resources are also, approximately about the same amount on, on resources. And I'm gonna explain how that's gonna... we expect to improve on that going forward. We have a production guidance for 2024 of 180,000 ounces-200,000 ounces of payable gold and 55-65 million pounds of copper. The mine has been operating for approximately 10 years. There's still a long way to go to understand the ore body to optimize it going forward. I'll explain some of those details. Some of the catalysts are, we have a preliminary economic, evaluation that I'll be going through all, some of the details on how we're gonna put together our plan on how we're gonna convert some of those resources going forward into a, a long-range mine plan.
And, we're going through a lot of focus on our operations on a, what I'll call a full-on reset on the operations in terms of safety, the mining productivity, the mining costs, which we needed. One, now that we have a long-term view, and secondly, with COVID and all the changes in the personnel and all the challenges that we had in an inflationary environment, now is the time to do a full reset on the operation. So I'll explain some of those details on how we're gonna achieve all this, all this growth and expansion going forward. So, we just had the overview on the deal itself. So what it did in the immediate is it gained two years of mine life, and the reason it was two years was because we ran out of tailings space.
We have mostly measured and indicated on our resources. It could actually be increased even further, but the key is we need to then do some engineering on where we're gonna actually put the tailings management going forward. So that's a key component of the preliminary economic estimate, is where does the tailings go? How do we optimize? There's a number of options available to us. We need to work with our stakeholders to be able to put that together, so that's a key engineering component. The other thing is, we've got a large endowment, not just on our resources, that's been drilled, we've drilled even more, and then we're gonna continue forward with further drilling this year and beyond into the future.
And then lastly, as I explained, we wanna execute on our operations in terms of all the components of the costs, the productivity, the recovery, the load-haul cycle on the mine, and so that we can fully optimize and get the full value out of Mount Milligan going forward. So just some of the key aspects of the PEA. I don't have a pointer here, but if you take a look at the pink outline, that's the reserves pit, and that carries us to 2035. And when I say large mineral endowment, I don't think you're gonna find too many operations with this amount of mineral endowment that's already been drilled.
But the resources pit, and there's a better view, plan view, on the next slide, you can see that it actually doesn't increase a significant amount, even though it's around the same amount of tons. So we have 250 million tons on reserves, and then on resources, we have 260 million tons. Slightly lower grade on the resources, but as we go forward, we're gonna optimize the strip ratio, we're gonna optimize the grade, and we're gonna put together a full, new life of mine sequencing, as well as optimizing some of the pit designs and all those components as well. And then we're gonna focus with our drilling on the Goldmark. The DWBX is actually the, the original ore body that plunges at depth.
If you can identify where the resources that could possibly turn into reserves in the Goldmark zone, you can extend the pit at depth. And then I'll show on the next slide, there's a number of other exploration opportunities that, just because of the large endowment and the way that it was structured in the past, we really went to 2033, and now we know that we can carry this going forward for the very, very long term. So just, just where are we going to focus on the exploration drilling? So in our budget, we've publicly announced $5 million-$7 million. That's somewhat discretionary. If we get good results, we will evaluate looking at extending that, those programs going forward into 2024 and beyond.
But just if you take a look at the endowment, so that gray boundary, that's actually the resource shell. As you can see, it goes significantly further out, out into the direction where we have the north slope. We have what we call Saddle West. If you take a look along at those, some of those section views, the porphyry is very large, and so this is gonna be a mine for a very long time. We're very excited about this, and you can see when, when Paul Tomory, myself, we're relatively new at Centerra, we evaluated the endowment, and then we discussed what this could look like to our partners. And this is... There's not too many projects that look like this with, with all the infrastructure in place already today.
And then just in terms of what are we gonna do with the existing facilities? So one of the key aspects of the porphyry deposit is the bulk of the gold is contained within pyrite. And what that does is when you recover the chalcopyrite, you're actually rejecting the pyrite. And so you have this dichotomy where you wanna recover the most gold, but you can't because you need to recover the most chalcopyrite, and that is one of the key aspects of the Mount Milligan flow sheet. So we are looking at a number of options to improve on that flow sheet. We'll be looking at potentially where we can invest in some minor, I'll say minor, not large picture, changes to the flow sheet, and then as well, looking at plant additions for this PEA as well.
But it's really important to understand the mineralogy and put a geomat model, and we're incrementally gaining. Even as we speak, we had a good quarter for our recovery, for our costs, with, with the chalcopyrite and the pyrite. And that's one of the key aspects of this, of this ore body to carry it going forward. You really need to understand the metallurgy, the geology, and how this all is integrated together. Mount Milligan was, I would say, second tier on, on safety several years ago. There's been an enormous amount of work by the operating team. We are now first tier on our safety. That's a lagging statistic. Key focus is on our leading indicators, and this is a key focus as well, because you're not gonna be able to operate successfully, cost-effectively, productivity, excellent productivity without good safety, because that...
The workforce needs to be engaged, and so that's moving forward. The entire load-haul cycle, the waste management, the drill and the blast, we're doing a full-on reset, evaluating all the fundamentals and putting this together so we can put in and make this a world-class operation. We expect these improvements. We will look at a lot of trade-off studies and a lot of incremental improvements for this program, but key step-change improvements for the PEA. And with that, I'll hand it over to Patrick.
There we go. Well, thanks very much, Paul. Certainly appreciate that. Mount Milligan is a cornerstone asset for Royal Gold, and we definitely look forward to seeing how Centerra works to unlock its full potential over the next quarters. So I'll now introduce Pat Godin. He's the President and CEO of New Gold for a discussion of Rainy River. Royal Gold acquired gold and silver streams at Rainy River as part of the original development financing back in 2015. So with that, Pat, over to you. You can advance slides with the little green arrow.
Good morning. So the same as Paul, so encourage you to read the advice from the legal counsel on safe harbor forward-looking statements. So first, about Rainy River is... Rainy River is a real—It's a mine where we worked really hard in the last two years to improve, we'll say, the accuracy of the mine. We did a lot of work in terms of health and safety for the same as my previous speaker. It was strongly believed that a safe mine is a productive mine, and it was a big reason why we had also retention issues, so we increased and our employees are really engaged. The retention has dropped significantly, and we have really good success in terms of efficiency and operational efficiency.
So we improve the pit, the mining sequence, but we also deploy a lot of time and effort in, in the mill. And actually, the mill is performing extremely well. We increased our gold recovery by 1.7% last year for the same grade, and also the throughput is really stable. We reduced our chemical consumption, we reduced our energy consumptions. So, and shutdowns now are an opportunity, not a problem, to manage, and it's changed a lot in terms of the operational efficiencies at mine site. Last year, we completed the phase three of the pit, so we are actually on the last pushback in the phase four, so that is ongoing. So we're trending to complete this phase. A lot of capital investment in the pit is on the ground for the first half of this year.
Second half of the year will be way more in terms of gold production, as you can see. For the underground mine, we are actually mining underground a small deposit that is named Intrepid, at a rate of 1,000 tons per day, and we are developing underground mine. Underground mine originally was planned to have an extraction rate of 4,000 tons per day. We'll push it up to 5,500 tons per day at a grade of approximately 3 grams, and we improve a lot of things in the mine design, reduce the number of meters that are required. We apply two mining methods: Avoca modified and open stopes. We also eliminate cement and backfill.
It will be just rockfill, and also we'll maximize the interaction with the pit, because instead to truck all the material through surface, with underground mine trucks will break through in the pit in two locations, and we will use our available open pit mining equipment to facilitate the hauling to the mill. So the main reason why our AISC are trending down and the gold production is increasing is mainly to the fact that we produce more gold looking forward in the pit and from the underground mine with our grade. And also that on an AISC point of view, actually, we are operating with 18 trucks. Next year, we're trending down to 9, and in 2026, we're trending down to 5 or 6 trucks. So basically, our operating costs will deplete, and also the underground costs will be more stable, so.
For the first time last year at Rainy River, we renewed the part that we mined of what we mined. We renewed 74% of this, and it's. We'll talk about that later, but it's the phase five in the pit that we'll mine after the completion of the current reserve mine in the pit in the end of 2026. So in terms of the guidance for 2024, we can see that the first half of the year, we are 40% of production, 60% will be in the second half. It's mainly due to the grade in the mining sequence in the pit. Lateral development will increase underground, mainly because we are increasing the throughput, the development to prepare the underground mine. Actually, we are in advance in the development meters.
We start the pilot hole for the vent raise a few days ago, and our main objective this year is to complete the ventilation buckle underground. After that, we will have unlimited capacity to speed up development. We will start the ramp portal from the pit in the second access, as you can see, at the end of June, and basically, we will break through in the pit probably at the end of this year with the underground connection. On the processing rate, we are mostly at 9 million tons or 24,000 tons per day in the mill, steady, so we're not seeing a difference. As I said to you, gold production, due to the grade, will 40% first half, 60% second half. Our costs are mainly stable on a total cash point of view.
Sustaining CapEx is higher in the first half, mainly due to the pushback, and the growth capital is increasing mainly from underground development and the construction, the. We are raising the tailings dam this year, as in the next two years, so it's seasonal investment, but mainly opening in summer. I talked to you about the first time we renewed reserves, and it's just the beginning. As you can see, what is mainly the. What is in brown is the phase five. That's what we're gonna mine after 2026, when the current reserve pit shell will be mined out. It's not necessarily a high grade.
It's 0.6, 0.65, 0.60, 0.65 grams per ton, but you just need to be smart, and we-- It's the maximum, the longest hole will be 600 meters, so we'll just recast the material in the pit instead to go to the waste dump. It's way more efficient and effective for us. You have a, a bit of the part of the design of the underground mine, so we developed the access from Intrepid. You can see the vent raise that we will develop in the next... That is actually under development and the ventilation buckle. So it's, it's 8% of the, of the ore will come from development, so the majority we have, we minimize the development in waste. So it will be a-- it's a mining method that should be pretty lean.
It's the cut-off grade is 1.7 grams per ton, mostly. So the margin is 1.3 grams per ton, so we need to do—we shall do the minimum investment, and what we are developing should get to the mill ASAP. Actually, what you see here is our production profile in terms of tons in the mill going forward. So after 2026, pit is mined out, and after that, we're processing the stockpile for a full throughput up to the end of 2029, and after that, we're reducing the throughput to 5,500 tons per day, but it will mostly be 13,000 tons per day. We'll operate a week on two in the mill. So phase five is not part of it.
The phase 5 will push the low-grade stockpile because it will add one year of full processing to 2030, and I will cover with you the exploration potential, what we're looking at in terms to push to extend the future of this mine going forward. You have a plan view of the underground intersection in red of the Rainy River property, but mostly close to the pit. What is in gold is the current pit shell. What is the blue extension in phase 5. But it's Rainy River, the previous management, and I think it's totally appropriate, they worked really hard to make it work, and the priority was to make it work and make it profitable. They did not invest time and effort to extend or to work to develop additional resources.
With the red intersection that you can see outside of the pit shell, they were never investigated, but it's results that were drilled prior to 2015. So Phase Five is one of the steps that we just did today, this year, with a bit of additional reverse circulation drilling, in addition to the diamond drilling holes that were part of it. So actually, this year, we'll spend; we budget 5, but we'll be pushed to 10, and we will rush to investigate all the targets. The main one is, you can see the extension of Phase Five to the Western Zone target that is at open pit mining potential. The same for the ODM East, the same for the 280 and the North target. So our objective here is to push the processing of the stockpile to 2032 and more.
So that's what we're working on actually to maximize. Everything is paid, so we have... First thing that I'm looking at when every time that I'm at site is how engaged are our people. They are really engaged, motivated. The majority of our people are coming from Fort Frances and the area. We have strong First Nation participation in terms of our manpower pool, so they represent 26% of our people. We're proud of that, and they're working really well. The mill is paid, all the money is, the money is already invested, the same for all the others, so we want to maximize the return for our shareholders, and we will deploy time and effort on that. Concerning underground, so it's a planned view, but it's mostly six lenses that we are mining. Where we have wide gaps is because we don't have holes.
It's very expensive to drill from surface, so we prioritize the drilling from underground. You can see just on ODM, what we call the gap zone. It's a land package that was purchased in 2015, but we never had the chance to develop this. Priority was to develop the mine. So it's an area between the underground main, under the pit, and Intrepid. It was never drilled. So we developed the ramp access to speed up the development itself and to get sooner in to the gold, to the ore, but it's also because it's providing to us a wonderful drilling bay to investigate the gap zone. And we will...
In our drilling that we are doing this year from surface, we need to maximize the return of our future development investment we're doing in development to increase the throughput that we can have for and to increase the return of each meters of development we're gonna do underground. Thank you.
Great. Well, thank you very much, Pat. Operations at Rainy River obviously are doing very well, and we're very pleased to see the production growth and the exploration potential that Pat highlighted, so thanks very much for that. So next up is Will Dunford, Senior Vice President, Technical Services at Kinross, to talk about Great Bear. Royal Gold acquired a royalty interest at Great Bear in 2022 with the acquisition of Great Bear Royalties Corporation. So, Will, the stage is yours. Thank you.
All right, thank you, and thanks for having us today. Obviously, it's always exciting to come into a room and talk about an acquisition where everything's kinda going the way you thought it would and better, and to talk about a project like this right in our backyard in Canada. So it's a good opportunity, and we appreciate that. I'll just see if I can figure this out. There we go. Oh, nope. The big green one. There we go. Okay. As the previous two speakers, I wanna draw your attention to the cautionary statement and just make sure you guys are aware that we will be speaking about forward-looking statements, and please make sure you take the time to read this in consideration of what we'll be talking about today.
So for those of you not familiar with Great Bear yet, we just wanted to give you a sense of what this is, where it is. I think a lot of people in the mining industry are familiar with the Red Lake gold camp, a historic mining district that's been producing gold mines for a long time. And this is an exciting new discovery of something that I would say is a little bit different in the Red Lake gold camp. You can see on the map attached here that we've got a couple different types of mineralization on the deposit. We've got the classic Red Lake-style mineralization at Hinge and Limb that was originally found on this deposit when it was Great Bear as an exploration company.
And then we've also tapped into what we call the LP zone, which is the reason and the thesis for this acquisition and the reason that we're here today. The location overall, we're about 25 kilometers outside of the town of Red Lake. Great infrastructure in terms of our property runs right along a highway, right along a power line, and close access to a mining community, and a Tim Hortons just down the road, so very strong infrastructure and setup. So this is the reason we're here. This is why we bought this deposit. This is what our geologists and our technical team saw a couple of years ago and where we put the acquisition through in 2022.
Our guys have been following this story for a while, and really what it was is that indication that there's something a little different here in the felsic rocks... than what we've seen previously in the Red Lake camp. The best analogy that we found was Hemlo, where they have a similar orogenic deposit, high grade, at surface, cropping out to surface, but increasing continuity and even higher grades at depth in the Hemlo Camp. We saw the potential that this deposit that we were seeing at surface, and the drilling we were seeing close to surface, was gonna continue at depth, and we would see an extension of that high grade that could provide a long-life, higher grade, high-margin mine. That's the reason we're here.
And we'll talk a bit more about where we've gotten to in the two years since we've owned this. So we're pretty excited that, you know, having acquired this with no resource at the time, we got the drills turning quickly, really expanded our resource drilling and our basis for a resource estimation, and by the end of 2022, we had declared our first resource. You can see that. It's a lot of numbers on the page, but on the left side of the page, you can see the initial resource that we put out at the end of 2022 after owning this for just under a year. And that was primarily a high-grade open pit.
You can see the average grade of that was 2.6 grams per tonne in the M&I category and about 3.6 in the Inferred. So it was complemented by underground resources, higher-grade underground resources, sitting mostly in that Inferred category. Over the last year, we've done a lot of work to expand that at depth and get a better understanding of what's happening underneath and trying to confirm that Hemlo hypothesis, that this is an orogenic system that will continue to produce for the longer term. You can see in the blue columns what's happened over the course of that year. So we now have about 2.8 million ounces of measured and indicated resources.
Primarily, that's, that's all open pit material at that 2.7 grams per tonne grade, so a pretty extraordinary grade for an open pit in a good jurisdiction. And then we've got another 3.3 million ounces in the Inferred category. A lot of that is the underground resource, and you can see the average grade of that is now 4.5 grams per tonne. So I think the exciting piece of this, trying to show all these numbers, is the differential that you back calculate, just what's been achieved in the last year with further drilling at depth. This is pretty deep drilling, where we're really targeting between 500 and 1,000 meters over the last year. So it's deep directional drilling, which allows us to efficiently target these resource expansions, and we added a million ounces.
If you do the back calculation on the difference in grade, you can see that we added those ounces at about 6 grams per tonne. So we are proving out that thesis, that this continues to get higher grade at depth, and we see that potential for a long-life underground mine. This is a bit more visual so that you can see what that resource is comprised of. You can see the colorful shapes there other than the green. That's the new resource shapes. That's the stope shapes for the underground. So you can see from that deep directional drilling that we did over the last year, a significant expansion of those high-grade zones where we've done the drilling beyond the initial higher up resource, the green shape, that was mostly above the 500 meters. So we're really pleased with the progress.
We continue to see drilling these deeper holes from surface and giving ourselves a vision, and others a vision, of what this is for the longer term. You can also see here that obviously, with the timing of when we have to do our work for the resource, we had to close off our drilling database in about September of last year, which meant that there's a lot of drilling that we continued to do at depth, which did not make it into that resource update. One particular hole of note is BR-843, which you can see in the center of kind of the pink. It's about 3.5 meters at close to 400 grams per tonne. So that's a pretty extraordinary hit at a mineable width. So we're really excited about the long-term potential here.
We're gonna continue drilling this out at depth this year. Similar to last year, we're really focused on this main LP Central Zone, and then proving out the same thing we're seeing there with these underground shape expansions into other areas like Discovery and Vigo. We're also doing some exploration for other Red Lake-style mineralization to continue to expand those zones at depth, and we are seeing similar very high-grade extensions of those zones at depth. So a lot of potential here. This is the key piece. This is the path to production, in terms of when this comes to fruition and starts producing gold. So right now, there's kind of two key components of the permitting path forward for us. The first is AEX. That's advanced exploration decline.
That's a provincial permitting process that we are in the process of now, and we're planning to kick off construction of the surface infrastructure to support the underground development this year, and we're planning to go underground next year. That's gonna give us access to do more efficient drilling at depth and continue to show the long-term value of this asset. We are fully in process now as well on its second key piece of progressing this project, which is the main project permitting. That will be a federal IAAC, Impact Assessment Agency of Canada, process, where we're getting approval for ultimately the mill and the open pits, really is what that is, and all the supporting infrastructure.
So we've already kicked off that process last year, and we're in the back and forth with the government and the project impact statement, agency review, et cetera. Looking at peers and historical track records that we've seen from other companies that have gone through this, we expect that process to take about two years, which should allow us to start construction in 2027 and get our first production by 2029. So we're pretty excited by how quickly we've gone from an exploration property with zero resource to having, you know, close to 3 million ounces in M&I and over 3 million ounces in Inferred, and being underway with both provincial and federal permitting.
The other benefit of this permitting path as we go back and forth with the IAAC agencies, it gives us a lot of time to get our studies right. So we're doing an extensive geotechnical program and a lot of work early on in this process to make sure we de-risk that construction, which will start in 2027. So this is our path to production. We're excited about what we have here, cornerstone asset that we expect to produce for a long time at a very attractive AISC right here in Ontario. Thanks.
Well, thanks very much, Will. Certainly appreciate that. Very exciting. We think Great Bear is, is really one of the most exciting gold projects in the industry today, and we're pretty confident it's gonna be a flagship asset for Kinross, so congratulations on that. So now we're gonna move to a video from Makko DeFilippo, who is the President and COO of Ero Copper, and he's gonna review the Xavantina mine. So Royal Gold, we acquired a stream at Xavantina in 2021 to help finance exploration and development work at the mine. So if I can ask you to play the video, please, and we will. There we go. Thank you.
My name is Makko DeFilippo. I'm the President and Chief Operating Officer of Ero Copper. I'm here to spend a few minutes talking about the excellent progress at our Xavantina operations and the exciting opportunities for growth in the future. The Xavantina operations are an important part of the history and a major contributor to the success of Ero Copper. Originally constructed in 2012, Xavantina is a high-grade and low-cost underground gold mine operating in the state of Mato Grosso in West Central Brazil. Since acquiring the mine in 2016, considerable investment in exploration, infrastructure, and mine development, supported recently by our partnership with Royal Gold, has transformed the Xavantina operations from a mine producing between 20,000 and 30,000 ounces of gold per annum to one delivering approximately 60,000 ounces of sustained annual gold production.
The exceptional growth in mine life, production, and cash flows achieved at Xavantina were driven by a project that we launched in early 2022, following several years of exploration success. This project, known as the NX 60 Initiative, had a simple mission: to achieve and sustain annual production levels of approximately 60,000 ounces of gold. It was an ambitious target that, at the time, represented a 60% increase over our 2021 production result. The initiative was supported by discoveries we had made in 2019 and 2021, including the discovery of the Santo Antonio vein and the discovery of new high-grade extensions of the Matinha vein.
In 2023, the completion of development and initial production from the Matinha discovery, combined with existing production of the Santo Antonio vein, lifted full-year process grades to just over 15 grams per tonne. High grades and record production levels allowed us to achieve record low C1 cash costs of just $422 per ounce and all-in sustaining costs below $1,000 per ounce, translating to record cash flow generation from the Xavantina operations in 2023. As we look ahead, we continue to see incredible opportunity for growth at Xavantina, given the significant exploration potential, our ability to leverage excess mill capacity, and perhaps most importantly, the quality of our operational teams, whom are committed to achieving operational excellence and committed to doing it safely. We are confident in the exploration potential of the broader Xavantina regional shear system.
To give some context, the entirety of the Xavantina mine as we know it today, sits within just 2 kilometers of what we now recognize is a small fraction of a much larger shear zone system with extensive gold occurrences. Today, our regional land package extends over approximately 130,000 hectares of prospective ground, and due to our excess mill capacity, we believe new discoveries can be brought into operation quickly and with limited upfront capital, as we have been able to demonstrate with Santo Antonio, Matinha, and the success of our NX 60 Initiative. In addition to our strategic and operational successes we have been able to achieve at Xavantina, we are deeply proud of our achievements off-site. We have demonstrated our commitment to building strong communities as the foundation for Ero's operational model.
At Xavantina, one of my favorite programs, made possible through our partnership with Royal Gold, is the recent expansion of the Hope Project. This initiative, established in 1997 in partnership with the Municipal Department of Nova Xavantina City, supports education and learning for at-risk youth in the community. Royal Gold's contributions have allowed for the program to nearly double in size, currently supporting 80 students. In addition, contributions have facilitated numerous classroom improvements and significantly expanded the quality of materials and resources available to the program. Our Xavantina operation has the installed infrastructure, the operational capacity, a significantly underexplored land package, and the commitment from all of us at Ero Copper to continue to grow the mine well into the future.
So Ero's progress at Xavantina has been remarkable in a pretty short period of time, and we do credit our exploration group for seeing the potential when we originally announced the transaction or when we identified it as a potential transaction. So we'll finish off the day, the formal parts of the presentation, with a video from Darren Stralow, who's the Managing Director and CEO of Bellevue Gold Limited, and he'll give an overview of the Bellevue Gold Mine. Royal Gold holds a royalty interest at Bellevue that we acquired in 2008, and that was part of a transaction that we did with a... We acquired a portfolio of royalties from Barrick. So if you could please play the video for Bellevue.
... Yeah, hi, everyone. This is Darren Stralow here. I am the managing director of Bellevue Gold. So we have just delivered to the market a, you know, high-grade, high-quality, gold mine in the northern goldfields of Western Australia. You know, we've spent the past two years essentially building this project. We poured first gold in October 2023, and since then, we've just been ramping it up to steady state run rate. You know, it's forecast to be a top-20 Australian gold producer. You know, we've got grade, we've got scale, we've got mine life, we've got margin. So it's a fantastic operation to be involved in. And, you know, just having got into production, one of the big focuses, and I'll take you through some of the detail in Verify, is all on growth.
So growth from a production perspective, from a resource, from a reserve perspective. You know, we've really only drilled the ore body from surface, and drilling it from underground is gonna be a big growth area for us. All the while, we're an ESG leader, so we've got some industry-leading ESG targets. You know, we're going through that phase where you go from developer into producer, which puts us in a really good spot. But you know, I'll start with why we're here in the first place, which is we have an amazing ore body. So what you can see in blue here is all the underground development that we've done to date. So we've been underground mining for over three and a half years, and we've got an extensive amount of underground development in place.
So, you know, you're talking your declines, your level accesses, your vent risers, your escape ways, you know, your pumping, your power, all set up, ready to jump off and create a pretty productive mine. And you look at the mining areas, you know, we've got 1, 2, 3, 4, 5 different mining areas from the outset, which will, you know, allow us to hit that production run rate very early in the mine life. And in fact, you know, we're working through getting up through that ramp-up phase and looking towards a very strong FY 25, fiscal year 2025, where, you know, we're confident of hitting our 1 million tons processed, our head grade, our recovery, and create a pretty significant mine.
You know, we're down into multiple areas, doing a lot of development in areas that we've done a lot of grade control drilling. So, you know, over the past 18 months, we've done about 160,000 meters of diamond core grade control. You know, all our mining areas are grade controlled to 20 meters by 10-meter centers, so we have a really high-quality amount of drill data. And now we're seeing that in the development phases as well.
So, you know, you can see some of the, the widths and the grades in the ore body that we're getting into, on the left-hand side there, you know, and importantly, this is from different areas of the mine that we're all getting into early, and we're all, getting into. And then from a, from a stoping perspective, you know, we've done over 30 stopes now. It's, it's typical Western Australian underground mining, which is top-down, sub-level open stoping. And what we're seeing is, you know, very good dilution parameters achieved. So it's a, it's a very, hard rock mass, so, you know, solid gabbro footwall and hanging wall.
Some of these stopes look like you cut them out with a knife, coming in right on design, and our target dilution was 10%, and we're coming in less than that based on the database of reconciliations that we've done over the 30-plus stopes that we've done to date. So that sets us up really well for mining and, you know, I'll take you through some of the 3D stuff, where you can really see the power of the work that we've done to date from a mining front. So, you know, from here, the dark blue is what we've mined up to date. So that's up to the end of calendar year 2023.
You can see these mining areas that are sort of being built out now, that we can jump off into. So, you know, you've got 1, 2, 3, 4, 5 as I said before, different mining areas. But I think importantly, you know, when you have a look at the ramp up and how it's gonna become a very productive mine, this is an area called the Upper Armand, and I'm looking at this, you know, in straight long section now. We've had, you know, probably plus 80% of our tons come out of here, as we built the mine. The reason is, it's the closest to surface, and we're mining top-down.
Where we're at now is we're in the process of opening up Lower Armand, opening up Bellevue South and opening up Deacon. And all three of those areas are expected to, to increase their tonnage, in the months ahead. At the same time, that tonnage there is staying static. So what this is gonna do is it's gonna drive our stope tonnes up. So, you know, for the, the last couple of months, we've been doing, you know, 45,000 tonne per month, of stoping. We've been doing 20-25 of, development and 20-25 of low grade. The long-term plan is that we'll be doing, you know, 60-65 of stoping, that's tonnes per month, and 20-25 of, of development.
So essentially, in that feed, we're gonna replace this low grade with additional stoping, which is our, which are our highest grade material, and that's gonna drive the grade up and, and really get us to run rate. So, you know, it's a pretty exciting sort of runway that we have ahead of us. And then you can see when we look at, you know, what the mining plan is gonna look like in FY 25, and sort of I'll spin this around so you can see the, the different areas that, that we're mining. You know, we're gonna be, you know, 1, 2, 3, 4, 5 areas that we can be quite productive from and give us a, a, a really strong platform to continue, you know, into FY 26.
You know, importantly, I'll put some drill holes on here that, you know, typically are quite good thickness and high grade, just to show that all these plans are underpinned by really high-quality data. And then we have a fully designed mine plan, which goes out 10 years, which is only from basically surface drilling, not underground drilling. But I'll take you through a little bit of the genesis of how Bellevue was discovered and why it's still here. I mean, you know, it's a mine that was mined back in the 1990s and then, I mean, forgotten about essentially, and you can see Bellevue here in the middle of the page. We're in this north-south trending greenstone belt in the Northern Goldfields of WA. We have some pretty significant, you know, deposits.
You know, Wiluna and Jundee, which are 10 million ounce plus deposits. You've got your Bronzewing, you've got, Gwalia down here, you've got Agnew-Lawlers. These are all 5 million ounce plus systems. So you've got all of the, the crustal scale mantle capping structures that you need for high-quality gold deposits. Bellevue was just simply forgotten about because of the nickel discovery, back in the late nineties. So what was mined back in the day, if you know, zoom in just on the tenement that we're on, was one subvertical structure through here. As I said, you know, they pulled out about 800,000 ounces at 13 grams per tonne. So it was quite a profitable mine.
But, you know, back in the 1990s, you know, low gold price, hard to get capital. It was interpreted to be faulted off at the bottom, and they essentially walked away from it and fully rehabbed it. A couple of years later, up in the top right here, you can see a mine. This, this is called Cosmos. And Cosmos was discovered by Jubilee Mines, which ended up getting taken out by Xstrata in about 2007 for $3.2 billion. You know, while Cosmos was operating during that time, Bellevue was just used... you know, the old workings were used as a water depository for the nickel water coming out of Cosmos.
You know, it was divested a few years later, put into a shell company, and then, you know, that shell company, through sort of some exploration success, became Bellevue. You know, what happened was, the, the geos that were managing Bellevue at the time, did some electromagnetic surveys from surface. They discovered a parallel structure, which is a hanging wall structure called Tribune. Then they found, you know, south and north extents of the, the Bellevue structure, and then a blind underground structure called Deacon, which sits down here. Now, if you flip around underground and have a look at it, you know, this sort of explains all those different mining areas I was showing you earlier.
Now, if you sort of spin that around and have a look, you can see again, you know, Tribune in the hanging wall, north and south extents of Bellevue, that's the area that was mined out in the eighties and nineties. You've got some flat dipping connecting structures called Viago, and then you've got Deacon out here, which is a 1.4 million-ounce structure, which we're just starting to get the mining into now. You know, you've also got in here, you know, what you can see is it's quite well-drilled from surface. But when you have a look, you know, just looking down the ore body, we can see we've done a lot of drilling in that mine corridor just to really prove up and de-risk that mine plan.
So that's quite well-drilled, but outside of that, from an exploration perspective, it's really not well explored, and that's something that we're going to target from underground. As I said before, downhole electromagnetic has been used, so geophys targets have been used to identify basically all of the blind discoveries that we've had at Bellevue. And what you can see here is a very high-grade area called Deacon, which you know lights up really well in the downhole EM. You know, if I go back to that area, Deacon, and you know we look at some of the drill results that we put out a couple of weeks ago, you know this is just a small part of Deacon. What we had was an identification of a high-grade shoot.
Now, we hit that in our development, and we started drilling around where we're mining, and you see some of the grades and thicknesses through this area are just, you know, they're world-class hits. And the fact that you're getting all these world-class hits so close together, it allows you to domain this area out independently and really see, you know, some of the grade and tenor that we're getting. And, you know, we're in the midst of mining this now, and it just looks fantastic. And it's just the start. So, you know, Deacon itself is actually this big, you know, structure around here. That little high-grade shoot is only this little bit in the middle.
What we've done is we've actually gone back and looked at the data and said, "Okay, based on the data we knew was in this, before we got the closest base stuff, is there potential for other high-grade shoots?" Well, look, you know, one, two, three, four, five, six, and potentially seven down here, different targets that we can follow up. So that's a very near-term and high-value exploration target. If I jump back into 3D again, and we have a look at some of this downhole EM of this area, I'll just get into the right orientation here. You can see Deacon sitting in the back here. You know, that's that big structure. This fault here, in dark blue, is called Consilma.
If you have a look at Viago as it comes across Consilma there, you can see it downshoots, just offsets by about 120 meters down. And in that 120 meters down in that Deacon area, you can see untested downhole EM. We simply just haven't had a drill platform to target it, but that will be, you know, target as we go. And is there potential to keep pushing Deacon down? I mean, of course, there is. It's just something that we need to drill and follow up as we go, and we have the drill drives to target that, that are, you know, that are embedded in our mine plan. You know, we've built a processing plant on site. You know, we finished it in October last year. It's going really well.
You know, we're achieving our 1 million tonne per annum run rate, and we've built into it the capacity to grow. So, you know, we can push it to 1.2 million tonne per annum with no capital outlay. There's a potential upgrade designed to go to 1.5 million tonne per annum. We've got that sitting on the shelf ready for when we prove up and have some exploration success.
But I guess what it shows you is that, you know, we've done the hard work to now to get it to the stage where we've built a project, we've delivered a project on time, on budget, in a really difficult time for the market, in terms of the inflationary, you know, the operating challenges that we've had over the past few years to, you know, to be able to, to deliver this project, to start seeing the gold bars, and get out there. And we believe that we've created a platform for significant growth in the future.
So just jumping, you know, back to the highlights, you know, we're really proud of the work that we've done as a team to establish this world-class mine, and we see a bright future ahead with lots of growth. Thank you very much!
So that was a little bit of a long video. Darren's clearly excited about the potential, but so are we. I mean, this is one of our newest producing assets, and it's a fantastic asset as far as you can see it from the exploration results. So one of the other interesting things that Darren actually mentioned, and touched on, was the proximity of Bellevue to other activity in the region, and Royal Gold has royalty interests at Cosmos, Gwalia, and Ulysses. And the King of the Hills mine is just off to the south of the map that Darren was showing. So Bellevue has a great address and a fantastic neighborhood for Royal Gold, so we're very pleased to be part of it. So we've now come to the end of the formal presentation.
We don't have that much time for questions, but we're happy to try and answer a few. Hopefully, we've given you a good update on Royal Gold and recent developments, but in summary, what we'd like you to take away is we have a long history of successfully executing a consistent business strategy. We have a strong balance sheet, cash flow, and leverage to gold. We're very focused on how we allocate our capital, and we think about shareholders when it comes to capital return and limiting equity dilution. We're also very well-positioned to compete for new business opportunities in the market today, and we have a high-quality portfolio that's diversified, that has lots of interesting organic growth potential inside of it.
So with that, we do have some time for questions, so if I can ask Bill, Jason, and Martin to come up and take the seats of honor. For those of you in the room, if you want to ask any questions, there are microphones. I'd ask that you use a microphone, please. I'll hand it to you. But if you're watching on the webcast and you'd like to ask a question, there is a box, a Q&A box, underneath the video, so please type your question into that. Unfortunately, we cannot take questions over the phone lines just because of the way we're set up today. So, questions. Cosmos, hold on a second. I'll grab a mic.
Thanks, Bill and team, for a very good presentation here today. Maybe first question's for Bill. In your opening remarks, you talked about your vision being the gold-- to, to be the gold standard. Can you comment on your size? Do you need to continue to grow in size in terms of truly becoming the gold standard here?
Yeah, I don't. Is that working? There we go. I don't necessarily. I think we will continue to grow. I think the opportunities are there. You know, and to the extent that growth makes us a preferred gold investment, okay, yes, yes, it is, that is the gold standard. The gold standard I kind of think of has to do with quality, the quality of the people, the quality of the portfolio, you know, how we deal with people, how we come to work and work as a team. So to me, I guess the gold standard encompasses a lot more than just growth, but to the extent that makes us more attractive to investors, yeah, it kind of falls into the vision.
For sure. And then maybe one other question here. As you mentioned, Cortez, we know that, as Barrick talked about, production's gonna be down year-over-year. You talked about, you know, one-third of your contribution coming from Crossroads. I think, Martin, during the Q4 conference call, you talked about, you know, essentially after all these calculations, it's gonna be 40%-50% decrease year-over-year from 2023 levels to Royal Gold. Is that still true? Does that still hold true? And then, looking forward, you talked about 25%-30% in 2025 and 2026 coming through from Crossroads. Is there anything in the Asset Handbook that can help us in terms of modeling Cortez, on a go-forward basis using the information that's been given to us?
Yeah, look, I think Cosmos, the information that we provided in Q1 or last, at the last meeting is still real. I don't know whether the Asset Handbook and... would provide any more real detail about how to model that, but I think the information we gave today is the way to go.
Yeah, I would suggest doing that through Q&A with potentially Alistair.
Cosmos Chiu, if I could just ask you to pass the microphone to Tanya Jakusconek, please.
Thank you very much, and thank you very much for the Asset Handbook, so very excited to look at that. I have two questions, if I could. I wanted to ask first, at Pueblo Viejo, we've gone to this mine site a few times, and that silver circuit is kind of a mystery. So could you maybe just give us an idea, as you look at it, do you have any idea when this circuit in your forecast is coming to place, and when we could potentially see some of these deferred silver, you know, kind of come to Royal Gold?
Yeah, well, look, we know, we know that Barrick is working on completing the expansion and starting to ramp up over the next, really over the next two quarters. And what we expect is that as that ramp-up progresses, we're going to see improvements in silver recovery, but probably over, over the next three quarters or so before we see real, real significant improvement there. So, so there is still some time while they get the rest of the plant running properly, and they get things going on the gold side, they get the throughput up, and then their focus will change over on the silver side.
So if we assume that we're not getting anything this year, from just continued deferrals into 2025 with the inventory that you will have on hand, how long is it gonna take you to get payment? Is it a 2-year process, 3 years that we should think about?
Yeah, probably over a 2-year period.
All right, we'll try modeling that yet again. Thank you for that one. And then the second one I would like to ask is just on the transaction environment right now. You showed a chart that showed the gold price at an all-time high, and yet long-term pricing close to $1,800 and that huge gap and therefore possibility that we don't see as many deals. So was that just deals from gold producers? I would assume that, you know, the environment for the base metal operators would be a bit different, and maybe streams is more likely what you're seeing right now. I'm just trying to understand that comment that you made.
Sure. Yeah. Yeah, I think, you know, I don't think it matters so much whether you're a copper producer or a gold producer. At the end of the day, you have a view of the value of what you're selling-
Mm-hmm.
- and so that's where the sort of bid-ask spread might be a bit wide right now. So that's why we say just applying a bit of caution to it might take a little bit more time to get some deals done for parties who have the capability to wait. Obviously, other parties, you know, they have other things driving their timelines, and so they might not have as much flexibility. But right now, the development pipeline looks pretty good and pretty mixed in terms of opportunities from development through to production. So we do anticipate seeing some transactions in the sector over the coming years.
Okay, and would you say they're still in that $100 million-$300 million range, that bigger portion of the pie that you showed?
Yeah, I'd say in terms of volume by number of transactions, definitely in that size range, but there are larger transactions out there that we see the possibility for in the coming quarters.
Okay, those greater than 500 million transactions, I mean, I'm thinking they're less than five. Would I be assuming that to be correct?
Yeah. I've never seen more than a few at any time in my 10 years at the company.
Okay, that's great. Thank you. I'm just gonna pass it to somebody else who wants to ask a question. Here, Brian.
Thank you. Sorry, and I hate to follow up on this, but on PV, so that $863 that you calculate, that you have to pay additionally, it, it's kind of a rolling average of what you've missed. So as we go into higher silver prices at the moment, you keep getting deferral. Does that get deferred, you pay more in the future when it comes back, or, or, or how does that actually work?
Well-
The best you can in two minutes.
Yeah, without going too far down the rabbit hole, it's definitely a range. And the range not only depends on the price of silver at the time, but it depends on how many ounces that offset is being calculated over. I mean, if there's only a few deferred ounces, then you might see a large number, $1 per ounce, attributed with it, because there's a dollar value being divided over the number of deferred ounces. So that's why it can vary quite a bit, and it's hard to predict what it's gonna be. It depends on the deferral, really, on the size of the deferral.
Just to be clear, you don't kick the... Once you get back to 52.5, the first thing that happens is you just keep getting stuff out of their share, and then you catch up after that, and it's out in the future when you finally make those payments to catch up. Is that the way it works on a rolling basis?
Yeah. So, but once it gets above 52.5, when we start getting those deferred ounces, that offset amount starts getting paid.
Right.
So yeah, it's not—we don't start getting ounces, and then we, we pay it-
Right
... later. Okay.
Got it. Thanks. Enough PV.
Okay, well, we've actually... Oh, sorry, Josh.
Yeah.
I saw one more question in the back.
Yes, sorry, just to continue on the theme of capital allocation, and back to that chart that showed gold prices versus where consensus numbers are, the suggestion at least is that you're saying it might take some time to get some deals done. You know, similarly, the stock has been relatively flat for several years now as gold prices have gone up. You know, when I look at how the company has structured some of its deals historically, or at least for our calculated returns, compared to maybe the free cash flow projections that Royal Gold has as a company today, the stock to me would look to be priced much more attractively than some of the deals.
With the expectation that cash is gonna be built on the balance sheet within a quarter or two, you know, what's your appetite to buy back stock?
Well, when it comes to things like increasing the dividend by the regular dividend by a larger amount, paying a special dividend or buying back stock, I think buying back stock would be the last thing we would do. I think the price, I might agree with you, the price has been a little disappointing, but I think we would have to look at the stock price and say, "That's the best use of our capital," and I would not say that's the case right now. I think the best use of capital is finding new investments and making those investments. We've talked not so much about buybacks, but, you know, would you ever do a special dividend?
I can tell you, every time we get to a point, we're saying, "Well, do we have a little extra capital here? What do we do with it?" There's a transaction. There's an investment that we like. I've never, in 18 years, sat there and said, "We really need to return more money to the shareholders," because there's always been that investment opportunity. So we talk about it, but I really wouldn't see us buying back shares.
Okay. Then, as I typically do, we can talk about guidance. You know, when I look at the company's guidance this year versus what production's been for the last couple of years, it's relatively flat as well. Maybe that explains the stock price. And I'm not sure about the validity of our forecast, but growth is very high for this company, and at least from a lot of the charts that were given here today, 70% of the company's current production has detailed mine level guidance being issued by the operators. It would be very helpful, I think, for the company to show what its growth profile looks like.
When you look at many of these assets that were discussed today, as well as new growth projects that are being developed, some of which we didn't talk about, Back River and so forth, to maybe highlight some of the growth opportunities that are there. I'm not sure if you have any comments on that or, or, you know, additional perspectives.
Yeah, I mean, one comment I'll make is we, you know, we have had. And I forget who mentioned, I think Martin mentioned it. We've had detailed conversations with some of our biggest shareholders, and I actually had one shareholder almost say, "Don't you dare give longer term guidance. There's no benefit to it. We don't pay attention to it." And I guess one of the things I would suggest is if you go back, go back to 2018, 2019, and look at some of the long-term, the five-year guidance that was given by operating companies and by some of our competitors, and see where they ended up. And that's what concerns me.
I'm not saying, you know, they're padding the future with these ounces, and they're not likely... They truly believed there were gonna be those ounces, but it didn't happen. And so I just turn to you and say: How is that useful, if we're putting things into a longer term guidance, and, you know, the percentage pos- the probability of those ounces appearing is, I don't know, 70%? 30%? It gets really difficult, and I don't know if you've ever tracked before we did the Rio Tinto royalty acquisition, we used to be able to talk about just production and guidance from the Legacy Zone , the Crossroads, and you would see the volatility year- to- year.
They might say, "Okay, next year we're gonna do 400,000 ounces out of Crossroads," and it would be 200,000 ounces. We get that in every mine, and that's why I, I think we just struggle looking out there and giving something to you that, that's credible.
Not the answer I was hoping for, but I'll accept it again this year. Yeah.
Right. Well, I think, I don't think there are any questions on the webcast. So we've run through our allotted time. Very much appreciate you coming to our 2024 investor update. We look forward to giving you updates throughout the year, as we always do with our quarterly conference call. If you have any other questions, please reach out, let us know. We'd be happy to answer, but thanks very much. Very much appreciate it.
Thank you.