All right. Good morning, everyone. Thanks very much to Bank of America for the opportunity to participate in the conference. I will be making forward-looking statements both here and during the Q&A session. They are subject to risks and uncertainties. Actual results may differ materially, and these risks are in our 10-K filings with the SEC. I just wanted to take a few minutes and just talk, cover some introductory topics that span a discussion of our portfolio, our approach to financing and our capital allocation process. I think firstly, with respect to the portfolio, I think it's underappreciated in the market, and I'll give you a few thoughts on the successes we've seen in our portfolio. I'm going to use some percentages.
Those come from our 2023 numbers. Almost 60% of our revenue comes from the U.S., Canada, and Australia. If you're interested in political risk, that's a very good percentage. 41% of our revenue generated by top-tier operators, Barrick, Newmont, and Teck. It's actually one of the more diversified portfolios in our sector, and that diversification has been improving. One of the things people talk about, our mine lives are longer than I think some people really expect. With the Milligan cost support agreement that we just did, we could see our largest asset extend its life into the 2040s, depending on the study that's completed next year.
You take Pueblo Viejo, Cortez, Khoemacau, Côté, Red Chris, all expected to have mine lives of at least two decades, and Andacollo, Peñasquito, Rainy River, Bellevue, King of the Hills, have mine lives into the 2030s. Our portfolio also has a very long history of reserve replacement. So I did the valuations on a number of the assets in our portfolio, and I had Wharf, El Limón, and Williams having mine lives ending in 2012, 2013, and 2014. They all paid revenue last year. Beginning of 2023, we thought Robinson was gonna have 3 more years of mine life, now has a mine life to 2036. When we originally did Wassa, we had Wassa mined out in 2023. That has a mine life until 2037.
A few of these assets that I've mentioned are actually underground mines. They have five-to-seven years of mine life at any one time, but they go on for decades. Another thing to note, with the exception of Andacollo, I think all of our key producing assets are important in the context of the portfolio of the operators. Milligan is important to Centerra, Pueblo Viejo, Cortez to Barrick and Newmont, Peñasquito to Newmont, and now Khoemacau to MMG. We've invested $2.6 billion in aggregate in our newer side of our business, the streaming business, and we've received $2.4 billion back.
Milligan and Wassa are now in the return phase, and PV, Rainy River, and Andacollo are about 85% of our investment has been returned, and our royalty returns in that portfolio are even more impressive. Turning from the portfolio to financing, I just want to draw your attention to our use of debt and cash from operations and not equity. If you read our press release last week, we've taken our debt position from $575 million to $75 million in the last 18 months, and those large acquisitions that we did in 2022 with Cortez and Great Bear, they're almost fully repaid without one share of equity being issued to accomplish the transactions. Haven't done an equity issue since 2012, and our 66 million shares outstanding is by far the lowest in the GDX.
So we think our model is well suited to, to debt finance. We have high margins, we have no sustaining capital, and we believe really it's the best way to, to finance our business. And then finally, on, on capital allocation, we believe that the best use of our, our cash is through the acquisition of, of new investments. Cash trades at 1x NAV, the new investments tend to trade at a premium to that. We next look to reduce and repay debt outstanding, and finally, we look to increase capital returns to our shareholders. I think you may, you may know we, we've paid an annually increasing dividend probably longer than almost all of our competitors have, have been around, and, and we are the only precious metals company in the S&P High Yield Dividend Aristocrats Index.
So, thanks for listening to my opening comments, and looking forward to the Q&A session.
Well, thanks very much for that. That was actually a resounding endorsement, I think, for the entire royalty streaming model. You highlighted a lot of really strong points there. What I wanted to do is just ask you to dig down a little bit more on the differentiators of Royal Gold versus your peers. I mean, obviously, your senior peers, but also thinking about some of the smaller peers as well. And it would be helpful if maybe you could address the model versus, you know, equity or ETFs and other sort of gold investments, but in particular versus peers from a more strategic point of view and a deal-making point of view as well.
Yeah. So I touched on the dividends, I touched on the share count, and I think those are huge differentiators. It speaks to a level of consistency, both in terms of payout ratio, but also we're really stingy with our shares. We just don't like issuing equity. I think the second thing to note, we are a U.S. company. We're the only really U.S.-based royalty company, and what that means is when the U.S. generalists, which is a huge market, find an interest in gold, and you're measured against U.S. equity indices, we're in over 200 equity indices in the U.S. If you're measured against those, you kinda have two choices: It's Newmont, and it's us. And I think that's a real advantage.
Then finally, I think the other thing is, you know, we're kind of alone in the middle. We've got two much bigger peers, and we have a series of smaller peers, but what we like about where we sit in the middle is, you know, we're small enough that the normal size transaction in the streaming market, you're gonna see in our results. You know, if we do a $200 million transaction, you know, we can look out two or three years and say, "Okay, you know, that's gonna represent a meaningful percentage," something you're gonna see in our results. But at the same time, we have enough liquidity to compete with the bigger companies. So I kinda like the position.
You know, I think our bigger competitors. I think they have a really tough job. How do you grow those vehicles? 'Cause they've been so successful. And then I look at the smaller companies, and I see a lot of competition, and it's almost the same thing. How do you grow? You don't have the same cost of capital that we do. So we kinda like, we're kind of on an island in the middle, and we kinda like being there.
I wanted to also ask about geopolitical or geographic exposure as well. 'Cause I mean, one thing that's remarkable or notable about your portfolio versus Wheaton and Franco, is you have invested a larger amount into Africa.
Mm-hmm.
What is, what is it that allows you to get comfortable with African exposure? Is it deal structure, is it sizing, is it the quality of the asset, or all the above, and something else?
Well, deal structure is not gonna save you from political risk, I don't believe. And if you think about it, you know, we're not that invested in Africa. So we're in Ghana, and we're in Botswana, really. Two countries that do have a mining culture, a mining history, which is something when we're looking at jurisdictional risk, those are things we really pay attention to. And in both of those countries, you have other people who've had exposure. So, you know, before we go into Ghana, we talked to people who have operated there, people who have invested there. What do we look for? And the exact same way in Botswana. We talked to the fellow who ran Debswana. You know, what do we need to be aware of?
So, it's not a comfort level with the continent as a whole, it is selective comfort in certain countries.
Yeah, that makes perfect sense. So I asked both of your peers this question, and I'm gonna ask you. View on the gold price, view on the silver price, thoughts on how we got to where we are at all-time highs in a very short period of time?
Yeah, I'll probably focus on gold more than silver here. I am so surprised by the gold price. I think when we started the year, the consensus number of Fed rate cuts was 6. If you had told me we were 5 months into this, and we hadn't seen 1, and inflation was still an issue, I would've been bearish on gold. At the same time, if you had told me, while that's going on, the ETFs are going to be having outflows, consistent outflows, I would've been even more bearish about gold.
Now, you know, central bank buying and retail buying in China and the US, I don't know, there was an article in The Economist, and one of the things they noted about demand was Costco. And you think, "This is a joke. I mean, that can't be driving the gold price." But Costco is buying half the amount of gold that the Chinese Central Bank is buying. So it does impact. And I think the other thing to just notice, the central banks that are buying are also the ones that are more likely to get offside with the U.S. government. And they look at what is happening, potentially happening to the Russian reserves, and they're saying, "I don't want to put up with that.
Where am I gonna put our money if we don't want our reserves confiscated, potentially?" And I think that's one of the reasons a lot of these central banks have been going into gold. And I think longer term, the bigger issue is that, you know, the U.S. fiscal situation. There is absolutely no political will to solve any of the problems that we have, and that will eventually result in a crisis. I don't know what that crisis looks like, but I think that's good for gold.
I wanted to ask your thoughts on concentration by asset, you know, particularly in light of what happened with Cobre Panama. What are your thoughts, particularly in light of one asset you have in your portfolio that's a fairly significant piece overall?
Yeah, well, you know, if you look, Milligan was probably 30%+ of our NAV a few years ago, and I don't know what the consensus is, but I think some people have it less than 20%. So we have done a very good job of bringing that down. Now, I think it's extremely important. Actually, if you, if I were to put up our strategic business plan on the wall here, the first thing you'd see is diversification. And it's not just getting that one asset down. I think our top five assets are 70% of our revenue. I would just every day come in, try to find a way to diversify that portfolio, because Franco's seen it, we've seen it.
When your biggest asset has an issue, it's time-consuming within the company, and it obviously shows up in your share price.
Like we've discussed this before, but it keeps coming up with investors, so I wanna revisit it, which is just the idea of long-term guidance. And I definitely appreciate that, you know, not being the operator of any of your portfolio assets, it is very challenging to provide a convincing sort of five-year guidance. But both your peers do, and investors, you know, use it to hang their hat on in terms of valuation. Is it something, you know, at least from that point of view, that you know, it might actually help your valuation, that you consider?
We have considered it. And in fact, it's not just our bigger peers. I think we're probably the only one in the sector that doesn't give the longer term guidance, and as you said, my, my position has always been, we don't control these properties. We get mine plans from year to year, and the difference in production from year to year, that these operators probably saw six months ago, suddenly shows up. I, I can go back in our strategic plan-business planning and look at life of mine models, and you see these vast differences. And I just look at it and say, "Why would anybody in the market look to us to tell them what...? Peñasquito, Pueblo Viejo are gonna do in three to five years.
We just, we don't know, we don't operate it, we don't have all the inside, data, to do that. And I would just, I'd just go back... It's kind of funny, you go back and look at some of the longer term guidance that some companies have given. Go back to 2018, 2019, and look at the period at the end of 2023. How many people came close to what they said was going to happen? And what you're gonna find, I think, is a very large discrepancy between what was projected, and there are valid reasons for the projections, but it didn't happen. And I have people say, "Well, just give it, no one's gonna hold you to it." Well, why, why, why do that?
You know, I want it to be a legitimate forecast, and since we can't really do that, I really hesitate. Final point, we've had some very large shareholders come to us and say, "We pay no attention to long-term guidance." And they don't say, "I wouldn't do it if I were you," they say, "Don't do it." And that—you know, these are our largest shareholders, they've been with us for years, and I say, "Okay, we'll just keep doing what we're doing.
Yep, that is totally fair. In the end, you're ultimately working for your shareholders, so that, that's good perspective, and I appreciate you sharing it as always. Could we maybe touch on the deal pipeline? I wanted to get a sense of what you're seeing in terms of deal size, use of proceeds, meaning, you know, is the idea to put it towards balance sheet repair or project financing or otherwise, and then sort of geographic exposure. So traditional sort of Anglo-Saxon countries-
Mm-hmm.
-versus LATAM or Africa.
Yeah. So size-wise, we've been very consistent. It's a $100-$300 million market. There are transactions that are lower than $100, and I think at our investor day last month, we said the average transaction since the beginning of streaming is about $100 million. So when people look back to 2015 and they say, "Well, you know, you're not seeing the very large transactions, you're not seeing this..." Well, that's not the market, that's the anomaly. And that's when I come back to our size and how it's good to be ano- you know, the size that we are, because most of the transactions are in a range that you'll see in our financial results.
That being said, I did catch some of Randy's comments, and we are seeing a couple larger transactions, which is really great to see. Those are really good things to look at. Use of proceeds, anything that needs capital, a stream can finance. Now, you know, traditionally, it's project development. It's always gonna be project development first and foremost. Balance sheet restructurings, you do see, those tend to be cyclical. And then there's M&A, which I think is the great untapped market. We always talk about it, but we rarely see it, where streams are used to do M&A. But we're seeing opportunities across all of those different areas. And then geography. I think streaming will always be sort of an Americas-focused product.
When I say Americas-focused, I mean where the operator is based, not necessarily where the project is based. I just think mining companies in North America have gotten their minds around streaming as a source of capital better than other areas of the world. You know, I talk to Australian mining companies all the time, they just don't like what we do. And they have, you know, a source of capital in the bank market and the equity markets that have supported them for years, so I understand it. I think most opportunities will be in the Americas, mainly because that's where the operators are based.
And then on commodity exposure, like within your current portfolio versus where you might see it going forward. You guys came close to diversifying a bit more into nickel and copper with the transaction last year. Perhaps that transaction may come back, but I mean, for now, it seemed to indicate a desire, at least an interest, in getting more exposure to battery metals. Is that something that's a strategic decision for Royal Gold, or is it just, you know, you're metal agnostic, and it's about the quality of the asset?
We're not metal agnostic. We are focused on precious metals, gold in particular. The part of the Serrote and Santa Rita transaction that was based on base metals was done for one single reason: they needed more money, and we were running out of precious metals. So it was something we had to do to get the investment to where the acquirer really, really wanted it to be. You know, I get the question all the time. It's not that we're against base metals or other markets that we can understand. It's just that what we're offering shareholders is precious metals-based exposure, and I don't think anybody would wanna buy us to have a diversified... To what? Go after copper or lead or zinc, yeah. They can do that elsewhere.
They can find other sources of exposure. We're about precious metals. We will look at base metals, but it's not. It's when it comes in the door, and we really like the opportunity, then we might do it on a one-off basis, but it's not part of the strategy.
Okay, great. I wanted to give folks in the audience a chance to ask a question, so please don't be shy. If you have anything in your mind that you'd like to ask Bill, please raise your hand. And while everybody's thinking about that, I wanted to circle back on some of your assets. So thank you for touching on Mount Milligan. I think it's clear what the significance of the transaction with Centerra is. What does it mean in terms of the long-term outlook for growth with Royal Gold, given the new transaction that you've done with Centerra on Mount Milligan?
Yeah. Well, you know, as I said, you, you look at the, the Cost Support Agreement that, that we entered into, and, and you say, "Well, you got 2 years of reserves out of it. You know, it doesn't, doesn't really move the needle." The needle gets moved if this study next year comes out and says that Milligan is gonna have a life into the 2040s. And that's what Centerra is, is talking about. And I think for a number of years, I talked about our portfolio, people looked at Milligan and said, "Eh, it's got 10 years of mine life. It's, it's not that interesting." Well, if, if we can turn that mineral endowment, or Centerra turned that mineral endowment into 2 decades of production ahead of us, that is fantastic.
I think, you know, I'm really looking forward to having that study come out because the farther out your portfolio goes in terms of mine life, the less pressure there really is to do something in the short term, like, "Oh, I gotta add something. I gotta add something beyond a 10-year Milligan life." And this thing should hopefully provide, you know, an extra decade or so of life to our biggest asset. So, it's a really important transaction for us.
Which is huge. And so it is more about life extension as opposed to expansion of production?
Correct. Yeah, I don't look at... I at least haven't looked at Milligan as an increase in throughput opportunity. It's a mine life opportunity.
Wanted to ask about Cortez. And it's, I mean, from an analyst point of view, it's a very difficult asset to model from a Royal Gold point of view. But just thinking about the asset overall, it experienced a pretty material issue at the end of last year, impacted guidance in 2024. So thinking about that asset in the broader area, what gives you the confidence and the value in that asset, and particularly considering that you kinda doubled down on the asset-
Mm-hmm.
-in, 2022?
We did, and I think everybody knows we have a decades-long history at the property, and we watched Cortez Hills get found, and we watched Goldr ush get found, and we watched Fourm ile, and we didn't have any interest in it before those acquisitions. I don't look at one year of performance and say, "Oh, you know, we didn't do the right thing on the valuation." We're, we think of Cortez as decades, a three decades type operation. And now we have exposure to the whole property. So, yes, they had an issue at Crossroads. Yes, production is down, I think, but I think the long-term thesis that we employed at the time is still really valid. And the one we really you point to is Four Mile.
You know, Barrick came out last year, and they were talking about Four Mile as having the potential for multiple Meikle-type ore bodies, the highest grade, undeveloped gold asset, in the Americas. And that's now part of our portfolio, and that is behind, the valuation that we paid and our desire to increase our exposure to that property.
Mark Bristow gave you some overwhelming support on that, too. He mentioned that Nevada Gold Mines in general is not a mature asset, suggesting there's a lot of future and a lot of exploration to be discovered.
Good to hear.
Yep. No, it certainly is, and it's important, important asset for them, so they invested in it quite a bit. And now the other asset that's very important to your top-line profile going forward and the longevity of your business is Pueblo Viejo. Now, what is your level of confidence with that asset this year, but more particularly in the much longer term?
Very confident in the long term, wait and see in the short term. You know, look, the expansion, you talk about straight lines, the expansion has not been a straight line. They seem with the most recent quarterly release to say, "We think we solved the issues that are impacting throughput," which is great. Now comes recovery. I think when you get the throughput up, then you can deal with the recovery. We have... I think, you know, Barrick would probably talk more about gold recovery than silver recovery. Silver recovery is obviously important to us.
So, you know, when we have deferred ounces at PV and when we did our guidance for this year, we just left the deferred ounces on the side because we just don't know how this is gonna play out. That being said, I think in six to nine months, we'll have an idea of where that asset is. So that to me is the one in the portfolio that is very important, but there's just some uncertainty around it.
Excuse me. I also wanted to touch on just industry consolidation, so potential acquisition of other corporate entities that do precious metal streaming. Is that a potential path to growth for Royal Gold?
It always is. And I, again, I think Randy said it as well. You're faced with this decision. You can buy asset by asset, and you're paying NAV, you might be paying a small premium to NAV. I don't think any of us at the bigger end need to get bigger necessarily, whereas, you know, 2008, when we were buying IRC, and I think Franco was buying Gold Wheaton, and that there was a consolidation effort, maybe want to get bigger. We don't feel the need to do that. We don't mind growing asset by asset.
At the same time, we have models on everybody, and if there's a meeting of the minds on, on valuation, and it makes sense, sure, that would be, that would be something we would, we would entertain. It's just not-- we don't... We spend much more time on asset-specific, opportunities than corporate acquisitions.
Okay, and then just finally, I wanted to ask about your thoughts on ESG. Obviously, the royalty streaming businesses don't operate any of the assets, so it's a bit of a unique approach to ESG. What's Royal Gold's thinking on that?
I mean, we try to contribute where we can. What that means, we help our operators in their communities. We have financed medical equipment to villages around Pueblo Viejo and Rainy River. We contribute to the programs in Nova Xavantina, in Brazil. We have a long-standing support of the Ghana oil palm plantation that is run by Wassa. So it's helping the operators with their community programs. It's what we do in our communities, and that's homeless, that's food insecurity, and then it's education, and trying to lay the groundwork for the next mining engineers, a mining generation of mining engineers. And we have established scholarships at about five different colleges focused on bringing people into the industry so that there is a future there.
That's really cool. I actually wasn't aware of that.
Yep.
That's a neat program. Bill, thank you so much for being here today. This has been an amazing conversation.
Thank you.
Nice to see you.
You too.