We're very pleased and honored to host Jason Hynes, the Senior Vice President of Corporate Strategy for Royal Gold, the third largest royalty and streaming company, historic entity. You have a press release this morning, Jason. Why don't you get right into it and tell us the story?
Sure, yeah, John, and our press release is. First of all, thanks for having us again. We always appreciate doing this presentation. Our press release this morning was just providing, as we do, ahead of every quarterly release, we just provide our stream sales. It gives the investment community the opportunity to see, you know, how the bulk of our business, which is kind of 70-ish% of our revenue, how that's looking. And then, obviously, we'll put out our Q3 results here in just after the first week of November, which will fold in the royalty business and all the other ancillary things and costs and whatnot, so. I've been with Royal Gold since 2013 in various business development and strategy roles.
I started in our Denver office, and I spent many years in our Swiss office, and I'm located in Vancouver right now. Happy to be here to give an overview and update on our business. Our portfolio of assets is in really good shape, and the gold price has been performing well, so it's a good time to give your listeners an update here. Assume everybody can see my screen here. Just quickly, during the presentation, I will be making forward-looking statements. Risks and uncertainties could cause actual results to differ materially from these statements, and these risks and uncertainties are discussed in our Form 10-K filings with the SEC.
So I think you've probably had a couple of streaming presentations already, John, but I will talk a little bit about the business model as well, as I weave it into the talk about Royal Gold specifically. But what Royal Gold attempts to provide to investors is precious metals exposure with consistent financial performance and really a focus on per share metrics. I'm gonna try to focus on how we provide this in this presentation and hopefully get across how we provide lower risk leverage to gold compared to operating companies. We have a long history of executing on a fairly straightforward strategy. We provide unique exposure to the precious metals royalty and streaming model, specifically through a combination of size and liquidity and being a US company.
We have pretty significant organic growth embedded in the portfolio right now that comes at no additional cost to the company or to our shareholders, and I'll close off by touching on our valuation, which, despite the strong gold price, is at pretty attractive levels relative to history, so Royal Gold, at a high level, it's a high-margin business, generates consistent cash flows from precious metals. We've been in business since the mid-1980s and on the Nasdaq for well over 40 years. In 2023, our last calendar year, we generated revenue of just over $600 million in a year, where the gold price averaged just under $2,000 an ounce, compared to $2,600 or so dollars today. Our stream segment generated 69% of that revenue, and the royalty segment's about.
We're pretty agnostic between the two products. They both provide exposure to top-line production at mining assets. There's some structural differences and structural considerations when we're deciding what type of investment to make, on our side and on our counterparty side. In November 2023, we increased the dividend for 2024 by 7%. This was our twenty-third consecutive annual dividend increase. As I mentioned, we're currently finalizing our Q3 results for next month, but in Q2, it was another quarter of strong financials with $174 million in revenue, $81 million in earnings and strong EBITDA margins, and again, 74% of our revenue was from gold.
Around half our revenue comes from Canada and the US, and geopolitics is something we put a lot of focus on, and we're very comfortable with our current exposure. And this slide is a little out of date, but you know, since the closing of the last quarter, we now have a clean balance sheet and no debt. So how do we compare to our peers? You know, we really think we sit in the Goldilocks position in the industry. We're big enough to compete for the largest transactions with significant cash flow and access to capital, yet we're not too big as to where growth becomes a challenge, because the average size transactions and acquisition opportunities that are out there still move the needle for us. This is...
It's an important differentiator when you add that to our organic growth and the types of acquisition opportunities we see today, and as I mentioned, we are the only American company of any size in the specific sector. So why would investors want to get their precious metals exposure from us? Like I said, we are gold focused, we are lower risk than mine operators, and we do maintain significant leverage to the gold price. The business model provides exposure to precious metals and mitigates many of the risks that come with investing in operating companies. The exposure we provide is direct exposure to metals prices, given that the vast majority of our interests are tied to the top-line production at mines.
But the optionality that's in our portfolio really leverages that exposure, and I'll talk a little bit more about that later on. Our portfolio is also diversified. That reduces volatility, and we're very much insulated from direct exposure to operating and capital costs through the business model. And this last point is what insulates our margins, which is important when considering how inflation erodes operator margins in rising price environments like the one we're in right now. Our historic performance shows we're a good alternative for conservative exposure to gold. Our share price is strongly correlated to the gold price, and our share price performance has beaten both the gold price and the GDX. This is going back here since the index was formed in 2006.
More generally, we've performed well against general market indices over this time, not just precious metals or mining-specific ones. I'll speak briefly to our disciplines and really long-term approach to how we run the business here at Royal Gold. We have a twenty-plus year history of accretive growth for shareholders. Looking back since two thousand, revenue and cash flow have grown dramatically, and there are really three key aspects to this growth. First, the business is high margin and scalable. Revenue growth far exceeds increases in our G&A. Second, the revenue growth is not just dependent on metals prices, although we do provide that exposure. We actually added volume in an accretive way, volume of metal, and lastly, we have largely financed our growth internally without a significant increase in the share count.
We're an original member of the GDX, and we actually have the lowest share count in the index, so you know, we really look to minimize shareholder dilution when we fund our business with cash flow, and low cost debt, and this often translates to higher per share growth for shareholders, and I'll talk a little bit about this as well. Just a quick snapshot of where we are on the liquidity front, just to be ready for new acquisition opportunities, because we really have to be patient. We need to maintain a strong balance sheet and liquidity in order to finance opportunities as they arise, and they can arise in lumpy fashion. As I mentioned, our approach to funding growth is to use cash generated from existing operations and our revolving credit facility.
Equity financing is always an option for us, but it is our least preferred. This waterfall chart on the left here shows how we allocated our cash flows in 2023 after a very busy 2022 on the acquisition front. We used operating cash for the repay debt and paid the dividends, basically, and we're now debt free, and that leaves us with over $1 billion available, $1 billion available under the revolving credit facility, so over $1 billion of liquidity, which is ample liquidity to consider new acquisition opportunities. A little bit of more history about our use of short-term debt to grow the business in this chart here, so a quick overview of our facility. We have eight top-tier banks in the $1 billion revolving credit. This provides reliable, low cost, and flexible financing.
You can see our playbook at work in this chart several times over, over the years. We draw on the facility to fund new acquisitions, and then we pay it down quickly using cash flow. Like I said, our acquisition activity can be lumpy. 2022 was a big year when we borrowed in Q3 and Q4 to acquire Cortez Complex royalties in Nevada and a Great Bear royalty in Red Lake, which is the only royalty that exists on Kinross' flagship development project. The debt that we borrowed to pay for those acquisitions was fully repaid in the subsequent quarters, and that rapid paydown really showcases the cash flow generation potential of our portfolio. You know, we're not blind to interest costs, but we believe that short-term interest expense is a worthy trade-off to acquire multi-decade assets without equity dilution.
Turning to the dividend, I mentioned this in the intro, but return of capital is a core strategic objective of ours, and it's one of the attributes that makes us unique among gold investments. We've paid a dividend since 2000, and we've increased it every year despite volatility in the gold price. And the goal here is to grow the dividend, but grow it in a sustainable way. And as you can see from the fairly consistent payout ratios on this chart, we've been able to achieve that. If you put it all together, since we launched the dividend policy almost 25 years ago, we've paid out almost $1 billion in dividends. And we're the only company in the GDX that's paid an annually increasing dividend since the index was formed in 2006, nearly 20 years ago.
This track record has got us into being the only precious metals company in the S&P High Yield Dividend Aristocrats Index, which is something that we're proud of. One of the most important activities that we do as a management team is making new investment decisions. While we have a dedicated business development group, and we're always looking at opportunities, most of these opportunities don't make it through our rigorous review process. You know, if we see technical, environmental, legal, other risks that we can't mitigate through contracts and negotiations, we walk away. We don't feel any pressure to do transactions, and if we can't find the right opportunities, we'll collect revenue, build up the balance sheets while continuing to return capital to shareholders and wait for the right opportunities to surface.
You can see from the chart on this slide that there are years we've committed close to $1 billion, and there's others where we've done no transactions at all, and we're just fine with that. We're just waiting for the right opportunities. One certainty over the medium term is that the mining industry always needs capital, whether it's to fund internal growth or M&A or to manage balance sheets. Touching very briefly on ESG, it's important to note that our business model does not provide operating control over mines, but investment stewardship has always been a core part of our business....
We need to ensure that the underlying operations that we're investing in can be operated in a sustainable way, and that's a key part of our due diligence process, because if an operation isn't being run sustainably, and that includes environmental and social considerations, then it won't operate for very long. When we write new contracts, we often incorporate language to ensure that operations are managed to the highest standards, and we also work with our partners to fund initiatives that can have a positive impact on the near mine communities, and those positive impacts on communities improve social license to operate and allow our operators to run their business in a more fulsome way. We've really co-worked to increase our transparency around these various processes.
We now publish investment stewardship and climate reports, and we're pleased to see, you know, material improvements in the perception and recognition of our practices along these lines. And, MSCI and Sustainalytics here, they're two influential ratings providers, and we have very good scores with both of them. Move to slide seventeen here, just to dig into the business model a bit more. One of the keys to our business being highly valued is exposure to reserve and resource growth, without requiring further investment from us. Picking a couple of examples here, Pueblo Viejo and Wassa. These are two assets that have been in our portfolio for close to a decade, so we can sort of look back on them and see how they've done.
In both cases, the total reserves and resources today are higher than they were at the time of the acquisition. And this is in addition to the production that we've received to date, that's allowed us to recover over 85% of our $610 million investment at PV, and over 140% of our $145 million investment at Wassa in Ghana. And 10 years later, there are growth projects going on at both these assets. At PV in the Dominican Republic, Barrick's expansion is in its final stages, and their goal there is to maintain gold production levels and extend the mine life to the mid-2040s.
At Wassa, in Ghana, in West Africa, resources have been outlined in the Southern Extension zone that could extend the mine life by another 11 years beyond the existing reserve life. They have execution options under evaluation by the operator there. Like I said, in both those cases, Royal Gold is not required to make any further investment to benefit from this upside. Resource conversion, exploration upside, production expansion potential, these are key factors that drive outsized returns in our business, and that's why identifying these attributes during due diligence of new opportunities is so critical. Quickly, the efficiency of our business model, you know, we have 30 employees.
Like I said, we produce over $600 million in annual revenue, and we have around a $9 billion market cap, and it really shows the scalability of our business model. And our efficiency is also shown in our low cash G&A, which is only around 5% of revenue in 2023, which contributed to another year of strong EBITDA margins. Cost inflation, which we hear about a lot in the industry, is not really a significant risk to our margins because we aren't directly exposed to mine operating and capital costs. And just continuing on this topic, you can see here in our cost structure comparison against the average gold producer. Producers are exposed to inflation and input costs, labor, energy, consumables, other site costs, many of which increase when commodity prices increase. And our G&A...
Our G&A costs are mostly steady, salaries, services, office rents, and not typically subject to short-term variability. Regardless, they're a very small fraction of our revenue. The cost of sales of our streams is the largest contributor to our per ounce cost that we report, but it is a direct percentage of the metal price we're streaming. It has nothing to do with the cost structure of the mine themselves, so we're not exposed to that. We've covered the business model a little bit, and maybe now I'll give you an overview of our asset portfolio, a little update on the asset portfolio. Our portfolio is global, but it is weighted towards lower risk and mining-friendly jurisdictions, and that's a strategic focus for us.
Our producing investments are shown here on this map, and the principal properties listed on the right in no particular order. These are the larger portfolio investments that provide the bulk of our revenue. And like I said, that's the best place to find a mine is near a mine, and we have exposure to globally significant, very well-established mining camps. Around half of our revenue comes from Nevada, British Columbia, Western Australia. And these are historical mining areas with great prospectivity, supportive regulatory environments, and access to the people and expertise necessary to advance projects. And on top of revenue-generating assets in these camps, we also have significant exposure to earlier stage projects. So they're great areas to be exposed to, generate that optionality. Our portfolio is gold-focused, but well-diversified, and that provides stability.
Our operating partners, they're best in class. They're well-capitalized to finance existing operations and growth opportunities, and they're experienced to effectively manage operations and crystallize upsides. Right now, I believe we have 37 mines contributing to revenue. That breadth of that portfolio compares favorably even to much larger mining companies, but we don't have the need to manage the operations on a day-to-day basis, but we still get that exposure. Sometimes we take exposure to the primary commodity on mine, and sometimes only to the byproduct metal. And generally, the primary commodities at the mines in which we're invested are about half precious metals gold mines and half copper or copper gold mines.
I've said a little bit about our country exposures, but our largest ones are Canada, the U.S., the Dominican Republic, and Chile, through some of our larger assets. These are jurisdictions that really understand the value that mining brings to their economies and affords a certain level of stability. The portfolio, this diversification really reduces our exposure to single asset operator and jurisdictional risk that can surface from time to time. You know, for example, in the chart on the far right there, Mexico is usually a bit higher, but this slide is based on 2022 revenue. As some listeners might know, Newmont's Peñasquito Mine had a lengthy work stoppage during that period that has since been resolved.
That we still are exposed to some of those risks, but the portfolio diversification really kind of minimizes the impact on our portfolio on any given quarter or year. The portfolio spans the different stages of mining project development. Over 130 of our interests are in assets that are not yet producing, being in various stages of exploration, evaluation, and development. This provides us with a real pipeline of organic growth potential as assets are advanced through the development pipeline to production by the operators with their dollars. Our King of the Hills and Bellevue Gold Mine royalties in Australia are a couple of examples of organic growth from projects that have moved through the pipeline.
Those royalties were added to the portfolio well over a decade ago, and it's just over the last few years that they entered production, now contributing, you know, meaningful revenue. To continue on the theme of organic growth, this slide here gives you some visibility on key catalysts that we see in the portfolio today.
There is potential for mine life extensions and production increases at several assets that are already producing, shown here in blue, including at Mount Milligan, our largest asset, where a mine life extension PEA is underway by Centerra, slated for release next year. We have new revenue producers this year, and others expect to come online in the near future. We had first gold in H1 of this year from Hochschild's Mara Rosa mine in Brazil and IAMGOLD's Côté mine in Ontario. At NGM's Cortez Complex in Nevada, the Goldru sh mine is ramping up production from 130,000 ounces this year to 400,000 ounces per year by 2028. First gold was also poured at Kinross's Manh Choh mine in Alaska in July.
This is a high-grade satellite deposit being processed at their Fort Knox operation that we have a sizable royalty on. B2Gold is expecting first gold production from Back River next year. I'll talk a little bit more about that later on. And then lastly, Kinross's, another Kinross project, their flagship Great Bear project, is currently expected to start up around 2029, according to their current forecast. And again, just to reiterate, this growth requires no additional capital from Royal Gold. It's all fully funded. While we don't feel pressure to make acquisitions, we have been actively adding to the portfolio, and this slide summarizes what we've done over the past three or so years. We deployed $1.2 billion in seven transactions, covering six different operations that meet our investment criteria.
We funded these again without equity, equity dilution by using cash on hand and a revolving credit facility, which has since all been repaid. Summarizing the long-term potential of these acquisitions. Starting at Cortez in Nevada, we own several royalty interests prior to 2022, and we expanded our royalty position in 2022 to give us exposure to the entire complex. A world-class, multi-mine gold complex in Nevada, which some would argue is the most mining-friendly jurisdiction in the world. And it's owned by two of the biggest gold producers in the world, Barrick and Newmont. The new Goldr ush mine is now operating, and they are really pushing forward growth potential at the Fourm ile and Robertson projects as well, which we have royalty coverage over.
At the Red Chris Copper Gold Mine in northern British Columbia, formerly owned by Newcrest, operated by Newcrest, now Newmont, who are advancing underground development and feasibility studies that should see a transition from open pit to a large bulk tonnage underground operation. The current expected mine life is north of 35 years, and that doesn't include additional resources from continued exploration success, and they've already defined exploration targets and sizes of potential resources on some of those targets, and quite material relative to the current mine life. At Xavantina in Brazil, Ero Copper has had a lot of exploration success there, and it's allowed them to target a sustained high-margin gold production of 60,000 ounces a year for the foreseeable future.
That's been a great investment for us just in the couple of years since we've acquired it. At Côté Gold in Ontario, this is IAMGOLD's. They poured first gold in March, and they announced commercial production in August. Also in Ontario, at Great Bear, which I mentioned a few times, Kinross has already delineated 6.6 million ounces of resources to date. They released a PEA earlier this year, which forecasts an average of 500,000 ounces of gold per year in the first eight years of operation. Really drilling at depth via an exploration ramp is expected to add to this profile over the next several years as they advance that project.
This is an ore body that's going to take years before we understand its ultimate potential, but Kinross are off to a really great start, in our view. At Back River in Nunavut, which is up in the Canadian Arctic, this is our most recent investment. We spent $51 million to acquire two royalties, which together are equivalent to about a 1.1% gross royalty. This added to a previously held royalty interest, and we now have a consolidated long-term royalty rate of over 3% exposure to that project. Construction is underway, and B2Gold's initial view is for 3.3 million ounces over a 15-year mine life, which is expected to start up in mid-2025.
They are making material investments in exploration on what we expect will ultimately be a multigenerational mine, to have a very positive view of the geology up there. There's really common themes across all of these recent investments, and they're consistent with our strategy. It's precious metals production with exploration upside, it's safe jurisdictions, and it's managed by experienced operators. Take a little peek at our valuation. We are trading at historically attractive multiples. I mean, the company's been performing well. We have strong cash flow. We've been allocating capital on a disciplined basis. We're showing good organic growth. We don't believe the shares are pricing in the strong gold price outlook, and our cash flow multiple is in the bottom half of the peer group.
We believe that the value of our long life assets that we've added over the past several years and the optionality in our portfolio is not being recognized in those current multiples. You know, if these higher long-term gold prices have staying power, this should get reflected in the fundamentals of our business and hopefully our valuation. Really, just to conclude, John, you know, Royal Gold, we're well positioned today. Our financial record is strong, our business is performing well. We have high-quality assets, a diversified portfolio, you know, we're showing organic growth. We're sitting at attractive valuations, and we have the balance sheet and liquidity to continue to grow that business accretively. So that's the end of my prepared remarks, John, so I'm happy to answer any questions you might have, which I'm sure you've got a few.
We welcome questions from the people we appreciate on the webcast, the audience, through the question box. Jason, looking at a couple of your recent good investments, we hope, assuming the buyback to 1.5%, the recent prices in the current technical study, Great Bear would be about a 13.5% pre-tax return. At last year's lower silver price, Khoemacau was about a 16% pre-tax return. Are those indicative returns, or how would you describe, the potential returns on other projects that might be simple and easy to understand, that you could communicate?
I'd say that, you know, John, if those were our target returns out of the box at the gold price environment that we're in on the day we make them, based on what the market knows of the asset at that time, we wouldn't get very many deals done. You know, we really have to take a long-term view on these assets, because a lot of them take time. It's already taken a few years for Great Bear. I mean, we bought Great Bear before there was any resource, right?
We entered into an agreement with Kinross in order for them to share their people and their data with us, so that we could come up with our own views, and that was the quid pro quo for allowing them to buy back 0.5% of it, to buy it down from 2% to 1.5%. But our goal is always, you know, what out of the gates, you know, transactions generally in the low to mid-single digits for high-quality assets, but our view is to grow those returns to well into the double digits over time. You know, we've been fortunate on Great Bear that we bought that really before the run-up in gold.
So the gold price has helped, but so has our view of the asset, and that's really coming to fruition a lot more quickly. I think at Khoemacau, we always love the geology there. We should keep in mind that when we bought that, the silver price was probably $16 or $17 an ounce, so it's close to double that. But that's what we're trying to do.
I mean, we're trying to get our shareholders exposure to high-quality projects so that they can have exposure to production in precious metals, and we expect those prices to go up over time. And so we expect those returns to accrete to our shareholders. But our goal really isn't just to get strong returns on the back of precious metals prices, get strong returns on the back of the fundamentals of the assets, and I think, those two are off to great starts.
Let me just check the question box from the audience. Your share price... I'm reading a typo type question. Your share price fell to the mid-twenties in 2016. What did you learn from that bear period to incorporate into your strategies going forward?
... Yeah, that was a very interesting time at Royal Gold. It's probably the understatement of the year. And the reason for it falling at that time, our largest investment at the time, and still is, was at the Mount Milligan project, and it was owned by Thompson Creek at the time, and there was market chatter that Thompson Creek might go bankrupt because they had taken on too much debt. The reality is, our position was secured. We were very close to the top of the capital structure, so the value of assets that was in the company at the time far exceeded the liabilities that sat above us.
So if that had ended up in a bankruptcy situation, we do believe we would have recovered our investment fully, but the market didn't fully realize that. But, you know, that it just goes to show that you I mean, the lesson learned there is you need to make sure you understand credit risk. You need to make sure you understand. And you need to make sure you have the balance sheet to weather the storm. And if we had to bring our balance sheet to bear to try to help fix that solution, we were able to do it at the time because we did have that strong balance sheet.
You know, we took an active role in fixing the situation by selling down some of the, trading some of the gold stream at Mount Milligan for some copper in order to entice gold companies to come in and consider this as an acquisition opportunity. That's really what allowed Centerra to come to the table, and Centerra's been doing a pretty good job with the asset ever since. Like I mentioned, we renegotiated that stream a little bit last year in order to provide them a little bit more of the long-term exposure to the asset to really incentivize them to invest and extend the mine life of that asset. That's what they're doing right now with this PEA, which will hopefully extend the mine life significantly as they advance it.
Maybe I can elaborate on the questioner's question. In that era, in addition to Centerra at Mount Milligan, or the former Thompson Creek, having trouble in moly, you had the investment in Rubicon Minerals, where the initial mine, the grade didn't pan out.
Yes. Yeah, that's very true, John.
In hindsight, going eight years without a big mistake is pretty good in the aftermath of Cobre Panama or Victoria Gold or some of the other companies that had a bump in the road.
Yeah. Listen, we're all exposed to the mining business, and we're not completely de-separated from it. We are exposed to it, and I'd say one thing, and that was a $75 million write-down, and we're very proud of our history of,
We're only talking $75 million.
Yeah. It was a $75 million write-down, which we kind of joke, cost us about $600 million in market cap at the time. But, I understand where shareholders are coming from, and shareholders can, if they see you make poor decisions on the technical front, they, it can cause them to question some of the other decisions you've made. One of the technical learnings we got from that experience, and we really did look back on it and dissect what went wrong, and it was really a structural geology issue that we didn't, it turns out, didn't fully understand.
So what we now do when there's complex situations at assets that we're doing due diligence on and really areas that could really make or break an asset, we will usually bring in a secondary or even a third expert to give us their view on it so that we really understand that. And at the time, we hadn't done that on the structural geology side at Rubicon.
In the first half of this year, the cash flow of Royal Gold was about $1.3 million a day, after-tax cash flow. I'm happy with that. With the higher gold price, is it reasonable to expect it to be 10%-15% more in the second half?
I mean, our. You'll see our Q3 results will be out in about a month, John, and we'll see what it looks like then. But it's not hard to calculate. I mean, we're not hedging gold, so we're getting exposure to the gold price on a daily basis as we sell our gold and receive our royalty payments. So it's pretty. You know, you can look at how we've done in the past at different gold prices and how the gold price has performed in the most recent quarter and kind of figure it out pretty easily.
How will the global alternative minimum tax affect Royal Gold?
The global alternative minimum tax won't have any effect on Royal Gold at all. When the U.S. did tax reform back, whenever that was, it's getting on several years now, they instituted something called the GILTI tax, G-I-L-T-I, and that is basically their version of the global minimum tax. So we're already paying, you know, the U.S. version of the global minimum tax, it, which is in the 13%-16% range. We do expect it to level the playing field amongst the competition, the Francos and Wheatons of the world, whose offshore subsidiaries are set up in low-tax jurisdictions. So that should be helpful to Royal Gold in leveling the playing field now that they have to put sort of a real tax number in their models.
Will Royal Gold ever do a share buyback?
You know, we always look at different ways to return capital. Traditionally speaking, we've just stuck with the growing a sustainable dividend, as I mentioned, as we've done for over twenty years, increasing it every year. We sometimes struggle with the math on share buybacks. When you're a company like us that trades at a premium to NAV or high cash flow multiples relative to other businesses. We struggle a little bit with the math of that. We have memos on share buybacks and special dividends that we have to pull out every now and then when, you know, cash starts to really grow, but it hasn't been a problem for us.
Every time our cash pile has kind of grown to a large level, acquisition opportunities have come out, and we've been able to find accretive places to put that money. And really, I think that grows our shareholder value that way. And, you know, we don't, we haven't issued shares. I've been with the company since 2013. I think the last time we issued shares was 2012. We've done, since I've been with the company, we've done billions and billions of dollars of acquisitions, and our share count has only gone up by a tiny amount based on, you know, employee share positions. So we don't... It's not a priority for us, but it's definitely something that we have in the playbook if we need it.
Jason, roughly how many submittals or propositions does Royal Gold get per month? How do you determine which ones make the first cut to be considered, and the ones that make the final cut to be invested?
Whew! I don't have those numbers right in front of me, John. It varies a lot. I'd say we, you know, there's both inbound calls that we receive, whether it's from companies or financial advisors that have been hired by companies in order to do something, and whether that's to raise money for a company through a new royalty or stream, or whether it's somebody that owns a royalty, a third-party royalty already, and is looking to sell it. I'd say we probably get between one and five, kind of coming in a month, and whether that's coming in directly to us or us reaching out to companies. When there's an asset that we don't know, our first is to look at the technical side of things.
So let's look at the state of the company or state of the project. Let's look at the geology. Let's look at the engineering possibilities and when it might be able to become a mine. So our first test is that, and then from then on, we get into... If it passes that first test, then we start really digging into the data and building models and really digging into the geology in a lot more detail after that first pass. And I'd say, you know, we probably drop 80% of them, of the things that we look at, though, after during that first pass.
So just to take an example, Franco and Osisko Gold Royalties partnered to make a $750 million commitment on Cascabel in Ecuador. Would that project be investable for Royal Gold, view as a country, the tech studies and timeframe?
Listen, the technical studies and timeframe, I'll put that aside for a bit. You know, we are very focused on geopolitics, and Ecuador right now is not a country that we have invested in before. We have studied it in the past. You know, there's a lot of potential there, so we'll have to continue to study it in the future because there's likely to be opportunities there. At this time, we don't believe it's investable.
One of the things that we look at is really personal, personnel safety, and we kind of look at each other around the room and say, "Well, do you want to go down there right now, or do you want to go down there right now?" And if the answer is no, then, you know, we shouldn't be putting, you know, technical teams together and sending them down there. From a timeframe perspective, it looks like a very attractive ore body. It's gonna take a lot of capital and probably some very big mining companies to get it done.
I suspect that you'll see the conditions to, you know, that $600 million-plus that hasn't already been put into it by Osisko and Franco comes with many, many, many conditions that will need to be met by whether it's the current operator or a future operator of that project. So likely a long timeframe, but, you know, sometimes these long timeframe assets can work out really well, but just didn't quite fit the Royal Gold strategy.
When Chile proposed the constitutional reform twice, finally staying with the old one, the first proposal had something in it called quasi-nationalism, or a state or government within a state, or if you would, Indigenous regions with their own laws and permits and rules and budgets and taxes. In fact, Ecuador and Bolivia have that in their constitutions. So Lundin Gold has been very successful. They're not in a zone that is Indigenous property, but apparently, the turf varies a great deal, and the rules are different based on this quasi-nationalism, so.
Okay.
I learn about new things trying to figure out these countries, Jason.
I mean, John, this is getting on a few years back, but you know, if you asked me ten years ago, "Hey, would you ever have qualms about investing in Peru or Chile?" I would have kind of laughed. I'd say, "Well, no. If you're in the mining business, you got to invest in Peru and Chile." And obviously, it just goes to show you, you got to really take a long-term view on these things, and really, I think you know, places like Chile, places like Peru, I mean, if you want to be in the long mine life business, you got to be able to look at those countries, and it's everything is situational as well. I mean, there's, you know, there's national politics, but then there's local politics and local social considerations to consider as well.
You have a portfolio of projects, and most of us have a portfolio of stocks. We take a little bit of risk and try to diversify it out.
Yep, yep, that's really what we look at ourselves as, is really kind of portfolio managers of assets.
Next question from the group: What have been the discussions at the board level about the concept of what you consider to be relatively cheap? I might not have understood. Let me try to reread it.
Oh, you mean when I said, maybe what it was when we were talking about our valuation and where we are relative to historic?
Yes.
I can switch to that slide here. You know, I mean, we have a-- there's a long... You can look back on a long history of where royalty companies and Royal Gold's trade within relative to the peer group. And that's what I'm talking about, relatively cheap here, especially if you look on that cash flow multiple side, us trading really close to the low end of that range. And that range is not just Wheaton and Franco, our larger peers, but includes Osisko, Sandstorm, and Triple Flag, the peers that are much smaller than us.
So 6% or 7% cash flow yield, you consider to be statistically cheap?
Yes. I mean, if that's what that equates to right there.
And cheaper than the deals we're going to do.
Yeah, that's exactly right. And listen, I'd say, you know, you looked back at our portfolio five years ago, and us being kind of in the low end of the cash flow multiple range was probably fair. If you looked at our portfolio and compared it to, especially our larger peers, Franco-Nevada, Wheaton, the duration of our assets was probably below theirs in terms of the mine life that people could see. Now we've made a very conscious effort to add long mine life assets to our portfolio in order to improve that, and we believe that will increase the value of the overall portfolio. I mean, you think of the acquisitions that we've made in the past sort of three, four years, you got very long mine life assets like Cortez, like Great Bear, and Red Chris, like Côté.
So there's a question about special dividends as the cash builds. Historically, you've left almost $1 billion of cash accumulated in the past until you had the right projects come along. Would you just be patient and let the cash build rather than pay special dividends?
Yeah, listen, that's a decision that we would. If the cash builds to a point that, you know, I don't want it, unsustainable is probably not a good word for it. It's very sustainable, but, you know, we would take that into consideration. But our primary, today, we haven't had that problem, 'cause every time, like you said, the cash has grown, all of a sudden, an acquisition window is open, and there's been ample opportunities for us to deploy that capital in an accretive way. But, like I said, we, you know, we study all different ways that we can return capital to shareholders, and that's a discussion that we will have, with the board, if we're in that situation at that time.
What is the largest dollar investment Royal Gold has ever made in its history? In a project, not acquiring I nternational Royalty or another company.
Mount Milligan. It wasn't made in a single investment, it was made in three different tranches, but we invested just over $780 million in that project. And we've actually gotten all that money back on a pre-tax basis, you know, and then some, you know, there's still several years of mine life left in reserves. And like I said, Centerra is looking at a PEA to hopefully extend the mine life by decades more.
If you had a $750 million cash position, that might be beginning to be bigger than you normally would put in a project?
Yeah, and you got to recall that we also have access to a $1 billion-dollar revolving credit facility that we've historically used to fund acquisitions when the cash, you know, the cash position hasn't been enough to fund it. You know, I don't wanna tell you what is the specific number when we start to think about is our cash balance getting too high? 'Cause like I said, it just hasn't been an issue in my 11 years with the company. That's one of the... Kinda going back to the Goldilocks comment that I made earlier, that's really one of the things that, you know, really differentiates us from our larger peers, is still relatively small, still an ability to deploy that capital in a reasonable basis.
I mean, if you look at Franco-Nevada and Wheaton Precious, I mean, they must be generating over $1 billion a year in free cash flow. So that's a lot of money that has to be deployed, or else they're gonna be, you know, likely under some pressure to find a way to return it.
One of the investors makes the comment that they would rather you return capital to shareholders, like a special dividend or buyback, rather than invest in low IRR projects. Clearly, the Great Bear project and even the low IRR projects at Cortez got better. The project got better, and the gold price rose, so that the low IRR project ended up being mid-teens at Great Bear or Khoemacau. So, how do you evaluate which low IRR projects have the best potential to get bigger?
You know, John, we're investing for the long term, and our experience is that near-term concerns with prices paid for high-quality assets are forgotten over the long term as that upside becomes clear. And as you just highlighted, you know, you've got your view of IRR of some of the acquisitions that we've made more recently, and those are a lot higher than what the market view would have been for them on the day that they were announced.
And we believe that's the high-value way to grow our share price. You know, we'd rather be buying assets at one times NAV and having them mature in our portfolio and ultimately trade, as you can see around the slide here, where we kind of trade in that at one point eight times NAV. We believe that's the most accretive way to grow our shareholders' value.
I just want to interject or help you a little bit in responding to that questioner. The world gets bigger, or demand gets bigger, and mines deplete in age, and the easy mines all got found one or two hundred years ago. The newer discoveries sometimes are very hard to mine, and the costs increase. On December thirtieth, Fortescue's i ron ore railroad had an incident. The tracks melted. It was a very hot day, 125 degrees. Four years ago, Norilsk Nickel ended up with a $2 billion fine because they spilled oil into the ocean, but the permafrost melted, and their foundations collapsed for oil storage tanks. Tomorrow, Pan Am Silver is going to describe an underground mine in 104 degrees Fahrenheit rock. There are lower-grade projects, deeper, more metallurgically complex projects.
So in addition to inflation, due to worsening productivity as mines deepen and strip ratios are higher, Harmony has a mine that's four kilometers deep in South Africa, and Agnico Eagle mine, they're three kilometers deep in Northern Canada. So the metals prices rise, not only because of inflation, but because it's harder to mine. And, they have a free call on the increase in the metals price due to inflation. It's no cost to Royal Gold or any royalty streaming company. So that's part of the allure of the mid-single-digit investments, because a decade later, there should be a higher return because of, the increasing difficulty of producing metals. Excuse me, Jason, I don't mean to take your time.
No, no, no. I appreciate that, John. I think you've got some very good insights into the business, so I think it's helpful. Yep.
We like to host the royalty streaming companies because they're a conservative business model. In addition to not having exposure to capital cost overruns and operating costs, BHP, Rio, and Vale, December 31, each booked $16-19 billion of reclamation liability. So for the mining industry today, reclamation is bigger than debt, and Royal Gold has no exposure to reclamation. That's a slide in your deck you need to put in.
That's a good point.
We're very patient with the royalty and streaming companies because there's some hard-earned they don't give us.
Yep. No, we and we appreciate your support there, John, and listen, exposure, not getting exposure to those risks, you know, has a cost associated with them, and the cost for high-quality assets is to win them, and what it might look like on day one, what might look like low IRRs. You know, we're taking a very in-depth long-term view of these assets.
Super. We ran through the question box. Your presentation was very straightforward. I might have had more questions from some of the other companies that confused me more. But, thank you very much. Congratulations on your role, Jason, and your career at Royal Gold.
Thank you for your support, John. I appreciate it.
Take care.
Bye-bye.