Well, good morning again. Our next presentation is going to be from Royal Gold. Royal Gold is a precious metal stream and royalty company with a portfolio of 186 properties across five continents, including producing mines and development stage projects. Joining us today from Royal Gold is President and CEO, Bill Heissenbuttel. Welcome, Bill.
Good morning, everyone. I would like to thank Bank of Montreal for the invitation to present this morning, and it's good to be back in person. I wasn't able to be here last year. I will be making forward-looking statements, which are subject to risks and uncertainties, and actual results may differ materially, and these risks are discussed in our 10-K filings with the SEC.
We just completed our first full year, as a December 31 fiscal year end, I'm pleased to give you some highlights. Revenue was $603 million, which translates into annual Gold Equivalent Ounces, or what we call GEOs, of 335,000 ounces and an average realized price of $1,800 per ounce.
Our results were down relative to the prior year, but that was expected based on the public guidance and the metal production we received from our operators at the beginning of the year. Despite having one of the more active investment years in some time, we maintain significant, and I think sufficient liquidity with conservative leverage ratios.
We remain gold-focused with 73% of our revenue from gold, with another 12% attributable to silver, and our portfolio has over 40 revenue-producing properties. We also remain focused on the core business of acquiring streams and royalties. As a refresher, we are economically indifferent between the two segments of our business. We don't pursue one over the other.
Because streams tend to be more tax efficient for operators and therefore a better financing tool, they tend to be larger, they tend to be more prevalent. That 67% of our revenue is generated from eight
streaming assets compared to 33% of our revenue from 32 royalty properties. That's just evidence of the relative size of our streaming investments and opportunities. It is interesting to note that in the past 18 months, we've made seven acquisitions totaling $1.2 billion. Six of the seven were royalties. If you had told me we'd do seven acquisitions in 18 months at the beginning of 2021, I would have told you we'd do six streams and one royalty. We had an excellent year in 2022 with a number of accomplishments.
During the calendar year, we made three major acquisitions totaling almost $900 million, two of which expanded our royalty footprint at the Cortez complex operated by Nevada Gold Mines. One of which was a 2% NSR royalty on Kinross' Great Bear project in Ontario. As we noted at the time of each acquisition, these transactions follow a strategy to seek out and acquire gold-focused assets with good operators in good jurisdictions.
You don't always find all three together, but we did so on three occasions last year. Within the portfolio, we got our advanced payment back at Mount Milligan. We saw extended mine lives at Milligan and Rainy River. We saw Khoemacau ramp up to full production while increasing our silver interest to 100%. We saw projects advance at Red Chris, Côté, and King of the Hills.
From a corporate perspective, we financed our numerous acquisitions with cash and revolving credit advances, avoiding equity dilution, but still remaining conservatively capitalized. We maintained our industry-leading consistency when it comes to annual dividend increase. That consistency saw us be included in the S&P High Yield Dividend Aristocrats Index.
We're the only precious metals company in that index. We completed our transition to a December 31 fiscal year-end. We met our inaugural guidance. Finally, and importantly, we set out on our own path with respect to ESG, defining ourselves as a finance and asset management hybrid company. We set out the four pillars of our ESG approach. We defined our vision, mission, and core values. As I mentioned, we've completed seven acquisitions in the last 18 months, six of which were material.
This analysis expands our review of this acquisition history beyond just our 2022 results. It shows that our 2021 and 2022 investments were strategically consistent, gold-focused, operator quality-focused, jurisdiction-focused, and most importantly, focused on extending the mine lives in our portfolio.
If we reduce the six material transactions to five to account for the fact that two of the acquisitions were on Cortez, I can say four of the five were in the U.S. or Canada, four of the five are gold-focused, and the other one is a copper-gold mix. All operators have a market capitalization over $1 billion, and all manage a multi-asset portfolio of operations. three of five produced immediate revenue.
With Kinross' recent announcement at Great Bear, all have multi-million-ounce resource or reserves, and finally, all have or are expected to have decades of production looking forward. The presentation format you typically see at these conference, I'm always a little bit drawn to the fireside chat. I find it very interesting, especially at a conference like this, where many or most of the people are familiar with our company.
Instead of having me talk at you for 20 minutes, I thought it might be interesting to address some of the topics that have been raised by investors in recent meetings and calls. If you'll sort of forgive me for having a conversation with myself, here are six areas of focus for investors, and I think in particular generalist investors. Low-risk gold optionality.
We're always asked, why is our business model an attractive way to gain exposure to gold from a risk and a return perspective, and what exactly do you mean by optionality? In the first place, there are a number of avenues by which you can invest in gold. They range from coins and physical metal to early-stage exploration companies.
If you line up the exposure you're getting with the risk you're taking, you can really end up investing at two different extremes, the relative safety and fixed nature of physical investments like GLD or the higher-risk exploration or operating companies that come with numerous challenges associated with exploring, developing, operating mines.
The royalty model offers exposure to gold, exploration upside with no further investment required, a diverse portfolio more so than any operator, a sustainable dividend, whereas physical gold pays no interest, and limited exposure to operating and capital costs. I've long described our model as the half step, the baby step beyond ETF.
Understanding optionality is absolutely critical to understanding our business. Once we make an investment, that is the extent of the investment unless we can contractually agree something different. We have a long history of making investments with a defined reserve or resource, only to see those reserves and resources increase over time. That's resource optionality.
Pueblo Viejo is actually a great example, with Barrick's recent announcement that it had converted 6.5 million ounces of resources and reserves net of depletion as of 12/31/2022. At year-end 2022, we had received almost 80% of our investment back, and the reserves subject to our stream are now larger than they were when we made the investment 7.5 years ago.
Although we have not seen the resource-to-reserve conversion take place at Wassa, additional resources have been identified since we made our investment. We already have our investment back. If you invest in GLD, one ounce will always be one ounce. If we do our job correctly, one ounce can be two or three or four ounces over time. This optionality is. It's also very important when you look at our Cortez acquisitions last year.
Now, I should note these numbers are on a 100% project basis. We've had an interest in Cortez for decades. We've had a front row seat to this, the discovery of Cortez Hills and Goldrush and Fourmile, even though they weren't on our original royalty ground. When Rio sold its interest in Cortez to Barrick in 2008 and asked for an effective 1.2% royalty on production above 15 million ounces, there were only 18 million ounces in reserves and resources at the end of 2007. By December 31, 2021, reserves and resources were 26.7 million ounces, and the mine was on the verge of reaching that 15-million-ounce threshold.
When we made our acquisitions in 2022, we were looking at that 2021 reserve and resource statement. In a very short period of time, Barrick announced reserves and resources of 31.5 million ounces at the end of 2022. We didn't spend any money, we didn't allocate any staff, we didn't hire any consultants as a part of this increase in the mineral endowment. We just think good mines get better.
That's the way we view Cortez. Another topic we get from investors: What is the market for new transactions, and how competitive is this market? I think there are a few key points to make here. Since the global financial crisis in 2008, 2009, when other markets completely disappeared, streaming became a better-known source of capital.
Since the great balance sheet deleveraging of 2015, streaming has become a mainstream source of capital, and it's used by companies of all sizes, including the likes of Barrick, Teck, and Glencore. It also became more than a byproduct value arbitrage play, as evidenced by our streams on Pueblo Viejo, Rainy River, and Wassa, all of which are primary gold producers.
I think streaming is now a source of financing that any CFO looking for capital for a project that has a precious metals flow, they need to consider and investigate us as an option. You may say there are more streamers in the market, and doesn't that make for much more competition? I'll go back to the mid-2000s when we had Silverstone, Gold Wheaton, International Royalty, Battle Mountain Gold Exploration.
Today, we have Triple Flag, Osisko Gold Royalties, Sandstorm, and others. The fact that streaming is more mainstream means there are more opportunities to consider. Will we see consolidation in the sector like we did in the 2000s? I personally think you're gonna see more of the consolidation in the mid-tier, sort of the Sandstorms, the Nomads, the Maverix, the Triple Flag Maverix, than you are having the larger streaming companies come down and buying smaller rivals. Streaming companies are not our only source of competition. Often, our biggest source of competition are the equity and the debt markets. What have we seen over the past few years?
BB-rated companies, which are probably the most likely credit profile to consider a stream, were borrowing at 3% a little over a year ago. That's a pretty competitive rate when you consider the debt can be repaid. Now those rates are closer to 7%. On the equity side, we looked at two gold indices, the GDX and the XAU, and two base metal indices, the United States Copper Index Fund and Invesco DB Base Metals Fund. Since 2021, those indices are flat to declining, not exactly indicative of an attractive source for capital. This industry always needs capital. Our sector has been the most consistent source of capital for over a decade, and we continue to look at a lot of new opportunities, I like our pipeline.
I think the final question we get on business development is, for us, is metal diversification. We're precious metal-focused, gold in particular. We do not actively seek out streams or royalties in other metals. Our current base metal revenue comes from portfolio acquisition. That's where Voisey's Bay came from. Our lead and zinc exposure comes from Peñasquito.
We did a deal restructuring at Mount Milligan to make it easier for Centerra to buy Thompson Creek. We didn't seek out that base metal exposure. It just came with the entirety of the transaction. That being said, if we are approached on a base metal opportunity or an opportunity in a market we can understand, we'll certainly consider an investment if it doesn't skew the revenue too much, and it checks a number of boxes in terms of operator, asset quality, jurisdiction, and returns.
One of the other questions, tell me about your ESG path and what are the challenges that you're facing? As we put together our initial ESG report last year, we sought a proper identity. We endorse the RGMPs from the World Gold Council. We endorse ICMM's 10 mining principles, but we can't implement them.
It was at that point where we decided to really firmly position ourselves as a finance and asset management company. While the principles for responsible investment looked appropriate, we just felt our business was so unique that we needed to really establish our own direction, albeit using PRI and the Principles for Responsible Banking as a guide. We created our four ESG pillars, one that covers. Sorry.
One that covers how we're governed and our culture, one that covers how we do due diligence, one that covers how we can help our operators achieve their sustainability goals once we've made an investment, and one that covers our commitment to be transparent with the market on our ESG path. I'll say one of the areas of challenge for us is Scope 3 emissions. Our Scope 2 emissions and direct Scope 3 emissions are small.
We're carbon neutral with respect to those emissions. However, our investment portfolio carries with it significant Scope 3 indirect emissions. As we continue to review the emissions, we struggle with a few points. Number One, how do you allocate emissions to a streaming company? Do we use the stream of the royalty rate? Do we use the reserves that are covered by our interest?
Number two, what do you do if an operator's already made a Scope 1 or 2 net reduction or net zero commitment? Finally, what do you do with an operator who hasn't made a commitment but has a mine life that isn't anywhere close to 2040 or 2050? We continue to review paths in this, in this area, and we'll keep you updated on our thinking as our thinking progresses. Capital allocation, always a big topic. I think, you know, the question typically, I think, involves the assumption that we're holding excess cash at times. If you look at the last 10 years, we've generated $2.9 billion in operating cash flow and made $2.9 billion of investments.
We've turned cash coming into the company that would be valued at 1x NAV into assets that should be worth a multiple of NAV over the last decade. The conclusion I would draw is, you know, we will continue to prioritize finding investments. It's the best way to increase shareholder value.
We'll use excess cash generated between investments to reduce any debt we borrow, and there really hasn't been any significant excess cash flow to talk about special dividends or buybacks. There are gonna be times when cash builds up on our balance sheet, but if we take a longer-term view, that additional of liquidity is gonna help us make new investments as and when they arise.
Some investors say, "Oh, with all your recent borrowing, are you closed for business?" The answer is not at all. Yes, we have borrowed $575 million under our revolving credit facility. At the end of 2022, we had $540 million in liquidity available for new investments. Consider our last seven investments.
Every single one of them could have been duplicated with our available liquidity, even the $525 million Cortez royalty we bought from Rio Tinto. The typical opportunity in this sector is $100 million-$300 million, and there aren't that many each year that turn into transactions. I believe we have sufficient liquidity to keep looking for good opportunities, and we're also not hesitant to use the full extent of our borrowing capacity.
This is a high-margin business without sustaining capital needs. If we were to use the entire $1 billion revolving credit facility, we'd only be like 2x trailing 12-month EBITDA, and then we'd have future cash flows sufficient to bring that debt down over time. The final topic I chose for this discussion is what makes you unique? I think there are a number of factors. I think one of the interesting things is our relative size. We sort of sit between the two larger companies and some mid-tier companies.
We don't have the move the needle issue that I think some of the larger companies may struggle with. We have the liquidity to compete with them. I think our technical skills that we've demonstrated in our acquisitions over the last couple of years is also unique. I'm struck by three factors. We're the only U.S.-based company in the streaming sector.
I think with Newmont, we are the only two larger gold-focused companies that are U.S.-based. We're in over 200 U.S. equity indices. If you're an investor measured against certain U.S. indices, we're in a finite group in terms of options for gold exposure. Sorry, there you go. We've been a publicly traded company for over 40 years. We still only have 66 million shares outstanding.
That is not a promise to never issue equity, but it is indicative of how we try to finance ourselves. Our share count is the lowest in the GDX. I just mentioned that the median share count in the GDX is 455 million shares. While some companies have impressive consecutive years of paying a dividend, only one company has paid a dividend for consecutive years and increased that dividend over a similar time period. I will say that that list of dividend payers, those are groups we're happy to be a part of. Consider the impact of that low share count. We've demonstrated remarkable increases in revenue and operating cash flow over decades without relying on the gold price to drive those results.
What that means is the underlying growth had to be financed in some way, we kept our share count low because we can rely on strong cash flows to reinvest in new assets and rely on debt as a source of capital. The net result is meaningful per share accretion in any number of financial measures.
With respect to the dividend, we are not trying to compete on a payout ratio. That is inherently volatile. We are not trying to compete on a yield basis given the premium at which our shares trade. We don't increase a dividend one year because we can afford it in one year. We look out years to understand what operating parameters might impact not just one year's dividend increase, but a number of future increases as well.
I opened with a review of our achievements in 2022, and I'm gonna close with some highlights you might look for in 2023. The Pueblo Viejo expansion is already. We're hopeful to have Khoemacau at full production for all of 2023. Newcrest is looking to complete a block cave [project] . Côté and Bellevue should move closer to production, while Aventina and King of the Hills look to increase production. Hopefully, we hope you find that our 2022 ESG report demonstrates continued progress with respect to TCFD disclosures. I thank you for your time. I'm happy to take any questions.
Well, Bill, you've taken my job and made it...
Stop.
Made it very easy for me. Next time, I'm gonna get you a little red-headed puppet you can hold beside you. Appreciate that. I have a few questions on the app. I mean, maybe we'll start with a question about your dividend. You referred to it as growing. I think a dirty word in the industry used to be progressive because that means it's harder to change shareholder expectations if you did have to cut it at some point. Can you talk about your dividend philosophy a little bit more? How important is it for Royal Gold to keep that dividend growing going forward, and how does that sort of change or inform your business activities as you go?
Yeah, you know, I started with the company in 2006. I think our 2005 annual report mentioned the dividend as one of the key focuses of the company. I mean, it's part of our culture. When you've increased it for as many years as we have, you know, nothing's a given in this world, but it's critical to who we are. I couldn't imagine having that discussion with a shareholder saying, "Sorry, we're gonna change two decades of success.
You also. I think you sort of alluded to it, but, I mean, it is important. You've been a member of the Dividend Aristocrats Index. Does that represent a major or an important part of your shareholder base as well, people that are looking for you specifically for that dividend?
I can't speak specifically to shareholder. We were included at the end of January of 2022, we did see an impact to our share price. The interesting thing about our you know, top five shareholders, they've been around forever. I mean, we have very sticky shareholders. I can't point within the shareholder register and say, "That investor came in because we're in that index." All I can say is we saw price appreciation, unusual price appreciation when we were included.
I have a question on the app about IAMGOLD's Côté mine. It's a part of your portfolio. I know they've taken some steps recently to bolster the balance sheet. Is there any opportunities that you see for Royal Gold to help them continue in those efforts?
Well, it's a little hard to say, but oftentimes when we look at cost overruns, and most people look at it and say, "That's not a good thing," we look at it and say, "That might not be such a bad thing for us." We're always open to those discussions. I think they have taken considerable steps with the asset sales, the transaction they did with their joint venture partner. They may not need financing, but we're always happy to have discussions with anybody that needs more capital.
That sounds good. Maybe, on that note, we have a question about Khoemacau, which did need more capital. Maybe you could talk a little bit about that, progress, process and how that mine's going. The question in the app is about the private equity group that owns Khoemacau and, you know, what their intentions are long term, or maybe what you see that asset doing long term.
Well, the process that we followed, and this isn't, you know, a reflection on Khoemacau or the owners, is we always expect a project to have an overrun, and we always plan for what we were going to do when an overrun occurs. We had a base stream, we had an overrun stream, and then we had a small debt facility. Khoemacau ended up taking all of that funding. I just want to be really clear, a lot of that was COVID, okay? This wasn't, you know, project budget getting out of control. I mean, this. They had serious challenges with COVID, I think on a couple of occasions.
They did end up needing that additional financing, but we had planned for it, and we didn't have to go beyond what we had planned for. I think that's a strategy we're always going to focus. You know, as for the private equity's plans, you have to ask them, but it's private equity, so I imagine at some point they're gonna want a return on their investment.
What, what's the, what's the mining landscape like in Botswana overall? I think it's not super common for a lot of people, at least in North America, to follow, you know, mining codes and things like that. I mean, obviously we hear about jurisdictional risk, maybe not so much in Africa these days, but it has been in the past. Can you talk a little bit about how you see that as a mining jurisdiction?
You'd be very familiar with the country if you like diamonds.
Yes.
There is a mining industry. It's not, it's not like this is brand new, and there's no culture, and they don't understand it. When we got into it, I'd always had a very positive view of the country. One of the nice things about the mining industry, it's not very big, and it's not very hard to find people who have experience in these countries. We were actually able to talk to specific people that had operated and lived in the country. We got comfortable with it, and we're very happy. I'd, you know, love to do another one in Botswana.
How do you think, If you put your, maybe you have a puppet for operators, and if you put your operator's hat on, how do you think about the capital needs that an operator has to sustain its volumes going forward? You know, in terms of how maybe Royal Gold looks at funding exploration or production-sustaining activities.
Anything that needs capital, we're open to. I will say on the exploration side, we have an excellent team of geologists. They are always looking for early-stage investment opportunities. You know, those investments are gonna be smaller. We're not going to put big dollars into early-stage opportunities, and if we do that, everyone needs to understand you're probably looking at 10, 15 years until you see something. You really have to like it. We don't see as much sustaining capital investments unless it's a very, very significant brownfield expansion. We tend to focus more on, you know, project development, greenfield project development, but you can use streams for M&A.
You can use streams for de-leveraging, and we consider those sort of the three stools to our opportunities.
I guess, something like, what you're seeing at Pueblo Viejo, and clearly that's an expansion, but, a big part of that would be sort of a tailings.
I don't think they need us, but I'm happy to take the call.
They're not. Yeah, they're not funding it yet. It is. I mean, the flip side of that is if there are mine life extension activities on assets that you have streams.
Yeah.
It does benefit you, for free.
I will say if anybody needs capital, I.. Quite frankly, it can be a tailings expansion, it can be a mill expansion, it can be the development of a new pit. All of that is right down the center of the plate for us from an investment perspective.
Thanks very much. It looks like we're out of time. Thank you very much, Bill. I appreciate your time.
Thank you.
Thank you.