Morning, everyone. We'll get started. Welcome to our fireside chat with Royal Gold. Just as an introduction to myself, my name is Fahad Tariq. I'm a Mining Analyst at Jefferies based out of Toronto. I cover large cap precious metals, including Royal Gold. Royal Gold is a precious metals royalty and streaming company with a current market cap of about $23 billion. Following its 2025 portfolio expansion, Royal Gold has materially increased its scale and diversification. In the second quarter, gold represented 76% of the company's revenue. No individual asset contributed more than 13% of revenue, and the portfolio generated revenue from established operations including Cortez, Pueblo Viejo, Mount Milligan, and Peñasquito, alongside newer interests such as Kansanshi, Antamina, Caserones, and Greenstone. Joining us today is Bill Heissenbuttel, President and Chief Executive Officer. Bill, welcome.
Thank you very much.
As I mentioned in my introduction, 2025, I think, was very transformative for Royal Gold with the acquisition of Sandstorm. It increased the company's scale diversification. Maybe as a starting point, can you talk about how the first half of this year has gone and demonstrated that scale and portfolio diversification?
Yeah. Actually, we're very happy with the first six months of this fiscal year. You actually stole some of my talking points with the introduction because when we announced the acquisition of Sandstorm, there were a couple of things that we really pointed to. Number one is diversification. As you just noted, the largest asset producing revenue for the first six months of this year was only 12.5%. There was one other one at 11%. So we only have two assets that represent more than 10% of our revenue. When you compare us to some of our competitors, all of whom have some sort of concentration risk in the portfolio, what we're trying to do is reduce event risk at any one particular mine, because things happen at mines. If we can diversify the portfolio, that certainly reduces the event risk. So I'm very happy.
If you went back to the first six months of 2025, I think the top five assets represented over 60% of the revenue. For the first six months of this year, it was 44%. On that basis, it has been a real success. When we bought Sandstorm, we talked about diversification of NAV, not necessarily short-term revenue. I actually think we are ahead of ourselves in terms of diversification. The other part of the Sandstorm story or strategy had to do with growth. We certainly readily admit that the old Royal Gold growth portfolio was a bit limited. Sandstorm actually had the opposite issue. Their operating assets were okay, but not that notable. Their growth assets were quite strong. You look at Hod Maden, you look at Mara, you look at Platreef, those were the three key assets that we identified at the time.
Let's look at where they were when we closed on the acquisition in October of last year and where they are now. Platreef was in construction. It has now delivered its first metal. Hod Maden didn't even have an updated technical report and had an operator that we clearly found out later did not have the social license to develop that project. That project is now in construction. With respect to Mara, we really didn't have a timeline. Glencore hadn't really talked about it. It had been on a few lists of potential projects. In December, they came out and said, "No, 2027 started construction, 2031 first production." They announced at the end of the second quarter that in fact they have started mining the old Alumbrera pit earlier than expected.
When I look at the whole of the portfolio, and I will even throw in there Antamina, which through the first six months generated $26 million or so of revenue, the record year for that royalty was $40 million. We are sort of on a record pace on one of the biggest producing assets in that portfolio. I am extremely happy with the way the first six months have gone with the acquisition.
Great. One of the things the management team has done a really good job is simplifying the inherited Sandstorm interests and assets. An example of that would be Hod Maden. As you think now of how the portfolio is today, is there further portfolio rationalization that needs to happen or changes that need to happen? What could a fully optimized portfolio look like?
Yeah. As you said, we have made great progress. I think a lot of institutional investors looked at the Sandstorm portfolio and said, "Boy, that is really complicated." There is just too much going on. It is not a pure royalty and streaming. You have the intercompany relationship with Horizon Copper, and then you have these, I will call, non-core equity investments and debt investments. Since we purchased Sandstorm, we sold Diversimet shares, we restructured the Bear Creek investments, turning it into cash and additional royalty.
We have simplified Americas Gold and Silver. We have done other things that are not that notable, but all those things take time away from the management team that is not focused on royalties and streaming, and we have gotten rid of so much of that. I think we have generated over $200 million in revenue from those actions, which has allowed us to pay down debt a bit faster.
What work do we still have to do? I think number one, we still do have that 20%+ interest in Entrée Resources. What we have said to the market is we think there may be a value-enhancing moment if Rio Tinto and the government of Mongolia can sort of resolve the issues with the mining licenses. We are sort of holding onto it right now. We are a little patient, but if we find the right opportunity, we do want to dispose of it. It remains non-core in our portfolio. The other one obviously is Hod Maden. We did take the step with the restructuring with SSR's exit to take some risk off the table. I will say the offer to get out fully would have been at a significant discount to value. We did not think that was the appropriate thing to do.
What we are now trying to talk to investors about really is, okay, it is a 15% interest on a $900 million project. We have already funded over half of our equity capital, and the rest is not very large relative to the cash flow. With respect to Hod Maden, the ideal optimized portfolio is we do not own it. We do not own the 15%. We just have a royalty interest. But if that takes some time, maybe get it through construction where we can generate more value, we may do that. If someone is interested in buying it today, call us up. We are certainly interested in having that discussion. But we are going to be a little more flexible with that investment.
I think you answered the question I was going to ask about Hod Maden, but just maybe what is the latest there in terms of where the project is and next steps?
Yeah, early stages. I think Lidya has done an excellent job from an engineering, procurement, construction. I think we're probably 25% overall progress into the project. We're probably still looking at a 2028, around there, production timeline. One of the things about that project is it's very much a civil works project, right? Tunneling and Lidya being part of the Çalık Group, the Çalık Group having all of that expertise, they were going to be the contractors anyway for much of the civil works contract. It's not as though we stepped into a project with somebody who doesn't have the experience to bring this thing into production. They've made a couple of changes with respect to the project that our technical team certainly agrees with. So far so good, very happy with it.
Okay, great. Just taking a step back and thinking about the company's capital allocation. The focus right now appears to be repaying the debt, which is, I think going faster than expected, paying a growing dividend, repurchasing shares, and of course, looking at new royalties and streams. How do you think about the balance between all of those things and specifically buybacks versus looking at new royalty streaming interests?
Yeah, I find it interesting. We got a lot of pressure at the end of last year about a share buyback program and in retrospect, the feedback we were getting was probably correct. Earlier this year, we did move forward with the first buyback program in the company's history. We were active in the first quarter at a price relative to where it is today that it was very attractive. But it's not a math problem. By that I mean, we have people say, "Well, your free cash flow yield is X and your cost of debt is Y. You should only be buying back shares. Buying back shares is a higher return than making a new investment." But when I look at it and I say, okay, the cost of debt may be lower than the free cash flow yield, but you know what?
When you pay back a revolving credit, your liquidity is preserved. If you're buying back shares, your liquidity is not. Liquidity is key in our business to be competitive for new investments. On new investments, share buybacks may be great in the short term, but if we make an investment in an asset that has a 20 or 25 year mine life and could go to a 40 year mine life, that's the long-term potential for the company and how do I look at a free cash flow a year versus the optionality on the gold price over 30 years? Those are all things that don't always factor into a math equation. I would say the preference would still be to find new investments first and foremost.
We just came through this period where people said, "Where's your growth?" If all we do is buy back shares, we are going to have to answer that question again in a few years. The buyback is formulaic in the sense that we look at our valuation at the time. How is it on an absolute basis, on a relative basis? Then we look at what are the other competing uses of capital. It may make sense to pay down the debt, increase the availability on the revolving credit so that we are positioned for new investments as opposed to buying back shares. Again, there is flexibility with respect to what management does there.
This is a good segue into the next question on just the capacity to do larger transactions. You mentioned the expanded RCF, revolving facility. Maybe talk about the deal pipeline and just transaction size, competition, willingness of base metal producers to monetize precious metals byproducts as you can appreciate because you have been doing this for a long time, that base metal companies today are in a very healthy position, right? They are looking at record copper prices, balance sheets are healthy. Maybe just touch on that dynamic and just what you are seeing out there.
Yeah. We have always said there are three purposes for, I will call them just streaming advances. There is project construction, there is M&A, and there is debt restructuring. What I always like to say is it is almost a cyclical thing. If you have got a balance sheet issue, you are not building a new project. If your balance sheet is healthy and the copper price is up, maybe that is an opportunity to build new mines.
We are always busy. I think we saw two things earlier this year that I think are great for this industry. Number one, BHP did a $4 billion transaction and what we always find is when the big guys, one big guy decides the streaming is okay. We do not mind it. I can create value from it. It does get the attention of the other diversified type. Most mining companies do not want to be the first one to do something.
That is positive. Go back to 2015, where you had Teck and Glencore and Barrick all do it, but you know what? Then it stopped. When they get interested, when the bigger companies get interested, you have got to have the liquidity to be in a position to take advantage of it, because those opportunities may not be there for the long term. I think the other thing is BHP is in Australia, and we have now seen a number of streams being done in Australia.
Australia has been a market that has been closed to the streaming business for a long time. The Australians just do not like it. They do not like royalties. But again, all it takes is one, and now I think we have got about three. So we are very hopeful, and going to spend some time in Australia that maybe there is more openness to the product.
I feel really good about the opportunity set. The competition really hasn't changed. There are effectively five of us that can compete. When you're talking about multi-billion dollars, you're talking about three of us that can really compete. That dynamic hasn't changed in years, quite frankly.
Great. So that's the inorganic growth. If you think about what's already in the portfolio over the next couple of years organically, Greenstone, Platreef, Red Chris, Fruta del Norte, Wassa, there's a number that are either ramping up or coming online, or could be expanded. Maybe of the ones that I mentioned or maybe ones that I've excluded, which ones do you think have the most potential to add to the cash flow profile for Royal Gold over the next several years?
Yeah. It's interesting that you use that long list because when we talk about diversification of current revenue, one of the other really nice things about the portfolio is we have diversification of growth. I think of the ones you mentioned, Platreef would probably make the biggest impact. But you look at, okay, Greenstone is ramping up. We're in the first full-year of the Sandstorm portfolio. We're in the first full-year of the Kansanshi acquisition, their contribution to us. You look at some of the Sandstorm assets, you're talking about expansions at Caserones, at Chapada. You're looking at all of what's been discovered at Fruta del Norte. And then maybe you go a couple of years out and you've got Hod Maden and you've got Robertson. You've got Warintza, Great Bear.
Again, we don't look to one asset and say, "That's going to generate 40,000 GEOs and that's our growth." We probably have 10 assets that may come in and make not an enormous contribution, but in the aggregate will make a material contribution to the company. Again, that goes back to diversification.
One of the areas that's been particularly strong year-to-date has been the copper and other metals revenue. I think the company's even suggesting that it could be above the top end of the guidance range. How do you think about commodity diversification? You've talked a lot about asset diversification portfolio, having diversification in the portfolio, just number of mines. What about commodity diversification? Does Royal Gold have a certain percentage that needs to be precious metals or is there a targeted precious metals exposure versus other metals?
I think the old adage was you had to be 70% gold to get the gold premium. We don't hold ourselves to any particular minimum percentage. We're focused on precious metals, we're focused on gold. Being three-quarters of our revenue in gold, another 10% of silver, that's great. That's not a bottom limit. I think we've been pretty consistent in saying that if there are other opportunities that come to us in other markets, we need to be able to understand those markets. We know base metals, right? Because we're looking at byproduct opportunities all the time. We have some background in other areas in iron ore, so we can look at that. Lithium, uranium, rare earths, we just have no expertise. We don't know what drives the market. We don't know what drives the prices. So try to stick with what you think you know on diversification.
Just like the Cactus royalty that we bought, it's probably two years ago now, we weren't looking for it. Someone called us up and said, "We have this royalty." We looked at it. Hey, we like the project. We like the location. We like the operator. Now Hudbay's come in as now the owner. That's a one-off transaction. I would just say that the copper exposure that we have, really it's not as though other than Cactus, we really went out to find it. We got Robinson as part of a package. We got Voisey's Bay as part of a package. We got the Milligan copper stream out of a restructuring of the original Milligan gold stream.
It's not as though we were looking to diversify into copper, but we want to retain the ability to have royalty interest in good assets in markets that we can understand.
That's really helpful. I feel like we've applied a lot of filters as to how the company's thinking about potential transactions. One that we didn't cover, though, is jurisdiction.
Maybe if you could touch on that, just especially because we've seen some of your peers maybe go into jurisdictions that historically they wouldn't have. Just your thoughts there.
Well, you can look at Sandstorm and Kansanshi and say, in one year, we got into South Africa, Zambia, Turkey, in a bigger way in Argentina. Again, it comes back to the diversification of the portfolio. Okay, big billion-dollar investment in Kansanshi. Okay, is that 9% of NAV or 8%? Turkey's 3%. That's part of it. I kind of like that diversification element to it. There are obviously places we're not going to go, but they're pretty obvious. I think the way we approach political risk, and I would say a couple of years ago, we were not active at all, and really, there were just some countries that we couldn't quite wrap our minds around, whether that was Cote d'Ivoire or it was Ethiopia. We just weren't comfortable making a big investment at that point in time.
Maybe we just needed to learn a bit more about those countries. But the way we approach it is political risk, we make investments that last decades. Sometimes the payback is 10 or 15 years, and you just have to understand that in that period of time you could have multiple changes of administration and policy. You look at Peru, they're what? Their ninth president in 10 years or 11 years. So what we try to look to is the culture. Is mining important to the economy? Do people understand it? Does it contribute to employment, to taxes? If you find those markets, you're better off. The thing I think we learned from Franco-Nevada's issue in Panama is there is no mining industry. There's one big mine.
When they got into trouble, there wasn't an industry there to say to the government, "No, this is what we contribute, and we're that important to the economy." It was like a learning experience for a brand-new country.
In terms of the potential, you talked about the corporate development team is very busy. There's still lots of large opportunities. One of the things we're hearing is that mining companies are still facing inflationary pressures, more so maybe on the OpEx side on near term, but even on the CapEx side, meaning that as they build new projects, the costs just keep going higher and higher. Is that resulting in more opportunities for bringing in a royalty streaming partner? Is that something that you're seeing as well?
Yeah, I would just say going back to inflation and operating costs. I feel very comfortable with where the assets in our portfolio sit from a cost curve perspective. I'm not worried that inflation's going to run away and we're going to lose key operating assets. But you actually highlight a really interesting point, right? We do well when the mining industry needs capital, which is all the time. If inflation gets into a capital budget, because we all know that when folks come out with 43-101 technical reports, whatever that capital number is, you've got to multiply it by +20%. Then you introduce inflation. Not every mining company plans for all of that. Not every mining company has the capital available to meet those needs. So, inflation that increases capital is an absolute opportunity because now the company's in the middle of a construction.
There is pressure to do something. So you might be able to get better terms than you would a company that doesn't necessarily need to do something right now. Inflation can be an absolute opportunity for us.
Great. Then just high level, post-Sandstorm, the company, as you mentioned, has a lot more growth long term. The portfolio has been much more diversified. I think, this is my perspective, that the market sometimes underappreciates the growth that is in the portfolio. Maybe just talk about how the team is communicating that to investors now, talking about near-term, medium-term, long-term growth, and just how well-received that message is.
Yeah. I think what we've tried to do is improve our disclosure. By that, I mean we had an investor day earlier this year, and for the first time the company gave a five-year outlook, and it's based on what the operators are telling us. Our team did not sort of digest it and diligence it. It's just an accumulation of what the operators were saying. I think that's key number one. That helps boil down a portfolio to where somebody can understand it over the medium term. We put together an asset handbook, and I mean, to try to take all the Sandstorm assets, diligence them, make sure that everything that they say was in the portfolio is actually effective, and put it into an asset handbook in six months was a tall order.
If you really dig through that asset handbook, there's a lot of good information. We have summary pages that help, again, digest some of the short-term production forecasts. We've changed our press release to try to put everything into regions. Maybe take a step up, help folks categorize where the revenue is coming from. We are more than happy to sit with investors, with analysts who have further questions. You want to dig through a bunch of assets, we certainly have the time. At the same time, we say we've got 80 producing assets. The top 10% of revenue generators represents two-thirds of our revenue. You don't have to get your arm around 80 assets to really understand.
It's a little daunting, but you go through a handful of assets or maybe two handful of assets, you're going to have a pretty good feel for what the company looks like.
Then just related to that, if you think about maybe one asset or a few assets that you think are underappreciated by investors in the portfolio, are there any that come to mind?
Well, yeah, it's funny. I think what gets lost with Hod Maden is how good that project is. It is a phenomenal development asset in the gold industry, but it gets clouded by the fact that we have this equity of what are you going to do with it? I was like, well, can you just focus on the quality? Because if we can get through construction, I think this thing could be really valuable. And what I always find with investors is there's always a show-me approach to things. Don't tell me Mara's going to be in production in 2031. I'll give you credit for it in 2031. We saw that with Khoemacau. It's just when we start, we make an investment, we say, this thing's going to go on much longer. Zaventem is a great example, right? We did the transaction in 2021.
The mine life went to 2026, and investors sort of threw up their hands and said, "What are you doing?" I said, "No, our geologists are telling us this thing is fantastic." Here we are today. The mine plan's now out to 2032, and our geologists still think this thing's fantastic. So I just think the future growth and maybe we need to improve in how we help people understand the potential of these assets. But anything that's in development or in the future, I find that investors say, "I'll give you credit when I see it.
I'm just cognizant of time. If there's any questions in the room, we can just pause for a moment and just wait for the mic. Oh, we got one over here.
Yeah. Thank you. When we think about the royalty and streaming sector, there is quite a number of players. I think there is a large cap like yourself and the Wheatons, and then we have Triple Flag and say, Osisko Gold Royalties. But then there is a host of smaller companies. What are your thoughts on corporate M&A for the sector?
Sorry.
Corporate M&A.
Corporate M&A.
Oh, okay. We just did our part. I am joking. The thing I always found, I spend a number of years telling investors that it is very hard to do corporate M&A because you have the larger companies that have a certain valuation premium, and then you have the smaller companies that have a lower valuation premium, and it would make absolute sense.
There is an accretive transaction for both companies if the smaller company is willing to negotiate off their current valuation. What we found for years was the smaller companies always said, "Well, when we get to be at your valuation, then you can pay us a 30% premium and we will talk about getting together." Well, that is not going to work. For years I sort of said, "That is not going to happen." Then Sandstorm Gold finally decided, you know what? I am willing to negotiate off my current valuation.
There were a number of factors within the company that I think they felt it was time for their company to be in a larger company. Do I think there should be more rationalization in the industry? Absolutely. You just have to understand, even the smaller companies, you probably have four or five CEOs that want to be the one that consolidates them. Sometimes culture gets in the way of things that mathematically probably make sense. Again, we contributed to corporate consolidation. I'd rather prefer assets right now.
Bill, maybe just related to that, maybe this is an unfair question, but just lessons learned from the Sandstorm acquisition. I think it's fair to say now that the market has digested it, they understand it. I think your team has done a really good job now of showcasing the growth in the portfolio. But at the time, there was some criticism of the transaction, negative market reaction. I'm just curious, from your perspective, lessons learned and how you think about it.
You always go back and think you could communicate some things better. We're not a very promotional company. When there are obvious drawbacks to things that we're doing, we'll say, yeah, we understand that the Sandstorm transaction looks like it's going to be short-term dilutive, but we're buying it for the projects and it's long-term accretive. I think I struggled with that communication a little bit. I also don't think I fully appreciated the views of institutional shareholders on the Sandstorm portfolio. It was a very retail-driven base. I thought people would already understand Mara and Hod Maden and Platreef, and they really didn't. Maybe we could have done a better job of explaining those assets and why we see value where perhaps the institutional investors that had ignored this thing for years just didn't quite pick up.
Thankfully, as I said, everything's going really well, so something's going wrong and we learned a lesson. That hasn't happened yet.
Yeah. Not to shamelessly plug our own research, but one of the reports we published very recently, we highlighted Royal Gold as a very attractive catch-up trade in the current part of the cycle, in part because evaluation continues to look very attractive relative to some of its peers. Again, I think you alluded to this, but the growth profile now looks a lot more clear or clearer to investors than it did maybe before. I just wanted to mention that. Then just finally, as a last question, I have been asking this of every management team, your thoughts on the commodities that you are most exposed to, in this case, gold, and maybe silver as well.
On the future of the metal? Wow.
Yep.
Yeah. $40 trillion in U.S. debt. I do not spend as much time on silver. Silver's also got that industrial component, but let's just say it is more volatile but tends to follow with gold. I just think long-term, I am really happy we are in gold. I think the fiat currency, the government debt, you are seeing the rising yields in the market. There is a potential for a real issue here, and I am bullish on the metal.
Then, if there is no other questions in the room, I am going to ask one more. Just in terms of the future of the royalty streaming kind of industry going forward, do you anticipate any changes in terms of how deals are structured or any new creative type of Yeah, maybe just different structures within the transactions and we are finding now some of the larger royalty streaming companies are almost becoming just an overall source of financing, not just for royalties and streams, but also providing debt, being there at different stages of the development of the project, providing technical expertise. It is becoming a lot more hands-on in some cases. Just your thoughts on the evolution of royalty streaming going forward.
Yeah, I would never say it's not going to change because the product has changed so much since. When Wheaton first came out with it, you remember it was like $3.90 silver plus a 1% inflation adjustment or something like that. Then silver ran up to 40, I think. So we started getting into, okay, we will do a percentage of spot. What we have found and I would say if there is one distinguishing characteristic that we like to point to, we like to think of ourselves as the creative team, where if an operator has a particular issue, we may be able to structure the transaction to meet that challenge, that goal. Where we do not do as well is where the competition is just give me as much money as you can. Plain vanilla, just bid to the highest bidder and that is it.
I think of Kansanshi, where we said, okay, if Cobre Panama is actually open, they are not doing a stream. So how do we help them if Cobre Panama comes back into production and they are a better credit quality? So we offered the two buybacks based on improving credit worthiness. So I think you will continue to see structures change just based on the unique characteristics of each situation and each operator. As for other products, we have invested debt. We invested debt at Khoemacau. We invested debt at Wassa. We got paid back on both. We are open to it. The only thing we would say is we want the stream to be the biggest long-term instrument as opposed to the equity in the debt.
It is not the preferred way we would like to do it, but if it secures the stream on a very good asset, yeah, we are certainly willing to do it. I think what you have seen over the last few decades, capital providers like banks have disappeared. The number of banks that do mining project finance is probably a quarter of what it was. So this industry has stepped in.
Great. I think that is a good place to stop. Bill, thank you very much. That was excellent.
Thank you.