Royal Gold, Inc. (RGLD) Earnings Call Transcript

Good morning. We're so pleased to host Jason Hynes, Senior Vice President of Royal Gold, who's going to tell us all about their progress and the various projects they've invested in. And without further ado, Jason, let's hear the good news.

Well, John, thanks for having us, and thanks for your support of the company over the many, many years you've been following us. As you said, on the SVP of Strategy and Business Development, I've been with Royal Gold for about 13 years. I've worked out of our headquarters in Denver. I've worked in our Swiss office, and I'm currently in our Vancouver office here. And it's a really good time, I think, to give an update on Royal Gold to introduce the company. Hopefully, there's some new shareholders online today. Our portfolio is performing really well. It's being boosted by strong commodity prices, although maybe not today's strong commodity prices, but in general, if you zoom out more enough, and it doesn't really appear to be reflected in our valuation relative to peers in our industry and where we've traded historically. So happy to walk through today. And please, John, interrupt me at any time with any questions you got, this presentation, it's probably a 20- to 30-minute presentation, but you jump in if you want me to clarify or go into any more detail on anything in particular. Just go to some forward-looking statements. I will be making forward-looking statements here today. Risks and uncertainties could cause actual results to differ materially from these statements. These risks and uncertainties are discussed in our most recent Form 10-K filed with the SEC. So please familiarize yourselves with this. So I'm not sure if the audience is going to be very familiar with the industry and with Royal Gold. But maybe just as a general comment, we are not a mining company. We provide top line precious metals exposure from a portfolio of royalties and stream interest on mines. So these are run by well-known operators. The business is high margin. It generates consistent cash flows from a large portfolio of producing mines with many more development and exploration projects also in the pipeline. In this presentation, I'm just going to cover some key attributes of Royal Gold and also the business model. Our focus is precious metals, gold, in particular. Close to 80% of our revenue is from gold. And then the balance is made up mostly of silver and copper. It's a very high-margin business. It's a predictable business. It allows us to maintain a long-standing commitment of dividend growth, 25 years straight. Our portfolio itself of producing development exploration assets is the most diversified in the sector by asset, by operator, by jurisdiction. And it's not just diversified revenue producing assets, but it's diversified in our growth pipeline as well, which means we're not relying on one or two mines or one or two development projects to make our results today or make our results in the future. Jurisdictionally speaking, our exposure is skewed to Tier 1 geographies with close to 70% of our revenue from North America. Our up -- just generally on the model, our operating cost exposure is limited, which means the margins are predictable, and we do not have very meaningful exposure to inflation, which I know is a topic of conversation these days.

Actually you benefit from inflation because if costs rise and prices rise, your revenue royalties are automatically worth more. And on the streams, your downpayment is fixed and the revenue upside is uncapped.

Yes. You're right.

So say that you benefit from inflation.

All right. Yes, you're right. I mean as long -- yes, the commodity prices are moving with inflation as they generally will, you're absolutely correct on that, John. Our market cap sits around $20 billion today. In the first half of this year, we generated over $750 million in EBITDA, and we have ample liquidity to grow and return capital to shareholders all at the same time. The portfolio has a lot of optionality in it. We do not have to invest for the organic growth that's embedded in our close to 400 assets of which over 80% are in production. So just maybe a quick overview of 2025, which was a very transformative year for Royal Gold with both corporate and asset acquisitions. On the corporate side, we acquired Sandstorm and Horizon, just under a year ago, we closed those acquisitions. Those added growth at both the production and development side of our portfolio. They added diversification, and they added duration to our portfolio, meaning sort of the average reserve life that we have in our portfolio. On top of those corporate acquisitions, we did a couple of big asset acquisitions. We did a $1 billion gold stream acquisition from the Kansanshi mine in Zambia, which is a copper mine operated by First Quantum. And we made a $200 million commitment to the Warenza project in Ecuador, which is an emerging Tier 1 copper gold asset expected to have a very long life. We've only said -- it's only been two full quarters that we've put out since we've closed those acquisitions and those quarters had record revenue, record cash flow, record earnings. And on the diversification side, which is something that is very important to our management team is really creating that portfolio effect is no asset was more than 13% of revenue. I mentioned that we increased the duration. And what that means is the weighted portfolio reserve life of our portfolio, which was -- before those acquisitions was probably 14 years is now more like 18 years. So close to 25% increase in our weighted average reserve life. We've already repaid most of the debt associated with these transactions. We've instituted and started executing on a share repurchase program, and we raised our dividend for the 25th consecutive year. So time 2025, we added scale, we diversified further, we added growth, and this was all on strategy. And maybe just keep all that in mind for when I get to the end of the presentation and talk a little bit about valuation and where we sit today. So I just want to spend a few minutes talking about Sandstorm and Horizon, the corporate acquisitions, which were really transformational and remained on strategy. Like I said, we've only had two reported quarters, but the short-term developments in the portfolio from these acquisitions have been very positive. Our strategy here in adding these companies to the portfolio was they had a very high-quality development asset pipeline. And this pipeline of assets has advanced faster than we had anticipated, and I'll talk a little bit more about some of the assets in there. But it wasn't just a development pipeline. They have a lot of high-quality producing assets that have contributed significant revenue and operating cash flow in the two quarters since we closed it. One of the tasks we took upon ourselves after closing was to simplify some of the more complicated and noncore investments that came along. Sandstorm and Horizon were sort of sister companies with interest in common. We've collapsed that intercompany arrangement, and we've unified those assets. And that was mainly the Antamina NPI royalty and the Hod Madden stream royalty and joint venture interest that we're in that portfolio. We sold over $200 million of noncore equity positions. We also inherited some nontraditional investments. In Hog Madden, a 30% joint venture interest is one of them, and we've already converted half of this interest. -- to royalties. And by the way, that mine is now under construction and 25% or so complete. There were a bunch of smaller complex investments in the portfolio, and we converted some nonperforming debt instruments at Bear Creek into royalty interests at [Carony], which is now under construction by High Liner Silver. There's been some really good -- like I kind of alluded to this, there's been some really positive portfolio developments in some of these development -- larger development assets that we acquired. And I think these have happened faster than we anticipated, obviously, boosted by strong copper and gold prices, which encourage operators and developers to move things forward as quickly as possible. Talk first about MARA, which stands for Minera Agua Rica, Alumbrera and a little bit of history here. Alumbrera was an old Glencore, Goldcorp, Yamana joint venture in Argentina, which operated for 20 years until 2018 when their reserves were exhausted. Proximal to Alumbrera is a deposit called Agua Rica, which is now a 1.2 billion ton undeveloped resource. So the concept here was you put these two projects together, you've got the Alumbrera large-scale processing infrastructure, and you use that to process the ore from the Agua Rica deposits. So Glencore has unified the ownership on this project, 100% now. And Aguarica is their next multi-decade leg of growth in their copper strategy, and Royal Gold has a very in-the-money option on a 20% gold stream. This new Alumbrera, Agua Rica combined project is expected to produce 100,000 ounces a year of byproduct gold from the Agua Rica deposit, which is what our stream covers. Glencore has been accelerating the development on it. They got [Regi] approval, which is basically Argentine large project sort of commitments to fiscal stability that the Argentine government is giving large projects. They actually received approval for that last week, and they've actually started the restart of mining at Alumbrera ahead of schedule, which is going to derisk the Agua Rica start-up. So the point here is they're going to -- there's a little bit of ore left at Alumbrera. They're going to use that to fire up the mills, make sure everything is working while they're developing some of the other infrastructure and then actually fix a few high wall issues, and they're going to use these old Alumbrera pits to store tailings from the Agua Rica or processing. So a couple of -- next step for Glencore on this project is a feasibility study update middle of next year and hopefully, a full investment decision by the end of the year and then full construction. And the critical path on this project is 35-kilometer or conveyor system to move the ore from the Agua Rica deposit back to the Alumbrera processing facilities. So we're very excited about that development assets coming online over the next few years. Moving to Platt Reef, another development asset. This is Ivanhoe's bulk tonnage PGM mine in South Africa. We received our first delivery of gold from this asset in August, just a couple of months ago, and they continue to ramp up this project with -- they're already into a Phase II expansion. It's well underway. They've completed Shaft #3, and their new 5 million tonnes per year concentrator is on track for completion at the end of year 2027. And this team has a Phase III expansion already planned to move forward. But right now, we're focused on execution of Phase 2. And maybe just to touch on some of the smaller things in the portfolio. People may know the Fruta del Norte mine, which is operated by Lundin Gold and Ecuador. We've got a 0.9% royalty on that. They've had continued production success, continued exploration success at both the high-grade gold and on some new very interesting copper gold porphyry targets. [Carony, which is a silver development asset in Peru is now under construction, and this is one of the world's largest silver deposits. This thing according to the feasibility study should produce around 10 million ounces of silver per year when it's up and running. And just some small things like I'll point to [Omai] here. This is a very exciting development asset in Guyana. They've got a brand-new updated PEA, they've got a 6 million-plus ounce resource, and they're hoping to be producing north of 300,000 ounces a year for 18 years according to that study. So as you can see, we're very pleased with the developments across this acquired portfolio that we've seen in such a short time since owning these businesses. So we provided 5-year guidance for the first time this past March and really demonstrates sort of the growth runway that we have in the portfolio. Our 26% guidance midpoint was 30% over 2025 actuals, and our first ever 5-year outlook shows an additional 17% growth from there. And this does not include material assets such as Mara, which I covered on the previous slide, 4 miles in the Cortez District, which we'll talk about in a little bit more detail later in the presentation. Hudbay's Cactus common project in Arizona, our interest in Rio Tinto's Oyu Tolgoi mine in Mongolia and the Entre Rio Tinto joint venture ground, Omai, just to name a few. So there's a lot of projects still to come beyond that 5-year outlook. And as we update hopefully update that 5-year outlook on an annual basis. Some of those projects will filter in, and you'll see that growth continue to climb. So it's the kind of -- back to [4 miles], the first time I've mentioned it, and we -- just to make it clear for everybody, we have full coverage of the [4-mile] deposit with us 1.6% gross smelter royalty, which we acquired around 5 years ago. This is the -- one of the most significant gold discoveries in a generation. It's right in the heart of the Barrick, Newmont, Nevada Gold Mines Cortez mining complex, which is where Royal Gold really built its business from the 1980s. Recently, it was a bar owned project for mile, but it was -- it has now been vended into the Nevada Gold Mines joint venture. So this is great news because it can now be advanced in an optimal manner with the rest of the Cortez complex because Cortez has a lot going on. It's got a lot of different ore types. It's got a lot of processing methodologies. And so having the flexibility to move these things forward under unified ownership is going to be great. They put out a PEA just on [4-mile] last year, and that PEA had a production range of 600,000 to 750,000 ounces a year for 25 years. So that is a very large discovery. Currently, they have 20 drill rigs on site doing infill and exploration drilling. They're planning for PFS by the end of 2028, a feasibility study in 2029, and there's a lot of permitting activities underway. And permitting in Nevada is complex and time-consuming. So this is going to take a few years to get all this sorted. But in the meantime, there should be lots of great news coming out on that project. So this is a very diversified growth pipeline that is really not dependent on one large asset, whether you're talking 2026, the 5-year outlook or beyond that. So maybe just a little bit. We've always been focused on gold, and we're going to talk a little bit about that goal focus here over the next couple of slides. Our company was started in the mid-1980s. So we've been focused on gold for 40-plus years. The strategy has been consistent over that time, find good assets in good jurisdictions run by good operators. Or as you can see here from the chart, our revenue has grown consistently and the metal mix has not really changed with gold remaining dominant. And our goal is to provide exposure to gold in a conservatively managed vehicle that investors can put in their portfolio and not worry about. Just to show that investing in Royal Gold is a good alternative for conservative exposure to gold. Our beta of 1.6 to gold shows excellent leverage. So that basically what that means is for every 1% move in the gold price, our stock has historically moved 1.6%. And conversely, we are far less sensitive to movements in the general markets with only a 0.6 beta to the S&P 500. And you can look back 20 years since the GDX was formed. Our share price has outperformed gold, the GDX and the S&P 500. So we've been a very good long-term investment in a volatile commodity. So a little bit more about the business and our margins and our dividend growth and return of capital strategy. The business is high margin and very scalable. Production volumes and commodity prices can fluctuate, but margins are high. They're stable and predictable, and there's very limited exposure to inflation as you and I traded thoughts on a few minutes ago, John. On a trailing 12-month basis, that EBITDA margin has been 83%. And importantly, our cash G&A is just 3% of revenue. So that's what it cost us on a cash basis to run this business every year. These costs are low. They're mostly fixed and hence, inflation to us is not a risk to our business and to our margins. Our head count is very low for the scale of our business. We have 39 employees managing a company with a $20 billion market cap and over $1 billion a year of operating cash flow. Our team is focused on identifying and negotiating new acquisitions. We spend a lot of time monitoring existing operations from a technical, financial and legal perspective as well. make sure that we understand what it is that we have and what it is that we're getting paid on. We don't have to have 1,000 people that are needed to explore, build and operate mines. Our partners do that for us. And this is what makes it a very scalable business. We can increase our volumes without material increases in our G&A -- cash G&A costs. Return of capital is a key strategic objective for us, and it's one of the attributes that makes us unique among other gold investments. We've paid a growing and sustainable dividend since 2000, and we've increased that dividend every year since 2001, despite volatility in the gold price. We've paid out over $1 billion of dividends in that time, all while maintaining a sustainable payout ratio. And we're the only company in the GDX that made an increasing dividend since the index was formed in 2006. And we're the only precious metals company, not just streaming a royalty company, but precious metals company that's in the S&P High-Yield Dividend Aristocrats Index, which recognizes that sustainable dividend growth. over multiple decades. Our Board reviews our dividend every year in Q4. And earlier this year, for the first time the Board approved a share repurchase program of up to $500 million, which we now have as an additional capital return tool, and we've started executing on this already Diversification has been a key strategic goal for us for years. We are portfolio managers, and we don't want to worry about nor rely on any one or two assets to sustain and grow our business. It makes it much easier for us to sleep at night as managers and investors and hopefully, makes it easier for investors to make an investment decision where they can just set it and forget it. Our portfolio does span the globe, but it is very much weighted towards lower risk and mining-friendly jurisdictions. It also spans the various stages of mining project development. We have north of 360 assets, 80 of them producing, 30 of them in development and -- greater than 250 of them at an earlier stage. And it's not surprising to see sort of a barbell curve like that's where you got a lot in production a lot on the exploration side and fewer in development just because projects -- once they go into development, they only spend a short time there before they move up to the production phase, hopefully for a long time. Organic growth comes from the development and exploration stage assets that advance to production, but it also comes from extensions and expansions at existing operations and strong commodity prices are a good tailwind for that I've mentioned already our commodity focus is gold, and we do have the highest gold revenue percentage of our large-cap peers with the balance made up of silver and copper, both metals that we like. Our strong preference is precious metals, gold, silver, secondary preference for PGMs over base metals, but we entertain high-quality, long-life based metal assets, particularly copper assets when the opportunity presents itself. I've mentioned that we are geographically diverse. North America has been the focus. We do invest in new jurisdictions from time to time. But when we do, we do significant due diligence. And we really have a preference for countries with both a strong rule of law and an established mining industry. Risks do move around over time. and we use diversification to manage that risk. But an established mining industry is an important component because you're going to go -- some countries, you're going to go through rough times, rough political times. But if mining has been a big part of the sort of economic and social fabric of our country, they understand the value that it brings, and it will usually come back around to the positive side. On a net asset value basis, this is the most diversified asset portfolio in the sector. of our top 10 assets, 8 of them were producing revenue. Two of them are in development. And of the 8 that are producing revenue right now, 5 of those have expansion or extension projects underway -- on the right side, our operating partners are best-in-class. They are large, well-capitalized, experienced mining companies -- over the past few years, we've added First Quantum to this list, Glencore, Rio Tinto as well. And sometimes you'll see good projects move into stronger hands over time through M&A. So in the past, when we've helped smaller companies or private equity companies build projects. Over time, those have moved into larger hands, and we see that in many of our investments and Co-macauis a good example of that, which was -- we sponsored a private equity company to build that project, and it's now owned and operated and being expanded by Min Metals group. This portfolio to us is the most important part of our business. It reduces our exposure to single assets, single operators, single jurisdiction risks. And like I said, helps us sleep better at night. And this is very important in our view for generalist investors, who can buy a portfolio instead of spending time reviewing asset details, they can just trust that there's a high-quality diversified portfolio that they're investing in without spending too much time having to evaluate assets one at a time. I know, John, that makes your job a little more difficult sometimes. We'll just talk a little bit about the limited operating risks associated with our business models, just for those who aren't familiar with it, I won't spend too much time on it, though. We provide gold exposure with reduced risk. And listed here are various ways you can invest in gold and how we are positioned relative to those other options. So we provide upside exposure to gold. I mentioned our 1.6 beta. We provide optionality with a diversified portfolio of assets that are in production, development and exploration and evaluation. And we provide a dividend. And all this is while reducing downside risk through diversity and without direct exposure to operating and capital costs. So on one end of the spectrum, you've got physical gold, which does not provide any alpha or a dividend. And at the other end, you've got mining companies, which have exposure to operating and capital cost risks, which can expose them to greater inflationary pressures. There's the perception that our business model does not provide leverage to gold. But like I said, that 1.6 demonstrates it does. It might not provide the same operating leverage that you see from a lower-margin producer, but our financial results demonstrate that leverage to gold.

So Jason, in some cases, it could be argued the royalty companies have better or more leverage than a producer because when the gold price rises, the CapEx costs go up, the operating costs go up, you get higher taxes, expropriation, wage hikes. iHealth Finance and Idaho exploration project in the spring and for the Diamond row contractor, the fourth rework. The first 3 didn't. Then the poor guy flood in Missouri in August and bought 2 diesel engines for the RC rig that didn't work from a different contractor. And now he's got to pay 2027 in advance for them to buy new equipment. And when the damn thing breaks down, he paid the workers anyway because if you don't pay the drill crews, those guys walk when the side of a bit breaks down, excuse me. So I believe the royalty companies have better leverage than the mine operators. My clients don't always understand but you guys have less problems.

Yes, we definitely have less problems. And perhaps what I was saying like in the strict definition of operating leverage census when you got those lower margins that moves in the gold price can have a -- but you're absolutely right in terms of our exposure to gold and how that flows through to our financial results. And definitely on a simplicity perspective, our operating partners do amazing, very hard work for our benefits. So this is -- I mean, this slide talks a little bit about it. So on the right, you can see our costs are low and either fixed or they're actually tied to metal prices. And those are prices that we make upon delivery under our stream structures. So margins expand as the metal price increases, whereas on the left, you got operator margins, which are lower. Like I said, does provide greater operating leverage in the strict sense when the gold price moves, but it cuts both ways and leaves them exposed to inflation as we see in various corners of the economy today, which eats into margins and makes them margin is much more difficult to predict. This is a simplistic comparison of the cost structure between a streamer and a producer showing the various inputs that are exposed to inflation. Producers have labor, input, energy, consumables, et cetera. And many of these increase when commodity prices increase as you referred to, John. And energy is a key one these days as diesel prices have sort due to various global issues. And diesel is obviously a very key input into the mining process. On the rural gold side, our inflationary exposure is limited to G&A. We've got salaries, service office rents, not typically subject to material short-term increases. And so anything that impacts costs impacts margins, and we have limited exposure to it. So spend a little bit of time talking about where Royal Gold sits in the sector, in the royalty and streaming sector, and we like to refer to ourselves as a sitting in the Goldilocks position. We are large enough to compete but still small enough to show growth. We can compete for the largest transactions. We did $1 billion acquisition last year, as I mentioned, with First Quantum. And we have significant cash flow and access to capital as demonstrated by those transactions that we were able to complete last year, both on the asset side and the M&A side. Well, that M&A transaction was a share deal, there was a significant amount of debt that we had to pay off for Sandstorm, and we did pay cash for the Horizon acquisition and less than a year in a year, we've paid off $900 million of that debt. So we can get lots of cash flow. We can do big deals, but still those small and medium-sized transactions they still move the needle for us. They still add to the growth, and it's visible. And really less than we've been monitoring, obviously, this industry a long time. And looking over the past 20 years, less than 20% of the transactions have been over $300 million. So the bulk of the growth opportunities in this sector are in that sweet spot for us. And so this Goldilocks position really allows us to compete against our peers across the size spectrum, whether it's the bigger guys for the bigger deals, the medium-sized guys or the medium deals and for a high-quality asset that we want exposure to, we'll go down market and do some smaller assets because we believe that those could add a lot of leverage in the future. Growth and optionality in the portfolio here, John, talk a little bit about this. Growth depends on successful capital allocation strategy, and our strategy has remained very simple and consistent over time. First, we reinvest in the business using nondilutive financing, whether that's cash from our operations or we use our revolving credit facility. Secondly, we always want to maintain a strong balance sheet and have access to liquidity in order to be ready to fund the next leg of growth. When we do a deal, we want to be ready to do the next deal if a high-quality attractive opportunity comes across our desks. And then third, we want to continue returning capital -- we have to be flexible as market conditions change, but our principal framework is to target double-digit returns on new investments. and we want to generate growth on a per share basis. When we do use debt to fund acquisitions, if operating cash flow isn't quite enough, we repay it quickly. And we want to continue growing the dividend as we've done for 25 straight years. We added a couple of new tools to the toolbox. Last quarter, a $600 million accordion feature to our revolving credit facility, which gives us access to greater liquidity in times when the transaction pipeline looks strong as it does right now. And as I said, the Board approved our first ever share buyback program up to $500 million. And we're going to use this to address when we see value disconnects in the market, and we were active on this in Q2 as we announced at the end of that quarter, and we'll give updates on that program with our quarterly results. So what's our track record of actually implementing this strategy over the past 25 years. Here's a few stats that I think, demonstrated. So since 2000, our revenue and our cash flow have grown significantly, and there's three key aspects to our growth. So our G&A has increased at a far lower rate. So revenue and cash flow growth are far exceeding increases and G&A expense, and that's back to that scalability point I made earlier on the number of people and the amount of G&A it requires to run our business. Secondly, our revenue growth, while it does benefit from the increase in metal prices is not dependent on increases in metal prices. We've added production volume through acquisitions. And just as importantly, we've seen organic growth from within the portfolio, which was bought and paid for long ago. So that comes in at no additional cost to our shareholders. We mostly financed our growth internally without a significant rise in the share count. We did issue 18.5 million shares last year to complete Sandstorm, and this was the first equity issue we had done since 2012, so my entire 13 years in the company. And even with these new shares that we issued, we still have the lowest absolute share count of any company in the GDX index. So we just want to focus on delivering sustainable per share growth for shareholders. We want to grow production, and we want to grow revenue, we want to grow cash flow and we want to be disciplined about increases in costs and about issuing new shares. So I mentioned that our goal is to achieve double-digit returns on our investments, but this double-digit return potential is not always evident on the day of the announcement. When we're evaluating investment opportunities, our extensive due diligence process takes a bottoms-up technical approach using a team of mostly in-house technical experts. And we'll supplement that team of in-house experts with trusted outside advisers when we want a second opinion on certain matters that may be unique to a particular investments. Key areas of focus in that due diligence process are exploration potential, the potential to convert resources into reserves and the potential for future upside in production with us throughput increases expansions and whatnot. And these are very key factors in the evaluation process because that's the stuff that is going to move us into the double-digit return territory. But when we announce deals, research analysts and shareholders don't always have the benefit of this detailed review, and this is often proprietary information to the company that we're reviewing, so we can't release it all. But -- so street estimates that you see of returns on announcements are often low and it may take years for the upside to become clear and to filter into analysts, research analyst views and shareholder views. And I think this slide illustrates that point. This uses Scotia research and their view of the internal rate of return, their estimate of the internal rate of return at the time of the announcement in the blue bar versus the return estimates that they update on a regular basis. So this was updated end of 2025 or mid-2026. So as you can see, as time has passed, expected returns have increased with production expansions, mine life extensions, and these are driven by reserve resource growth, reserve growth. And again, this comes almost uniquely at -- with no investment from us. And we're not cherry picking assets here. These are 6 of our principal assets. Strong commodity prices can be a tailwind to these returns, and they -- not just by driving higher revenues from the metal that we receive, but also they allow operators to reevaluate uneconomic scenarios. They allow them to convert resources to reserves because they can use lower cutoff rates, and it encourages them to explore. And almost as importantly, high commodity prices, they provide that excess free cash flow that operators need to invest in that growth because that investment isn't coming from us. It's coming from the operators and see here just some examples here. Kansanshi has been in the portfolio less than a year and the view on returns has nearly doubled, obviously, not a lot has changed in the underlying operation there that is largely driven by a pretty significant increase in commodity prices during that time. Khoemacau, we've had the benefit of significant increase in the silver price, but MMG is undergoing a material expansion at that project, which is going to benefit us. Just a few examples. Pueblo Viejo also undergoing an expansion Mount Milligan announced mine life extension last year, putting our largest asset back into the 2 decades plus. And Cortez is Cortez is Cortez here, and it's just been an amazing asset for us over the decades in decades, and we always look to add to it when that opportunity arises. Here, we are just looking at that same story, but in a different way, looking at it from a net asset value perspective. So this compares the investment that we made to acquire the asset, how much we had to spend to buy the stream or royalty and that's in blue at the bottom. And it compares it to the amount of revenue we've already pulled out plus the remaining consensus view of value. So -- the goal here is the bottom line always stays the same. We've already made the investment. The goal is to grow the top line through revenue and by adding to reserves, adding to resources through expansions through commodity price increases here. So you can see here all these assets, the revenue plus the expected view of future value is significantly higher than the investment that we made. Kind of referred to extensions to mine life, which provides a double benefit here. You can see in the dark blue on the left, the mine plan, which is based on the reserves and in the lighter blue is incremental production, and this is just an illustrative chart. But what it does is it provides longer exposure to the gold price as well. It doesn't just provide more production and revenue. That longer exposure to the gold price when you extend mine lives, which increases the odds of us hitting multiple bull cycles across an asset. And as we all know, this is a bit of a cyclical business. So the longer you're in the market, the more opportunity you have to hit those -- the high parts of those cycles and reap significant returns. Operators, we're always looking to extend asset lives and try to capture incremental revenue. near-mine exploration expansions will generally produce greater returns than over greenfield investments for them because they can leverage existing infrastructure and permitting requirements are usually less burdensome compared to greenfields. And just to give you a sense of how extensive our portfolio is in 2025, there was over 2 million meters of drilling across properties in which we hold and interest. That would include exploration and brownfield drilling. So this is all drilling, which will create value for Rogol shareholders, whether it's near term, medium term or long term. and we do not have to fund capital or invest further to get exposure to any of that upside. So this is growth that we don't have to pay for and won't have to pay for. And this optionality really is the most important part of our business model and is really what drives the premium valuations, the royalty and streaming companies seem to get in the markets. So we can get into a little bit on some detail of some actual assets here, John. And I think we have a development pipeline that is the envy of the industry. And this slide is really just a sampling of some of the assets expected to ramp up or come online in the next 5 years. This organic growth pipeline has significant catalysts, which are going to extend well into the next decade. And really, this is just a sampling here. I mean I'll just pick a few here. Back River project or the Goose project as B2 calls it up in Nunavut is ramping up, and we will eventually be a 3% -- 3.3% royalty interest once they hit certain thresholds in the next year or so. I've talked a little bit about Platreef already. Look at Robertson here, another mine in the Cortez district here. This is an open pit oxide mine first production expected next year, and that's going to add 250,000 ounces a year to the Cortez District for quite a long time, and we have a 2.6% interest over that specific part of the Cortez District. Hod Maden, which we haven't talked about a lot yet. There we have royalty interests. We still have a 15% joint venture interest. And we also have options on the royalty interests that are held by SSR Mining that they received back when they exited the project and transferred the operatorship back to Lidia. Great Bear, Kinross' flagship project in Red Lake, where we have a 2% royalty. We're in size our new investment in Ecuador that we made last year, and we've forwarded $150 million of the $200 million total investment there. That should hopefully come online later this decade. MARA, we've talked about Fourmile, Cactus. Welcome, which is a privately -- in Argentina in private hands, outgo in the early 2030s. Again, this is just a sampling. Caroni now under construction. -- and expected to produce 10 million ounces of silver, where we have a 2.75% real changes. I've talked a little bit about Oma. And not even listed on here. We got Thesis Gold's Lawyers Ranch project in British Columbia that has strategic investments from AngloGold and CENTERA, and we have royalties covering 0.5% to 2% of the various parts of that project. people might be familiar with i-80 Gold and their portfolio of development assets in Nevada. They've raised over $1 billion in the past 2 years to advance that portfolio of assets, and we have royalties across all of them.

That's a good question. Franco invested $250 million for 1.5 stepping up to 3% royalty on IA gold you already had royalty relationships there. Were you outbid?

John, there was a -- I mean, we don't talk about specifically how we think about things, but -- we have very significant royalty interest there already at such a low cost basis that, to us, the risk reward of having somebody else's money come in and advance those projects rather than us having to buy royalty interests at a much higher gold price commodity price, we just felt that the risk reward was better to let somebody else's money come in and advance our royalty interests.

So you sent Paul a fruit basket?

And they're an amazing -- that's an amazing company. What they're doing in Nevada. It's very complex. They've got multiple projects going on, multiple processing methodologies and we're really excited to see what they can turn that -- those assets into great management team there. But yes, we did send them approved basket. I'm just going to conclude on this slide, John, that we can just kind of jump into questions and talk about specific assets that you want to here. But this is really the opportunity for investors in rural gold right now. So hopefully, I've demonstrated that the underlying business is performing well. We've got strong cash flow. We've got a good organic growth pipeline. We've got a clean balance sheet. We've got a management team that's focused on continuing to execute on a simple strategy. And the opportunity is that our relative multiples are showing significant price and at discounts to our large cap peers. And our cash flow multiple is lagging both our large and our small-cap peers. And we obviously have to ask the question why? And I think what we believe internally is we need to demonstrate that our investment thesis was correct. We did $5 billion plus of M&A last year, and we've only put to complete quarters out with both Sandstorm and the Kansanshi stream under our belt. And the market has not yet absorbed the scale and growth potential. -- of the portfolio, but the numbers are already in

I had a 2016 research report on Sandstorm when they had only a royalty before they bought Marianas who had the 30% working interest mode. And I was forecasting in 2016 the hot bottom output in 2020 revenue. So now we're hoping for 2031. So there's nothing wrong with your communication. I think that some of the properties had a couple of bumps in the road and the investors will pay for it when the cash is slow.

Yes. And maybe just on Hod Madden, in particular, that's now under construction. And Lidya is telling us late 2028 for first store. I mean we've funded equity into it. The company is looking to do some project finance to kind of close out the build. And we're very, very excited -- that's a very attractive project. Turkey is one of those countries that's new to us, but it's one of those countries that has a very long history of mining. They understand the value of mining to the economy to society. And having that project in the hands of a well-known local partner with a significant construction experience, we think is going to be very positive. And things are underway there, and we're heading there for a site visit in November art visits.

Too conservative on that.

I hope you are, too, John. But you're right, listen, things take longer, right? I mean I think that you can look at the same thing with MARA. I mean it's always difficult, especially big companies like Glencore as to when they're going to pull the trigger on significant investments. I mean MARA is still a -- it's a brownfield, but it's still a $4 billion to $5 billion incremental capital to get Agua Rica into production. It's not always easy to get the time right on these assets, especially when you're acquiring them when they're at an earlier stage. But we're getting pretty confident on the time line on a lot of these things now. So this valuation disconnect, John, is really it's recognized by certainly become recognized by the market. It's definitely recognized by a number of research analysts, just cherry picking 1 RBC has us designated as a top 30 global pick across there -- this is in mining. This is across their entire global coverage universe. So it's starting to become recognized. And -- we are just very well positioned within a strong commodity price environment. Our portfolio has the scale. It has the diversification. It has the duration. It has growth -- it has a strong balance sheet. It has the cash flow necessary to contemplate more accretive acquisitions. And we'll continue to grow that shareholder return strategy, and we're just committed to being patient -- we're going to take a long-term approach to value creation, and we're going to work hard to ensure that the market has the information it needs to close the valuation gap. And I think as we continue to put out quarters, the next few quarters with the pro forma business with all these assets combined and continue to give asset updates. I think that will all come into focus for the market. And closing that valuation gap is a really big opportunity for current and new Royal Gold shareholders. And this slide here just kind of shows where we are trading relative to where we have traded historically. So this is our view that we should trade at or close to the -- our larger cap peers is it's borne off of history, and we've always traded perhaps a lower cash flow multiple historically -- and that, we believe, was associated with the limited duration of our portfolio, which, again, like I mentioned, we fixed that with these acquisitions over the past few years with that average reserve life now approaching 2 decades.

Some of the large cap gold stocks are at historically low multiples because people didn't believe the gold price or maybe don't -- still don't believe it, even though it came down over 1,000 more.

Yes. Yes. Like I don't like to look at the gold price.

And it's a tough comparison. If you could bear yourselves to Wheaton and Franco, it's easy to achieve because they're so expensive.

Yes, that's right. And I think if you look at our portfolio, the quality of it, especially the diversification effect that we do not rely on a single asset for our revenue. We do not rely on a single big development asset for future growth. It's just a very diversified portfolio. And that diversification strategy. I mean it's just a regular portfolio management approach, but we've seen it in the industry. We've seen the issues that happened at Cobre Panama. And that asset is one that we covered it back in the day and would have been happy to have in our portfolio one time, but it just goes to show you what portfolio concentration can do even for super high-quality, large companies. And every one of our peers in the space has one of those assets, whether it's Salobo or Malartic or Triple Flag North Parks in Australia, everybody's got that one big asset, and we have a real diversified portfolio. And so mining is a risky business, and things do happen. And if and when they do happen, it should limit the downside to us.

Jason, there's a slide you don't have that encourage all the royalty streaming companies to have. In addition to not having CapEx and OpEx, you also don't have reclamation liability. At the end of '23, BHP, Rio and Vale each had $17 billion to $20 billion reclamation accounts, which were much bigger than their debt. That year, Newmont ended the year with $8.6 billion of reclamation. About $5 million of it is Yanacocha. And part of the reason Newmont gave away or sold properties was to reduce the reclamation account -- but it's actually as big a deal as not having CapEx do not have reclamation liability. And those things always get bigger. -- because the requirements get tighter.

Yes, you can come back to this slide and you can think about the producers on the right there, those are sort of their cash costs. If you extend that to sort of the what they call the full enchilada all-in fully loaded sustaining capital cost. And if you think of every ounce of gold or a pound of copper you produce and you got to set aside some money future money for reclamation. That absolutely tells an even better story for us. It's a good point.

Jason, sometimes when I studied basement or industrial companies, Earnings per share is a little bit abstract because sometimes there's a gazillion shares. And I would calculate cash flow positive or negative per day. And that helps you understand whenever business is good or bad in U.S. Steel or General Motors is going out of business or not. So I just want to explain where I'm coming from. So in the first half of this year, Royal Gold at $3.5 million of after-tax operating cash flow per day Franco of 5.5 and Wheaton 8.5 million a day. I wish I had money like that to spend. So when you're a small team is sitting around the table with $1 billion to reinvest every year or distribute to shareholders, how are you going to find all those good opportunities?

I think the only thing that we have is the history of being able to find those good opportunities. And there's been times when that cash balance has really started to grow, and the opportunities weren't there, and we're not going to be desperate and deploy capital just because we have growing capital. And at that time, every -- it's happened before, we've dusted off the old memo on incremental shareholder return, get that memo up, polish it up. And then usually, as soon as we do all the hard work to publish it up, some great investment opportunities have come along. And allowed us to deploy that liquidity into where we believe its highest value for shareholders, which is new growth. It is a risk for the future. I'll tell you the business development pipeline right now, John, is one of the strongest I've seen in the industry in a long time. The royalty and streaming structure has become such an accepted form of financing now that we basically get to review almost every investment opportunity that a mining company is making. They are going to consider streaming and royalty as one of the tools. And every CFO that's presenting to their Board, I don't think they can get away without presenting whether you're looking at debt, whether you're looking at equity, whether you're looking at using your strong operating cash flow you need to contemplate a royalty in a stream. And it's very easy for them to do because we are able to work so hard and they know we have a pool of capital that is accessible in as little as 6 to 8 weeks of due diligence and documentation. So I'm confident right now that there is enough opportunities not just for Royal Gold, but for the sector as a whole really for high quality. Now listen, you've got to take a view on commodity prices. You've got to take a view on gold, you got to take a view on silver, on whatever you're investing in. But our jobs, we see our jobs as putting our shareholders' money to use in high-quality assets that are operated by high-quality mining companies in high-quality jurisdictions, within the context of the commodity price environment that we're in. And that's what we will do and that's what we will continue to do. But we will be patient. We will not do a deal just because we feel like we have to do a deal because the cash balance is growing. If you look at our transaction history, which I think I've got on a slide and here somewhere, if you bear with me, you can see here that we have years where we deploy very little, your '23, '24, '16, '17, '18, and it's the years like 2015 and 2022 and 2025, where we see opportunities, whether it's within the commodity price, whether it's high-quality assets, whatnot, where we've deployed a significant amount of capital, which has created tremendous value for shareholders. And 2015 is really the year that built the modern streaming industry for Franco, Wheaton and Royal Gold win. Balance sheets were extended among large especially copper players but also some precious metals players -- and that's when we had the opportunity to do business with tech. That's when we had the opportunity to buy a stream on Barrick's and Newmont's Pueblo Viejo mine, which is in 1 million years, did we think we'd have the opportunity to buy a stream on 1 million-ounce a year gold mine from a gold producer. I think that was we've seen companies be a lot more cautious with their balance sheets since that time. And the opportunities have come in different ways over the years. third-party royalties are always a little bit of a wildcard opportunity. You never know when a third-party royalty holder is going to want to sell a royalty. That's where we got our extra Cortez exposure, including the 4-mile exposure back end in late '21, early '22 with $729 million investment there. And that's just because there was a couple of big royalty holders that decided that the time was right to sell. So as you can see here, we're going to be patient. We're going to invest when the opportunities are good, and we're going to make sure we've got a strong balance sheet to do so. while all the while making sure that we continue to return some of that money to shareholders.

Earlier this year, Wheaton did to $4.3 million silver transaction on Antamina. That was a great advertisement both for Wheaton and the whole sector. What is the biggest transaction, Royal Gold has been asked to do?

Well, our balance sheet is in pretty good shape, John. I don't think it's in $4 trillion cash payment on one day shape. I don't think we would want to extend ourselves to that point. We are comfortable going to 3x net debt to EBITDA. So if you just pick a $1 billion of EBITDA just for our mistakes even though that significantly underestimates our current EBITDA. But -- so could we do a $3 billion deal using our balance sheet, we could -- but that's not -- the balance sheet isn't the only thing that we look at, John. We're looking at concentration. We just spent years diversifying our portfolio so that no single -- so we're not hanging our hat on any single asset. And we really don't want to kind of recreate new concentration risk by doing a huge deal and creating a new 20% of revenue or 20% of NAV asset in our portfolio. So that is a factor that we will keep in mind as well is really concentration and that's concentration in a single asset to a single operator in a single jurisdiction. So I don't want to tell you what -- I can't tell you exactly, it's all dependent. Is this a cash flowing asset? Is it a high free cash flow yield asset? Is it a long-life asset. Just just to tell you that there are some large transactions in the market right now, and we feel like we have -- if they're the right ones for us that we have the balance sheet to be able to execute them.

So Kansanshi has been your biggest single 1 at $1 billion and acquiring the 2 companies last year was $4 billion. I'm your friend -- when I'm looking at the slide you have, and I'm going to ask you about all the old deals that have bumps in the road.

Sure.

So -- when you went into Euromax, Ilovitza in North asadonia in 2014, I think I calculated that there were 13 different flags over Scope since 1870. And your guys your polite. You guys said that you consulted with attorneys in North Macedonia, and I left my ass off wondering what the tradition of law was in North, whether it was hit work, stalling the auto and Turks or what. So is that project proceeded?

So maybe just a little bit of the history there. So that is a while ago, that was 2013, I believe?

2014 in your slide.

Yes. And so we -- that was a new jurisdiction for us. We definitely saw some risks and some uncertainties around the time line. I don't think anybody thought it was going to sort of take this long. But -- our approach to that, John, wasn't ...

It's not build, right?

It's still not built, yes, I can give a quick.