Q2 2022 Royal Gold Inc Earnings Call
Good day and welcome to the Royal Gold six month transition period in December quarter, 2021 conference call all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I would now like turn the conference over to Alistair Baker, Vice President of Investor Relations and business development. Please go ahead.
Thank you operator, good morning, and welcome to our discussion of Royal Gold's six month transition period.
Remember quarter 2021 results.
Event is being webcast live and you'll be able to access a replay of this call on our website.
Speaking on the call today are bill heightened bottle, President and CEO , Paul Wagner, CFO , and Treasurer and markets, though executive Vice President and C O all of Royal Gold Corporation.
Dan Breeze, Vice President corporate development of RG AG and Randy Schatzman General Counsel are also available for questions.
During today's call, we will make forward looking statements, including statements about our projections and expectations for the future.
Statements are subject to a restaurant uncertainties that could cause actual results to differ materially from these statements.
These risks and uncertainties are discussed in yesterday's press release, and our filings with the SEC.
We will also refer to certain non-GAAP financial measures, including adjusted net income adjusted net income per share and adjusted EBITA margin reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are available in yesterday's press release, which can be found on our website.
I'll give you an overview of the transition period in December quarter, followed by Mark with an operating update Paul will then provide a financial update and bill will wrap up the call with some closing comments. We'll then open the lines for a Q&A session.
I'll now turn the call over to Bill.
Good morning, and thank you for joining the call.
As of December 31, we closed out a six month transition period from this point forward, we will be reporting on a calendar year schedule.
I want to thank our team for the hard work to complete another audit just six months. After the last while also incorporating our first property disclosures under the FCC's New S. K 1300 reporting guidelines.
Turning to the results for the six months period I'll begin on slide four.
In summary, we posted very solid results.
Flat to declining precious metal prices.
We still posted a 12% increase in revenue to $343 million.
Included excellent results from our royalty portfolio.
Our volume of 191300 gold equivalent ounces was an impressive 18% above the six months ending December 31 2020.
Yeah.
Operating cash flow was very healthy at $249 million up 28% over the same period last year and earnings were $138 million or $2 10 per share.
After adjustments earnings were $2 11 per share.
A larger percentage increase in cash flow then revenue is indicative of the efficiency of our business and our ability to leverage our low cost base that is largely insulated from the effects of inflation.
We raised our dividend in November for the 21st year in a row and on January 31, we were added to the S&P high yield dividend aristocrats index.
Index is made up of 114 companies that have consistently increased our dividend every year for at least 20 years.
We're the only precious metals company in this index and we're pleased to be included alongside the likes of well known companies like IBM and Nike.
We used our operating cash flow to repay debt and at the end of December we were debt free with approximately $1 2 billion of available liquidity.
We also added growth to the portfolio during the period with the previously announced acquisitions of the Red Chris royalty and Nx Gold mine stream and increased our silver stream rate had come account I'll, let mark give a more detailed update on coal Macau in his remarks.
Finally, I'd like to welcome Martin Raffield to our team and a new role as Vice President of operations Mark.
<unk> has extensive experience in operational corporate construction and consulting roles and we got to know him. When he held senior project development and technical roles at Golden Star and through his participation in some of our due diligence team efforts after he left Golden Star.
Martin skills and experience will further add to our technical depth and we were very pleased to welcome him to the team.
With that I'll turn the call over to Mark for an update on our portfolio.
Thanks, Bill I'll start on slide five with some comments on our transition period production.
We provided our initial guidance for the six month transition period in early August and raised guidance in November to reflect the record production we.
We reported for the September quarter strong performance again in the December quarter of 93900, <unk> allowed us to reach a 191300 <unk> for the period exceeding the top end of our revised guidance range of 180000 to 190000 G E. L F.
As Bill mentioned most of this outperformance was due to production volume rather than metal price impacts as he owes were approximately 191000 using the same metal prices, we used to set our guidance.
Turning to slide six I'll provide some commentary on the December quarter.
I'll note that we're reporting before many of our operating Counterparties. So I don't I won't be able to provide specifics on all of our interests.
Overall revenue was $169 million with volume of 93900 Geo's.
Royalty segment contributed $57 $9 million in revenue an increase of 14% over the prior year quarter, representing about 34% of total revenue for the quarter. Notable revenue increases were attributed to Cortez with higher production following recovery from a pit wall.
Stability issue that impacted the first half of 2021, and two voice East Bay due to higher base metal prices.
We also had a large revenue contribution in the quarter due to a true up of previous period underpayments from Louisville.
Increases were partially offset by lower revenue from our south lever to incur and I'll be net profits interest royalty, which was mostly due to the timing of revenue recognition.
We recognize the NPI revenue in the September quarter of 2021 and in the December quarter of 2020.
On the stream. So I had revenue of $111 million was up about 3% from the prior year quarter.
New revenue from cool Macau, and Nx gold was partially offset by lower sales from the Mount Milligan copper stream.
A glib will be a whole silver sales and deliveries were lower due to continued recovery issues with the silver circuit.
Recoveries continued to track your minimum recovery levels prescribed in the stream agreement can we saw further delivery deferral of approximately 41000 ounces during the December quarter.
The balance of deferred silver is now approximately 459000 ounces, we expect silver recoveries.
We'll remain highly variable until the expansion project is completed and bottlenecks associated with the silver circuit in silver recovery can be fully addressed.
This remains a cash flow timing issue from our perspective, we don't expect it to have any lasting impact on silver revenue.
Turning to slide seven I'll give an update on uncool Macau in Botswana.
K C. M reported continued ramp up of mine production since our last quarterly call in November but progress has been slow due to impacts from COVID-19.
Botswana was hit hard by the Omicron variant in December and comb Macau was no exception.
December approximately 25% of the operator workforce, including about 40% of the highest skilled operators were unavailable to work due to COVID-19 protocols, which affected about 40% of the mining shifts.
When combined with shortages of skilled operators with typical operational issues related to startup starting up a mining operation and a new ore body.
<unk> in the quarter was slower than expected.
Fortunately the worst of the homework around wave appears to have passed currently only 2% of the mining workforce is self isolating and January production was approximately 40% of the 10000 tonne per day target.
K C. M has extended the ramp up period and is now expecting to reach full production by the fourth quarter of 2022, which is about one quarter later than the schedule. We gave you on our last call.
While we're not providing detailed ramp up forecast for the next quarters I expect operational flexibility will increase as more mining mining areas continue to open up it is worth highlighting the ground conditions are.
Or as expected or body weights and grades are in line with the resource model metallurgical recoveries are in line with expectations. We are also confident that the project has the equipment and manpower resources required to support the planned production ramp up.
With respect to <unk> financial position working capital that's been impacted due to the slower ramp up in work.
Currently discussions with K C M on providing the final 26, and a half million dollars available under the silver stream.
This discussion includes RK mine finance as well as K C M shareholders, and we expect that additional support and Echo equity will be provided alongside any further scream contribution.
The aim of all parties is to ensure sufficient liquidity is available to a lot of cool Macau to reach full production levels.
In the event, we contribute the full 26, and a half million well a gold stream interest would increase to 100% of payable silver which had full production is expected to be one eight to 2 million ounces per year.
Well COVID-19 was an unforeseen challenge when development started in 2019, KC EMS management is handling the situation well and has a well engineered ramp up plan in place and we're pleased to have increased exposure to this high quality project.
Casey and provided an update on their web site earlier this week it cool Macau Dot com and I encourage you to review that information for additional detail on the project progress.
I'll now turn to slide eight to make some brief comments on a couple of other recent developments.
At Mount Milligan Centare provided 2022 production guidance of 190000 to 210000 ounces of gold and 70 to 80 million pounds of copper, which compares well to actual production of 196000 ounces of gold and $73 3 million pounds of copper.
For 2021.
They expect this production to be weighted 60% towards the second half of 2022.
Also in progress as an updated life of mine plan with an expected release in the second quarter.
Turning to Nx Gold Arrow announced year end increases in M&A resources of 32% and two P reserves of 25% and provided 2022 production guidance of 39000 to 42000 ounces above actual production of 38000 ounces achieved in two.
<unk> thousand 21.
We have also started the annex 60 project to bring the new Martini vein into the mine plan in 2024, and expect to increase and sustain long term gold production of approximately 60000 ounces per year.
We like the near term potential of Nx gold when we acquired the stream and we're pleased to see how quickly <unk> copper has advanced our plans to realize this potential.
Now I'll turn the call over to Paul for a review of our financial results.
Thanks Mark.
I'll now turn to slide nine and give an overview of the financial results for the quarter for this discussion I'll be comparing the quarter ended December 31, 2021 to the prior year quarter.
Revenue was $169 million for the quarter, a 6% increase over the prior year period.
Strong production of 93900 gold equivalent ounces or Geos, which was an 11% increase over the prior year period.
Most of the revenue increase was driven by strong operating performance as Mark mentioned in his remarks.
Also contributing to our increased revenue was the second quarter of deliveries from common count and Nx gold, which together contributed about $8 million during the quarter.
With respect to metal prices compared to the prior year quarter. The average price of gold and silver were down about 4%, while the average price of copper was up 35%.
Gold continued to be dominant making up about 73% of our total revenue.
I'll buy silver at 12% and copper at about 10%.
Cost of sales, which excludes D D N a and it's specific to our streaming segment was steady at $25 $1 million compared to $24 $9 million in the prior period.
<unk> expense was $49 $1 million up slightly from $47 $9 million in the prior year quarter.
Our DD&A expense on a dollars per G. E O basis was $523 per geo for the quarter compared to $567 per <unk> in the prior year.
The decrease in our DD&A per GE was a result of strong stronger performances within our royalty portfolio.
Earnings were $68 $2 million or $1 four per share a 14% increase from the prior year quarter.
After adjusting for a $1.5 million expense related to the fair value change in equity Securities. Our adjusted earnings were $1 five per share.
We reported another very strong quarter of operating cash flow at $119 million.
Which was a 19% increase over the prior year and was primarily due to higher proceeds received from both our royalty and stream interests.
Turning to slide 10, I'd like to make a few comments on our performance relative to the transition period guidance.
As Mark covered in his remarks, our transition period <unk> sales came in slightly above the revised guidance range due to stronger volumes within the portfolio.
Our transition period DD&A of $521 per G. E. O came in slightly below the bottom end of our earlier guidance range of 525 to $575 per G E M.
The lower DD&A per Boe, when compared to our earlier provided guidance range was largely due to the better than expected contributions from our royalty portfolio.
As most of our royalties have been in the portfolio for many years, they didn't have lower overall carrying values and lower depletion rates.
Our reported effective tax rate for the transition period was 17, 8%.
Absent the effect of discrete tax items during the period, our effective tax rate was 18, 9%, which was in line with the earlier guidance range of 18% to 22%.
With our move to calendar year end reporting we expect to begin providing one year total <unk> sales guidance.
As several of our Counterparties have yet to release their own production guidance for calendar 2022, we are not able to provide our 2022 ges sales guidance today.
We do expect to provide this guidance early in the second quarter or once all the information is made available.
However, looking forward to the March quarter for our stream segment and absent any potential operational impacts from Covid, we are expecting a slower start to the year sales with the first quarter range of 50000 to 55000 Geos.
I'll now turn to slide 11, and provide a summary of our financial position at the end of the quarter.
Our liquidity position continued to strengthen as we ended the quarter with $144 million of cash working capital of $155 million and $1 2 billion of available liquidity.
In line with our strategy of using operating cash flow to manage our debt level, we repaid the remaining $50 million revolver balance in early December and ended the year debt free and with a full $1 billion revolver undrawn and available.
We view the revolving credit facility as a key financing tool to provide accretive growth to our shareholders are.
Our business continues to generate strong operating cash flows and we are comfortable using that in a measured way and repaying that debt as cash flow allows.
With respect to our outstanding commitment under the Chromecast stream agreement as Mark mentioned, we currently have $26 $5 million available to Casey M.
Casey I'm has advised that it intends to draw the remaining $26 $5 million stream advance payment later in February .
It would then increase our silver stream interests from 90% to 100%.
As part of the Nx Gold stream, we also have potential payments of up to $10 million through 2024.
Depending on Aero copper meeting certain exploration and resource targets.
We expect that funding for either of these will be made from our available cash resources.
That concludes my comments on our financial performance for the quarter and I will now turn the call back to Bill for closing comments.
Thanks, Paul we ended calendar 2021, and a very strong position and we're looking forward to building on that strength as we start 2022.
Our diversified precious metals focused portfolio continues to perform well and our strong balance sheet and cash flow position us well to act on new opportunities.
We also anticipate positive news in 2022 from several assets in the portfolio.
<unk> is expected to continue to ramp up throughout the year and a pre feasibility study on the project expansion is expected in the second half of the year.
Our first royalty payment from Red Chris is due by the end of the first quarter.
New gold just looking to release the optimize underground mine plan study for rainy River in the first quarter, while some tariff plans to issue an updated technical report and life of mine plan for Mount Milligan in the second quarter.
Existing royalty interest in Australia, and they see first gold production that king of the hills and the initiation of construction at Bellevue in the middle of the year.
We may see higher production at Nx gold.
With further exploration undertaken and work expected to continue on the longer term and X 60 project.
And finally, the Pueblo Viejo process plant expansion is expected to be complete by the end of the year.
On the ESG front, our short term incentive compensation plan was modified in the transition period to include certain ESG factors and we anticipate releasing our first ESG report in the first half of this year.
We will be hosting a virtual investor update on April 20th this year, and we hope that you'll join US as we go into detail on these as well as other topics of interest.
I'd like to finish by coming back to something I mentioned in my opening remarks, namely inflation and how our business model Insulates us from direct exposure to the pressures faced by operating companies.
Many of which have reported recent cost inflation of 5% to 7%.
We have not seen inflation erode our margins and our 80% adjusted EBITDA margin in the December quarter of 2021 was unchanged compared to the December quarter of 2020.
With our disciplined history of maintaining low and stable G&A costs I expect it will continue to maintain our high leverage to gold prices, while maintaining consistent and high margins.
Operator that concludes our prepared remarks I'll now open the line for questions.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the case if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Tayo, Tyler Langton with J P. Morgan. Please go ahead.
Yeah. Good morning, Bill Paul Mark Thanks for taking my question I guess.
Just to start Paul could you reiterate I know you gave the guidance for Q1 was that was that for stream volumes of 50 to 55000 I just wanted to make sure I got that correctly.
That's correct it was the stream segment quarter.
Sales 50 to 55000.
And do you have any can you provide any color just in terms of you know that.
The the kind of sequential.
Declining what assets are driving it and that is that anything to do with just the.
Because of the deferrals.
Or just any kind of color there.
Yeah, Let me turn it over to Mark, but they're a little bit of timing as we've said and you know sometimes you have.
Changes in delivery schedules and timing as such but I may turn it over to mark to.
To give a little bit more color on some other notable items.
Yeah sure Paul Youre exactly right is that really the big item I think is timing related to shipments around Mount Milligan.
And having a ships come in early they they vary from.
Between 102 hundred days, so it can be difficult to determine exactly when we should schedule them. So we received oh.
We had sales in the December quarter that would.
Could have fallen into the March quarter. So that's that's really the two biggest items.
Okay. That's helpful and then I guess.
Bill in terms of.
Guess geopolitical risks and I guess, we're seeing.
Sort of some headlines and puzzle you know they wanted to Chile like around nationalization and I guess are you are any of these sort of like headlines, causing.
You any pause when you sort of look at new investments or do you think sort of are you seeing sort of that impact you know developers kind of even sort of like looking at new projects.
Sure It does.
Influence our decision, making to some extent I mean, you have to take into account that the current conditions within.
Our country I I've always been amazed at how the mining industry seems to be able to operate through a very difficult situations and a lot of our investments.
We typically look decades out.
So I you know I try not to let short term trends are moves I'd take us completely out of the market and unless those those trends are significant.
But it's a it's a bit of a balancing act, but the short answer to your question is yes, we absolutely are.
Consider those factors when we're looking at new countries.
Great. Thanks, so much.
Again, if you have a question. Please press Star then one our next question will come from Cosmos <unk> with CIBC. Please go ahead.
Hi, Thanks, a bill and team for the conference call today.
Maybe my first question is on Cominco Kcl.
Clearly I think they need a bit more liquidity or more money.
Given the COVID-19 impacts Dave they're exercising the 26 and a half million dollars. What's you are asking for a lender support and additional equity from shareholders I'm not sure. How much you can share with us, but you know well how tight is their financial situation.
And you know how concerned are you or how concerned should we be in terms of.
Their financial situation.
Yes Cosmos. Thanks for the question I think one of the things that I'd like to like to do is give mark perhaps an opportunity.
To talk about.
Sort of a review we have done.
Association with this request for funds.
Because hopefully it'll give you a little confidence and how.
How we see the plan.
Marc does that okay with you.
Yeah sure Yeah. So kosmos with every stream draw. We you know we do have a level of diligence on that on how things are going I think for this one I would say we did substantially more perhaps than we would usually do and well.
Share with you a bit of of what we what we do and what we did.
I mean, we took a look at the definition drilling to make sure that definition drilling that they were carrying out now confirm the ore body grade and width and Uh huh. It is.
We look took a deep dive on their per ton there schedule with respect to development and stoping.
And found pelagic all works out with their mine design and the.
Productivity is as Dave assumed in our schedule, all our makes sense and supportable.
We see that on the on the milling side that there that they are achieving or exceeding our recoveries.
The operating costs are or are in line with what they've actually achieved in and we could we could see how their projected out into 2022.
And putting all of these things together I mean, we get our we look at the cash flow and liquidity.
Or being projected by co Macau and feel very confident that they have so that they've got a well engineered plan and.
Happy to try to filling any gaps.
Good morning.
Yeah great.
I guess it really is based on the fact that COVID-19 had an impact on on the startup could you maybe talk about you know once the situation late in Botswana in terms of vaccination, then and yeah. You know we don't want hopefully not another varian is going to come around but you never know.
So how how vulnerable is the country, you know and the workforce to something.
Something like that happening once again, because it again it sounds like.
You know it had an impact this time around and it is getting to the point, where the financial situation.
It could be a bit tighter than they would have liked.
Yeah, Yeah sure. So good question I mean December was was significantly impacted us as we made comments about you know the production was probably impacted by 40% to 50%.
With the skilled minor many of the skilled miners and quarantine.
But yeah, I think just actually yesterday I was speaking to the.
CEO of coma, Cowen Ive mentioned that the vaccination rate amongst their.
<unk> employees and contractors is over 90%. So they have a very high site vaccination rate.
Oh, I don't know if I can I can't speak, particularly about the country, but the site is is well vaccinated and they have very rigorous.
Testing and management protocols around Covid.
Issue so.
A lot of confidence that they're doing everything they can around that.
Great.
Maybe switching gears a little bit too.
Two quick modeling questions here I noticed that self laboratory one of your not small, but one of the smaller than cominco, where the smaller ones and.
Alea I noticed that the cost this time around for this quarter was $1 8 million last year was $5 4 million I think you know this is in part drove the beat earlier today I guess my question is how should we how should we look at this end and what's more of a rough.
And at a run rate and how should we model going forward.
Yeah. Thanks for the question Cosmos, and I think you're referring to our NPI.
Yes.
Which in and of itself means volatility but.
Paul would you want to.
A little background, there I'm not sure we can give you much in terms of forecast but.
Maybe Paul can help.
Yeah. Good morning Cosmos, Thanks for the question Paul.
You know as you've heard us say in the past you know what are the strengths of our portfolio the optionality in depth within the portfolio.
We acquired this royalty back in 2010, I believe when we acquired International Royalty Corporation. So certainly has been nice to see in 2020.
Contributions from this NPI as well as 2021.
But to provide you a bit more color on the royalty.
<unk> is calculated and paid annually in Australian dollars.
Actually due to us within 60 days of northern Star's fiscal year end, which is June 30th.
So but as is common with many MPI contracts, we don't have much visibility into the calculation.
We can only recognize revenue during the period in which we receive the royalty calculation.
So more or less on a cash basis versus an accrual basis.
But as Mark mentioned in his comments, our 2020 MPI was received and recognized as revenue in December 2020, which is made up a large part of that $5 4 million that you mentioned for the prior year.
While our 2021 MPI was received and recognized during our 20 September 2021 quarter.
Really why you're seeing the decrease in this December quarter.
But I would like to add that the recent acquisition of Saracen by northern start the <unk>.
Purchase accounting rules would require northern star to record its interest at South laboratory and at fair value.
This accounting exercise may increased northern start carrying value at South Robertson, which could then increase their calculated depletion on the property, that's possibly reducing the net profits that would be attributable to our NPI calculation. So again, we don't have much visibility into this calculation, but this.
This kind of an accounting exercise.
It could impact the royalty amounts that are owed to royal gold in the future.
Okay, great that helps.
Yeah, It doesn't and we will try our best to forecast, what our what you might get from that.
The other the other question I have in terms of modeling as income taxes I see that for the transitional period. It was 17, 8%.
Yeah forecast at 18% to 22%. It's always good I guess you know when it comes to taxes to be slightly under but my question is Paul what drove the lower than expected tax rate and again what.
What should we model on a go forward basis.
Well I'll start to come.
Come on line as we've said.
Typically we provide are our annual tax guidance during our first quarter.
<unk> will be able to provide that guidance.
And our next quarterly conference call you know really the we did have a couple of discrete tax items during the quarter.
It's.
They werent werent too much but it did drive down our effective tax rate by a point or two.
Small discrete items during the period.
It really was a result of a favorable settlement agreement that we received with the foreign taxing authority.
On a long standing tax abuse.
Tax dispute.
The terms of that settlement agreement are confidential, so I'm not really able to comment on the specifics.
But I can share that that uncertain tax position that created the benefit that's lowering our.
Tax rate for the period was part of the RSC transaction back in 2010. So it's something that we you know we don't anticipate seeing going forward.
Great and then you know you mentioned guidance that jogged my memory, a little bit maybe one last kind of wrap up question for Bill I'm you know clearly we're looking forward to 2022 guidance.
Have you given any thought in terms of what you would you be giving out longer term guidance as well if somebody appears in the industry have been up on a 10 year guidance five year guidance long term guidance is that something that Royal gold is also considering bill.
Cosmos I'd say not for 2022.
And I'll just add.
Maybe I I know I'm a bit alone in this view.
But we don't control. These properties, we have some good visibility and we've got a lot of assets, where we don't have visibility because we don't have contractual rights.
So for me to give guidance on properties that were just not that close to is very difficult.
And we started just with the six month guidance last year, and we haven't changed the range three months later.
I think if you own the properties you might not.
You might not end up doing that so let's see what when we give the annual guidance, let's see how we do with respect to that guidance and if we feel good about it.
Maybe it will we'll consider something longer term I would say three years, maybe you start to have a five or 10 years on properties again, we don't own I don't know what that's worth to you to be honest with you.
Gotcha. Thanks.
Thanks, once again, bill and team and those are all the questions I have.
Thanks Cosmos.
Again, if you have a question. Please press Star then one our next question will come from Josh Josh Wolfson with RBC capital markets. Please go ahead.
Thank you very much back to cool Macau.
The release mentioned some discussion with the lenders.
Given Royal Gold was also part of the group with its overrun facilities. I think there was $25 million is there any potential revisions to the terms that were that were outlined there or it's royal considering other means of investment here beyond the stream and the existing debt in place.
What we're anticipating right now is what we haven't in the press release, the coma Cal has available to it 26, and a half million dollars under the old bond stream.
That's that's really all we're we're looking at.
Okay.
And there is no revision to the existing terms that were set for that debt. So I think it was repaid at its something like seven years.
That's correct.
Okay.
Great. That's all my questions. Thank you.
Thank you.
Our next question will come from Tanya Jack.
Jack Fusco, Nick <unk> with Scotiabank. Please go ahead.
Hey, good morning, everyone and thank you so much for taking my questions.
Tim I just wanted to circle back if I could on Pueblo Viejo.
Just trying to get a better understanding on that sells a recovery I think you mentioned that athlete downstream of the plant expansion at Pueblo Viejo, it's going to be quite variable. So should we be thinking that since the plant.
Expansion isn't going to be done until the end of this year that through 2022. We you know we may not be getting many of these deferred ounces returning back to last summer a minimal contribution from Pueblo Viejo.
Tenure might turn that over to Mark.
But I'm not sure that's going to be much we can add to what we've commented on but mark is there anything you'd want to.
Oh yeah.
Yeah, there really isn't much to add I would I would say you know we've seen a lot of variability over the 18 months last 18 months as you've seen and I don't I don't see that variability really changing it's.
It's been very hard to to really predict what that recovery is going to be for the for for the full quarter.
So you know my my thinking is that the variability continues.
And so our.
Expectation is these bottlenecks will get worked out with the expansion as we're as we're being informed and then we would see a more steady.
Silver recovery.
Situation.
Maybe you can't give us that.
Yeah.
Sales, but maybe you can talk a little bit about the silver circuit and what is what are now the issues and whatnot.
Yeah.
Yeah, Mike I mean, my perspective and from a.
Reading the monthly reports and talking with folks excite is theres really been a push on on tonnes through the plant.
And what happens when a what.
And it's focused on gold production as you would expect and what happens is the that that push on tons over overwhelms or where it comes up against bottlenecks are associated with the silver circuit and the silver circuit for various reasons will end up getting bypassed.
In the process and then the silver has not recovered.
I think the one thing I'd I'd I'd leave you with is that.
The site is very incentivized to recover silver I mean, the reserve grade is over 14 grams in it you know what.
At 9 million tons, a year of processing. They are 4 million ounces of silver going through the circuit.
Having a having a 40% JV partner and having a nice hum credit on cash caught some by byproduct cash cost. So we're comforted that they're incentivized at site to be very proactive on managing the silver recovery and we.
Think it'll be variable until the expansion is completed and expect it to settle down after that.
What comfort do you have that they just don't continue to jam that that the malware that with the gold.
Well I think you know I mean, my my sense is that they would continue they will continue to push tons. This year.
But that but the bottlenecks associated with that and the silver circuit it'll get addressed in the expansion.
And that's the that's the guidance we've received from the site folks.
So maybe you could just share with me what are the bottlenecks I can do that more research on that.
Oh.
Hum piece.
The.
Hi.
Aye.
I hate to go off the top of my head on what's the most important at least important because I'm afraid I will not get it correct.
Effectively what is happening is the.
Is this the circuit on a whole gets bypassed for for a number of reasons based on on managing the heat into the circuit or managing lime into the circuit.
Both of which are key inputs to the lime boil circuit, you need heat and eat line and there are circumstances, where one or both of those are inputs.
Inputs get restricted.
All right, maybe I'll take it offline.
Okay. Thank you I just wanted to come back to my second question, which maybe Bill can talk are you know the team can talk I just wanted to come back to the deal environment. Just wanted to review your strategy cause some strategy has changed over the last little while just wanted to review your forecast flat.
It continues to be in that precious metal space.
Angola or has anything changed there with that what I'm not sure if youre looking at.
Yes happy.
Happy to happy to answer that.
No nothing has changed.
I think you've probably heard me say.
More times than you'd like to hear me say that if I was given five projects in three year Golden one silver and one is that as non precious we'd probably look at the gold ones first and then silver and we take them in that order, but.
But I think I've been clear that if we if we find something that is non precious that we consider to be.
Quality project, a quality operator, a good jurisdiction, we absolutely will entertain it.
We believe within our precious metal revenue mix that we have room.
For something that is that is non precious so nothing nothing's changed.
Okay, and then just on the non precious side are we still talking about base metals or battery metals. There is no energy and are out there and you know coal and or anything else in there just wanted to clarify that.
Yeah, not not energy I mean, it has to be a market that we understand and I and I think I'd have to say and by market I understand I think there are some battery metals might not feel totally comfortable.
Totally comfortable being in but I also think the risk profile of the operation.
I would want it I think there'd be a mining operation where box skills could could be could apply on the.
The mining side the metallurgical side. So if we can understand the market. We can understand the operation I think that's it.
Okay, and then can we just circle back to just.
Just the opportunities in our precious metal space.
We last quarter, we talked about the 100 to 300 million range for funding project development and balance sheet repair is that still what you're seeing.
Can you I I like to get give Dan Breeze, a shot at answering some of these questions. So absolutely Dan are you available.
Sure Bill Hi, it's on you hope, you're well and a good good question.
The the size range that we talked about.
It's pretty consistent in terms of what we're seeing now the $100 million to $300 million range I think whats, perhaps new work is if you look at the equity issuance last year for precious metals, it was down year over year.
And so I think what's happening Tanya is is some of the pressure on the smaller companies developer companies.
It's hard to raise equity and so we're seeing opportunities for royalty financings that probably in a better market would attract equity.
And which is interest and so I think these are sub 50 million dollar opportunities.
And we're looking at these through the eyes of land packages for example, where there could be meaningful upside over the longer term, there's a smaller but interesting. So I think that's the newer parks in terms of the opportunity set that we're seeing more recently.
So development of royalties on development assets of packages on that is how I understood. It.
Yes, we are seeing some third party royalties, but primarily on for.
Development capital.
So you can imagine a company that would potentially look at the equity markets for say $10 million to $30 million. If that's not available then they are open to a royalty type structure for financing, okay and so that's a.
That's a newer focus as I mentioned, okay, and then still I'm, assuming that there are some stream opportunities that not 100 to 300 million range.
There are we like the pipeline and you know looking back last year. As you know it was you have to go back to 2015 to see the kind of volume that transacted last year.
We're seeing.
A good level of opportunities, we like what we see right now.
I'd say, it's still very much weighted towards development capital in terms of use of proceeds.
A little bit on balance sheet, strengthening but not as much as we saw last year and then.
As well just looking at asset purchases as well to help fund that.
Purchase is another opportunity set that we see in the market right now as well.
No I appreciate that just wanted to check is from moment to moment. Some strategy have changed so really appreciate the insights. Thank you.
Thanks Daniel.
Thank you for the question.
This concludes our question and answer session I would like to turn the conference back over to Bill Hudson Butler for any closing remarks.
Well I just want to thank you for taking the time to join us today.
We really appreciate your interest in Royal Gold and we look forward to updating you on our progress.
During the next quarterly call.
Take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.