Q4 2024 Royal Gold Inc Earnings Call
Thanks for watching!
Nadia: Hello everyone and welcome to the Royal Gold 2024 full year and fourth quarter conference call. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question please press star followed by one on your telephone keypad.
Nadia: I will now hand over to your host, Alistair Baker, Senior Vice President, Investor Relations and Business Development to begin. Alistair, please go ahead.
Nadia: Thank you, operator. Good morning and welcome to our discussion of Royal Gold's fourth quarter and year-end 2024 results. This event is being webcast live and a replay of this call will be available on our website.
Speaker Change: Speaking on the call today are Bill Heissenbuttel, President and CEO, Paul Libner, Senior Vice President and CFO, Martin Raffield, Senior Vice President of Operations, and Dan Breeze, Senior Vice President, Corporate Development of RGAG.
Nadia: Randy Chapman, Senior Vice President and General Counsel, is also available for questions.
Nadia: During today's call, we will make forward-looking statements, including statements about our projections and expectations for the future. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements.
Nadia: These risks and uncertainties are discussed in yesterday's press release and our followings with the SEC.
Nadia: We will also refer to certain non-GAAP financial measures, including Adjusted Net Income, Adjusted Net Income for Share, Adjusted EBITDA, and Cash G&A. Reconciliations of these measures to the most directly comparable GAAP measures are available in yesterday's press release, which can be found on our website.
Speaker Change: Bill will start with an overview of 2024 performance, Dan will provide some background on the Cactus Royalty acquisition, Martin will give some commentary on the portfolio, and Paul will provide a financial update. After the formal remarks, we'll open the lines for a Q&A session. I'll now turn the call over to Bill.
Bill Heissenbuttel: Good morning and thank you for joining the call. I'll begin on slide four. 2024 was an excellent year for Royal Gold. We recorded a stronger than anticipated fourth quarter and set records for revenue, operating cash flow, and earnings for both the annual and quarterly period.
Bill Heissenbuttel: For the full year, revenue was $719 million, operating cash flow was $530 million, and net income was $332 million, which were 19%, 27%, and 39% higher, respectively, over 2023.
Bill Heissenbuttel: On an adjusted basis, our earnings were a record $346 million, or $5.26 per share.
Bill Heissenbuttel: both remain the largest contributor to revenue for the year at about 76% of total and almost 60% of our revenue was generated from the US, Canada and Australia.
Bill Heissenbuttel: We have a business with very high margins, and our adjusted EBITDA margin was just over 81% for the year and reached almost 84% for the fourth quarter.
Bill Heissenbuttel: Our business is not directly exposed to inflationary cost pressures, and we have continued to see strong margins with a rising gold price.
Bill Heissenbuttel: During the year, we paid over $105 million back to shareholders in dividends and raised our annual dividend to $1.80 per share for 2025.
Bill Heissenbuttel: This is the 24th consecutive annual dividend increase, which is an unmatched record in the precious metals industry.
Bill Heissenbuttel: And since we initiated our dividend in 2000, we have returned approximately $1 billion to shareholders.
Bill Heissenbuttel: We also completely repaid our revolving credit facility in 2024 and we finished the year with no debt and approximately 1.2 billion dollars of available liquidity.
Bill Heissenbuttel: There were a few other notable developments during the year, including new revenue from Mara Rosa, Mancho, and Cote Gold Mines, each of which poured first gold during 2024.
Bill Heissenbuttel: A new agreement with Sinterra at Mount Milligan. It provides an incentive for Sinterra to continue to invest in the long-term future of Mount Milligan.
Bill Heissenbuttel: and the addition of new royalties on the Back River Gold District in Canada and the Cactus Project in Arizona.
Bill Heissenbuttel: Both of these meet our criteria for investing in good projects with expansion potential operated by strong management teams and located in safe and mining-friendly jurisdictions.
Bill Heissenbuttel: Turning to slide 5, we performed very well in 2024 compared to guidance.
Bill Heissenbuttel: We issued our annual guidance in April 2024. We provided sales in terms of metal units rather than one GEO number to avoid distortion in the GEO calculation caused by volatile metal prices.
and we will continue to use this approach.
Bill Heissenbuttel: Compared to the guidance ranges, both sails were at the top end of the guidance range.
Bill Heissenbuttel: Copper and other metal sales were slightly higher than the guidance ranges. ED&A expense and effective tax rate were within the ranges and silver sales were slightly lower than the guidance range, primarily due to lower silver deliveries and sales from Pueblo Viejo.
Bill Heissenbuttel: Silver Recovery, Pueblo Viejo, has been disappointing for several quarters, and we flagged this on our last quarterly call.
Bill Heissenbuttel: Our gold sales for the year were stronger than we expected when we gave our outlook for the fourth quarter on our last quarterly call, and this improvement was related to higher-than-expected fourth-quarter revenue from the Penesquito and Cortez royalties and an earlier-than-expected gold delivery from Andecoyo in the fourth quarter.
Bill Heissenbuttel: These positive developments, once again, underscore the difficulty we have in forecasting the production levels of projects we don't operate.
Bill Heissenbuttel: I'll turn the call over to Dan to go over the Cactus Royalty purchase, but before handing over I want to point out that while this is a Copper Royalty, this purchase does not indicate a strategic shift away from our focus on precious metals.
Bill Heissenbuttel: We have consistently said we are open to non-precious metal investments in markets we understand and we do this as an opportunistic purchase that should provide a good return over a long mine life. The metal we understand very well. With that I'll turn it over to Dan.
Dan Breeze: Thanks Bill. Turning to slide 6, in late December we acquired a 2.5% NSR royalty over the Cactus project from a private seller for $55 million. Cactus is a brownfield copper project in Arizona approximately 70 kilometers southeast of Phoenix.
Dan Breeze: Arizona Sonoran Copper, the current operator, has a right to repurchase 0.5% of this royalty until July of this year.
Dan Breeze: The project was operated from 1974 through 1984 by ASARCO and Arizona Sonoran acquired the project assets and interest in 2020 from the ASARCO Trust.
Dan Breeze: The project is attractive on its own merits, and we have the confidence in the Arizona-Sonoran management team, some of whom we've worked with in the past.
Dan Breeze: We are not alone in our positive view of the project, as Arizona-Sonoran has attracted the attention of Rio Tinto and Hud Bay, two base metal mining companies that together own just over 17% of the shares outstanding.
Dan Breeze: Turning to slide 7, the royalty covers about 50-60% of the Park Sailor deposit and 100% of the Cactus East and West deposits.
Dan Breeze: We estimate that the first royalty payment to us will occur in about year five of operation and generate 4,000 to 6,000 GEOs per year in the first 15 years at current prices.
Dan Breeze: The mineral resource estimate is current, and there are approximately 7.3 billion pounds of copper contained in the measured and indicated resource, and an additional 3.8 billion pounds in the inferred resource.
Dan Breeze: The results of the August 2024 PEA show a straightforward project producing 5.3 billion pounds over a 31-year mine life.
Dan Breeze: Most of the mining will be done by open pit and copper cathodes will be produced with a conventional heat bleach and SXCW process.
Dan Breeze: Arizona Sonoran is working to update the resource and complete a pre-feasibility study this year, followed by a feasibility study and construction decision in 2026. First production is expected in the 2028-2029 timeframe.
Dan Breeze: Permitting should be straightforward given that most of the project is on private land. Several of the key permits require only amendments given its brownfield status and the project is subject to only state of Arizona permits.
Dan Breeze: I'll now turn the call over to Martin to discuss portfolio highlights from the quarter.
Martin Raffield: Thanks Dan. Turning to slide 8, I'll give some comments on fourth quarter revenue. Overall revenue was a record $203 million with a volume of 76,100 GEOs.
Speaker Change: On our third quarter call we forecasted a slightly softer fourth quarter but strong metal prices and a stronger contribution from our royalty segment helped overall revenue exceed our expectations.
Speaker Change: Royalty revenue was up strongly by about 43% from the prior year quarter to $78 million, and the royalty segment contributed about 38% of total revenue, which is higher than we've seen over the past several quarters.
Speaker Change: We have 35 royalty assets that generate revenue, and although they are generally smaller contributors than our stream assets, strong performance from several of these can have a positive impact on our overall revenue.
Speaker Change: In addition to a very strong quarter from Pen Esquido, strong contributions from Manchur, Bellevue and Robinson more than offset lower revenue from the Cortez Legacy Zone.
Speaker Change: Revenue from our stream segment was 125 million dollars, up by about 27% from last year, with increased contributions from Mount Milligan, Rainy River, Pueblo Viejo and Wassa.
Speaker Change: I'll turn to slide 9 and give some comments on notable developments within the portfolio.
Speaker Change: Firstly, I'll note that as part of an annual materiality review of individual stream and royalty interests,
Speaker Change: We have redefined our principal properties to be Andacoyo, Cortez, Mount Milligan, and Pueblo Viejo. These four properties contributed approximately 55% of our total revenue in 2024.
Speaker Change: This review considers primarily the relative contribution of estimated future revenue and to a lesser extent historical revenue to our portfolio from each property.
Speaker Change: While Penesquito and Comacao are relatively smaller, these and other assets remain important contributors and we will continue providing disclosure on non-principal properties as appropriate.
Speaker Change: Moving on to specific property updates, Eric held an Investor Day in late November and gave some details on plans at Cortez.
Speaker Change: In the near term Barrick is expecting overall gold production from Cortez to increase with mining of ore in the Crossroads pit increasing following stripping as well as the continued ramp up at the Gold Rush underground mine which is expected to produce 400,000 ounces of gold per year at full production levels.
Speaker Change: For 2025, ARIC is forecasting production from the Cortez complex of between 680 and 765,000 ounces, with Crossroads and Gold Rush driving production to over 1 million ounces in 2027.
Speaker Change: Relating to the longer-term potential at Cortez, Barrack reported several developments, including the receipt of the record of decision for the Robertson Project in the fourth quarter
Speaker Change: The significant increase in gold resources at the Four Mile Project after incorporating results from recent drilling, and further exploration progress at the Hansen Target at Cortez Hills Underground and the Swift Target to the west of the pipeline deposit.
Speaker Change: Eric plans to advance these projects with feasibility work ongoing for the Robertson Open Pit Project, a pre-feasibility study planned to begin in 2025 at the Four Mile Project, and continuing exploration at the Hanson and Swift Targets.
Speaker Change: As a reminder, our approximate exposure to these areas is 9.4% gross royalty on Crossroads, a 1.6% gross royalty on Gold Rush, Four Mile, Hanson & Swift, and a 0.45% gross royalty on Robertson.
Speaker Change: Eric also provided some updates on Pueblo-Viejo in the same session and outlined several projects that are intended to achieve planned throughputs and recoveries.
Speaker Change: Barrick expects plant throughput to increase steadily from 2024 and reach the expanded 14 million tonne per year capacity in 2028. Note that a 35-day shutdown is expected in the first quarter of 2025 to complete a seconder optimisation.
Speaker Change: With respect to recoveries, Barrick expects gold recovery to increase from approximately 80% at the end of 2024 to 90% by the end of 2026. And a project to improve silver recovery is targeted for completion by the fourth quarter of 2025.
Speaker Change: Barrick is guiding that its share of gold production for 2025 will range between 370 and 410,000 ounces, which is expected to increase further in 2026 as throughput and recovery projects are completed.
Speaker Change: Merrick also reported that it is currently advancing work on the new El Naranjo tailings storage facility with a late 2029 target for commissioning. The facility is expected to provide storage capacity for eight additional years beyond the current life of mine, which is expected to be 2046.
Speaker Change: Turning to slide 10, Anand Koya of TEC reported in January that risk mitigation plans to increase water availability were implemented in 2024, enabling mill throughput rates consistent with the mine plan through the second half of 2024.
Speaker Change: Tech also provided copper production guidance that reflects ongoing drought conditions that remain a production risk.
Speaker Change: and expects copper production to increase by about 26% from approximately 39,700 tonnes in 2024 to a range of 45,000 to 55,000 tonnes per year from 2025 through 2027.
Speaker Change: Gold and copper grades have been relatively well correlated, and gold production has historically tended to track copper production.
Speaker Change: MMG reported that it is working to access higher grade areas to achieve a high production run rate of 60,000 tonnes per year of copper in concentrate by 2027.
Speaker Change: MMG does not provide silver guidance, but there is a relatively strong correlation between silver and copper grades and production at Kermakalp.
Speaker Change: Additionally, MNG reported that a feasibility study for the expansion to 130,000 tons per year started in December 2024, and construction of the expansion is expected to begin in 2026.
Speaker Change: First concentrate production is expected in 2028, subject to refining the timeline in the feasibility study.
Speaker Change: Recall that Royal Gold Silver Stream interests cover expanded production from the Zone 5 mine and the Mango Northeast deposit.
Speaker Change: I'll wrap up with a few brief comments on other portfolio assets, particularly related to 2025 production and catalysts.
Speaker Change: B2 Gold has recently reported that the Goose project at Back River is on track for first gold to be poured by the end of the second quarter.
Speaker Change: Recall that our royalty ramps up gradually over about three years to the full 3.3% GSR level.
Speaker Change: We're looking forward to a full year of contribution from Mara Rosa, Cote Gold, and Manchot after each poured first gold in 2024.
Speaker Change: 2025 production guidance is 94 to 104,000 ounces at Mororosa and 200,000 ounces at Manchot and at Cote we expect to receive royalty revenue on approximately two-thirds of the 360 to 400,000 ounces produced.
Speaker Change: The cash price paid at Savancina will increase from 20% to 40% of spot price when they reach the 49,000 oz delivery threshold, which we expect will occur sometime in the second quarter.
Speaker Change: Since we acquired our stream interest, 17 of production has outperformed our initial expectations and we have received delivery of 45,000 ounces as of the end of December.
Speaker Change: Note that the change in the cash price will not impact GEOs.
Speaker Change: And finally, we're looking forward to seeing results of Mount Milligan PEA towards mid-year.
Speaker Change: If Sentara shows a mine life extension beyond 2035, it should be a significant positive development for Royal Gold.
Paul Libner: I'll now turn over to Paul for a review of our financial results.
Paul Libner: Thanks, Martin. I'll now turn to slide 11 and give an overview of the financial results for the quarter. For this discussion, I'll be comparing the quarter ended December 31, 2024, to the prior quarter.
Paul Libner: Revenue for the quarter was up 33% to a record $203 million.
Paul Libner: Gold remains our dominant revenue source, making up 77% of our total revenue for the quarter, followed by silver at 10% and copper at 9%.
Paul Libner: Royal Gold has the highest gold revenue percentage when compared to our major peers in the royalty and streaming sector.
Paul Libner: Turning to slide 12, I'll provide a bit more detail on specific financial line items for the quarter.
Paul Libner: G&A expense was $8.9 million, down slightly from the prior year and mostly due to lower corporate costs.
Paul Libner: Excluding non-cash stock compensation expense, our cash chain expense has remained stable or decreased, which combined with the increase in our revenue, the result was margin expansion over the past year.
Paul Libner: Our cash G&A has decreased from approximately 5% of revenue in the prior period to nearly 3% this quarter.
Paul Libner: Our D&A expense decreased to $34 million from $40 million in the prior year.
Paul Libner: On a unit basis, this expense was $444 per GEO for the quarter compared to $518 per GEO in prior year.
Paul Libner: The lower overall depletion expense in DD&A per GEL this quarter was due to lower depletion rates in our stream segment.
Paul Libner: and a higher concentration of revenue from the royalty segment. In particular, increased production at Penasquito, which carries a lower depletion rate.
Paul Libner: It is worth noting that some of our royalties have low depletion rates. So in a quarter like this, where there was an increase in the concentration of royalty revenue, depletion expense can be lower and our margins may increase.
Paul Libner: Interest expense decreased significantly to $1.4 million from $6 million in the prior year.
Paul Libner: The decrease was primarily due to lower average amounts outstanding on the revolving credit facilities.
Paul Libner: Tax expense for the quarter was $26 million, resulting in an effective tax rate of 19.5%.
Paul Libner: This compares the tax expense of $13 million to an effective tax rate of 17.5% in the prior year.
Paul Libner: The higher tax expense in the current period was due to higher pre-tax income, driven primarily by our record revenue.
Paul Libner: That income for the quarter was up 71% over the prior year to a record $107 million, or $1.63 per share.
Paul Libner: The increase in net income was primarily due to higher revenue and lower interest expense.
Paul Libner: Our operating cash flow this quarter was a record $141 million, up 40% over the prior year.
Paul Libner: The increase in operating cash flow was primarily due to higher stream and royalty cash receipts.
Paul Libner: We expect to provide full year 2025 guidance for metal sales, depletion expense, and our effective tax rate in mid to late March. However, to help you prepare your estimates, we expect our stream segment sales to range between $40,000 and $45,000 GEL during the first quarter of 2025.
Paul Libner: As with our prior practice, this is the only quarter during the year when we will give quarterly guidance and this quarterly guidance should not be viewed as indicative of the full year guidance.
Paul Libner: I'll now turn to slide 13 and provide a summary of our financial position as of December 31st, 2024.
Paul Libner: We remained debt-free at the end of the quarter, and our total liquidity was approximately $1.2 billion, which includes the fully undrawn and available $1 billion revolving credit facility and approximately $190 million of working capital.
Paul Libner: That concludes my comments on our financial performance for the quarter and I'll now turn the call back to Bill for closing comments.
Bill Heissenbuttel: Thanks, Paul. 2024 was a very strong year for Royal Gold. Our business is designed to deliver leverage to gold and our 2024 results demonstrate the direct relationship between a strong and rising gold price and Royal Gold's financial performance.
Bill Heissenbuttel: We saw contributions from a number of new producing assets. We acquired two quality royalties, produced our first asset handbook, increased our dividend, and hopefully set the stage for an increase in the mine life of our largest revenue source.
Bill Heissenbuttel: Looking forward to 2025, we think the uncertain global geopolitical and macroeconomic outlet will continue to bias risk and the gold price to the upside.
Bill Heissenbuttel: While we expect to give formal guidance in mid to late March, we believe the guidance ranges will be similar to what we provided in 2024.
Bill Heissenbuttel: Our key assets are positioned to provide medium-term growth, and we will watch with interest several catalysts.
Bill Heissenbuttel: Wrap-up progress at Gold Rush and continued studies at Four Mile, both at the Cortez Complex.
Bill Heissenbuttel: The planned ramp-up of throughput at Pueblo Viejo. Feasibility study work on a Comacao expansion, a Life of Mine extension study at Mt. Milligan, and first production at Back River.
Bill Heissenbuttel: On the business development front, we will continue to look for the best opportunities to provide further growth, continuing our strategy of adding exposure to high-quality assets with Upside.
Bill Heissenbuttel: experience management and good jurisdictions and with a strong balance sheet and robust cash flow we are positioned to compete for those opportunities with our disciplined approach to project evaluation
Bill Heissenbuttel: Operator, that concludes our prepared remarks. I'll now open the line for questions.
Thanks for watching!
Speaker Change: Thank you, if you would like to ask a question please press star followed by one on your telephone keypad. If you would like to remove your question please press star followed by two. When preparing to ask your question please ensure your phone is unmuted locally.
Speaker Change: Our first question goes to Cosmos 2 of CIBC. Cosmos, please go ahead.
Thanks for watching!
Cosmos: Thanks Bill, Dan, Martin, Paul, and Alistair. Maybe my first question is on Cortez. Bill, I know you don't give out longer term guidance.
Speaker Change: However, you know, the Cortez royalty is certainly very complex. There's different parts to it, legacy royalties versus what the newer ones here.
So, I guess my question is, as you mentioned,
Thank you.
Speaker Change: Cortez is looking at 720,000 ounces-ish this year, can grow to a million ounces by 2027 based on Crossroads, Gold Rush, and Martin, thanks for giving us the 9.4%, 2.2%. My question is, how can we use that information potentially to help us refine our model?
Speaker Change: In terms of what growth could come through at Cortez, is it as simple as taking the 9.4 and the 2.2, averaging out to 5.8% GSR and say that growth, the additional ounces would be subject to that kind of, you know, GSR or how can you help us out?
Thanks for watching!
Thank you.
Speaker Change: Yeah, Cosmos, we struggle with the exact same thing, and I think.
Speaker Change: The issue is, and I understand Barrick talks about it as one project, it is not one project to us. When you've got a 9.4 and 1.6 percent loyalty.
Speaker Change: The GEOs that result from that are completely dependent on where the ounces come from. Now, I think when we get to the point next month where we're giving you the guidance for this year, I think we'll be able to give you the math to make it work.
Speaker Change: putting out there. Now, I will say a million ounces in 2027, to me, sounds exciting, because if it is crossroads,
Speaker Change: That is, that is, you know, a bigger piece of, has a bigger loyalty rate associated with it. But longer term, I just can't help you right now. I mean, we will continue to work with Derek to try to improve that. Right now, the best we're going to be able to do is on an annual basis.
Speaker Change: Okay so I guess you will find out a bit more maybe come mid or late March when we get the 2025 guidance. We might not see the full picture but you'll help us out however you can.
Is that going to impact your Q1?
or Q2.
And then my second part of my question is...
Speaker Change: I seem to see that gold recovery is going to take a bit longer.
Speaker Change: to optimize versus silver recovery, which should be by the end of 2025.
versus optimization of gold recovery by the end of 2026.
Can you maybe comment on that as well?
Speaker Change: and in terms of how they're able to optimize the silver recovery first.
Martin Raffield: Okay, I'll take the first part of your question and then I may turn it over to Martin to do the second part.
Martin Raffield: So, the way our deliveries work, they work on a quarterly basis. We get deliveries the 15th of March, June, September, December.
Martin Raffield: based on the three-month period of the last month. So the March delivery will be December, January, February. It all depends when this 30-day period lasts. Let's just assume for a second it's all January, February. So the deliveries we get in March will be down.
Martin Raffield: That, whenever it gets delivered in March, gets sold in June.
Martin Raffield: And so that's how you should think there's always sort of a three to five month lag between what they're producing and what we're selling
Martin Raffield: If the 30-day period sort of goes half February and half March, you're going to see sort of, you know, lower deliveries in March themselves, but then it will impact
Martin Raffield: the June delivery and therefore the September sale. So it all depends where this this 30-day period ends up, but at least you understand how deliveries go and and that we sell what we get in one quarter, we sell it in the following quarter.
Martin, is there anything you can add on silver recovery?
Thanks for watching!
Speaker Change: Hi, Cosmos. I think Barrick have got a lot of projects running at the moment to improve both the gold and the silver recovery side.
If you look at their presentation,
Speaker Change: a couple of days or yesterday. They've got the SAG mill de-slime cyclones being put in. That's going to improve the output of the SAG mills and send the slimes straight to the thickeners and into the autoclaves.
Speaker Change: They've got grinding thickener modifications ongoing. As you mentioned, removing and replacing the center well to improve the autoclave feed and density.
Speaker Change: In terms of the silver recovery, the important one there is the cooling tower upgrade, because what that does is it allows the
Speaker Change: So that cooling tower upgrade is kind of the thing that is going to improve silver recovery.
Speaker Change: and then they've got further projects on the carbon regeneration kiln upgrades that improve both gold and silver recovery. So to answer your question, it's not completely clear to us.
Speaker Change: why the gold recovery is over a longer period of time but it is clear to us that improving the silver recovery in the third fourth quarter this year is really related to that cooling tower upgrade that allows the lime boil to work more efficiently and allows more silver to be recovered.
Speaker Change: Great, thanks Martin. I guess in the end that's what matters to you in terms of being able to really understand why the silver recovery goes up because that's the most important part to Royal Gold I would imagine.
Bill Heissenbuttel: Maybe one last question on Cactus. Bill, as you mentioned, this is a copper royalty.
Speaker Change: But Bill, as you mentioned, this is not an indication of you changing your strategy in terms for the company. So maybe, could you maybe comment on, I saw that in the last quarter your revenue mix was
Bill Heissenbuttel: 76% gold, 12% silver, 9% copper. Are you happy with that mix?
Bill Heissenbuttel: I'm happy with the mix. You know, the thing I think I've said is that when our business development team is out there marketing, looking for opportunities,
Bill Heissenbuttel: We're focused on precious metals. If someone happens to call us up and say hey, I've got this copper royalty Would you want do you want to have a look? Sure. We'll look at it
Bill Heissenbuttel: So I you know, we don't really target percentage of revenue. You know, I'd say, do I want cold revenue to be higher? Yeah. I mean, that's what we
Bill Heissenbuttel: do. But it certainly doesn't mean we throw to the curb good opportunities that happen to be in markets that we understand. It's really just what we focus on, where we put our efforts, but we're always willing to react to other things.
Of course. I mean, one last question on cactus.
Bill Heissenbuttel: As you mentioned, I think the majority of the royalties are at Cactus East and Cactus West, with a bit at Parks and Sawyer. I don't know the asset as well, so I'm just trying to figure...
Bill Heissenbuttel: I don't know how this kind of comes around or comes together.
Bill Heissenbuttel: But what can we expect, you know, when a pre-feasibility study is...
due to be released later on in 2025.
Speaker Change: I'm sure we're going to see some Park and Sawyer, but is Cactus East and West going to be in there as well? Because again, I'm just trying to, you know, refine my model here. If I was to take the entire
Speaker Change: reserve or the resource here, this would be worth a lot more than the $55 million that you paid for. So number one, I'm just trying to figure out the different components to it, what's going to be included in the pre-fees that's coming up, and how can we how can we value it?
Speaker Change: Yeah, Cosmos, what I might do is ask Dan or Martin. Dan, I don't know if there's anything just sort of commercially from a valuation perspective you might be able to add or Martin if you have anything specific to the study that's coming out that that would help.
Thank you.
Bill Heissenbuttel: Thanks, Bill. Hi, Cosmos. Good to hear from you. I think I might just pass it over to Martin. And, Martin, maybe what we could do is...
Bill Heissenbuttel: Just share a little bit of color about how the ops team there Came up with a schedule in terms of those deposits and how we're thinking about it But Cosmos, I think we defer you over to to the operator ultimately
Bill Heissenbuttel: in terms of how they're looking at the assets, and give you some commentary. Martin, any color on the scheduling? Yeah, certainly. So, Cosmos, we believe that the Park Salyer deposit is going to be the first area into production.
Bill Heissenbuttel: and we believe we've probably got about 50-60% of that AOI coverage, possibly even a little bit higher.
Bill Heissenbuttel: So, however, the first production to come out of there is our AOI is likely to be delayed by a couple of years as they move from the south to the north with the mining.
Bill Heissenbuttel: So we've got a good portion of the Park Salyer area and we've got complete coverage over the cactus east and the cactus underground area. So, sorry, the cactus west and the cactus underground portions.
Bill Heissenbuttel: Those we do believe are going to come in a bit later, however because they're working on the PFS at the moment
Bill Heissenbuttel: There's a lot of scope to change things as they run their optimization processes, so we're waiting with a great deal of interest, like you, in terms of seeing what that BSS comes out with.
Speaker Change: Yeah, I think that's probably enough said at the moment on that.
Speaker Change: No, that's perfect. Thanks, Dan and Martin. And we'll keep our eyes out for the pre-Ps as well. But those are all the questions I have. Thanks again for answering all my questions.
Thanks, Counsel.
Speaker Change: Thank you. The next question goes to Brian Carr of Raymond James. Brian, please go ahead.
Brian Carr: Hi, good morning. My question is really Cause's last question, but just to be clear.
Brian Carr: When you say the first payments that you think you're going to get on Cactus are in year five, that is purely on the assumption of
Brian Carr: where the minings come from. There's not a checkerboard royalty. This is all one royalty and the buyback of 0.5% is all the same royalty. There's not like
Speaker Change: multiple royalties. I don't see here that part of the equation. This is just purely your assumptions about what the future mining plan will be when you say you won't get any royalties until year five. Is that correct?
Speaker Change: Yeah, Brian, thanks for the question. Yeah, Martin, chime in here if I go astray here. Technically, there are two royalties. They're the exact same thing.
Speaker Change: We only describe it as one just to keep it simple. But there's no checkerboard. It's just the coverage. It's just the timing of when we think the material is going to be processed. It's not
Speaker Change: It's not really, you know, on again, off again, an on again, off again approach.
in terms of our ALI.
Speaker Change: Great, that's what I want to make sure. So if I looked at your production profile, if it were the same that you have on...
Speaker Change: You know you're page seven now basically you just start as it turns out You know you start to get the big year of production is when you'd start to kick the royalty and the way you See things now. I realize it can all change with no Feasibility is that is that the right way to look at this?
Speaker Change: That's the way we're looking at it now. Now, as Martin said, as they go through these studies, that could change. And maybe they do mind it in a different sequence. But right now, where you're going, I think it's the correct way to think about it.
Speaker Change: Thanks. It's just same thing as cause. I'm just trying to get the math to work on on this thing. The second thing, just can you remind me, I see that you've heard silver is up to, you know, 1.7 million ounces that PV now. So, I mean, that's almost a buck a share or whatever.
Speaker Change: effectively what actually happens like if they finally get the recoveries worked, can you just remind me how you start to recover those deferred ounces?
Yeah, I'll try to see if I can keep this.
as simple as possible. And Dan can always.
Cut me off if I go astray.
Speaker Change: The key recovery rate is 52.5%. So, you know, when silver recovery was 70%,
Speaker Change: you know, we'd get our 75% of the silver, not a big deal. As the silver recovery went down,
Speaker Change: Basically, the 75% we go all the way up, so at 52.5% we're getting 100% of the silver.
Speaker Change: They've been below that and that's when you start getting into the deferral of the ounces I think what when they start getting above 52 and a half percent That's when I think you're going to see the deferred ounces sort of unwind in the other direction and come back to it
Speaker Change: The only thing I'd caution you a little bit is when you're looking at the value of what we might get Number one if they deliver deferred silver, we have to pay the 30% of spot price so that you're read
Speaker Change: you're immediately taking 70% of the value. And then we have deferred some cash price payments based on the fact that we have not been getting the ounces. Those also have to be paid. And I don't have the exact number right now, but if you look at the gross value of the silver right now,
Speaker Change: You know, the net to us might be, I don't know.
Speaker Change: 35, 40% of the value when all is said and done. So I guess where I'm going is don't look at that gross number and say, wow, you guys are missing a lot, because there are payments that would have to be made once those ounces are received by us.
Speaker Change: Great, thanks Bill. That's what I was trying to figure out, so that's very, very helpful. Thank you very much for my questions.
Thank you, Brian.
Thank you very much.
Speaker Change: Thank you and as a reminder if you would like to ask a question please press star followed by one on your telephone keypad.
Speaker Change: And the next question goes to Tao Oyedeji of Scotiabank. Tao, please go ahead.
Good afternoon, everyone, and thanks for taking my question.
Tao Oyedeji: So, I would just like to ask about your deal pipeline. Are you still seeing opportunities mostly in the $100 million to $300 million range?
Tao Oyedeji: And then, this year, can we still expect more transactions, more deals on non-goods?
Tao Oyedeji: I know that you talked about it being opportunistic in nature, but are you still expecting anything?
Tao Oyedeji: and then maybe just comment on your structure. Would you still structure deals using combinations of equity, debt, or has this changed?
Tao Oyedeji: And then we were sort of hearing about a deal in the market, like a $1 billion deal.
Speaker Change: Do you want to comment on this, like if you were to take on this deal, can you do it by yourself or would you sort of like do a syndicated deal approach if you were to get involved?
Speaker Change: Yeah, let me try to tackle a couple of them and then I might get Dan in here. So, you know, we don't comment on particular transactions, so if there's a billion dollar deal in the market we wouldn't...
Comments. That's it.
Speaker Change: specifically on it. I think generally speaking, we're totally open to syndication.
Speaker Change: The only thing about syndication is you have to find a partner that...
Speaker Change: think similarly to you in terms of structure, returns, security, guarantees. There's a lot that you have to agree with your partner. But, you know, we could handle a billion dollars. I'm not worried about doing that by ourselves.
Speaker Change: But again, if someone comes along and says we want to work together, happy to do it. That's great.
Speaker Change: You know, the equity debt stream side of things, you've seen us do debt at Comacal, you've seen us do debt at Golden Star, both those loans were repaid. We'd rather not do it, but if a stream transaction is, say, 60 to 70% of a total financing, somewhere around there.
Speaker Change: and doing some debt and doing some equity would get us the transaction. We are open to it. Again, not a preference, but if it gets us the right.
stream transaction, we have to consider it.
Speaker Change: and then, you know, more copper. No, again, this isn't a change in strategy.
Speaker Change: If something comes up in the latter part of this year, middle part of this year, that's copper and we like it, we might do it.
Speaker Change: But it's certainly, again, this isn't a switch to, okay, how many copper deals can we do? How many zinc deals or nickel deal, whatever. That's not the approach. And nobody can ever forecast what transactions are coming up in this market.
Speaker Change: Don't take one deal as an indication of what's to come. Dan, do you wanna just talk about the market in general?
Dan Breeze: Sure, Bill. Yeah, maybe just to answer the last question there, which is the range.
Dan Breeze: $103 million. I think that still holds and we always talk about that it seems every quarter. But you look at the last two deals that we've announced, including Cactus here today, they were sub $100 million deals. So we do look at things that are smaller, we do see things that come across our
our radar that are interesting and we'll obviously transact.
Dan Breeze: We are aware of a couple of larger opportunities in the market, and in general I would say the things that we see in the pipeline right now are more precious weighted, gold in particular, around project development. So I think that kind of summarizes it from what we see right now.
Thanks for watching!
Speaker Change: Does that answer your question? Yeah, thank you very much. Maybe just to follow up to that, do corporate opportunities make sense to you? Why or why not if they don't?
Thanks for watching!
Are you talking about M&A amongst royalty and streaming companies?
Thank you.
Speaker Change: yes okay we always we always look at it there are obviously times when that could very well
Speaker Change: found historically is you have certain companies that trade at higher multiples, you have certain companies that trade at lower multiples.
Speaker Change: and where the transactions probably make sense. So between those, if the lower multiple company wants to trade at a higher multiple and then get a takeover premium on that higher multiple, it makes less and less sense.
Speaker Change: We don't need, you know, we haven't done, you know, a true corporate transaction in about 15 years.
Speaker Change: You know at that time we were getting bigger. We wanted the assets. We don't feel the need to get bigger We don't need to add assets
Speaker Change: in one go. So if it makes sense, we're open to it. But you just don't see a lot. And I think that's the reason of the valuation differences and finding two parties who find the right time and the right price.
Speaker Change: That's really tough to find. So, totally open to it, but you just don't see a lot.
Speaker Change: Okay, thank you for that. And one other question, like yesterday, we saw a new mine plant, Arena River from Neil Gould. Maybe just provide some comments on this from Royal Gould's perspective.
Thanks for watching!
Speaker Change: Yeah, I'm going to turn it over to Martin, but I may caution you, it's also news to us, probably, so he may not have had a chance to digest everything we just saw, but I don't know, Martin, if you have any color you can add.
Thanks for watching!
Yeah, it is pretty new to us.
Speaker Change: We understand to a certain extent how the mines are operating in our portfolio, but we don't have...
Speaker Change: very intricate knowledge of them. So if a company changes a plan, if they come out as as Rainy River did with a fairly low Q1 and Q2 from a production perspective, we don't we don't have a lot of color to add to what they've said. So
Speaker Change: It's new to us and we're busy digesting it at the moment.
Thanks for watching!
Speaker Change: Thank you for that. My last question, your updates on visas and resources, when can we expect that? And your guidance that's coming out in mid to late March, is it coming out with an investor date?
Thanks for watching!
Speaker Change: I'm sorry, I didn't get the first part of the question. Did you say reserves and resources?
Thanks for watching!
Yes. Your reasons and resources, when are they coming out?
Speaker Change: Yeah, so, you know, it's sort of an iterative process for us a little bit because we have some companies that report as of 1231. We have Australian companies that report as of June 30.
Speaker Change: We have a section under our portfolio that has reserves and resources that will get updated.
as we go.
Speaker Change: the information. I think the second part of your question was an investor day.
Thanks for watching!
Speaker Change: Yes, I'm asking if the guidance in late March is coming with an investigation.
Speaker Change: No, we don't expect to have an investor day around that. You know, I'm sure Alistair will release it and we'll see what questions we get. If it makes sense to pull groups together, I guess we can do that, but we don't have any plans to do it right now.
Thank you. Thank you. Thank you.
Speaker Change: Thank you. Those are all my questions. Thank you. Thank you.
Speaker Change: Thank you. The next question goes to Derek Ma of TD Cohen. Derek, please go ahead.
Derek Ma: Thank you. My question is on capital allocation. World Gold is debt-free now, generated $141 million operating cash flows Q4, and $1.2 billion available liquidity. Is there sufficient supply and potential deals in the market to deploy all the capital that you're generating?
Thank you.
Derek Ma: If I could forecast the deals we're going to see, I could answer the question. You know, based on the fact that we see transactions, again, in the $100 million to $300 million range, you can say, you know, unless you see two or three of these things,
Derek Ma: you probably have more capital than you need. The problem is you just don't know what's going to happen. And just, you know, everybody in the industry goes back to 2015 when we deployed, you know, a billion
Class dismissed.
in a four or five month period.
Derek Ma: So we have to be a little bit careful. We do think the best place to invest, to use the capital we have...
Derek Ma: used to buy me raffles because we put it in at...
Derek Ma: and hopefully we trade at a premium to that, that is increasing value. If we get to the point where we're just not seeing the transactions, they're not meeting the criteria that we have.
Derek Ma: and we think we have more capital than we need, yeah, then we're gonna have a discussion with our board. Do we do anything? Don't we do anything? I've never really seen that happen. The transactions tend to come frequently enough that we're able to take the capital we're generating and redeploy it into assets.
Thanks for watching!
Derek Ma: This may be a difficult follow-up, but at what point do you think you are over-capitalized then?
Give them their cash flows and let them work it.
Derek Ma: I haven't given enough thought to that and haven't had the discussion with the team or the board to give you, you know, a figure where we think, oh, we don't need anything more than that.
Thank you.
Speaker Change: Okay, that's fair. One more question on cactus. The area of interest, I don't think it includes their target at main spring, but does it include the Northwest extension?
Hard to tell from that.
Martin, do you have a...
That's all I've got.
Yes, it does include up to the northwest.
to annotate the expansion. Okay.
of the Exploration Optionality.
Speaker Change: Northwest the Cactus and Northwest Extension, I believe, so that's one of their...
Exploration Targets.
Yes, it includes that area.
Okay, great. Thank you very much. That's all I have.
Thank you.
Speaker Change: Thank you, we are almost out of time so the last question goes to Josh Wolfson of RBC, Josh please go ahead.
Josh Wolfson: Thanks. I apologize in advance for the nitpicky nature of this question, but just the comments earlier on guidance and some of the discussion on flat, you know, year-over-year ranges.
Josh Wolfson: Are you thinking about that more in terms of what the GEO ranges would be, or would that be on the individual metals? And I ask just because, you know, there have been some significant ratio changes on a year-over-year basis. Thank you.
Speaker Change: Yeah, Josh, we plan to give this year's guidance the way we did last year.
Speaker Change: which is bimetal and then revenue for the smaller metals. I think if we find a point where gold in particular
Speaker Change: has found a new range, we might go back to GEOs. I don't know yet, but you know, if we had just gone GEOs in 2024, we would have been way off and been explaining like two or three GEO numbers. So for the time being, we're gonna stick with the way we did it last year.
Thank you for watching. Please subscribe to my channel.
Speaker Change: Okay, so which would imply when you're saying sort of stable numbers that would be, you know, by individual metal?
Correct.
Great, thank you.
Thanks, Josh.
Speaker Change: Thank you. I want to hand back to Bill Heissenbuttel for any closing comments.
Bill Heissenbuttel: I just wanted to thank you for taking the time to join us today. Thank you for the questions. We certainly appreciate your interest and we look forward to updating you on our progress during our next quarterly call. Take care.
Bill Heissenbuttel: Thank you, this now concludes today's call. Thank you all for joining, you may now disconnect your lines.