Royal Gold, Inc.

Good day and welcome to the Royal Gold Fiscal 2021 Full Year and Fourth Quarter Conference Call. All participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to 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 fourth quarter and 2021 fiscal year results. This year, this event is being webcast live and you will be able to access a replay of this call on our website. Participating on the call today are Bill Heisenbuttel, President and CEO, Paul Libner, CFO and Treasurer, Mark Yistow, Executive Vice President and COO of Royal Gold Corporation, and Dan Brees, Vice President of Corporate Development of RGAG. Randy Sheffman, General Counsel, is also available for questions. 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 and 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 net cash. 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. Bill will give you an overview of the fiscal year, Mark will provide a portfolio update, Dan will review the recent transactions, and Paul will provide a financial update. After closing comments from Bill, we'll open the lines for a Q&A session. Now I will turn the call over to Bill.

Good morning and thank you for joining the call. I'll begin on slide four. Fiscal 2021 was an excellent year for Royal Gold. We accomplished a number of strategic objectives during the year and in the short period since June 30th in an environment that continues to be impacted by COVID-19. Financially, we had an excellent year and turned in records for revenue of $616 million cash flow of $407 million and earnings of $303 million. On a per share basis, earnings for the year were $4.61 or $3.59 after adjustments. With respect to the portfolio and our growth profile, we also achieved some important goals. We strengthened our focus on our core business by divesting the Man Cho project, formerly known as Peak Gold, to Kinross. We continued to fund the development of ComiCal where we now have an 84% silver stream on an asset that saw first concentrate production in June. And we made three acquisitions that are gold focused with good operators, good jurisdictions, and most importantly, geologic and production upside. We renewed our revolving credit facility, extending the maturity by two years and securing a source of non-dilutive financing for our future acquisitions. I would like to personally thank all of the lenders in the facility for their support of Royal Gold. We raised our dividend for the 20th consecutive year, continuing a tradition of increasing capital returns to our shareholders. We made good progress advancing our ESG initiatives. We supported not only the communities in which we work, but also committed to meaningful programs with our partners at WASA and Pueblo Viejo. and found a creative way to fund ESG programs as part of the NX Gold Stream transaction. We remain committed to the long-term sustainability of our portfolio operations, and we are looking for more of these kinds of investments in the future. We continue the renewal of our board, and we welcome Fabiana Chubbs as our newest director upon the retirement of Chris Thompson. We believe that board renewal is an important part of good governance, and five of our six independent board members of joining the board in the past eight years. And finally, this will be our last June 30 fiscal year end. And we will move our reporting timeline so as to be more consistent with the rest of the industry by changing our fiscal year end to December 31. We think this is an important change as it will allow investors to more easily evaluate and compare our performance against others in the industry. I'm very pleased with the progress we made in fiscal 2021. and I think we ended the year in a great position. With that, I'll first turn the call over to Mark for an overview of operating performance and portfolio updates, and have Dan Brees give you some background on our acquisitions, and then turn to Paul, who will lead you through the company's financials. Mark?

Thanks, Bill. I'll start on slide five. Solid quarterly operating results finished off a year of strong portfolio performance. Precious metals dominated revenue for the year and gold accounted for 74% of the total. GEOs increased 32% from the fourth quarter physical 2020, with most of the increase driven by the royalty segment. Royalties provide our highest margin and increased performance from this segment can lead to very positive impacts on our financial results. We saw large royalty GEO increases from Cortez as mining ramped up at Crossroads and at Penesquito, where production from the Pyrite Leach Plant significantly increased over the year. While these assets are the biggest contributors in the royalty segment, the combined impact of increases from smaller assets like Boise's Bay, Canadian Malartic, Dolores, and Robinson was also significant to the portfolio. Revenue, which was up 40% from the prior year quarter, had a strong tailwind from rising metal prices. However, holding metal prices constant shows that about half of the revenue increase from the prior year quarter was due to production volume increases, further supporting the strong portfolio performance for the year. Moving on to slide six, I want to mention progress at Comacow, our most significant development project. First concentrate was produced at Comacao on June 30th, followed by first concentrate shipment on July 19th. The Comacao team achieved first production on schedule and within 3% of the budget, which is a major accomplishment in light of the COVID-19 challenges. We expect to receive silver deliveries from first shipment later this month. While the mine was officially opened by the president of Botswana on July 30th, The project remains in the commissioning phase. Coma Copper Mining, or KCM, expects production to ramp up during the remainder of 2021 and reach steady state production in early 2022. Commissioning is going well, and at the end of June, over 350,000 tons of ore was stockpiled on the surface. But it's too early to provide any delivery expectations for the September quarter, and we'll provide a further update on our next quarterly call in November. As discussed last quarter, at the beginning of April, we provided a further $10.6 million towards the Silver Stream and $18 million in debt financing. And at the beginning of July, we provided a further $7 million in debt financing. So in total, we have now contributed $222.6 million in stream funding and the full $25 million debt facility. KCM has a further $42.4 million available under the stream. Our stream stands at 84% of payable silver. And KCM has advised that they don't expect to draw any material amounts from this remaining available stream funding. Turning to slide seven, I'll quickly mention some of the other developments in the quarter. At Pueblo Viejo, Barrett continues to advance plant and tailings expansion projects. Barrick reported that overall process plan engineering is about 87% complete, while construction is 10% complete, and they expect to complete the process plan expansion by the end of 2022. Social, environmental, and technical studies for additional tailings and waste rock storage capacity also continue to advance. Post-expansion, Barrick is expecting gold production to be maintained at approximately 800,000 ounces per year, on a 100% basis until the mid-2040s. With respect to silver recovery, BEREC has completed maintenance on the silver circuit and recoveries have improved. BEREC is also working on modifying the circuit, which should further improve recoveries. At the end of June, deferred silver deliveries under our stream totaled 437,000 ounces. And with the recovery improvements, we expect deliveries of deferred ounces to begin in the current quarter. As I said last quarter, this is a cash flow timing issue for Royal Gold, and we don't expect these deferrals to have any lasting impact on silver revenue. Turning to Mount Milligan, Sentara has reported good results from brownfield exploration on targets below the pit limit and along the south and southeastern margin of the pit. Sentara announced in May that they're completing an update to their life and mine plan, taking into account exploration success, productivity improvements, flotation circuit enhancements that are being implemented, and operating cost reductions that have been achieved. We look forward to seeing the results of the update. Sentara also provided an update on the water situation earlier this week. During the June quarter, they continue to access groundwater and surface water sources and they currently have over 8 million cubic meters of water in inventory, which they expect is sufficient to provide for at least 12 months of continued operation. Work is also continuing on a longer-term water supply solution, and they recently received an environmental assessment certificate amendment and related permits to access water sources through November 2023. I'll now turn the call over to Dan to comment on recently closed acquisitions.

Thanks, Mark. We recently completed three transactions that are aligned with our strategy and fit well within our portfolio, and we expect each will provide solid growth potential for Royal Gold. We'll give a brief overview of each in the order of closing. I'll start in slide eight with the Cote Gold Royalty, which we acquired on June 7th from a third-party royalty holder for $75 million. The Cote Gold project is located in Northern Ontario and is currently under development by IAM Gold and their partner, Sumitomo Metal Mining. Fote is being developed as an open pit mine and Ion Gold estimates gold production of almost 500,000 ounces per year for the first five years with a mine life of at least 18 years. The project is about 27% complete and work this year is focused on earthworks, pre-stripping and water management infrastructure. The project is fully funded and Ion Gold is targeting first production in the second half of 2023. Our 1% NSR royalty is on the Chester III claims which cover approximately 70% of the current 7.3 million ounce reserve, as well as large property blocks to the east and northeast of the main deposit. This royalty gives us exposure to a large and long life project with interesting exploration potential in a tier one jurisdiction. Moving to the NX Gold Stream on slide number nine, we announced this transaction on June 30th and closed it on August the 6th. The NX Gold Mine is located in the Mato Grosso State in Brazil and is operated by Arrow Copper. We made a $100 million advance payment in return for 25% of the gold produced until 93,000 ounces have been delivered and then 10% thereafter. We will pay 20% of the spot price for each ounce delivered until 49,000 ounces have been delivered and then 40% thereafter. We also committed to make an additional advance payments of up to $10 million to incentivize Arrow to continue exploration and add resources to the mine plan. One of the attractive aspects of this asset is the large land package. Our stream covers an area of interest of more than 52,000 hectares with excellent exploration potential. Arrow is currently undertaking a large exploration program, both at the mine and regionally, and has a 60,000 meter drill budget for 2021. Since the transaction announcement, Arrow has already shown some interesting results with the best intercept to date located 10 meters beyond the limit of the 2020 resource shell, grading 22 grams per ton over nine meters. They have also identified two mineralized gold systems located 1.2 and 25 kilometers from the mine workings that in each case are within our area of interest. Another aspect we like here is the underutilized processing capacity. The mill is only running at 60% capacity and there is potential for higher gold production if Arrow can fill the mill and use the excess available. This stream provides exposure to immediate cash flow from an asset with excellent upside potential, and we expect to receive a first delivery of about 2,500 ounces tomorrow covering production from May 1st through closing. Moving to slide 10, I will mention the 1% NSR royalty on the Redcrisp Mines. Redcrest is a producing open pit copper gold mine in Northern British Columbia. It's owned by a joint venture between Newcrest and Imperial Metals and is operated by Newcrest. Newcrest acquired its interest in 2019 and has undertaken a program to develop the underground potential with the aim of converting Redcrest to a block cave operation in the next five to six years. Newcrest's goal is to transform Redcrest into what they define as a tier one asset which includes attributes such as a 15 plus year mine life and the likelihood of significant resource or exploration upside. The royalty we acquired covers 5,100 hectares and includes all known normalization and prospective exploration areas on the Porphyry corridor, which provides our shareholders with exposure to excellent longer term resource upside. The royalty is paid annually in the first calendar quarter of the year, and we are entitled to royalty payments for all of 2021 starting from January the 1st. Slide 11 shows a good 3D rendering of the open pit and the resources at Redcrest from a recent Newcrest presentation. Newcrest continues to do a significant amount of exploration and is defining a world-class deposit with a 1.2 billion ton resource containing 15 million ounces of gold and more than 4.3 million tons of copper. The deposit as defined to date is approximately 300 meters wide by 3.4 kilometers in length and 1.3 kilometers in depth. And the resource is based on the gully, main and east zones. Results from the main zone have confirmed potential for higher grade mineralization beneath and to the southwest of the pit. The recent discovery of a higher grade pod at the east ridge target expands the footprint of the higher grade mineralization across the eastern end of the deposit highlighting the potential for resource growth over time. Newcrest has plans for further drilling to define the extents of the east ridge, east zone and main zone areas, and work is underway on an exploration decline. Lease of both a pre-feasibility study and an initial ore reserve are targeted for September. These three acquisitions all fall squarely within our strategic objectives of providing gold-focused revenue with significant production and exploration potential. And with that, I'll turn the call over to Paul to discuss your financial results.

Thanks, Dan. I'll now turn to slide 12 and give an overview of the financial results for the quarter. For this discussion, I'll be comparing the fourth quarter of fiscal 2021 to the prior year quarter. We set another record for revenue during our fourth quarter. We recognized a 40% increase in our revenue to $168 million on volume of 92,400 gold equivalent ounces, or GEOs. The increase in our revenue was largely due to higher average metal prices, higher gold sales from Andacoyo, and higher copper sales from Mt. Milligan. Continued strong contributions from our royalty portfolio also contributed to our record revenue this quarter. Specifically, we saw strong performances from our Penasquito, Cortez, and Boises Bay royalties. These increases were partially offset by lower gold sales from Mt. Milligan and lower silver sales from Pueblo Viejo. With respect to metal prices, the average price of gold, silver, and copper increased 6%, 62%, and 78% respectively over the prior year quarter. Gold continued to be dominant in the portfolio at 76% of revenue, while precious metals accounted for over 80% of our revenue for the quarter. Cost of sales, which excludes DD&A and is specific to our streaming segment, increased to $24.7 million from $20.7 million in the prior year. The increase was due to higher metal prices and higher stream sales during the quarter. Our G&A expense increased slightly to $7.2 million and was primarily due to Royal Gold's increasing community and social contributions as part of our overall ESG initiative. Our G&A expense was again in line with what we expect in a typical quarter, absent any large or unusual items. Our total DD&A expense increased to $48 million, primarily due to higher GEO volumes. However, the higher GEO volumes were partially offset by lower depletion rates at some of our principal properties, which we also discussed in our last quarterly call. Our DD&A expense on a dollars per GEO basis for the quarter was $520 per GEO, compared to $648 per GEO in the prior year, and below the $525 to $575 DD&A per GEO guidance range we provided last quarter. The lower DD&A per GEO 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 then have lower overall carrying values and lower depletion rates. Earnings were $82 million, $1.24 per share, an increase of 67% over the prior year quarter. We had two adjustments to our earnings this quarter. The first and largest adjustment was an $11.5 million, or $0.18 per share, tax benefit due to the release of an uncertain tax liability resulting from a settlement with the Foreign Taxing Authority. The second adjustment was a $2 million or $0.03 per share gain on the change in fair value of our equity securities. After removing these two items, our adjusted earnings were $1.04 per share for the quarter. We reported operating cash flow of $120.9 million this quarter, which was also a record for Royal Gold. Our operating cash flow was up $29 million from the prior year, which was due to higher proceeds received from both our royalty and stream interests. Moving on to slide 13, I'd like to make some comments about guidance and the change to our fiscal year end. As Bill mentioned, this will be our last fiscal year ending in June, and we will be moving to calendar year end reporting effective this coming December 31st. The six month stub period between July 1 and December 31st, 2021 will provide a transition period for us to move to the new calendar year reporting, and we will start our calendar 2022 reporting on January 1st, 2022. As part of this change in year-end reporting, we expect to begin providing one-year guidance for total portfolio GEO sales, DNA per GEO, and our annual effective tax rate early in the second quarter of each calendar year. This will replace the quarterly stream sales and inventory guidance that we currently provide to the market. To help you transition over to our new guidance process and reporting, we are providing both stream GEO sales guidance for the September quarter and total GEO sales and DD&A guidance for the six-month stub period ended December 31, 2021. With respect to our stub period effective tax rate guidance, it is a bit too early for us to provide the information at this time, but I expect we can provide this guidance on our next quarterly call. For the September quarter, and absent any potential operational impacts from COVID, we expect stream segment sales to be in the range of 62,000 to 67,000 GEOs, and inventories for the quarter end to be in the range of 22,000 to 27,000 GEOs. For the six-month stub period, and again, absent any potential operational impacts from COVID, we expect total GEO sales to range between 175,000 and 185,000 GEOs, while we expect our DD&A to range between $520 and $570 per GEO. The GEO and DD&A stub period guidance assumes metal prices of $1,750 for gold $25.50 for silver, $4.15 for copper, $8 for nickel, $0.95 for lead, and $1.25 for zinc. I will now turn to slide 14 and provide a summary of our financial position. Our liquidity position continued to strengthen as we entered the quarter with zero debt, cash of $226 million, and working capital of $245 million. including the undrawn $1 billion revolving credit facility, we had over $1.2 billion of liquidity available as of June 30th. In early July, we amended our revolving credit facility. The amendment extended the maturity of our credit facility from June 2024 to July 2026. We view the credit facility as a key strategic tool for financing growth and extending it for a further two years ensures we will continue to have low costs and flexible capital available. As part of the recent business development successes that Dan discussed in his remarks, earlier this week we drew $100 million on our revolving credit facility to help finance these new stream and royalty interests. Upon this draw, we now have $900 million available to further help finance future growth. Assuming continued strong operating cash flows, we do anticipate repaying the $100 million advance over the next one to two quarters, also absent any new business development success over this same period. With respect to our outstanding commitment under the ComiCal Stream Agreement, as Mark mentioned, we currently have $42.4 million available to KCM, if required, until the earlier of development completion or 60 days after the start of commercial production at ComiCal. And as part of the new NX Gold Stream, we also have potential payments of up to $10 million from calendar 2022 through 2024, depending on aero copper meeting certain exploration and resource targets. Upon any election by KCM or Arrow Copper for further funding, we anticipate making these contributions from our available cash resources. That concludes my comments on our financials for the quarter, and I will now turn the call back to Bill for closing comments.

Thanks, Paul. In closing, fiscal 2021 was an excellent year for Royal Gold, and I am pleased with the progress we made on many fronts. From enhancing our growth profile to securing long-term committed financing sources, to supporting the ESG efforts of our operators, and finally to continuing the long tradition of returning capital to shareholders at an increasing rate. I would like to thank our staff and our board for their effort and support as we continue to navigate through an uncertain pandemic world. We have shown ourselves to be adaptable to each new normal we have encountered, and I remain confident we can still build on our success as the environment continues to change. Operator, that concludes our prepared remarks. I'll now open the line for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question will be from Tyler Langton of J.P. Morgan.

Yeah, good morning. Thanks for taking my question. I guess just starting with Red Chris, obviously sort of the longer-term potential for the mine is just in its ability to kind of move underground ultimately. Could you just talk a little bit about what kind of gives you the confidence, kind of an ability of the operators to do this? Yeah, I guess that's – and then also just sort of related –

know kind of key milestones you know to look for um we'll sort of learn more about the sort of the longer term plans for the mine yeah tyler thanks for the question um uh this is bill obviously the first milestone is the report that's going to come out uh next month um but beyond that i just you know i i realize it it can be a little hard for for folks to to to value um go back to some of the comments i made at the beginning we see this as a great asset great operator great jurisdiction so to me it's a it's a premium multi-decade asset um you know we've known numerous major mining companies have have tried to purchase it over the years so clearly there's something uh well beyond the open pit that you that you see there um so we did you know we did come up with a with a long-term mine plan I kind of refer you to, there's a comparison Newcrest did to Acadia, and that sort of was always in the background of our thinking. But I thought what I might do is turn it over to Mark and just ask him to maybe give you a few thoughts technically how we went about creating a mine plan and an evaluation.

Yeah, sure. Thanks, Bill. I think there are probably three points to start off with. I mean, we certainly view long-term as it's a bulk tonnage underground operation that's going to produce well above the 30,000 tons a day they currently process at. I would note that Imperial Metals talked about 60,000 tons a day back in 2017 in some presentation materials. We've certainly taken a more conservative view than that, but I think it gives you a little bit of a perspective on the potential. The second point, and I think it's very important, that the deposit has several higher-grade core resource areas defined as an underground resource. And that really is the key, I think, to the value proposition for Newcrest and, of course, for our royalty, is being able to start out in something like the East Zone And now we see the East Ridge Zone developing with a nice core of high-grade material. So we see a block cave being developed around an East Zone or potentially an East Ridge Zone as it develops. You know, historic reports, you know, from that Imperial Metals, they used to differentiate between Main Zone and East Zone resources. And you can really see that there's a significant grade difference between the what the east zone offers. It's 20% higher in copper grade and 40% higher in gold grade than the main zone when you compare east zone to main zone. And then finally, I guess what we see is these higher grade zones will allow the development of the bulk tonnage underground, and that development will put in infrastructure that will allow lower margin material in the long term to be developed. So I think those three aspects end up culminating in some very simple buckets of production that we see. We see about the early period, which is for about the next seven years, to produce at a very similar rate to what they're doing now. The underground will get developed and put in place. It'll start a ramp-up period, but you can think of seven years of current production You know, we see a period of, you know, in the range of about 18 years where production will be about 200,000 ounces of gold a year and 170 million pounds of copper. And that's when the East Zone cave or another higher grade area will be dominant in the production profile. And then following that, you know, out to probably about a year 40, you would end up seeing production drop down from the higher-grade period to roughly about double what the production is that you're seeing today at the mine site. So that's the way we looked at the development of the asset, the production profile, and the valuation. Does that help you?

Yeah, no, that's perfect. That's very helpful. Thanks. And then just... For a second question, just on Pueblo Viejo, I know you had the roughly 437,000 ounces that were deferred. So those kind of flow in roughly evenly over the next several quarters. And then I know sort of the silver deliveries were sort of 1.5 million ounces this year compared to 1.7 in 2020. When we look for 2022, should we see a rebound in those numbers?

Now, Bill, you want me to take that?

Yeah, Mark, why don't you talk about when we think the deferred ounces might come in?

Yeah. Yeah, so we know that the site has taken care of their maintenance issues, and we see the silver recovery improve to a level that it will not require any additional deferral in silver if that continues, which we would expect it to continue. So, We would see deferred silver ounces starting in the September quarter. And I think thinking about it on a regular return basis for certainly well into and maybe towards the end of 2022 is the way I would think about it. But if they get better recoveries than we modeled, it may be a bit sooner than that. That's the way I would think about the silver coming back to us.

All right, great. Thanks so much.

The next question comes from Josh Wolfson of RBC Capital Markets.

Thank you. Thanks for making my wildest dreams come true, both changing your fiscal year end and also providing more comprehensive guidance. So congratulations on that. For the second half of the year, I would have expected production to be a little bit higher. It looks like it's kind of more steady state from what the first half was. And I say that because PV improvements, Cortez is ramping up, and then the most recent NX transaction. Are there other offsets against these items or is there some conservatism that's maybe baked in or maybe timing differences on streaming volumes?

Yeah, I've got to work on your dreams if we just made your dreams. No, I don't think there's anything in the portfolio that we would point to that we expect to drop out. I do think it comes – Milligan and Andakoi are so important to our volumes, and it's really dependent on freight shipping and, you know, something – something that ends up in inventory. Maybe we thought it was going to be in sales. And I think there we might be a little bit conservative, but there's nothing I can really point you to. The range we gave is an increase over what we did for the first month of this calendar year.

Okay. Yeah, I guess maybe it depends where we're in the range, but that's fair. Now, looking at the investments that were done, this is the most active rate of investment I've seen the company in since, I think, 2015 or so. You know, at that point in time, you know, diversification was a pretty important strategy and obviously the prices of commodity were much lower. You know, today, is there a coincidence that we just saw kind of three transactions announced, you know, over a pretty short period of time? Or is there maybe a bigger vision or strategy that's taking place since that we're in the earlier stages of?

Well, I may disappoint you with the answer, but it's pure coincidence. We can't time these things. We've said that for years. You know, we can go years without making an investment, and all of a sudden you see this flurry. So there's no change to the strategy. There's no change to our approach. I can tell you the business development team and, therefore, our operations team have been extremely busy. We're extremely busy. Through this year and we were we were successful in getting three across the line.

There's no magic to it Okay, and then focusing on the on the Cote deal Could you could you let me know I guess how does it work for for Canadian royalties? You paying the Canadian tax rate or is it us tax rate and also does? Does the royalty incorporate the you know potential Gosselin resource? I

I'm going to, let me take the last part first. It does not include the Gosselin. And as far as tax rates go, Paul, do you want to take that on?

Yeah. Hey, Josh. Yeah. The royalty is paid in Canadian dollars and will be subject to Canadian tax. But, you know, overall, the tax rate that you know, we, you know, have during the period is, you know, you can still plan on a 19% to 23%, you know, effective tax rate. We will not be accruing, you know, as we're not contractually entitled to the royalty calculations, so there will not be any accruals for the royalty payments. Instead, you'll see the royalty being recognized in the period that it's due, which I believe is the March 31st quarter. Okay.

And that's what you're saying on an annual basis, just to be clear, just for that.

Yeah, that's on an annual basis. And I believe it's been $3 to $5 million, I want to say, over the past few years. And again, paid in Canadian dollars. Obviously, we're a U.S. functional currency, so there will be a little bit of conversion to U.S. dollars upon that time as well.

Great. Those are all my questions. Thank you.

The next question comes from Cosmos Chu of CIBC.

Hi, thanks, Phil, Paul, Mark, Dan, and Alistair. I guess I share the same dreams as Josh, so I'm going to thank you for changing the fiscal year end as well. Maybe first off on Ret Chris, I guess my question is, given that you acquired the royalty from a third party, what kind of

access to data did you have to get comfortable you know doing your due diligence process and as you said looking at the asset beyond the open pit today yeah before i turn that over to mark for a bit more detail on the process and you know who we might have hired to help us go through it um anytime we're buying a royalty from a third party we're dealing with public information And I'll say it's no different than what we did at Penesquito. It's no different than what we did when we bought the Barrick royalty portfolio or international royalty. In many of those cases, there were 43 101s, but in some cases there weren't. And we were sort of left to make estimates. So this is nothing new to us. And with that, Mark, do you want to just sort of run through in maybe a little bit more detail what you looked at, who we might have brought in to help?

Yeah, sure, Bill. Yeah, it's a good question, and it certainly is a lot more difficult looking at a third-party royalty. But we did bring in a block caving expert that provided just the guidance on how to think about production rates from the resource models. Now, we had only public information, some technical reporting, and some resource estimates and presentations. But from those, we were really able to understand what the shape of the ore bodies underground were, where the high grade was. And from those shapes, we were able to put estimates together on how we should think about or how we felt Newcrest would think about a block cave development. basically give our best estimate of that. That's how we ended up going about looking at that. There's not a lot of rocket science there. It's really trying to find an expert that can guide us on how to think about it from really ore body shape, grade, production rate standpoint. That's what we did.

Thanks, Mark. Yeah, of course. I only asked that question because, as you said, this one's a bit more challenging, because I guess the next data point hasn't come out yet the PFS, unlike some of the other ones that you might have mentioned in terms of third party acquisitions. But it's good to hear, you know, in terms of the process that you went through. I guess, my next question is, you know, in terms of right, Chris, on a go for basis, what are your audit rights in terms of your royalty? And then to your knowledge, is this the only royalty that's currently in place on Red Chris? And then I guess the last follow-up is, you know, is this the beginning of a new relationship whereby this could lead to, you know, potentially further, more direct acquisitions of royalties on the asset on a go-forward basis?

Dan, are you comfortable taking the royalty contract question?

Yeah, sure. Hi, Cosmos. It's Dan. I hope you're well. Thanks for the question. Sorry, just to be clear, the question, maybe we'll take the last question first. You're asking about specifically with Glencore or with just third parties in general?

With actually New Crescent Imperials. Could this actually lead to further acquisitions on Red Chris, if I'm looking out?

Well, it's certainly something we would be very interested in. I don't know if there's real visibility on that yet. Obviously, this is a third party that we acquired it from, and so our interactions with the operators have been limited to this point. But certainly, if there is a need for capital down the road, we would be very interested to help out and help out with the development in particular. It's exactly the kind of asset that we'd like to deploy more capital into. So we'd be open to that for sure.

And that's why, you know, hence the first part of my questions. I should really ask these questions one by one instead of like having like multiple parts. And that's the reason why I asked about potential audit rights, you know, into the future. Would you have more interaction with the operator in this case? And then also is this the only royalty that you know of on Red Chris so that you could actually have more royalties in it?

I understand. Yes. So as far as I know, it's the only royalty on Red Chris that we were aware of. And we have pretty standard audit rights in terms of looking at payments. The payments, I think Paul was talking a little bit about this. It's an annual payment. The payment comes in in the first quarter of the calendar year, the following calendar year. It's paid in Canadian dollars, and we would have some audit rights there, but that will allow us to have some interaction at the joint venture level.

And, Cosmos, this is Paul. I may just add to that. Yeah. You know, the operator, you know, they are required to deliver to us the royalty statement or calculation during that March quarter. And that calculation does need to be certified, if you will, by an independent-type accountant or accounting firm. We also will have audit rights to that calculation, which will go beyond that and cover us for a year after the calculation is received.

Great. Thanks, Paul. And, Paul, since I have you here, could you maybe just quickly touch on the structure of the royalty and the tax rate that we should apply to it?

Yeah. Yeah, so, again, the royalties held by our Canadian subsidiaries are generally taxed at a minimum 26.5%. So they're taxed at the Canadian rate up there. And you said structure. So, yeah, it's held by our Canadian subsidiaries. So, again, taxed under that environment. Perfect.

And maybe just one last question here. I think, Dan, you kind of touched on it. um but uh you know as the previous comments you've been very active um you know aero copper cote lake red chris um 100 million 75 million 160 million is that the kind of size that we should be looking for in terms of uh you know future acquisitions and then you know you kind of touched on it as well clearly you know these are all gold acquisitions any other common traits that we can distill from these acquisitions and would that provide any kind of insight into future acquisitions?

Yeah, Cosmos, I'll take a crack at the what do these acquisitions signify is just being consistent with the strategy of focusing on gold. We have said before, if we find something outside of precious metals that we find attractive, we're not going to hesitate to do it. But when we're actively looking for opportunities, if we can find something that's gold or precious metals, that's where we want to spend our time. So I hope the market looks at it and says, yeah, that's what they said they would do. And we don't see a need to try to diversify to find opportunities. We're finding opportunities in our our core area and as far as the size of the acquisitions i i think we've we've been talking about sort of 100 to 500 million for for a number of of quarters um so you know a couple of these are at the lower end but uh you're gonna i think you're gonna find more opportunities in that range than you are the the eight nine hundred million dollar uh ones but look we're positioned for those two when and if they come

Thanks, Bill, and team for all the questions I have. Thanks again.

The next question comes from Greg Barnes of TD Securities.

Thank you. Mark, I just want to clarify some of the comments about the Red Crisp production levels you were talking about. So the first seven years is more or less what you have now. Then it would be 18 years following that the 200 000 ounces of gold and 170 million pounds of copper under 170 170 million pounds of coffee yes right 18 years on top of the first seven and then back to double the current production rate after that that that's uh that describes uh how we look okay so just roughly on you know 1750 gold and 350 copper I'm getting about $9 to $10 million a year in revenue pre-tax to Royal Gold. Does that sound about right when you've got to full production from the block cave?

Alistair, let's see. That is roughly correct, but I think Alistair may have a more precise number at his fingertips.

It's Dan here, Greg. That's correct. Or in the ballpark at consensus numbers. Okay.

And just as the mine evolves, the block cave, when that's in full production, can the open pit continue to run or is that no longer possible given you'd be block caving underneath it more or less, I think?

Yeah, we assumed that there would be a little bit of an overlap period, but once the block cave is approaching full production, the open pit would be shut down.

Okay, that's very helpful. Thank you. Those are my questions. Thanks, Greg.

The next question is from Tanya Jakuskanek of Scotiabank.

Great. Good morning, everyone. Thank you so much for taking my questions. Just wanted to come back to your two latest acquisitions that were announced last night. And just I want to thank you very much for giving us the production profile and how you look at the acquisition in terms of the production profile over this period to help us. Know that Newcrest will be coming out with a reserve and a study in September. Just wondered what made you go ahead of this release. Was it because there was an auction process in place and something triggered it to go ahead of getting that study?

No, I don't think the timing was, I don't think they were trying to front run a study. And we have preferred to wait, sure, but the opportunity presented itself at a specific period of time. And again, I guess we have some comfort being able to take the information that's in the public, form a view on what we think the production profile is going to look like, and act on it, because we've done it in the past. You know, if we get something wrong, I would say it might be a matter of, I hope it's a matter of timing rather than absolute scale. But I didn't sense there was really an opportunity to sit back and say to Glencore, just hold on, let's wait for the study to come out.

Okay, so should I take this as this was more of an exclusive transaction between yourself and the seller? I can't say that.

I don't know. I never know who else is bidding for an asset like this. I would assume there were a few people interested.

And maybe just to remind me, did the operator Newcrest and his partner have a right of first refusal on this royalty?

Yes.

Okay. Okay. That's my question for that one. And maybe just moving on to Cotea. Just wanted to come back to that one and just wanted to kind of have your idea of what you've assumed in that acquisition in terms of a production profile there. Just based on the current reserves and mine plan that they put out, it looks like there's limited returns on the royalties. So just curious on your assumptions in terms of upside.

Yeah. Mark, I think that'd be a good one for you.

Sure, thanks. Thanks for the question. Yeah, we looked at the inferred resources within the reserve pit, and we took a factor on that. We also looked at the $1,500 resource pit shell and felt that at that price that there would be the potential for an additional stage of mining with an increased metal price We also note that the IM Gold talked about going from 36 to 42,000 tons a day as a future opportunity. And I think kind of probably on the other side of the equation, we realized the Gosselin zone is being drilled, and we took that into account as a potential detractor from our production profile. So does that help you out on how we thought about it?

So including the inferred resources and that additional stage of mining, from what I'm understanding, it's more than that 18-year mine life that's defined. Would that be a fair comment?

Yeah, that would be a fair comment, correct, yeah.

Okay. Okay, that's helpful there. Thank you for that. And if I can come back just to taxes, and that's not my forte, but If someone can help us understand just where your position is on or share your views on the global minimum tax proposal that's being proposed and whether or when it would be enacted and the impact on Royal Gold.

Yeah, and I think I touched on it a quarter ago. We already kind of have a global minimum tax when it comes to our streaming business, and that's the GILTI rate. And the difference between the guilty rate, our effective guilty rate, and the 15% that's being thrown around is, it's not that much. So for Royal Gold itself, if that global minimum tax and the guilty rate were to be sort of the same, there'd be no change to our business. The real key for us is what will Canada do with respect to overseas operations? You know, as you know right now, there is a tax difference between what our Canadian competitors can do if they do their transactions overseas and what we can. If you narrow that gap, that's great. And I hope we get there. You know, the other thing obviously that's going on is you've seen the very early discussions about a budget and how to pay for the budget. the guilt fee rate could go up there. But again, if Canada does implement a 15% minimum tax, even if we keep the gap we've got, we know we can compete. So I don't think global minimum tax itself affects us. It's really how does it affect our competitors. And you'd have to tell me when you think Canada might approach that subject and act on it.

Okay. Okay. No, that's great. Thank you.

Thanks, Tanya.

The next question is from Brian MacArthur of Raymond James.

Hi, good morning. I'll also thank you for changing the year end as well. But can I just go back to Redcrest for a minute? And that's very helpful, the guidance you've given. But obviously, this is a very long life asset. The real trick, I assume, is to get the volumes up nearer term. You know, Newcrest does 90,000 tons a day at other block caves. I'm not totally familiar with... the asset, but you sort of assume 60,000 tons a day, but is there geometry that over time constricts it to that size? And I get it, you did a base case at 60,000 tons. I'd be curious in your view what the opportunities are to make that bigger, because that could obviously make a fairly big difference if you bring those ounces and pounds forward. Mark, over to you.

Yeah, sure. I'll just correct one statement there. Imperial Metals looked at the 60,000 ton a day block cave and our view on that, we took a much more conservative view on the throughput or mining rate than they did. What I just pointed out is they ended up putting out a nice 2017 discussion on how they conceptually thought about the block cave. But it really comes down to height of the cave and footprint of the cave on how fast or what the production rate is. We felt very comfortable thinking in the 50 to 55,000 ton a day range. But if they were able to potentially look at multiple zones like the east zone and the east ridge at the same time, Geez, conceptually, if the resource continues to grow, I would say there's certainly some upside opportunities the way you're thinking about it. They're very creative people. They've demonstrated that.

Yeah, and I realize that may not be at the beginning, but as you go into those tail-end years, as you open the whole thing up, you're sort of saying there may be flexibility to go higher than that in those back-end years, which obviously... Because as you said, you've got whatever it is, 40 years right now. If you can bring that forward, it makes a big difference.

That would be correct, yes.

Great. Thank you very much. Thank you.

Due to time constraints, we will now end our question and answer session. I would now like to turn the conference back over to Bill Heisenbuttel for any closing remarks.

Well, thank you for taking the time to join us today, and thank you very much for the numerous questions. We appreciate your interest, and we look forward to updating you on our progress during our next quarterly call. Thank you.

Thank you. The conference is now concluded. Thank you all for attending today's presentation. You may now disconnect your lines. Have a great day.