Royal Gold, Inc. (RGLD) Q3 2015 Earnings Report, Transcript and Summary

Good day and welcome to the Royal Gold Fiscal 2015 Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Karli Anderson. Please go ahead.

Thanks, Alison. Good morning and welcome to our discussion of Royal Gold’s fiscal third quarter 2015 results. This event is being webcast live and you’ll be able to access a replay of this call on our website. Participating on the call today are Tony Jensen, President and CEO; Stefan Wenger, CFO and Treasurer; Bill Heissenbuttel, Vice President, Corporate Development and Operations; and Bruce Kirchhoff, Vice President, General Counsel and Secretary. Tony will open with an overview of the quarter, followed by Bill Heissenbuttel with an operational update and then Stefan Wenger will provide a financial update. After management completes their openings remarks, we’ll open the line for a Q&A session. This discussion falls under the Safe Harbor provision of the Private Securities Litigation Reform Act. A discussion of the company’s current risks and uncertainties is included in the Safe Harbor statement in today’s press release and is presented in greater detail in our filings with the SEC. Now, I will turn the call over to Tony.

Thanks, Karli, and good morning. Thank you for taking the time to join us today. I will begin our presentation on Slide 4. We had a very good third quarter as our gold equivalent volume grew 36% on a gross basis. That higher volume drove a 28% increase in revenue from a year-ago, despite a 6% decline in gold price, and in turn adjusted EBITDA increased 16% from the same period in 2014. We’re proud to have paid over $14 million in dividends during the quarter which is about one-fourth of our nearly $66 million of operating cash. Stefan will provide more details on our financial performance momentarily. From an operating standpoint, Q3 volume was particularly strong relative to a year-ago at Mount Milligan, Cortez, Mulatos, and Robinson. We expect three major catalysts to drive our performance in 2015. At Mount Milligan and Peñasquito, wherein both cases the operators are forecasting 20% to 30% volume growth and at Rubicon’s project where production is set to begin mid-year. Bill will talk more about our operating performance and provide some insights into what to expect for the reminder of calendar 2015 in a moment. On the business development front, we made our final scheduled payment to Rubicon Minerals for the Phoenix stream in the third quarter and made the first $7.5 million deposit to Euromax for the Ilovitza stream. We are actively working to add new business to our portfolio and continue to believe this is an excellent time to do so. Turning to Slide 5, you’ll see that we have received record quantities of gold from Mount Milligan and are making progress towards the average quarterly run-rate at design capacity. Thompson Creek reported quarterly production at Mount Milligan of over 46,000 ounces of gold and reiterated their guidance that they expect to achieve design capacity of 60,000 tonnes per day by calendar year-end. In our June quarter, we expect to receive deliveries from Mount Milligan based exclusively on final settlement timing and volumes, which could take three to five months after concentrators produced at the mine. Based on the shipments we have seen so far, we currently expect slightly lower sales for Mount Milligan in the June quarter. On Slide 6, we shared an interesting chart from Goldcorp’s recent Investor Day. It highlights long-term potential growth at Peñasquito associated with our metallurgical enhancement project, which they forecast could extend mine life by five years. This is in addition to the 20% to 30% higher volume expected at Peñasquito this calendar year. I should also note, as future value embedded in our portfolio, that we have a 1.4% royalty on a portion of the El Morro project, which is also available for viewing on this slide. On Slide 7, you’ll see photos of the mill and some underground development work at Phoenix project. It’s only been 14 months since we acquired our stream at Phoenix and we’ve enjoyed watching the project rapidly evolve through further exploration, underground development, and construction. Rubicon is now commissioning the mill and continues to guide for gold production mid this calendar year. I’ll now turn the call over to Bill.

Thanks, Tony. On Slide 8, we first compare March quarter versus December quarter gold equivalent ounces on the right side of the slide and also year-over-year results on the left. Relative to last quarter the big story is that we had higher GEOs from Mount Milligan. Moving forward we will be receiving gold from Mount Milligan based on final settlements only for all future shipments, which by agreement must be no more than five months after it leaves the mine. As Tony stated, we expect our June quarter volume to be down slightly from the March quarter. You’ll also see in the chart that Voisey’s Bay production is lower than the prior quarter. Historically, we’ve received nickel and copper concentrate shipment data from Vale on a regular basis, which allowed us to estimate our Voisey’s Bay royalty revenue for financial reporting purposes. When actual quarterly payments differed from our estimates, we adjusted the estimates during the subsequent quarter based on actual payment information received. We did not receive nickel and copper shipment data for the December 2014 and March 2015 quarters. For the March quarter estimate reported today we used historic concentrate shipment data and then made an adjustment for our December quarter estimate based on the actual royalty payment we received in February. From this point forward, we intend to recognize Voisey’s Bay royalty revenue on a cash basis. This means that Voisey’s Bay revenue we recognized for the June quarter may only include whatever adjustments to the March quarter estimate are necessary based on the actual payment information we receive next month. And finally, volume at Peñasquito was fairly flat from the December quarter, and Goldcorp has disclosed that they expect 2015 volume to be back-end weighted. Now, in the comments that follow I will compare third-quarter production versus the prior year quarter which is summarized on the right of the chart. Mount Milligan production increased 18% to 46,100 ounces of payable gold during the quarter. However, throughput and production were impacted by frozen and plugged feeders, and unscheduled maintenance issues in the March quarter. Thompson Creek implemented action plans to address the issues. Mill throughput averaged 39,500 tonnes per day during the quarter, compared to 33,000 tonnes per day for the prior year quarter. Throughput improved during the last half of March 2015 achieving 50,000 to 54,000 tonnes per day. Thompson Creek continues to guide to design throughput of 60,000 tonnes per day by calendar year-end. At Andacollo, payable gold production in concentrates decreased 8% as a result of lower mill production over the last few months. Harder ore and unplanned maintenance downtime in the concentrator impacted copper concentrate shipments early in calendar 2015, while a failure of the tailings thickener and scheduled maintenance impacted mill production late in the March quarter, which may impact what we receive in this current quarter. We are expecting a stronger second-half of the year at Andacollo. At Cortez, production increased 59% over the prior year quarter as surface mining activity increased at the Pipeline Mining Complex, where our royalty applies, while no significant mining activity occurred in these areas during the prior year quarter. Production subject to our royalty interests was about 201,000 ounces in all of calendar 2014 and Barrick is forecasting about 132,000 ounces in calendar 2015, most of that front-end loaded. We have long waited for Crossroads pre-stripping to begin and we’re excited to learn Barrick is commencing stripping this calendar year. Crossroads is an area of approximately 3 million ounces subject to Royal Gold’s 5% NSR royalty interest. At Mulatos GEOs attributable to our royalty interests increased 24% aided by the timing of final settlement of gold that was produced at the end of the fourth calendar quarter of 2014, but for which settlement with the refinery had not yet occurred. Alamos announced an increase in 2015 production guidance from calendar 2014 levels as a full year of mill production is expected to more than offset lower heap leach ore grades during calendar year 2015. At Peñasquito, gold production subject to Royal Gold’s royalty interest, which lags Goldcorp’s reported production due to the timing of concentrate shipments, increased nearly 50% over the prior year quarter to approximately 174,000 ounces, while silver, lead and zinc production decreased by 16%, 13% and 8% respectively, over the prior year quarter. Goldcorp expects the gold production for calendar 2015 to be weighted to the second-half of the calendar year, as mining will move into the higher-grade portions of the Peñasco pit beginning in the June quarter. On Slide 9, we provided operator estimates where available for calendar 2015 on the area subject to our interest. The important takeaways for 2015 is that we expect, A, a stronger second-half of the calendar year at Andacollo, Mount Milligan, Mulatos and Penasquito, these operations comprised about 65% of our revenue in the third quarter and their performance should more than offset a weaker remainder of the year at Cortez; and B, we have no volume guidance available from Voisey’s Bay, but point out that it was a normal percentage of our revenue in the March quarter. Today, we are also reporting our 2014 year-end reserves. Gold equivalent ounces reserve were 5.3 million ounces at year-end 2014 compared with 5.6 million ounces by year-end 2013. The reduction was due mainly to depletion. And I’ll turn the call over to Stefan.

Thanks, Bill. I’ll start on Slide 10. Today I’ll summarize the financial results we reported this morning, with comparison to the prior year quarter. I’ll also discuss the tax rate and our amended credit facility. Revenue of $74.1 million was up 28%, driven by Mount Milligan once again. Our DD&A rate was $408 per gold equivalent ounce for the quarter, reflecting greater contribution from Mount Milligan. We reported net income of $25 million or $0.38 per share, up 23% on a combination of higher revenue from Mount Milligan and a lower effective tax rate. For the quarter, we reported income tax expense of $1 million for an effective tax rate of 4%. Since December the U.S. dollar has appreciated significantly against the Canadian dollar, increasing from a rate of CAD 1.16 per U.S. dollar to a rate of CAD 1.26 during the March quarter alone. This dollar movement resulted in an $8 million of non-cash gain, which is reflected as lower income tax expense upon re-measurement of our Canadian deferred tax liabilities to their U.S. dollar value. For the full-year, we’ve required lower tax expense of $11.4 million as a result of dollar movement since July 1, 2014. Absent these foreign exchange gains in the third quarter, EPS would have been $0.26 per share and our tax rate would have been 35%. Looking forward, we will continue to re-measure our Canadian dollar denominated deferred tax liabilities for currency movements at each balance sheet day. Today, the Canadian dollar versus U.S. dollar exchange rate is approximately $1.21, a decrease of about 5% from the March 31 rate. As we look ahead to our full year results a 5% movement in the Canadian dollar exchange rate would impact our full-year effective tax rate by about 7 percentage points. Unrelated to tax, I also wanted to flag that our March quarter results have a small amount of expiration costs on the income statement. This is related to our exploration funding at the Peak Gold joint venture. And we would expect to have some costs associated with the summer exploration program reflected in the June and September quarters as well. Now turning to Slide 11, this morning we also announced an amendment to our credit facility, which expanded our revolver capacity to $650 million, from $450 million on the same terms and with the same syndicates. The previous $150 million accordion feature was eliminated. I’d like to thank our banking syndicate partners at HSBC, Scotia Bank, CIBC, Goldman Sachs, and Bank of America Merrill Lynch for their of Royal Gold through the credit facility. You’ll see on the slide that our enhanced liquidity position is nearly $1.4 billion. Our outstanding commitments are few and are success-based. We have $1.2 billion completely uncommitted after detecting our current and success base commitments. We’ve also generated over $180 million in operating cash flow over the last 12 months, which gives us great flexibility to balance return of capital to shareholders’ growth. And finally, on a housekeeping note, this morning we filed an updated S3 shelf registration statement, which is immediately effective. This shelf will allow us to remain flexible with respect to our capital raising decisions in the future. And now, I’ll turn the call back over to Tony.

Before closing, I would like to just take an opportunity to welcome Alistair Baker to our business development team. Alistair was most recently with Barrick Gold in their corporate development group, and brings a wealth of experience to Royal Gold. He would join Marcus in establishing our Toronto office. Now, to wrap up on Slide 12, I’ll update to you on three key themes to watch this year. The first is growth. Our gold volume from Mount Milligan will continue to grow as the mine rounds up towards full design capacity. Phoenix is expected to further enhance our growth profile of our streaming business in the second-half of this calendar year, and likewise Peñasquito is poised for a strong second-half of the year as well. The second theme is quality. Through the end of the December quarter, the average gross margin amongst our producing properties was 52%, holding fairly steady from a year-ago. As you would expect, asset quality is one of our principle streams as we look to add new business. And the third theme is opportunity. We’ve enhanced our liquidity today with no diluted impact to our shareholders. And continue to offer an attractive cost of capital to counterparties, who like us, want to grow their business in a way that preserves and enhances shareholder value. Operator, that concludes our prepared remarks, and we’ll be happy to take any questions.

Thank you. [Operator Instructions] And our first question comes from Andrew Quail from Goldman Sachs. Please go ahead.

Yes. Hi, Tony and team. Thanks very much for taking my question and congratulations on a solid quarter. Just a couple, one on Mount Milligan, so you - I think Tony you just outlined that you guys are moving to a receipt basis, is this or is it timing issue for next quarter and then will pretty much flatten out going forward?

So, Andrew, good morning, first of all. Let me just make sure, you said Mount Milligan we’re going to receipt basis?

Yes, yes.

So what’s happening on Mount Milligan is that we’re going to a settlement - final settlement basis. So remember our first 12 shipments in Mount Milligan we had provisional payments, so we got paid on as well as final settlements. And by contract that was to evolve into only payments on final settlements. So that’s what’s happening there. As Bill and I both mentioned, that can take about five months. And so we’ll have pretty good transparency of what’s in the quarter, because we’ll be able to see the ships that are on the water and things like that. There still is some on Mount Milligan with regard to what particular shipments will close in a particular quarter. So I hope that’s responsive to your question. With regard to going to cash receipts we also talked about Voisey’s Bay and want to make sure that your question wasn’t directed towards Voisey.

That wasn’t Mount Milligan, sorry, I didn’t - I’m wondering if mixed up. And one on Andacollo, obviously, it sort of been obviously declined the last - probably last 12 months, and what you guys received. Do you expect, obviously, you expect a stronger second-half. Do you sort of see going into - not just the next sort of six months but the next sort of 12 to 18 months. Do you sort of seek getting back to levels previously said in 2014.

No - and I go back to 2013, when we talk about the response for the question. We always knew that higher grade in Andacollo was in the first few years. And we saw that higher gold grade at that time. If memory serves me correct, 2014 was a little bit flatter and I think we have a slightly stronger 2015 projected. But I think, if you look forward and just keep your estimates around the reserve grade, maybe a little bit higher and there is a reserve tails, the grade that deplete a little bit but, not any major movements that I foresee at that property.

Okay. And last one I think I asked you probably every second times. I mean, you guys are obviously paying at 24% of your - I think it’s 25% of your operating cash flow. Do you see scenario over the next sort of foreseeable future that could be increased or revised upwards?

So, I’ve always…

…as dividends, as dividends.

Yes, I’ve always responded when questions about dividend that we’re very, very proud of the dividends we had in place since the year 2000 and increased every year since 2001. So that’s a fantastic trend in having 25% of your operating cash flow payout, is it pretty impressive, payout ratio in any business. But for us, I wouldn’t expect a real large swing. I would hope that we can continue to show the confidence in our business by having a healthy dividend, I don’t see a reason, why not to do that. But on the other side of the allocation of capital, we see a lot of interesting opportunities in the marketplace today. And most of our growth through our history has been through share price appreciation. And so that’s where we’re mainly focused. And I think the yield will only go up in a significant way if we felt we are running low on opportunities in the business.

And last one little bit just on Phoenix, so it’s for our modeling purposes. What do you think, when do you actually think you actually get revenue, or obviously it’s ahead of schedule and that fantastic. But when you - what sort of quarter do you sort of see, you guys would see revenue that would go into your P&L?

Yes, Andrew, it’s a good question. Thanks for that question, it’s probably a piece of guidance that will be healthy in the marketplace, okay. This is not a complex circuit and it’s not a large concentrate circuit, so we probably expect to see those flowing through that rather quickly. But maybe small amounts of revenue to our account, let me characterize that differently, small amounts of gold deliveries to our account in September quarter. But I won’t be surprised, if I wasn’t until the December quarter that we actually received gold sales and perhaps have few - sorry, deliveries in gold sales.

Awesome. Thanks very much for answering this question, Tony.

Thanks for your interest, Andrew.

And the next question comes from Patrick Chidley from HSBC. Please go ahead.

Good morning, Patrick.

Morning and afternoon, everybody. Just wanted to - you’ve obviously got a lot of cash on the balance sheet, you’ve got - you’ve just made some initiatives to increase liquidity. And I’m wondering what kind of opportunities are you looking for with this Worcester as it were. Would they be, I mean, you mentioned just I think to help companies maybe to some objectives in terms of financing things. Would that be new projects, or would that be products and development or would it be looking at opportunities with existing production?

Patrick, let me ask Bill Heissenbuttel to respond to that and probably have a follow-up commentary too?

Thanks.

Yes. Actually, we talk about the business development that’s really falling into three buckets. The first one is project development, but of course, in those instances, you are probably talking about a period of time from our investment into an asset that is delivery gold to us. The two more recent buckets, if you will, and recent I would say over the last couple of years, we’ve seen the ability for us to potentially participate in mergers and acquisition opportunities that was initially base metals and you got up precious metal byproduct. But Now what we are also seeing is debt restructuring. And to the extent you got a company with a levered balance sheet, perhaps a near-term debt maturities our stream can alleviate the financial distress, because streams are valued and paid over the life of the mine. So those three are really the areas in which we try to find new opportunities.

Actually be active in all three of those areas, Patrick. And the one thing that I think has changed although in the last 12 or 18 months is that, there’s more cash flowing opportunities in the marketplace, I think today than there has been in the past. So we’re excited about being able to put that money to work in getting gold deliveries associated with that relatively quickly.

Great. Okay, thanks. It sound encouraging. And also just on exploration and you mentioned the peak project, is it - could you give us an update on that and is that a one-off sort of thing still, or you do more of those?

Yes, sure, we’re happy to give you an update on that peak joint venture, and we’re just very pleased to have an opportunity to work with the Tetlin village people in Alaska there on their land and associated with a company Contango ORE in the joint venture. It is a bit of a one-off. We - in my tenure here, we haven’t done attracted to do any exploration ourselves. You’ll remember Patrick, and being a long-term follow of the company that we started in the business a quartile as an exploration company and this company actually discovered this south part of the South Pipeline. So that there is a tremendous amount of value to be created there. And when it comes to the peak gold joint venture, we just saw a really interesting prospect in an area that wasn’t remote like many places are in Alaska already 1 million ounces a little bit more equivalent gold resource at this point 3 gram kind of materials would add a lot of the boxes picked, as far as what would attract us to be interested in the project. And we just have a - the real good support network in Alaska having worked there in my early career and we’re using a company called Avalon Resources to help us do that exploration. So we are not happening to staff up for that, and so it’s just - we just had a lot of the stars come together on their project. And as far as the - what are we doing whether this year we are - we have a $5 million initial budget. And as Bill, maybe Stefan, I think, actually talked about our success-based investing. This is one of them. We’ll start out with $5 million and if we continue to see encouragement, we may put additional money on this year. But it’s a long-term play over a number of years here. So I don’t want to get out in front of it, but we are quite excited about it.

Okay, thanks. And then I did know just you had mentioned that Barrick have started this stripping the Crossroads Deposit for the first time, I guess, is that on the road show a full development then and is it sulfide ore mine, is it?

No. I think I would - let me answer the latter question first. It’s mostly oxide and I think about 85% of that will go on the heap leach pad. And just a small fraction of that will go into a refractory type, say a Goldstrike Roaster, but the rest of it will be milled. So bulk of it is heap leach available and doesn’t compete against any other horse through the mill. So that’s a piece of good news. = The - as far as the schedule those, I don’t think we’re in a position, we have to have confidence and be able to guide you as far as our fastest stripping might occur. So just give us a little bit more time there to understand that schedule a little bit clear. But surely is a great thing to see a step, or this is something we’ve been asked about for many, many years.

All right. it’s about 3 million ounces, it that correct?

You’re correct.

Okay, great. All right. Thanks, Tony and everybody.

Thanks, Patrick.

[Operator Instructions] And the next question comes from Garrett Nelson from BB&T Capital. Please go ahead.

Hi. My questions have already been answered. Thanks.

Thanks, Garrett.

And we have a final question from Kevin Chiew from CIBC. Please go ahead.

Hi, Tony and team, it’s actually Cosmos here.

Hi, Carswell.

Hey, how are you doing?

Well.

I have a question on Voisey’s Bay. Certainly, I don’t know how much you can tells us, but I guess it’s two parts. First off, how would you recommend us forecasting future production and future revenue coming from the Stream to Royal Gold. It sound like you might be having a bit of a trouble on your end, as well just given the reports that aren’t being provided at this point in time? And the second part of my question would be, I thought I read about two months ago that Vale had come to an agreement with the government in terms of an extension of full production at the Long Harbour until 2018, 2019, it won’t be exclusively processing or from the Voisey’s Bay until that point in time with the extension. Dose that benefit this agreement, in anyway do you foresee any kind of benefit to Royal Gold from that extension?

Yes, again, let me answer the latter question first, and then I’ll go to the former. But the - there has been a couple of - let me back up even further and say that the provinces had placed a limit of how much concentrate could be processed outside of the province, and that’s the material that went off to the Sudbury Complex. And they also required Vale to bring that amount of concentrate back into process through the Long Harbour facility in years to come. So they had a specific - initially a specific amount of concentrates they felt was sufficient to build Long Harbour. And Long Harbour was not built within that timeframe and so that was extended to another term and I think that was just about the end of last year or sometime that it was already to be filled up. And then so they extended it, what I believe is the second time. And that gives them a little bit more breathing room. I think it’s fair to say, and then it’s our belief that they hadn’t got that extension, we would not probably be able to be processing ore outside of the province today. So, yes that has come to a benefit for us, because they haven’t switched over completely to the Long Harbour facility yet. That’s scheduled to happen during the course of the year and we understand in the latest press release that they talked about having it almost entirely Long Harbour by the end of the year for Voisey’s Bay. So that brings me to your former question, and as far as what can we recommend as far as forecasting and here to I ask for your patience. We understand that there has been some material that’s been processed at Long Harbour already and so we’ll be receiving payment schedules associated with that at sometime in the near future. And once we fully understand how they intend to treat our royalty and the associated detectables at Long Harbour, then we’ll be able to give you much clearer picture, Cosmos. But I am not talking about by the end of the year, we should have that clarity, I think we’ll have that clarity much sooner than that.

Okay. Sounds good. And then…

Just one more comment I’d like to make, and with all of this change happening there, we just thought it was prudent to take a more conservative approach and not forecast what’s likely to be, because this is absolutely new turf for us.

Yes. And that’s why as you mentioned in the press release as well, Tony, that you now transitioned to a more cash accounting message for the Voisey’s Bay royalty, right?

Exactly.

Okay. And then maybe a bit more guidance as well in terms of taxes maybe for stuff, and what should we use in terms of a tax rate or given - it was 4% effective tax rate into the current quarter. How should we look at again if you can give us a bit of more guidance in terms of how we should forecast for the rest of the fiscal year as well as maybe next year as well.

Sure, Cosmos. With respect to forecast I’m not going to give specific guidance on the full-year tax rate, because there’s with the FX in particular there’s a lot of moving parts there. But if you look at our year-to-date fully year - or the nine month tax rates about 8%, obviously a big benefit from the FX that I talked about. If we keep all things static for the full fiscal year ended June, we would end the year with about 12% effective tax rate. [Technical Difficulty] I would see depending on where the FX rate is you’d have to solve to get to that 12%. If the FX rate moves you might see something closer to 35% tax rate in the fourth quarter to get to that 7 point movement I talked about from that 12%.

Okay. Great. That’s all I have.

Thank you, Cosmos.

Thank you.

Cosmos [ph].

And we have a question from Farooq Hamed from Barclays. Please go ahead.

Hi, good morning, guys. Just I actually had a follow-up question off of one of Patrick’s questions. So, Bill, you referred to kind of the opportunities that you’re looking for in three buckets and one buckets was that restructuring. I’m just wondering and that’s something that’s kind of new for you guys. I’m just wondering how do you think about counterparty risk, when entering into debt restructuring deal?

Well, I mean counterparty risk is probably first and foremost where we start and it probably starts with the people involved. I can tell you my background is actually from the lending industry. So everything I do probably starts with a bit of a credit analysis. Because, in some of these instances the stream maybe done at levels in a corporate structure that aren’t actually at the operating company level and you might be somewhat dependent on the parent company to make sure that the deliveries are there. So we pay attention to financial statements and corporate cash flows and debt ratings and everything else. But it’s often starts with the counterparty risk, because if they’re not financially strong to deliver we could have a big problem very quickly.

My issue is kind of that, I mean this doesn’t always have to be the case. But if you’re looking at partnering or buying a stream from somebody that needs, that have a short-term or near-term pressure on their balance sheet from a near-term debt being due, and so they’re looking for relief and looking to sell a stream. Doesn’t that by nature suggest a weaker counterparty?

It could, every situation is different. If we can elevate a near-term debt maturity with something that gets paid out over 20 or 30 years, that may actually change the credit profile of the company [Technical Difficulty] to the level of that and the timing of the maturities, and that all goes into whether or not we’re going to take that counterparty risk.

And I think, one more thing that I would add to that it all starts with the quality assets that are in the lines of the piece of business that we do, and we have to have a lot of confidence in that and make sure that that asset can provide that cash flow. And there are - to Bill’s points, there are times where we simply - we’ve quite liked an asset, but we have been able to get comfortable with the entire debt package on the project and we have had to walk away from some of those things. So we are very much of Q2 what you are saying Farooq.

Okay. Now that’s fair. And just some of you think, as thinking about kind of would be some of the trials that you went through kind of on the Mount Milligan side. And then maybe just a second part to that question in terms of participating in the M&A process. So you’re thinking somewhere along the lines of kind of [Technical Difficulty] offering, financing to facilitate an M&A deal between two producers, something like that?

That’s right.

Okay. And in that environment, how like how has the traffic kind of change in the last three, six months versus the end of 2014?

The short-term, I don’t think it’s changed all that much. I think you probably a few years ago, you saw many of the major diversified rationalizing their portfolio and selling some across smaller assets, non-core assets, and they have precious metals, streams in them. And that’s a situation where we go to a producer and we say, we believe our cost of capital is lower than your cost of capital. Therefore, we think we can add value to your bid. So that’s historical, I’d say, what you see a little bit more on the project finance side is that precious metals companies willing to actually entertain steams. So who knows that could be another opportunity for us.

Sure. Okay. That’s helpful. Thank you for that.

Thanks, Farooq.

Having no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Tony Jensen for any closing remarks.

Well, thank you very much for taking time to join us today, and we appreciate your continued interest in Royal Gold, and we look forward to updating you on our progress in our next quarterly call. Have a great day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.