Good morning and welcome to the Royal Gold Fiscal 2019 Third Quarter Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Alistair Baker, Director of Business Development. Please go ahead.

Thank you, operator. Good morning and welcome to our discussion of Royal Gold’s third quarter 2019 results. 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 Tony Jensen, President and CEO; Bill Heissenbuttel, CFO and Vice President, Strategy; Mark Isto, Vice President, Operations; and Dan Breeze, Vice President, Corporate Development of RGLD Gold AG. This discussion falls under the Safe Harbor provision of the Private Securities Litigation Reform Act. The discussion of the company’s current risks and uncertainties is included in the Safe Harbor and cautionary statement in today’s press release and slide presentation and is presented in greater detail in our filings with the SEC. Tony will give you an overview of the quarter, followed by Mark with an update on our operating results. Bill will then provide a financial update, and Tony will wrap up the call with some closing comments. We’ll then open the lines for a Q&A session. Now, I will turn the call over to Tony.

Good morning and thank you for joining the call. I will begin on Slide 4. This was another solid quarter for Royal Gold with improvements in all of our financial metrics compared to the December quarter. Our revenue for the quarter was $110 million, up 13% from our previous December quarter of $98 million. This increase was made up of 6% higher volumes and improved metal prices with realized gold and silver prices up about 6% and 7% respectively. Earnings for the quarter were $0.44 per share, up 22% from $0.36 in the previous quarter. Operating cash flow was $77 million, which was 31% higher than the December quarter due to working capital changes mainly associated with lower taxes and interest payments. I should emphasize that we had an inventory build of about 8,000 GEOs due to receipt of an earlier than expected delivery from Mount Milligan. Had that inventory been released, our financial results would have been notably impacted in a positive way. We paid dividends of $17 million, up by $1 million from the last quarter after the Board approved a dividend increase in November to $1.06 per share for the calendar year. Our cash flow payout ratio for the quarter was approximately 22% and comfortably allowed us to meet our strategic objective of paying a growing and sustainable dividend. Consistent with the past several quarters, we also continued to strengthen our balance sheet. With over $22 million in working capital and our undrawn credit facility, our available liquidity is now about $1.2 billion. In addition to providing these solid operating and financial results, we also announced an investment in Silver Stream and the Khoemacau project in Botswana, which adds a high-quality growth project to our portfolio. Finally, I would like to briefly mention the Peak Gold project…

Thanks, Tony. Starting on Slide 7, the Khoemacau project continued to advance since my mid-February site visit, just before the transaction was announced. Excavation of the central and north box cuts is advancing as shown in the photo. Brush cornering for the 35-kilometer access road is almost complete and the 240-person construction camp upgrade is complete and the camp occupied. Detailed design and engineering are reported to be 71% complete with certain long-lead items for the mill upgrade already purchased. Although still at an early stage, the project activities are progressing well. Moving to Slide 8, I’d like to discuss some of the recent development at several of our key operating properties. We’re very pleased to see during the quarter that amendments to the environmental assessment certificate at Mount Milligan were granted to allow access to additional surface water and groundwater sources until November 2021. Centerra expects that these additional sources should supply enough water to relieve constraints on the mill operations, which have been impacted since late 2017. As expected, water constrained this past quarter across Mount Milligan to maintain lower throughput that averaged 27,000 tons per day, well below the full capacity of 55,000 tons per day. As such, we expect lower sales in our first fiscal quarter of 2020. Centerra upgraded its pumping infrastructure and began drawing water from these additional sources at the beginning of April and throughput is steadily increasing as the water level increases in the tailings facility. Centerra expects the additional water captured from the spring mill will allow operations to ramp up to full capacity in May and maintain 55,000 tons per day through the remainder of this calendar year. Due to the unusual timing difference between production at Mount Milligan and the receipt of stream deliverables, we expect mill throughput increase…

Thanks Mark. I will turn your attention to Slide 11 and give an overview for the financial results for the quarter, which I would describe as quiet and steady. I will be comparing our quarterly results to the comparable quarterly period in fiscal 2018. As Tony mentioned at the beginning of his remarks, revenue this quarter was $110 million on volume of 84,200 gold equivalent ounces. This volume included our expectations with respect to the stream volumes we discussed during our fiscal second quarter conference call and the actual results announced last month, which were slightly better than expectations. With respect to volume, GEOs decreased approximately 4% in this recent fiscal quarter relative to the same period last year. Volumes were impacted by lower gold and copper stream revenue from Mount Milligan, partially offset by higher gold and silver sales from Pueblo Viejo and Andacollo. Metal prices had a negative effect and were down across the board with gold down 2%, silver down 7% and copper down 11% year-on-year. G&A expense for the quarter decreased to $6.8 million, down from $8.1 million in the prior year quarter and $7.4 million in the second fiscal quarter of 2019. The prior year quarter included G&A spending on the Vale litigation, which has subsequently been resolved and G&A expense for the last couple of quarters are more in line with typical levels. Our DD&A expense for the quarter was $39.4 million or $468 per GEO, which is in line with both last quarter and the prior year quarter. We recorded a small gain of $1.8 million this quarter as a result of the mark-to-market movements in the equity positions we hold. This is the third quarter since we adopted the new accounting standard for the recognition and measurement of financial instruments that give…

Thanks, Bill. I will conclude on Slide 13. To summarize the quarter, our existing business generated solid earnings and cash flow, and we continue to strengthen our balance sheet. We also added a high-quality growth project of our portfolio during the quarter. We remain well positioned in an active business development environment, where our flexibility and access to capital remain advantages. Looking forward, Royal Gold is made up of 22 highly talented and dedicated professionals. I truly believe that you will see several of our employees leading organizations in the future. It is rewarding to watch our people perform and to grow. They know what to do and how to get it done. Our team is anchored by arguably the best board in the business, who plays a critical role in setting strategy and providing the guidance. Together, we have developed a very successful culture and a business that is durable and robust. With this combined 360-degree leadership, the expertise in our company and the excellent state of our business, it is time for me to step aside after 16 years with the company and 13 years as President and CEO. I have informed our board that I would like to retire by the end of the March quarter of 2020, essentially one year from now. This long notice is characteristic of Royal Gold, working in a transparent and methodical fashion. Our board has been actively engaged for many years in succession planning at several levels within our company. They are well prepared for this transition, and I’m confident they will select an excellent leader for Royal Gold’s future. Brandon, that concludes our prepared remarks and we will be happy to take questions.

Thank you. [Operator Instructions] Our first question comes from Cosmos Chiu with CIBC. Please go ahead.

Thanks, Tony, Mark and Bill for the conference call. First off, congratulations on your retirement, Tony, it’s certainly sad to see you leave, but it’s well-deserved and you’ve certainly done a very good job in the past, over 10 years now. So, congrats once again.

Thank you, Cosmos. Thanks very much.

Now the questions, I guess. Maybe a question for Mark, certainly, two things happened after the quarter end, with the tailings facility at Rainy River impacting throughput and also the blockade at Peñasquito. Mark, you sort of touched on it, but how concerned are you at this point in time with what’s happening at the 2 operations?

Obviously, timely questions. I guess, as you just look at the news around Ontario, you know that many areas are impacted by this excessive precipitation and the rapid snow melt. So, having particular issues with excess precipitation, perhaps not a big surprise and, I guess, we feel that the operation’s in good hands and they’re properly addressing the situation. We think it will come back within the guidelines that New Gold gave. So unfortunate perhaps, but can’t really predict the weather. With respect to Peñasquito, I mean, that’s that seems it’s been a bit of a recurring theme, as you might recall, I think it’s perhaps the third blockade that they’ve experienced since well, in the last 3 or 4 years. I mean, we certainly expect to see it resolved in a manner systematically and the same as it’s been done in the past. I mean, we know that they were operating and storing concentrate at least up until late April. So, I mean, we’re confident that it will get resolved as it always has gotten resolved and the shipments will start coming as expected. So, I’m not sure what else I can tell you that but that’s so.

Well, I think that’s good. You talked about certainly, you talked about Mount Milligan, you have talked about Peñasquito, you had talked about Rainy River. One that you didn’t really talk about was Golden Star. Wassa is certainly doing well. But I think when they reported earlier today, Prestea Underground hasn’t been doing as well, being there’s higher dilution than expected. Any concerns there, in terms of what’s happening at Prestea Underground and how would that impact potentially impact the revenue, the royalty stream revenue coming to Royal Gold?

Okay. Good question. Yes, certainly we watch Prestea very closely. We have similar concerns that you raised that it’s just really has not performed according to its feasibility level throughput or mining rate or grade. We’ve visited here in January. We had an independent review done on the resource estimate to get a little bit more color on how to think about the asset. My takeaway is that the problems that they’re having are fixable, and they really the new management obviously is focused on doing exactly that. So, we think the problems are fixable at the site level and that the ore body is still a solid ore body, and we think it will produce and can produce at a profit. As far as the impact, what you see is frankly Wassa is overproducing, and of course, Prestea has been underproducing. And year to date, I mean, they’re virtually right on where we expect them to be. I mean, it’s not the obviously the mix we’d like to see, but they haven’t had an impact on us yet. And they’re still guiding to be in their guidance range. So, I think they’re going to I think there’s a lot of opportunity for improvement. And I think there’s a lot of there’s some good low-hanging fruit that they can work on.

Cosmos, I’d just like to add to Mark’s remarks which were spot on and just remind you that on an overall basis with our Golden Star investment that we did in 2015, we’ve already got 50% of our money back. And we’ve got mine lives that are longer today than when we’ve invested in the project. And we still like the exploration upside of that package, it’s just been a great investment for us. So, if the current new management team can harvest some of that low-hanging fruit that Mark talks about, that’s even so much the better.

For sure. Maybe switching gears, a little bit here, question more for Bill. On that $370 million convertible that’s coming, that’s maturing in mid-2019, can you remind us of the conversion terms in terms of that convertible? I’m just trying to figure out if it’s going to, you’re going to need cash to repay the entire $370 million? Or is there a component to it that could potentially be converted into shares?

So, the settlement that has been selected under the indenture has us paying cash for the $370 million. And to the extent the price was above, I want to say it’s 102 30, somewhere in that range, any excess would be settled in shares. Now for anything to be settled in shares, the volume-weighted average price of our stock from April 15, for a 45-day trading period from April 15 up to maturity has to exceed the conversion price. And given where our stock is today, every day that we trade below, makes it harder and harder. So, our expectation is we’re going to pay $370 million in cash, and there won’t be any shares that are issued.

Which is exactly what we wanted, we want to be able to settle that whole thing in cash and continue to garner shares.

Okay. Yes, for sure. It’s just I just needed a number so that I can put that into my model as well. And then maybe last question here. I think Tony had touched on it in terms of Cortez. Cortez, certainly did really well in this past quarter. It sounds like the Barrick Newmont joint venture partnership could enhance production even more. I think Cortez isn’t the only asset you have in Nevada, there’s other one, you have a small one, and Goldstrike. You have something at Leeville. So, are there any other ones that potentially when the update comes around, could we see upside potential as well?

No, I would think that Crossroads is probably the most susceptible to improve production schedules there as we have talked to the Barrick Goldstrike team sorry, the Barrick, Newmont team. I don’t think there is probably a lot of difference that would happen at some of the other assets where we hold an interest, but I could be proven wrong. I think what we need to do is just let those folks spend a little time and fully realize the synergies that we all hope are there.

Yes, for sure those are the questions I have. Thanks a lot again Tony. I guess you are not leaving so you have to put up with us for another four quarters.

It’s been absolute pleasure to do so, Cosmos. Thank you for your questions.

Alright, thanks.

[Operator Instructions] Our next question comes from Josh Wolfson with Desjardins. Please go ahead.

Thanks. Also want to extend the congratulations to you, Tony, for the very successful career so far at Royal. I had a couple of questions for Peñasquito. The production or the operator guidance that was provided in the initial press release, you mentioned that you were looking for more information from Newmont about the outlook at the asset. Were those numbers provided to the company by Goldcorp? Or what was the source of those production forecasts for 2019?

Hey, Josh, are you talking about our release and our tables in our press release?

Yes, correct.

So those are really numbers that are really backward looking. That’s what we actually received as far as royalty statements. So, we haven’t yet received the forward-looking numbers for the year as far as I understand. And Newmont, I believe, just spoke about that the other day, where they anticipate doing a very extensive review at Peñasquito and coming out with some guidance about mid-year. And frankly, I think that’s a fair position on their part after having only been in the position for a few days. They need time to digest the asset before they commit. So, we’re a bit like you, on the sidelines, waiting for the guidance from the project.

Okay. Yes, so the table this would be Table 3, where it shows the 2019 operator’s production estimate, but it sounds like the numbers may not be relevant at this time?

Yes, I think I see Bill Heissenbuttel is pointing that out to me as well. Those were the prior operator’s estimates, but again, I think we should raise our eyebrow to those and see what Newmont comes out with.

Okay, that makes sense. And then with regards to the production that was reported for the first quarter at Peñasquito, it seemed a bit later than our expectations. Obviously, there is a ramp-up period there for the TLP, there’s some lower grade sequencing and also the current blockade. The results that Royal Gold reflected though, were those more affected by the actual production output? Or was that more a function of the potential, I guess, delays in concentrate delivery schedules?

Mark, do you want to take that?

Yes, sure. We receive our royalty statement 1 month after the quarter end. So, they do reflect actual performance in the quarter. Now they could have a buildup of some inventory partially based on the blockade that was already spoken about. But really, it’s the numbers are really driven by the lower grade that was expected in the quarter. Does that answer your question?

Yes, yes. So, it sounds like it would be more the production side than the delivery schedule?

Yes, I think, the other thing to add there to Mark that we learned is that Newmont continues to believe it’s a great build throughout this calendar year, starting at a lower grade in this first quarter and continuing to improve as we get more and more into the heart of the stage of mining.

Okay. And one last question for Mount Milligan. It sounds like the longer-term water sources, I think, were mentioned as an opportunity in 2021. Should we be looking at potential throttling of throughput for 2020 as we’ve seen for ‘18 and ‘19 or is that not expected, I guess, going forward in terms of the water availability issues?

Josh, we certainly hope that the past those things are in the past now with regard to reductions in the wintertime. This new strategy is completely built around that philosophy, that there will be sufficient water in the tailings, facility on the capture of all the things that they’re doing now. So, they’ll certainly go into the next winter season in a significantly improved position. And we think it’s likely that they will be able to operate as they expected, full capacity through the wintertime. And then the looking forward 3 years, the reason for that is that they have do an amendment to their permit and that takes a little bit more time. And I just say that it’s entirely possible that some of the near-term solutions that we’re seeing now might be the longer-term solutions as well. But they are taking the time over the next 3 years to really optimize the water source and not just be completely dependent upon atmospheric precipitation.

Understood got it alright thank you very much and congratulations once again.

Josh thanks for the questions and very much thanks for the kind words.

[Operator Instructions]

Operator, I think we’ll go ahead and wrap up the call at that at this particular point. And just thank everybody for joining us today, and we appreciate your continued interest and support in Royal Gold and this entire management team. And we look forward to continuing to update you on our progress on our next quarterly call. Thanks, everybody.

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