Good day everyone, and welcome to the Royal Gold 2020 Third Quarter Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Alistair Baker, Vice President of Investor Relations and Business Development. Sir, please go ahead.

Thank you, operator. Good morning and welcome to our discussion of Royal Gold's third quarter 2020 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 Bill Heissenbuttel, President and CEO; Paul Libner, CFO and Treasurer; Mark Isto, Executive Vice President and COO; Dan Breeze, Vice President, Corporate Development of RGAG; and Randy Shefman, General Counsel. 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 and cautionary statement in today's press release and slide presentation, and is presented in greater detail in our filings with the SEC. Bill will give you an overview of the quarter, followed by Mark with an update on our operating results. Paul will then provide a financial updates and Bill 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 Bill.

Good morning and thank you for joining the call. Before beginning, I would like to note that all Royal Gold participants on this call are doing so remotely. And I ask your understanding if our responses to subsequent questions are perhaps less coordinated than usual. I'll begin on slide 4. Despite the current situation with COVID-19, which I'll touch on in a minute this was another solid quarter for Royal Gold. We had a 24% increase in revenue over last year's quarter to set a new record for quarterly revenue of $136 million. Although gold equivalent ounce volume of 86,200 was up relative to the prior year quarter, the main driver of the record revenue was a significantly higher realized oil price. Earnings for the quarter were a healthy $38.6 million or $0.59 per share, which were $0.68 per share after adding back a $0.05 noncash mark-to-market loss on our equity securities and a one-time noncash charge of $0.04 related to noncash employee stock compensation. Paul will go into more detail on both of these items in his remarks. We saw strong operating cash flow of $99.7 million, which allowed us to make the second advance of $22 million at Khoemacau, pay our quarterly dividend at the new higher rate of $1.12 per share per calendar year, and make a further payment on our revolving credit facility of $30 million. We paid down the balance on our revolving credit facility to $105 million and with a combination of $101 million of working capital and $895 million of revolver capacity we maintained approximately $1 billion of liquidity for new business opportunities. Turning to the effects of COVID-19. Our employees have been working remotely very successfully for almost two months. And I want to recognize our team's efforts in adapting so well…

Thanks, Bill. On slide 5, I'd like to start with an update of Khoemacau project in Botswana, currently under development by the Khoemacau Copper Mining or KCM. Construction continues to advance well. Overall, project construction completion reached approximately 43% at the end of March quarter with 80% of the capital committed. We made our third contribution to the advanced stream payment on April 3rd of $47.9 million and we've now advanced approximately $136 million towards the project. The photo on the slide shows an aerial view of Zone 5 taken in April, where activity is evident across the site. Underground development was initiated in early February and saw four of the five declines located in the Central and North boxcuts advancing by end of the quarter, while the fifth portal in the south boxcut was initiated in early April. Turning to slide 6, I selected a few progress photos of the central boxcut, which is the most advanced of the three boxcuts. The photo on the left from early February shows the access ramp down to the portal face when handover to the mining contractor Barminco occurred. The photo on the right shows a close up of the portal face marked off for drilling and blasting. Turning to slide 7, you can see progress on the central boxcut portals on the left and the photo on the right shows ventilation fan installations in the same portals. A similar sequence of activity is occurring at each of the south and north boxcuts. Good progress occurred elsewhere on the project during the quarter. However, many activities were curtailed starting on April 2 due to the COVID-19-related travel restrictions imposed by the Botswana government. Although six months state of emergency has been declared by the government of Botswana to help prevent the spread…

Thanks, Mark. I'll turn your attention to slide 10 and give an overview of the financial results for the quarter. For purposes of this discussion, I will be comparing the third quarter of fiscal 2020 to the prior year quarter. As Bill mentioned at the beginning of the call, we had another record revenue quarter with revenue of $136.4 million on volume of 86,200 gold equivalent ounces or GEOs. GEOs were approximately 2% higher year-on-year. As we announced at the beginning of April, stream segment volume for the quarter of 62,000 GEOs was in line with the expectations discussed during our last earnings call in February. Metal prices had a positive effect during the quarter, with gold and silver prices up 21% and 9%, respectively, while copper was down 9% year-on-year. Gold continues to be the most significant driver of our revenue and accounted for 79% of our total revenue for the current quarter, up slightly from 77% in the prior year quarter. G&A expense for the quarter was $9.6 million, which is up from $6.8 million in the prior year quarter. Our G&A expense each quarter includes noncash compensation expense and generally averages $1.5 million to $2 million per quarter. As highlighted during our last earnings call in February, we expected to recognize additional noncash compensation expense this quarter due to a couple of recent senior management retirements. During the current quarter, we recognized approximately $3.3 million in additional noncash compensation expense attributable to retirement or $0.04 per share net of tax. The additional noncash compensation expense recognized was a onetime item, and we anticipate our quarterly G&A expense to be between $6.5 million and $7.5 million going forward. Our DD&A expense for the quarter was $51.2 million or $594 per GEO. As Mark mentioned in his remarks, recent…

Thanks, Paul. The current operating environment has been challenging. And although, we are able to continue our daily activities without disruption, we have seen revenue impacts from temporary suspensions at several operations in our portfolio. The impacts to revenue so far have been relatively minor and the bulk of our asset base has continued to generate revenue and cash flow. This environment has highlighted one of the main benefits of our business model, which is at the combination of a large diversified portfolio and modest G&A and fixed cost allow us to absorb short-term revenue reductions at individual portfolio assets without affecting the sustainability of our business. Additionally, our portfolio is relatively unexposed to weak base metal prices as approximately 80% of our revenue in the quarter came from mines that produced more than half their revenue from precious metals. We also believe our financial position will remain strong despite the current environment. We have no near-term debt maturities and our revolver matures in June 2024 and our access to liquidity positions us to act on new business opportunities that may present themselves in the normal course and as a result of the challenging environment in which all companies now operate. Operator, that concludes our prepared remarks. I'll open the line for questions.

[Operator Instructions] And our first question today comes from Josh Wolfson from RBC Capital Markets. Please go ahead with your question.

Thanks. First, I'll give you guys a shout out where you lack annual guidance, the quarterly guidance is certainly very, very helpful from our perspective. As it relates to Crossroads and the ramp-up there now that there's sufficient information from the Nevada partnership and what the mine plans and the reserves look like when -- how would you expect that ramp-up to get to what the steady state rate is which I guess based on your 8%, NSR would be 35,000 ounces per year?

Josh, this is Bill. Thanks for the question. I think the best way to direct that question would be to Mark. Mark, are you able to touch on that one?

Yes. I guess, the schedule that we were provided by the Cortez team as we explained in our prepared comments that it'll be fairly consistent to averaging the 175,000 ounces for the year. And there's a fairly -- there's obviously a very significant step-up going into calendar 2021. So the way I would look at it is really the 175,000 will be spread it out through the year with modest increase towards the end of the year with a pretty significant step-up as you go into the new calendar year. And then you'll -- then as the comments said that over the period of time you'll see an average of 425,000 ounces from our royalty ground being reported. But you're -- between years there can be some fairly significant swing. So it will be a little bit of a lumpy profile. Is that helpful?

Yes. That helps, I guess -- so over that 2021 to 2026 period, I think, it sounds like based on the different royalty rates by land tenements. If we assume that 8% NSR to then -- that seems reasonable. But maybe let me just clarify is that reasonable to assume? And then for 2021, can we just assume a flat 8% across that 175,000 ounces, or are there different rates that will significantly vary what the production is to Royal Gold?

Yeah. Good question. The way it's – we like to lay it, out and it was very consistent with the way we look at the royalties and for our budgeting purposes. So the 8.2% gross value royalty on the production that we just talked about is an excellent way for you to think about the production yes.

Okay. Great. And then with regards to Khoemacau and the current time lines there, I understand that there was a reiteration of the timelines, but there was also a caveat that potentially could vary based on the impacts of COVID. Is there any sort of additional disclosure you can provide in terms of what sort of buffer exists and the implications of I guess the six months sort of restrictions in Botswana and what that means if it's extended or if the severity were to increase of the current situation?

Mark probably another one for you.

Yeah sure. Yeah, I can provide a little bit more color around Khoemacau. So the underground development has been tracking on schedule. Effectively, it was a – it's an Australian contractor and their – the miners effectively remained at site during the shutdown period whereas most of the service type construction activities which are more locally driven with local manpower tended to significantly reduce. So the critical path certainly has been the underground development, but as the reduction in manpower continues what you'll see is the mill refurbishment will become the critical path item. Now, we understand that there – they should start loosening up some of the restrictions here very shortly, but it's really very difficult for us to make any kind of projection of the impact. But it's – they've managed the COVID-19 situation very well so far and can continue underground development I think for at least another two or three months with supplies they have on site.

Okay. And then last question also related to Khoemacau. The deal that was structured with the additional option available was done in a lower price environment. Is it safe to assume that that will not be exercised by the operator at this point?

Josh, I don't think we can know one way or the other at this point. A lot of times whether or not you draw on some extra funding like that has nothing to do with the price environment at the time. It has to do with what your capital cost of doing what's happened to the cost to build the project. So I think it's going to be more of a cash needs base than a strategic what's the price of silver right now decision. But we're really not going to know that probably for at least six months or so.

Okay. Those are my questions. Thank you.

Thank you.

[Operator Instructions] Our next question comes from Brian MacArthur from Raymond James. Please go ahead.

Good morning. I just want to follow-up on Josh's question. You've given nice guidance here for Cortez, but the operator generally has a 10-year plan. Can we assume – like it looks like there's another one million-plus ounces that come out after that Crossroads. Does that – I get it it's probably going to go down from 400,000 ounces but is it kind of flat lined after that, or can you give us any guidance?

Brian, I'm going to make a brief comment and then I'll turn it over to Mark to see if he can add to it. But the information that we have provided to you is really what Barrick has given us permission to disclose to the market and the manner in which we can disclose it. So I think for right now, we're kind of limited to the years where we're talking about. I do think, it's probably more than we've ever given in the past. But Mark, do you have a different perspective on that?

No. No. That would have been exactly – you're exactly correct. Yeah.

Okay. Great. Thank you.

Our next question comes from Adam Graf from B. Riley FBR. Please go ahead with your question.

Hey, guys. Thanks for taking my question. Just real quick about the two assets you haven't – didn't speak about today. One is the Holt mine run by Kirkland Lake and your interest there. I think Kirkland announced was it earlier this week that they're putting that mine on care and maintenance? And I wonder, if you had some comments there? And then also at the Las Cruces mine by First Quantum, I understand that they are – they have to make a decision about going after the underground sulfides? And if you've gotten any update there.

Thanks, Adam. Let me first – I'll go to Holt, I'll give mark a little chance to try to think about Holt and Las Cruces. I'm not sure we have a lot of detail on Las Cruces. But yes, we did see Kirkland Lake's announcement with respect to Holt. It's clearly a noncore operation for them. I don't know what plans they have for it. But it wouldn't surprise me if the asset eventually came up for sale. But beyond that these things happen from time to time we sit there with a royalty that does not burden the property. And so, I think we'll just have to see -- obviously it's not core to Kirkland Lake. So we'll see what happens over the next few months. But beyond that, I can't really say anything about their management team's plans for the asset over the next few months. Las Cruces, I can't help you with. Mark, do you have any thoughts?

Well, we don't have any new information on the underground project. But it would be worth pointing out that our particular royalty on Las Cruces is for copper only, whereas the underground material is polymetallic. So as you think about that with respect to Royal Gold, you should only be thinking about copper. But we really can't provide any additional details on their plan.

All right. Thanks. And maybe, if you guys can give us any kind of an update on production out of Robinson and Voisey's Bay because those companies are not all that transparent about what they produce?

Mark, do you have any comment there?

Well I think our view on Robinson certainly for the next -- this calendar year would be similar to last year. We don't particularly get a lot of additional information as well. We do attend annual site visit, but it has been close to a year now since we've been there. And on Voisey's Bay, so they did announce that they curtailed the mining for three months although the understanding we have is that stockpiles in the hydrometallurgical plant smelter will be used during this three-month period. So from a nickel and cobalt perspective, we wouldn't expect to see much of anything different. There will be some impacts later on to copper production. But as far as the -- as far as nickel cobalt, we don't expect to see any change because it's a stockpiled concentrate.

And that copper -- the copper will be -- will impact this upcoming quarter or the subsequent quarter?

It would be -- I think it comes in the fourth quarter of this year.

Yes. The sales bit -- Mark I think what you're talking about there are really two products. It's all the products that come out of Long Harbour, but it's also the third-party copper concentrate sales that are done on a seasonal basis, so that part of the royalty tends to be a bit lumpy. That's the part that would be sort of missing with the mine shutdown. Is that fair, Mark?

Yes. Correct.

Excellent. Thank you, guys. Appreciate the color.

[Operator Instructions] Our next question comes from Tanya Jakusconek of Scotiabank. Please go ahead with your question.

Yes. Good morning, everybody. Just wanted to circle back on M&A, if I could and sort of what sort of opportunities are you seeing in the space right now?

Yes. Tanya, it's obviously a good period of time for us. I can tell you that our business development team is quite busy looking at opportunities. You, obviously, have some stress on the base metal side. We're starting to see some -- a few transactions that might be. They're still sort of in the range of the $100 million to $500 million that we always talk about, but maybe more towards the larger end of that range. Obviously, the challenge we've got with business development, we can do a lot of things virtually. We can get to know operating teams virtually. We can do a lot of term sheet negotiations virtually. But when it comes to things like site visits in travel restrictions, that’s the thing, if this goes on too long that would put a break on a lot of those types of opportunities. So I'm very pleased with the level of activity that we're seeing.

So would you do a transaction that would be obviously pending due diligence, if it came down to that, that you haven't been able to go on site?

Well, that's what we're actually looking at right now, is the processes that are running. You do things out of sequence. Usually, these things go in a couple of phases and your site visit is early on in Phase II. Well, you don't necessarily need to do a site visit at that point in time. You could continue to negotiate a term sheet, you can work on documentation, you can do as much of the due diligence as you can and you just move the other stuff to the back of the process. That's something we are seeing in the market.

Okay. All right. Great. Thank you so much.

Thanks, Tanya.

And ladies and gentlemen, at this time, I'd like to turn the conference call back over to management for any closing remarks.

Great. Thank you for taking the time to join us today and I hope you all stay healthy in the coming days and months. We appreciate your interest in Royal Gold and we look forward to updating you on our progress during our next quarterly call. Thanks very much.

Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for joining. You may now disconnect your lines.