Good day, and welcome to the Royal Gold September Quarter 2021 Conference Call. [Operator Instructions]. 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 September Quarter 2021 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; and Mark Isto, Executive Vice President and COO of Royal Gold Corporation; Dan Breeze, Vice President, Corporate Development RGAG, and Randy Shefman, General Counsel, are 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 that 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 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 quarter, followed by Mark with an operating update. Paul will then provide a financial update, 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. Turning to this quarter's results, I'll begin on Slide 4. This was another great quarter for Royal Gold. Performance was excellent once again across the portfolio, and we recognized revenue of $174 million, gold equivalent ounce volume of 97,400 and operating cash flow of $130 million, all of which are quarterly records for the company. Earnings for the quarter were $70 million or $1.07 per share. We had net cash of $60 million at the end of the quarter and subsequently paid down $50 million on our revolving credit facility. We now have $50 million of debt outstanding and access to $950 million of available liquidity under our credit facility. We received our first silver deliveries from Khoemacau. And after the end of the quarter, we increased our stream percentage to 90% of the payable silver. Mark will share more details on his recent visit to Khoemacau, and we're looking forward to increased contributions as the mine continues to ramp up. We have also seen recent positive news from the acquisitions we announced last quarter. Newcrest published a positive block cave pre-feasibility study at Red Chris. I would like to complement our technical team for its work on our acquisition due diligence. Our team's estimate of cumulative GEO production for the next 2 decades was in line with Newcrest's study. And this study clearly demonstrates a long mine life with good future optionality. Ero Copper released further positive exploration results at NX Gold, which confirms exciting near mine and regional exploration potential and construction progress continues at the Côté project and it is on track for first production in the second half of 2023. And we continue to progress our work on ESG initiatives. At Rainy River, we entered into contribution…

Thanks, Bill. I'll start on Slide 5. The portfolio again continued to perform well with record yield deliveries in the quarter. Our Royalty segment contributed $58.5 million in revenue, an increase of 45% over the prior year, representing about 34% of total revenue for the quarter. The increase was led by Cortez where mining has recovered since pit wall stability issues curtailed production starting late last year, while higher grades and leach recoveries drove improved production during the quarter. Other royalties that contributed large increases included Penasquito, Robinson and Kurnalpi, which is our NPI on the South Laverton Mine in Australia. On the stream side, revenue was up 9% over the past year, and we received the first contributions from both Khoemacau and NX Gold. We also received the first delivery of deferred silver ounces from Pueblo Viejo. If you recall, Barrick deferred delivery of silver ounces during the March and June quarters due to equipment issues in the silver circuit that caused recoveries to fall below contractually prescribed levels. The circuit issues were addressed and with improved silver recovery, Barrick delivered approximately 18,700 deferred ounces in the quarter. The balance of deferred ounces has now declined to approximately 418,300 ounces, and we expect these ounces to be delivered over the next several quarters. This remains a cash flow timing issue from our perspective, and we don't expect it to have any lasting impact on silver revenue. Turning to Slide 6. I'd like to give an update on Khoemacau and Botswana. I had the opportunity to visit the site in mid-October and was impressed with the excellent progress transitioning from construction into operations. As I've described on earlier conference calls, mine development has been in progress since the March quarter of 2020. So far production began in September with ground…

Thanks, Mark. I'll now turn to Slide 11 and give an overview of the financial results for the quarter. For this discussion, I'll be comparing the quarter ended September 30, 2021, to the prior year quarter. Revenue reached a record of $174 million for the quarter, a 19% increase over the prior year period. We also had record volume of 97,400 gold equivalent ounces, or GEOs, which was a 27% increase over the prior year period. As metal prices are mixed, most of the increase in our revenue was driven by strong operating performances, as Mark mentioned in his remarks. Deliveries from our newly acquired NX Gold Stream also contributed to our record revenue and contributed approximately $4.4 million during the quarter. With respect to metal prices compared to the prior year quarter, the average price of gold was down 6%, the silver price was flat and the copper price was up 44%. Gold remains our focus and continue to be dominant in the portfolio at about 73% of total revenue. The higher copper prices increased the percentage of copper revenue to 14% and silver came in at about 10% of revenue. Cost of sales, which excludes DD&A and is specific to our streaming segment, increased to $27.2 million from $21.9 million in the prior period. The increase was due to higher gold and copper sales from Mount Milligan and higher overall copper prices. Gold sales from the newly acquired NX Gold Stream also contributed to the overall increase during the quarter. Our DD&A expense was $50.6 million, up from $46.3 million in the prior year quarter. The increase was primarily due to higher gold and copper sales from Mount Milligan, higher gold production at Cortez and gold sales from the newly acquired NX Gold Stream. These increases were partially…

Thanks, Paul. The portfolio performed exceptionally well again this quarter and delivered record revenue, cash flow and GEO volumes. With revenue from 44 operating mines, the breadth of our portfolio provides for consistent top line performance, and our discipline around maintaining low and stable G&A costs allows that top line performance to produce high margins. Our cost structure is designed to remove direct exposure to operating costs, and we are not subject to margin pressure caused by inflationary input prices. Our business offers inherent protection of margins from inflation, which seems to be creeping into the global economy. Looking forward to 2022, I think we're in great shape. We expect to see progress at several assets in the portfolio. And in particular, we're looking forward to higher production levels at Khoemacau, first production at King of the Hills, continued exploration success at NX Gold and continued advancement on the Pueblo Viejo expansion. In addition to this organic growth potential, we remain active in the pursuit of new business opportunities. Between our balance sheet, $950 million available on the credit facility and ongoing cash generation, we are well placed to act quickly on those opportunities that fit our criteria for investment, which include precious metals with the preference for gold and the potential for exploration and production upside. Operator, that concludes our prepared remarks. I'll now open the line for questions.

[Operator Instructions]. Our first question comes from Tyler Langton with JPMorgan.

Maybe just to start with Khoemacau. I guess the deliveries were a little bit sort of higher than I had modeled out this quarter. Should -- is it fair to assume that sort of your deliveries will just kind of ramp in line with sort of the production ramp at Khoemacau? Or are there any -- I guess, are there any lags or anything else we should be aware of?

Thanks for the question. I think, contractually, I wouldn't expect any lags. This is not -- the contract's similar to Andacollo or Mount Milligan, where the deliveries actually occur a number of months after final settlement. We get paid very shortly after a provisional or final settlement is reached. So I'll ask Mark if he wants to say anything, but my -- I just look at the ramp-up between now and the third quarter and just ramping it up, assuming that, that is the end date of getting to 100% capacity. Mark, would you add anything else to that?

No, no. I think, here, it's a good description.

Okay. And then I know sort of production is kind of -- over the mine life, close to average, I think, 1.8 million to 2 million ounces. Is it fair to assume, I think sort of in the first several years, the production was supposed to be a little bit lower than that average?

Actually, I don't have it right in front of me, but the -- if you go back to the 2019 presentation we did on the project, we actually gave an estimated production profile. And one of the very interesting things about it is, both copper and silver is relatively constant. There isn't -- I don't believe that there's any major variability through the 20 years of the mine life. And again, I'll sort of turn Mark. Are you aware of any change?

Yes, you're absolutely right, Bill. There's very little change. I think from a modeling perspective, using the average numbers is a very accurate way to do it.

Okay. That's helpful. And then just a final question. I guess, in sort of deals, one of your, I guess, peers commented this morning that they were -- the focus is still on precious meals, but they're sort of also open to sort of base battery and bulks. And are you still focused on precious metals? Or are you seeing -- are most of the deals that you're seeing sort of on the precious metal side? Or are you sort of, I guess, interested in sort of looking outside precious metals?

We're going to stay focused on precious metals. As I think I've said before, strategically, if we find a very attractive base metal opportunity, we will certainly consider it. Right now, I think our precious metal revenue percentage is something that could accommodate some other metals. The only thing I would caution is, we understand the precious metals markets. We understand most of the base metals market. If you get outside of those things, and we're dealing with industries that we may not understand as much, that would might -- I don't want to say it's an impediment, but it's something we'd have to certainly consider whether or not we're getting into something we don't fully understand.

Our next question comes from Cosmos Chiu with CIBC.

Maybe my first question is on taxes. Paul, as you mentioned, you're subject to the GILTI tax anyways. And the global minimum tax is not going to be additional to it. But could you confirm? I seem to believe that -- I think I read something about -- as you mentioned, right now, the GILTI tax is 13.1%. I thought that was going to go up as well. So does that help in terms of -- or how does that piece of the puzzle fit into the global minimum taxes? And then the other part of my question is with the potential of the global minimum taxes coming in, does that change your ability in terms of how you repatriate funds back from Switzerland?

Paul, can I turn that over to you?

Yes, yes. Appreciate it. Cosmos, thanks for the question. Yes, the -- under the Build Back Better, I think legislation that's being thrown around here in the U.S., there is talks of that the U.S. could implement that GMT, which would -- under our current legislation, under the GILTI regime, as you said, it's 13.125%. That could move to 15% if it's moved under the Build Back Better here in the U.S. So we could see a slight increase, as I said. But again, we don't anticipate that being a significant impact to Royal Gold. So with respect to repatriation of earnings, that's a great question. our Swiss earnings, which are subject to that same GILTI rate, those earnings or cash can be brought back to the U.S. tax-free. So in 2000, I believe it was '17 -- the introduction of GILTI regime and prior taxation of repatriated funds was eliminated as the GILTI tax and repatriation of taxation, that would effectively call the double taxation. So again, when the GILTI regime came in, there was no repatriation taxation.

Great. Maybe switching gears a little bit on Khoemacau here. Reading the MD&A and also looking at the presentation, it seems like the ramp-up of the mill is slightly ahead compared to the ramp-up at the mining operation, the underground. Am I reading it correctly, Mark, or not?

Yes. Exactly. The mill has ramped up very well on the stockpile ore that was there. They tested the 10,000 tonne a day rate successfully. The recoveries as we -- as I stated, are well within the bounds of where they expected them to be. The stoping has ramped up slower than they expected. So the constraint in the operation will not be the mill, it will be the mine and it will be ramping up to stoping. You can think about development or generating about 60,000 tonnes a month or so, and the rest of it is coming from stoping ore, which will be really the ramp-up piece as we go into next year. So as I said, you can expect 75% of the 10,000 tonne a day rate by the end of March, and it's really around stoping.

Great. And that's maybe one last question here for Bill. Bill, I appreciate that you, in answering the last question, your focus continues to be on purchase metals. And as Paul mentioned earlier, 73% of your revenue in the quarter was from gold, 10% from silver, 14% from copper. In an ideal world, Bill, are you happy with that mix? Or would you have wanted that to be a bit different?

Well, since we're precious metal-focused in gold in particular, in an ideal world, the gold figure is higher. I mean I -- people always ask us about minimums, and I always say, when I look at it, I'd like the gold to be higher. I mean copper is -- I think gold is down because our copper revenue was so much higher with the prices where they are. But strategically, again, I've always said if you give me 5 projects, 3 gold, 1 silver, and 1 copper, I'm probably going to look at the 3 gold ones first, but we'll look at all of them.

[Operator Instructions]. Our next question comes from Scott MacDonald with Scotiabank.

Congrats on a good quarter. Bill, just wanted to follow up on your comments on the types of the business opportunities you're seeing. What are the types of deals you're looking at predominantly in terms of the counterparties use of proceeds? And what kind of range of deal sizes are you looking at?

Yes. Actually, I answered the first question from a strategic perspective, but I thought I might ask -- bring Dan Breeze in here, if I can, and have him as the Head of our Business Development, to give you a sense for what we're seeing.

Thanks, Bill. It's Dan here. Look, the environment has been really good this year, 2021. And if you look at the transactions year-to-date, it looks like it's going to be one of the best years in the last 5 years or so in terms of dollar volumes. In particular, the first half of the year, and I know that your firm has highlighted this in your quarterly industry reports, and that's when we transacted with NX Gold as well. Royalties, the volumes are also pretty solid through the year, lots of third-party royalty transactions. Obviously, we were part of that with Côté and Red Chris. Some packages are still trading with the operators are finding a good market to sell those packages into. But I'd say it's been a bit slower, Scott, if you look at, say, July through September, a bit more slow, but we're seeing processes now start to kick off. And I think it's going to be a good finish to the year. The pipeline actually looks quite good right now. In terms of use of proceeds, I'd say it's still weighted towards project development followed by -- probably by strengthening of balance sheets and again, looking at our Ero Copper, NX Gold transaction. That's an example of that type of financing. So it's good. I think the size is very consistent with what we've been saying this year, $100 million to $300 million range, similar to what we transacted and in terms of those types of deals, that's what we're seeing right now in the pipeline. And that's a good size for our company. It's meaningful to our portfolio. And again, as Bill said, focused on gold, and that's actually what we're seeing. It's mostly gold opportunities, a bit of silver as well on the streaming side. So hopefully, that helps you.

This concludes our question-and-answer session. I would like to turn the conference back over to Bill Heissenbuttel for any closing remarks.

Well, thank you, everyone, for taking the time to join us today. We certainly appreciate your interest in Royal Gold, and we look forward to updating you on our progress during our next quarterly call. Take care, everyone. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.