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Royal Gold, Inc. (RGLD)

Q4 2023 Earnings Call· Thu, Feb 15, 2024

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Transcript

Operator

Operator

Hello, everyone, and welcome to the Royal Gold, Inc. 2023 Full Year and Fourth Quarter Conference Call. My name is Emily, and I'll be facilitating your call today. After the presentation, there will be the opportunity for any questions. [Operator Instructions] I will now turn the call over to our host, Alistair Baker, Vice President of Investor Relations and Business Development. Please go ahead, Alistair.

Alistair Baker

Analyst

Thank you, operator. Good morning, and welcome to our discussion of Royal Gold's fourth quarter and full year 2023 results. This event is being webcast live, and you will be able to access a replay of this call on our website. Speaking on the call today are Bill Heissenbuttel, President and CEO; Martin Raffield, Vice President of Operations; and Paul Libner, CFO and Treasurer. Randy Shefman, General Counsel; and Dan Breeze, Vice President, Corporate Development of RG AG 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, adjusted net income per share, cash G&A, adjusted EBITDA and net debt. Reconciliations of these measures to the most directly comparable GAAP measures are available in yesterday's press release, which can be found on our website. Bill will start with an overview of 2023 results, Martin will give some commentary on the portfolio, and Paul will wrap up with a financial summary of the quarter. After the formal remarks, we'll open the lines for a Q&A session.

Bill Heissenbuttel

Analyst

Good morning, and thank you for joining the call. I'll begin on slide 4. During 2023, we delivered revenue of $606 million, operating cash flow of $416 million and earnings of $239 million or $3.63 per share and after adjustments earnings were $3.53 per share. Our gold equivalent ounces or GEOs were slightly below our guidance range, as we indicated might occur during our third quarter conference call. And Martin will give you some more details a bit later. While inflation pressures have eased from their peak, operating companies are still seeing cost inflation and margin erosion. Without direct exposure to operating and capital costs, we are protected from inflation pressure and margin compression, and we maintained our strong adjusted EBITDA margin of 79%. We paid approximately $100 million in dividends and keeping with our commitment to return capital to shareholders, and we raised our dividend again by 7%. This is the 23rd consecutive annual increase to our dividend, which is an unmatched record in the precious metals sector. We also maintained our focus on the balance sheet and repaid $325 million outstanding on a revolving credit facility during the year. After an active year of acquisitions in 2022, we started the year with a revolver balance of $575 million. And we've quickly reduced that to $250 million, increasing our total available liquidity at the end of the year to about $845 million. This is in keeping with our capital allocation strategy to use non-dilutive financing to acquire high-quality assets. And we maintained our low share count during the year to ensure that shareholders have full exposure to our growth. Finally, we announced an agreement yesterday with Centerra to provide future cost support to the Mount Milligan mine that will allow an extension of the mine life to 2035 and…

Martin Raffield

Analyst

Thanks, Bill. Turning to Slide 5, I'll cover portfolio performance over the year compared to the guidance that we gave in April 2023. Overall, the portfolio performance was solid for the year. However, as Bill mentioned, total sales of 315,600 GEOs with slightly below our 2023 guidance of 320,000 to 345,000 GEOs. This was due to underperformance at two of our principal properties, both of which we have discussed on our last earnings call. The first was Peñasquito, where there was an unexpected four-month labor strike, and the second was the slower-than-anticipated ramp-up of the plant expansion of Pueblo Viejo. Our DD&A and tax rates were in line with guidance, and Paul will go into more detail on these items in his comments. Turning to Slide 6, I'll give some comments on fourth quarter revenue. Overall revenue for the quarter was $153 million with volume of 77,500 GEOs. Our Royalty segment contributed revenue of $54 million, in line with the prior year quarter. However, as a percentage of total revenue, the Royalty segment was a larger contributor than in the recent past at about 36% of total revenue. Revenue from our Stream segment was lower compared to last year at $98 million. Lower contributions from Mount Milligan and Pueblo Viejo were only partially offset by higher revenue from Andacollo, Xavantina and Rainy River. I'll turn to Slide 7 and give some comments on notable developments at a handful of operations. At Mount Milligan, as Bill mentioned, Centerra reported an increase to the mine life to 2035, with the potential for work underway to increase this further. Centerra also provided 2024 production guidance of 180,000 to 200,000 ounces of gold and 55 million to 65 million pounds of copper. Centerra expects this production to be evenly weighted throughout the year. At…

Paul Libner

Analyst

Thanks, Martin. I'll now turn to slide 9 and give an overview of the financial results for the quarter. For this discussion, I'll be comparing the quarter ended December 31, 2023, to the prior year quarter. Revenue was down 6% to $153 million for the quarter. As Martin mentioned in his remarks, lower contributions from Mount Milligan, Pueblo Viejo, and Peñasquito were the main drivers for this quarter's lower revenue. The lower contribution from these properties were partially offset by higher contributions from Cortez and Andacollo as well as higher average metal prices. Gold and silver prices were significantly higher, up 14% and 10%, respectively, and the price of copper was up 2%. Gold continues to be the dominant revenue source, making up 80% of our total revenue for the quarter, followed by silver at 10% and copper at 8%. At 80%, Royal Gold has the highest gold revenue percentage compared to our major peers in the royalty and streaming sector. Turning to slide 10, I'll provide a bit more detail on specific line items for the quarter, which was another straightforward and quiet quarter for Royal Gold. G&A expense increased slightly to $9.7 million from $8.8 million in the prior year and was due to higher corporate costs and non-cash stock compensation expense. Although, we did see an increase over the prior year, our cash G&A costs remained low at about 5% of total revenue. Our DD&A expense decreased to $40 million from $49 million in the prior year. On a unit basis, this expense was $518 per GEO for the quarter compared to $521 per GEO in the prior year. The lower overall DD&A expense was due to a lower depletion rate at Pueblo Viejo, as well as decreased sales from Mount Milligan and Pueblo Viejo when compared…

Bill Heissenbuttel

Analyst

Thanks, Paul. 2023 was another year of consistent and solid performance from Royal Gold. We maintained alignment with our strategic goals of keeping a disciplined focus on gold, strengthening our balance sheet and increasing our capital return. We had a very active year of adding assets to the portfolio in 2022. And during 2023, we took advantage of our strong cash flow to pay down the debt used to finance those transactions as well as continue our long record of increasing our dividend. Our balance sheet is in great shape, and we have excellent liquidity to compete and take advantage of business development opportunities that may present themselves. We expect to provide full year guidance for 2024 early in the second quarter, which will reflect the lower production at Cortez and smaller organic growth assets that we have previously discussed like King of the Hills, Bellevue, Côté, Mara Rosa, and Manh Choh. We also expect to publish an asset handbook early in the second quarter, and we plan to host an in-person session to give a more fulsome update on the portfolio around the same time. Operator, that concludes our prepared remarks. I'll now open the line for questions.

Operator

Operator

Thank you. [Operator Instructions] Our first question comes from Jackie Przybylowski with BMO Capital Markets. Jackie, please go ahead.

Jackie Przybylowski

Analyst

Yes. Thanks very much and thanks for taking my question. I know you addressed this a little bit in your prepared remarks, but if you could give us a little bit more color on what happened, I guess, on Nevada Gold Mines, that would be really helpful whatever you can maybe tell us about. I know they had sort of mentioned in their call yesterday that there were some issues with accessing grade. Can you maybe just give us a little bit more color on what's happening there?

Bill Heissenbuttel

Analyst

Hey, Jackie, thanks for the question. When you refer to Nevada Gold Mines, I assume you mean Cortez in particular?

Jackie Przybylowski

Analyst

Sorry, yes. Yes, sorry. Cortez.

Bill Heissenbuttel

Analyst

Yes. Okay. Yes, that's fine. I'll just turn this over to Martin to give you a little background. I'm not sure we know much more, but Martin, over to you.

Martin Raffield

Analyst

Yes. Thanks, Jackie. We really don't know much more than what was said on the call yesterday with Mark Bristow. They talked about a resource model change to the Crossroads area. They talked about that, indicating that it would reduce the oxide mill feed in 2024. And it was ascribed to a fault cutting off the high-grade ore in the pit that I think is a fairly recent point of understanding. So not really much more than that. In terms of how this impacts us, would you be interested in understanding more about that, Jackie?

Jackie Przybylowski

Analyst

Yes, absolutely. Thank you.

Martin Raffield

Analyst

So Cortez overall in 2023 had a really strong year. They produced about 890,000 ounces on a 100% basis. Out of that, we received about 49,000 GEOs. And about 80% of the 49,000 GEOs was sourced from our legacy zone with a high royalty rate of 9.4%. And that was really primarily driven in turn by the Crossroads production. So, 2024 guidance for Barrick is now 620,000 to 680,000 ounces again on a 100% basis and this represents about a decrease of 27% from their 2023 production actual numbers to the midpoint of that 2024 guidance. And really with -- this impact to us is disproportionate because of our 9.4% gross royalty percentage over the Crossroads area and the impact to that Crossroads pit that they are now talking about. Due to our revenue mix at Cortez, the overall decrease from our 2023 production GEOs of 49,000 is going to be in the region of 40% to 50%. Can't really provide any more detail about what's happening at Crossroads at the moment. We don't know any more than the rest of the market, but we do hope to be able to provide some more detail on that when we get to our 2024 guidance.

Jackie Przybylowski

Analyst

Okay, great. That was actually going to be my next question. When you put your guidance out in April, that will be reflected in your guidance, I guess, right, for 2024?

Martin Raffield

Analyst

Absolutely, yes.

Jackie Przybylowski

Analyst

Great. Okay. Thank you so much.

Bill Heissenbuttel

Analyst

Thanks Jackie.

Operator

Operator

Our next question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu

Analyst · CIBC. Please go ahead.

Hi. Thanks Bill, Paul, Martin, and Alistair. Maybe my first question is on your 2024 guidance as well. I know you haven't put it out yet. I'm just trying to figure out the thought process through it and your process in terms of how you come around in terms of putting your guidance together, of course, there's challenges like Crossroads and Cortez? And as you mentioned, 2024 will also benefit from start-ups or ramp-ups at Bellevue, King of the Hills and a number of new assets like Cote and Goldrush. And so how do you go about your process of putting guidance together? And how do you kind of factor in any kind of risk, any kind of ramp-up risk and start-up risk and things like that?

Bill Heissenbuttel

Analyst · CIBC. Please go ahead.

Yes, Cosmos, thanks for the question. I mean, the process is very much bottom-up. And Martin and his team, I think they meet numerous times to talk about individual assets. Now, it kind of depends on the asset itself and the contract because in some cases, we have excellent information rights. We may have a budget for the year. But in others, especially on the Royalty side and the solar Royalty side, we don't really know. All we can go on is what the operators are saying publicly. Just as an example, Peñasquito is a royalty we don't really have any information right. So, we wait to hear what Newmont says about what's going to happen at Peñasquito. So, that's probably why it takes us a little bit longer than others because we had to compile the guidance that is given by the operators. I will tell you that we do make adjustments. It's one of the reasons we don't give guidance on an asset-by-asset basis because we may get a number from an operator or see a number from an operator in the public domain. And just say, well, based on our experience, what we've seen at that mine historically, they may not achieve that recovery rate and they may not achieve that grade that they expect. So that's kind of the process, and that's why it takes us another couple of months to put it together.

Cosmos Chiu

Analyst · CIBC. Please go ahead.

Yes. I guess asked more directly, would you say you're fairly conservative when you put this together?

Bill Heissenbuttel

Analyst · CIBC. Please go ahead.

I mean, we're -- I don't want to say we're fairly concerned. We try to be fair based on what we expect. I don't want anybody to think that we sort of take the numbers and be more conservative on guidance so that hopefully we can exceed guidance. That's not how we do things. We put out a number that we think is achievable.

Cosmos Chiu

Analyst · CIBC. Please go ahead.

Understood, great. Maybe switching gears a little bit. Congratulations on getting additional deals or kind of like the agreement with Centerra completed. From that perspective, I had to read it quite a few times in your press release yesterday, your new agreement with Centerra. Fairly complex, a lot of moving parts. Can you maybe talk about how you came up with that structure, the different kind of production hurdles that you've put in? And would it have been easier to kind of rewrite the origin agreement? Because I know this agreement here is in addition to the original agreement. So maybe the thought process around that as well.

Bill Heissenbuttel

Analyst · CIBC. Please go ahead.

Yes. I mean, I will say I would agree with you. The first place you would think of going is to amend the existing agreement, I will say. Sometimes, amending agreements creates complications, and we just felt that in order to avoid some complications, it would be better to leave that agreement completely untouched. This is sort of a mine life extension project. This is a bolt-on agreement that supports that mine life extension. And that's the direction that the negotiations sort of took over time. As for the specific numbers, I just wonder if I might ask Dan Breeze to sort of offer his thoughts. Dan was sort of our lead negotiator on the transaction and maybe he can share some thoughts with you.

Dan Breeze

Analyst · CIBC. Please go ahead.

Hi, Cosmos, thanks for the question.

Cosmos Chiu

Analyst · CIBC. Please go ahead.

Hi, Dan.

Dan Breeze

Analyst · CIBC. Please go ahead.

Maybe we could just talk a little bit about, I think if your question -- if I understand your question, you're asking about how we ended up with this structure generally speaking? Or do you want to actually get into the numbers?

Cosmos Chiu

Analyst · CIBC. Please go ahead.

No, I think generally speaking, how you came over the structure and how it is the best structure for the situation today?

Dan Breeze

Analyst · CIBC. Please go ahead.

Sure. Well, obviously, we had to consider our interest here and what we thought was appropriate and acceptable for our shareholders but also what Centerra was looking to do. And ultimately, we were aligned in that sense with looking for ways to ultimately extend the mine life. And that was really the key reason or driver of the structure, thinking about the long-term, thinking about a way where we could provide long-term cost support. And that, as you heard Centerra talked about this yesterday in their call that will allow them to make investments, if you will, today and going forward over the next one year, 1.5 years to hopefully realize what that longer-term plan will look like. So that was really the main driver, Cosmos. And then looking at the shorter-term, between now and, say, 2030, what we tried to do there is consider Centerra's focus on their reserve plan and the numbers that they were working towards and not wanting to impact our economics over that time period. And so that's what we put in place, a structure that is unlikely to be drawn, just given the triggers of the commodity prices below $1,600 and $3.50 a pound in copper, so well below where we are with long-term consensus prices. But that structure just gives them the confidence to move forward on that reserve plan. So I think those are the two main factors that fit into or we consider to fit into this new well structure that you see.

Cosmos Chiu

Analyst · CIBC. Please go ahead.

Great. Thank you, Dan. That perfectly answers my question, and thanks, Bill, as well. Thank you.

Bill Heissenbuttel

Analyst · CIBC. Please go ahead.

Thanks, Cosmos.

Operator

Operator

[Operator Instructions] Our next question comes from Lawson Winder with Bank of America. Lawson, please go ahead.

Lawson Winder

Analyst · Bank of America. Lawson, please go ahead.

Thank you very much, operator. And hello, gentlemen, good morning and good afternoon. I just had a couple of questions for you. So one was on the guidance for Q1. Thank you for providing that. It's always helpful to have that in a full year guidance. How did you guys think about Andacollo for that in terms of production? I don't know, if you can provide -- or in terms of deliveries, I don't know if you can provide a range, but is something kind of like 2024 divided by four kind of the right way to think about that? And then yes, that would be the first question on the guidance.

Bill Heissenbuttel

Analyst · Bank of America. Lawson, please go ahead.

Hey, Lawson, so is your question on the quarterly guidance that we just gave because that number, we would pretty much know because Andacollo was one of those assets where we received the gold about five or six months after it's been shipped. So we would have a pretty good idea of what that is.

Lawson Winder

Analyst · Bank of America. Lawson, please go ahead.

That's exactly what I'm asking. If you could tell us the number, that would be great.

Bill Heissenbuttel

Analyst · Bank of America. Lawson, please go ahead.

We don't do asset-by-asset guidance. And I don't think we've ever given exactly what a particular asset is going to do in any quarter.

Lawson Winder

Analyst · Bank of America. Lawson, please go ahead.

So yeah, so just thinking about Andacollo in particular, like accounting for the fact that they had those issues with water in Q4. And you've disclosed that in your 10-Q what the full year deliveries were. I guess, the question is then what was Q4 production, I guess, in terms of seasonality? Was Q4 much lower than Q1, Q2 and Q3 as a result of those or more in line? Just any sort of color on that direction would be helpful.

Bill Heissenbuttel

Analyst · Bank of America. Lawson, please go ahead.

I don't know. Martin, is there anything that you can think of that we could provide right now?

Martin Raffield

Analyst · Bank of America. Lawson, please go ahead.

Look, Teck had talked, Lawson, about the issues going into next year with the drought conditions and how that is potentially going to impact them. I think we probably started to see some of those impacts towards the end of last year. But I don't have -- I don't think numbers -- individual numbers for the production we should be talking about at the moment.

Lawson Winder

Analyst · Bank of America. Lawson, please go ahead.

Okay. No problem then. Maybe I'll just leave the guidance there then. The other question I wanted to ask actually was about Cortez and the Goldrush aspect of that. So Goldrush, you guys actually have multiple royalties. And on one portion of Goldrush, it's higher than the other. And so what I wanted to understand is as Goldrush ramps up, when based on the current mine plan, would Royal Gold start to get the benefit of that higher rate? And is there a point where there's an overlap in the royalties such that the two are additive?

Bill Heissenbuttel

Analyst · Bank of America. Lawson, please go ahead.

Yeah. The area of Goldrush where we have a higher royalty rate, I think, is in the far southeast portion of it. Martin, do we have an estimate of timing as to when that might come in?

Martin Raffield

Analyst · Bank of America. Lawson, please go ahead.

It's far, far in the future.

Bill Heissenbuttel

Analyst · Bank of America. Lawson, please go ahead.

Yeah, that's what I thought.

Lawson Winder

Analyst · Bank of America. Lawson, please go ahead.

Okay, that's very helpful to know. Thank you both very much. I appreciate that.

Bill Heissenbuttel

Analyst · Bank of America. Lawson, please go ahead.

Thank you.

Operator

Operator

Our next question comes from Tanya Jakusconek with Scotiabank. Please go ahead.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Great. Good morning, everyone. Thank you so much for taking my question. I just wanted to come back to Crossroads. I was the one who asked Barrick on the call yesterday about Crossroads and what exactly has happened. And maybe my understanding, which may be different from yours and -- was that we have this fault that they thought was an area where they had high grade, and when they did additional confirmation drilling, the fault seemed to have -- was there that they hadn't expected and we lost these high-grade goals. But my understanding was that we also have lost reserves and resources from this area as well. Is that your understanding? So are you expecting also a decline in the reserves and resources in this area?

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

Martin, I'm going to hand that one to you.

Martin Raffield

Analyst · Scotiabank. Please go ahead.

Thanks, Tanya. We don't…

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

I know. Sorry, Martin, but it was just -- go ahead.

Martin Raffield

Analyst · Scotiabank. Please go ahead.

Yeah, look, I think we would expect some change based on what has been said over the past couple of days. But I can't really give you any detail around that because we haven't seen the detail ourselves yet.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Okay. So I guess from our perspective, just for the 2024 number, from what very high-level guidance you've provided, it would be safe to assume that, that 49,000 GEOs was -- that you achieved in 2023, we can remove maybe 20,000 off that number for 2024?

Martin Raffield

Analyst · Scotiabank. Please go ahead.

Yes, that's exactly right.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Okay. And then we will wait. Would you know about these reserves and resources when you report -- when you give us guidance in April in your new reserves…

Martin Raffield

Analyst · Scotiabank. Please go ahead.

Yes. We're going to…

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

All right. Okay. Maybe we can come back…

Martin Raffield

Analyst · Scotiabank. Please go ahead.

Yeah. So we will try and give more detail around that.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Okay, all right. Thank you. And maybe I guess, I'm just going to come back to just the M&A environment yet again. You mentioned now you've paid off a lot of your debt. Just wondering, what you are seeing out there and size-wise and how big would you be looking at in terms of potential transactions?

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

Yes, Tanya, I'll hand that over to Dan to make a comment.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Thank you.

Dan Breeze

Analyst · Scotiabank. Please go ahead.

Sure, Bill. Hi, Tanya. Hi. Thanks for the question, Tanya. Look, I think -- well, as you know, we didn't announce a transaction last year. But looking back, I think it was one of our busier years with the internal reviews that we do on opportunities. And I think what you saw in the market and maybe we're going to see or at least in the near term is probably representative of the state of the market right now, which is smaller lots, but smaller opportunities across the board. And I think it's really being driven, Tanya, still by a high cost of debt right now in the equity markets, which maybe they're recovering a little bit now. But generally, they've been less supportive of smaller companies, in particular, those with single asset development project type risks. So I think that's what's driven these smaller royalty financings that we've seen in the market in the last 12 months or so. I think that's going to continue. But we do still see that we obviously are in the same range of $100 million to $300 million. I think that still holds, but there are many more opportunities at the lower end of that size range, right? It's busy. And I think -- as I said, I think, it's being driven by other types of capital just not being readily available right now.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Okay. And can I ask about you're ready to have --

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

Does that answer your question?

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Yes, that's -- thank you. So, similar range, similar sort of structure helping the smaller guys. Question for you. Obviously, Newmont is looking to solve some of the assets and my understanding is that the data room is open and people are looking. And have you seen or heard of any opportunities for you there?

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

Yes. I mean, go ahead, Dan.

Dan Breeze

Analyst · Scotiabank. Please go ahead.

Well, we're -- sorry. Bill, go ahead.

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

No, I was just going to say, look, we always point to these events as opportunities for stream financing. And to the extent we can be a good financing partner in that process, we are always happy to do it. The only caveat being we said the same thing about Barrick and Randgold. We said the same thing about Newmont and Goldcorp and really didn't see much develop. So we certainly have our eyes and ears open. But I guess I wouldn't want you to say, yes, there's going to be a lot of opportunity based on the disposal process.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Would you, Bill, increase your exposure to Africa if there was an opportunity for a stream there?

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

Sorry, which asset?

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Just in Africa, the continental Africa. Would you take on that higher geopolitical risk?

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

That'd be very country-specific. We've had a very good experience in Botswana. We haven't had a bad experience in Ghana. But again, eyes wide open there. We've had a long-term reluctance in South Africa. So I would say, the number of countries in Africa where we would be comfortable is maybe a handful and you might not need all the fingers on your hand to do it.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Okay, got it. All right. Thank you so much. I really appreciate it and really would hope for more clarity on the Crossroads, if you could, by April.

Bill Heissenbuttel

Analyst · Scotiabank. Please go ahead.

Yes. Thanks, Tanya.

Tanya Jakusconek

Analyst · Scotiabank. Please go ahead.

Thank you.

Operator

Operator

The next question comes from Brian MacArthur with Raymond James. Please go ahead, Brian.

Brian MacArthur

Analyst · Raymond James. Please go ahead, Brian.

Good morning. Most of my questions have been answered, but can I just ask, for the Mount Milligan deal, how this will be accounted for, i.e., when you get the gold payments and you get the free cash flow at the bottom; is that going to be through revenue and be counted as GEOs? Or is it going to be if, I just want to think of it as other cash items coming through?

Bill Heissenbuttel

Analyst · Raymond James. Please go ahead, Brian.

Yes. Brian, I'm going to ask Paul to step in here and talk a little bit about the accounting. The only thing I -- the only caveat I will give you is he's going to tell you that they're working on the finalization happening. So, bear with them a little bit.

Brian MacArthur

Analyst · Raymond James. Please go ahead, Brian.

Yes, I'm sure.

Paul Libner

Analyst · Raymond James. Please go ahead, Brian.

Yes. Hey Brian, how are you? And Bill's right, we obviously need to qualify some of these statements with that fact that, yes, we're still evaluating the accounting treatment, but we do expect to complete that analysis here during our first quarter, at which time we'll certainly give you more information with our next report. But as I sit here today, the consideration that we received obviously was the cash as well as the deferred gold ounces. I do anticipate bringing those on to the balance sheet certainly as a receivable. And obviously, since that receivable is in the form of gold, the commodity, I do anticipate that we will have to mark-to-market that receivable through the P&L each subsequent reporting period. As far as the -- when the time comes that we receive those ounces, obviously, through that mark-to-marketing, if you will, over time, we'll take those ounces into inventory under our policy and we'll sell those. I can't say today with certainty that it would be revenue, I don't think would be revenue. It could be some other form of an income, maybe not revenue, which equals then GEOs. But again, more to come on that, but that would be where I would see things today.

Brian MacArthur

Analyst · Raymond James. Please go ahead, Brian.

So, can I maybe just ask, I mean, I guess I can see the deferred gold maybe one way. But for the 20 -- I mean, the money you're going to get in upfront, I mean, I guess where it goes is obviously with Cortez coming down, your growth rate in GEO isn't going to be that high this year, I suspect. So, I mean, you're going to count that $25 million as part of GEO growth this year because it is, in a way, I guess, part of that stream? And it's not an insignificant amount of money.

Bill Heissenbuttel

Analyst · Raymond James. Please go ahead, Brian.

No, I mean, that wouldn't touch revenue.

Brian MacArthur

Analyst · Raymond James. Please go ahead, Brian.

Right. That will just go straight to say if I should think of it, that will come in with, say, the $36 million from the sub-debt coming back from [indiscernible], right? in?

Bill Heissenbuttel

Analyst · Raymond James. Please go ahead, Brian.

Exactly.

Paul Libner

Analyst · Raymond James. Please go ahead, Brian.

Correct.

Brian MacArthur

Analyst · Raymond James. Please go ahead, Brian.

Okay, great. Sorry about that. That's great. That was the last question I really had in all this. Thank you.

Bill Heissenbuttel

Analyst · Raymond James. Please go ahead, Brian.

Thank you.

Operator

Operator

Those are all the questions we have so this concludes today's call. Thank you, everyone for your participation and you may now disconnect your lines.