Royal Gold, Inc. (NASDAQ:RGLD) has announced a robust financial outcome for the second quarter of 2024, with near-record revenues and significant debt repayment. The company's revenue soared to $174 million, marking a 21% increase from the previous year, supported by higher metal prices and new royalty acquisitions.
Earnings per share reached $1.23, and the company achieved a net cash position after repaying $100 million on their credit facility. Royal Gold also expanded its portfolio by acquiring two royalties in the Back River Gold District, with the Goose Gold Development Project expected to start producing gold in Q2 2025.
Key Takeaways
- Royal Gold posted near-record revenues of $174 million, a 21% year-over-year increase.
- Operating cash flow stood at $114 million, with earnings of $81 million or $1.23 per share.
- The company repaid $100 million of its credit facility, reaching a net cash position.
- Two royalties were acquired in the Back River Gold District, enhancing exposure to the Goose Gold Development Project.
- Higher metal prices contributed to increased revenue, with gold prices up 18%, silver up 20%, and copper up 15% compared to last year.
- Gold constituted 74% of total revenue, followed by silver (13%) and copper (10%).
Company Outlook
- Management expressed satisfaction with the company's debt reduction strategy.
- Over $900 million has been invested in acquiring royalties on Cortez, Great Bear, and Back River without shareholder dilution.
- The company boasts a strong balance sheet and liquidity, positioning it well for future acquisitions.
Bearish Highlights
- The company faced challenges in closing transactions, with three preferred bids failing in the last 18 months due to market factors.
- Management noted the unpredictability of deal timelines, which can range from two to six months or longer.
Bullish Highlights
- The acquisition of royalties in the Back River Gold District is seen as a positive move, increasing the company's growth potential.
- The Goose Gold Development Project is anticipated to produce 120,000 to 150,000 ounces of gold in 2025, escalating to over 310,000 ounces annually from 2026 to 2030.
Misses
- General and administrative expenses increased to $10.5 million, primarily due to higher noncash stock compensation expenses.
- The company acknowledged the complexity of the Back River royalty structure, which includes deductions affecting the effective rate.
Q&A Highlights
- Clarification was provided on the Back River royalty rates during the Q&A, with a combined royalty rate of 3.3% including the CAM and Hill royalties.
- The royalty structure's complexity was simplified for understanding, with a 3.3% GSR rate comprising a 2.2% total from CAM and Hill royalties and an additional 1.1% royalty.
Royal Gold's second-quarter performance reflects its resilience in a dynamic market and its strategic focus on growth through acquisition. The company's management remains committed to enhancing shareholder value through prudent financial management and strategic acquisitions, as evidenced by their recent royalty purchase in the Back River Gold District. The next quarterly call is expected to provide further updates on the company's progress and outlook.
InvestingPro Insights
Royal Gold, Inc. (RGLD) has showcased strong financial performance in the second quarter of 2024, and a closer look at the real-time data from InvestingPro indicates a company with solid fundamentals and promising analyst expectations. InvestingPro Tips highlight that Royal Gold has not only raised its dividend for 8 consecutive years but also has analysts revising their earnings upwards for the upcoming period, reflecting confidence in the company's financial prospects.
InvestingPro Data reveals a market capitalization of $8.41 billion, underscoring the company's robust presence in the market. The P/E ratio stands at 35.19, suggesting investors are willing to pay a premium for the company's earnings, potentially due to its impressive gross profit margin of 84.89% for the last twelve months as of Q1 2024. This high margin is indicative of Royal Gold's effective cost management and its ability to generate significant income from its sales.
Moreover, the company's ability to maintain dividend payments for 25 consecutive years, as noted in the InvestingPro Tips, speaks to its financial stability and commitment to returning value to shareholders. The tip that Royal Gold's cash flows can sufficiently cover interest payments further reassures investors of the company's financial health.
For readers interested in deeper financial insights, there are additional InvestingPro Tips available, including the company's moderate level of debt and predictions of profitability for the year. Visit https://www.investing.com/pro/RGLD for a comprehensive list of tips and to gain a more nuanced understanding of Royal Gold's financial position and future potential.
Full transcript - Royal Gold Inc (RGLD) Q2 2024:
Operator: Hello everyone. And welcome to the Royal Gold 2024 Second Quarter Conference. My name is Seb, and I'll be operator for your call today [Operator Instructions]. I'll now hand the call to Alistair Baker to begin. Alastair, please go ahead.
Alistair Baker: Thank you, operator. Good morning. And welcome to our discussion of Royal Gold's second quarter 2024 results. This event is being webcast live, and a replay of this call will be available on our Web site. Speaking on the call today are Bill Heissenbuttel, President and CEO; Paul Libner, Senior Vice President and CFO; Martin Raffield, Senior Vice President of Operations; and Dan Breeze, Senior Vice President, Corporate Development of RG AG. Randy Shefman, Senior Vice President and General Counsel is 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, adjusted EBITDA and net cash. Reconciliations of these measures to the most directly comparable GAAP measures are available in yesterday's press release, which can be found on our Web site. Bill will start with an overview of the quarter, Dan will provide an overview of our most recent acquisition, Martin will give some commentary on the portfolio and Paul will provide a financial update. After the formal remarks, we'll open the lines for a Q&A session. I'll now turn the call over to Bill.
Bill Heissenbuttel: Good morning, and thank you for joining the call. I'll begin on Slide 4. We had strong financial performance during the quarter with near record revenue of $174 million, a 21% increase over the same period last year. Operating cash flow of $114 million and earnings of $81 million or $1.23 per share. After minor adjustments, earnings were a record $1.25 per share. Revenue was 74% gold and over 56% of our revenue was generated from the US, Canada and Australia. Our adjusted EBITDA margin remained strong and steady at 81% for the quarter. And despite a 21% increase in revenue, our cash G&A was flat providing further evidence of the scalability of our business model. Solid portfolio performance and the strong gold price helped us generate significant cash flow during the quarter that we allocated in line with our long held strategy, which included payment of our regular quarterly dividend with $26 million, repayment of $100 million of the balance outstanding on the revolving credit facility. We ended the quarter with $50 million of debt outstanding and we have now returned to a net cash position. After quarter end, we made a further repayment of $25 million. And so far in 2024, we have repaid $225 million of debt. And finally, we reinvested in the business with the acquisition of two more royalties on the Back River Gold District, which increases our exposure to the Goose Gold Development Project in Nunavut, Canada. We'd like to give you a brief overview of this acquisition, and I'll turn the call over to Dan to review the asset.
Dan Breeze: Thanks, Bill. I'll turn to Slide 5 and spend a few minutes on the Back River royalty purchase. In late June, we completed the acquisition of two royalties that cover the entirety of the Back River District for cash consideration of $51 million. Back River is an 80 kilometer gold belt in Nunavut being developed by B2Gold (NYSE:BTG). Most of the development activity underway is at the Goose project, and the deposits to the north, including the George Project, are at an earlier stage. The royalties we acquired cover all reserves, resources and potential extensions thereof in the district. The first royalty is a 0.7% net smelter return or NSR royalty that starts paying immediately and declines to a 0.35% NSR royalty after CAD5 million of revenue has been delivered. The second royalty is an approximate 1.3% gross smelter return or GSR royalty that begins paying after about 780,000 ounces are delivered. The first royalty is a deduction against the second, so while we have acquired two royalties, the interaction between the royalties allows us to account for the purchase as one asset. Together, the royalties are equivalent to an approximate 1.1% GSR royalty. If you recall, we already had exposure to the Back River project through ownership of other royalties that we acquired in 2008. So these royalties complement and add to that existing position. Turning to Slide 6. I'll give a brief overview of the Back River project. B2Gold is currently advancing construction of the Goose project, which will be a combined open pit and underground operation completing a 4,000 tonne per day conventional gold leach process plant. B2 currently expects first gold production in the second quarter of 2025 and they are estimating production of between 120,000 and 150,000 ounces in 2025, increasing to over 310,000 ounces per year from 2026 to 2030. B2 is forecasting total production of 3.3 million ounces over 15 year mine life. Total measured and indicated resources contain approximately 6.3 million ounces of gold, which includes approximately 3.6 million ounces in proven and probable reserves. Inferred resources contain an additional 2.9 million ounces. And according to B2 Gold, the average historical resource conversion rate from inferred to measured and indicated has been 73%. The area is highly prospective and B2 has an extensive exploration campaign underway to add to this resource base. Royal Gold's exposure to the Back River district increases significantly with this transaction. And the summary royalty rates on Slide 6 should help you understand how the royalty rates on the Goose project change as various production levels are achieved. We expect that the threshold for the first royalty rate increase will be reached in 2026 and the threshold to reach the GSR royalty rate of 3.3% will be reached in 2028 based on B2 Gold's production forecast. We are pleased with this transaction as it increases our exposure to a very attractive project in a stable jurisdiction being developed by an experienced operator. I'll now turn the call over to Martin.
Martin Raffield: Thanks, Dan. Turning to Slide 7. I'll give some comments on second quarter revenue. Overall revenue for the quarter was near record $174 million with volume of 74,500 GEOs. Higher prices were the primary driver for the increased revenue. Our royalty segment contributed $51 million, about 29% of total revenue for the quarter. Royalty revenue was up about 34% from the prior year quarter with higher contributions from Peñasquito and Robinson and approximately $2 million in new revenue from Mara Rosa, Bellevue, and Northern Star’s Wonder Underground. These increases were partially offset by lower from the Cortez legacy zone. Revenue from our Stream segment was $123 million, up by about 16% from last year with increased contributions from Mount Milligan, Xavantina, Wassa and Andacollo, partially offset by lower revenue from Pueblo Viejo. I'll turn to Slide 8 and give some comments on notable developments at our principal properties. At Mount Milligan, Centerra reported last week that they're on track for completion of a PEA in the first half of next year to evaluate opportunities to extend the mine life beyond 2035. They also reported progress on the site wide optimization program with significant reductions to date on milling costs and improvements in mining costs expected in 2025. At Pueblo Viejo, Barrett reported in mid-July that production in the second quarter was flat compared to the prior quarter and a shift to recovery rate optimization will occur in the second half of the year as throughput is ramped up. Silver recovery remains lower than target. And while we received deliveries of 333,000 ounces, we saw a further deferral of 143,000 ounces in the second quarter. At Andacollo, Teck reported an improvement during the second quarter in the drought conditions that have caused water restrictions and limited throughput rates. Teck expects the improvement to continue in the second half of the year. Turning to Slide 9. At Peñasquito, second quarter production was strong driven by high gold and zinc production resulting from higher grades in the Chile, Colorado pit and good mill throughput and recoveries. Newmont expects production levels to remain steady in the third quarter with an increase in gold production in the fourth quarter as mining returns to the higher gold grade [Peñasco] pit later in the year. At Khoemacau, MMG reported the first full quarter of results at the Zone 5 mine since the ownership transition. Production was impacted by equipment availability and high turnover of skilled labor. MMG reported that it is hired and is training a significant number of replacement workers. There are also measures being taken to reduce dilution with the expectation of achieving better ore grades in the coming quarters. In addition, MMG reported their intention to complete an expansion of Khoemacau by 2028 with the target of producing 130,000 tonnes of copper per year. Recall that Royal Gold Silver Stream interest covers expanded production from the Zone 5 mine and the Mango Northeast deposit. We're pleased to see progress at some of our newer assets in the portfolio and note the initial gold pour at Manh Choh and the achievement of commercial production at both Côté and Mara Rosa. And finally, it's worth noting some positive developments at a couple of our Australian royalty properties. At Bellevue, a five year plan was announced to significantly grow production by increasing underground ore movement and processing capacity. Bellevue has a June 30th fiscal year end and gold production levels are expected to increase steadily from 165,000 to 180,000 ounces in fiscal year 2025 to 240,000 to 260,000 ounces in fiscal year 2029. And at Wonder Underground in Western Australia, we received our first royalty revenue in the quarter from high grade development ore being blended into the Thunderbox mill. Northern Star is referred to an initial reserve containing approximately 455,000 ounces and expects the underground ramp up to continue with production stoping to start later this year. I'll now turn the call over to Paul for a review of our financial results.
Paul Libner: Thanks, Martin. I'll now turn to Slide 10 and give an overview of the financial results for the quarter. For this discussion, I'll be comparing the quarter ended June 30, 2024 to the prior year quarter. Revenue was up 21% to $174 million for the quarter, which is the second highest quarterly revenue in the history of the company. As Martin covered in his remarks, one of the primary drivers for the near record revenue this quarter was higher metal prices as gold was up 18%, silver was up 20% and copper was up 15% over the prior year. As Bill mentioned, gold continues to be the dominant revenue source, making up 74% of our total revenue for the quarter, followed by silver at 13% and copper at 10%. Royal Gold continues to have the highest gold revenue percentage when compared to our major peers in the royalty and streaming sector. Turning to Slide 11, I'll provide a bit more detail on specific financial line items for the quarter. G&A expense increased to $10.5 million from $9.1 million in the prior year. The increase was due to higher noncash stock compensation expense. Excluding noncash stock compensation expense, our cash G&A was $7.2 million, which was unchanged from the prior year quarter. Our cash G&A costs as a percentage of total revenue have remained low despite inflationary pressures and have impacted the metals and mining sector in recent quarters. Our DD&A expense decreased slightly to $36 million from $38 million in the prior year. On a unit basis, this expense was $4.80 per GEO for the quarter compared to $5.27 per GEO in prior year. The lower overall depletion expense and DD&A per GEO this quarter was due to three primary factors; first, a decrease in our Khoemacau depletion rate from $17.41 to $15.21 per ounce; second, lower gold and silver sold to Pueblo Viejo; and finally, higher contributions from our royalty segment, specifically Peñasquito, which royalty has a lower overall carrying value and depletion rates. We continue to forecast that our total DD&A expense will be within our previously guided range of $141 million to $157 million. Interest expense decreased significantly to $2.5 million from $8.4 million in the prior year. The decrease was primarily due to lower average amounts outstanding under the revolving credit facility when compared to the prior year. The all-in interest rate for outstanding borrowings under our credit facility was 6.5% at the end of June. Tax expense for the quarter was $19 million, resulting in an effective tax rate of 18.9%. This compares to a tax expense of $2 million and an effective tax rate of 3.1% in the prior year. The lower tax expense in the prior year period was due to a discrete tax benefit of $8.5 million attributable to the release of a valuation allowance on certain foreign deferred tax assets. The 19% effective tax rate for the quarter was in line with our expectations for the full year. Net income for the quarter was up over the prior year to $81 million or $1.23 per share. The increase in net income was primarily attributable to higher revenue and lower interest expense. After adjusting for a small discrete tax item and other minor adjustments, net income for the quarter was a record $82.6 million or $1.25 per share. Our operating cash flow this quarter was nearly $114 million, up 5% over the prior year. The increase in operating cash flow was primarily due to higher cash receipts from stream segments when compared to the prior year period. I will now turn to Slide 12 and provide a summary of our financial position as of June 30th. During the quarter, we returned the balance sheet to a net cash position with a repayment of $100 million on our outstanding credit facility balance. As of June 30th, we had $50 million of debt outstanding and total available liquidity of approximately $1 billion made up of the undrawn revolver balance and our working capital. I will also note that our working capital at quarter end was abnormally low. The lower working capital this quarter resulted from the acquisition of the Back River royalties from our available cash and also from the reclassification of the remaining $50 million revolver balance from a long term liability to the current liability. We reclassified this amount as a current liability given the $25 million repayment we made in early July and a final $25 million payment we intend to make early next week. With the repayment expected early next week, we will have zero debt outstanding. That concludes my comments on our financial performance for the quarter, and I will now turn the call back to Bill for closing comments.
Bill Heissenbuttel: Thanks, Paul. Our second quarter was strong and we were diligent in sticking to our long-standing strategy of allocating capital to our dividend, the balance sheet and new business. I'm particularly pleased with our progress on debt reduction. With the coming $25 million repayment that Paul noted, we will have repaid all the borrowings we incurred to fund some of our recent portfolio additions. Looking back two years, we have spent over $900 million to acquire royalties on Cortez, Great Bear and Back River, and we did not dilute our shareholders by issuing equity to finance these transactions and a fully replenished liquidity available for future acquisitions. These are high quality gold royalties in Tier 1 jurisdictions and I expect them to offer significant upside over the coming decades. Our financing choices mean that our shareholders will enjoy the full benefit of that upside. As one considers the current state of political instability and market volatility, we are very well positioned for this uncertainty. We are tracking well toward our full year guidance for overall sales, DD&A and effective tax rate. Our balance sheet is solid and we have excellent liquidity available to take advantage of business development opportunities that may present themselves. Operator, that concludes our prepared remarks. I'll now open the line for questions.
Operator: Our first question on the call comes from Tanya Jakusconek from Scotiabank.
Tanya Jakusconek: Maybe I will just start on Back River. I'm just interested on the royalties you purchased. Were they from existing like individuals, like I wasn't aware that other companies had a little royalty. So maybe just starting off with who is the seller of these royalties, individuals or companies…
Bill Heissenbuttel: Dan, do you want to take that one on?
Dan Breeze: The [Hill] royalty, Tanya, came from a private trust and the CAM royalty was from a subsidiary of a US company, third party royalties, and it was a competitive process as well.
Tanya Jakusconek: And are there more of these royalties then available on this property or are these…
Dan Breeze: so the property itself has a few royalties, Tanya. This is the bulk of the royalties. There are a couple of smaller royalties, I don't think they're available to purchase. But this is the bulk that we're talking about here in terms of our ownership now.
Tanya Jakusconek: I know yours and I know there's other companies as well that have exposure. I'm just always intrigued on how many pop up, and I wasn't sure whether this is the end of it. You said there's a couple of smaller royalties that are not available. Are those individuals as well?
Dan Breeze: Again, we don’t have all the detail in front of me here, Tanya, I believe that some or at least one is held by an individual and another is held by a company off the top of my head here. But I do agree with you. It's interesting that we see these things sometimes pop up and sometimes they surprise us as well. I think what we're seeing right now in the market, Tanya, is a pretty robust market for these third party royalties. There's been a number of transactions announced as you've seen already this year. And I think it's a combination of stronger commodity prices that's motivating sellers and then a pretty robust buyer market. So all of us in the sector have lots of capital to deploy, it's pretty competitive. So it's a good market to sell into. So in general, I wouldn't be surprised to see more.
Tanya Jakusconek: And so historically, we had talked about this $100 million to $300 million range. So the first thing I need to ask is, is that still the range of -- obviously, you did something in 50. But would you say that these royalties, obviously, are smaller and you're saying that you're seeing more of them. So maybe we can see this range go down to $50 million to $300 million versus $100 to $300 million, which maybe be more the stream? I'm just trying to differentiate now what you're seeing more. One of your competitors mentioned a much higher range on the upward side. So I'm wondering if you're seeing a larger range but on the downward side.
Bill Heissenbuttel: Dan, why don't you keep going…
Dan Breeze: So I think, Tanya, I think the way that we see the market right now is -- and I think I mentioned this, perhaps, in the last call or two is that sub-$100 million level, that's what has been pretty busy for us in general. And I think the Back River royalties are an example of that category of opportunities. It's good size, good quality transactions. Those are the things we're looking to add in the portfolio. I think when we're talking more in the $100 million to $300 million range, which I think is still fair to say, I know we always give you kind of the same answer, but that's what we continue to see. We are aware of a couple of larger opportunities outside of that range. But I think, in general, it's fair to say the $100 million to $300 million range is still very consistent in the broad sort of range that we see across both royalties -- some royalties, but mostly on the streaming side.
Tanya Jakusconek: And then maybe, Bill, can you talk to me a little bit about how this -- we hear about all of these deals and everyone has super busy and has a lot of opportunities out there. But maybe you can walk us through from the time you are approached on an opportunity or you're proactive and start looking at opportunities. Can you just walk us through like what it takes to get the deal announced and sort of the time line so that all of us are aware that we hear all of these deals, but like they're not going to be completed tomorrow?
Bill Heissenbuttel: And just to be clear, when we talk about our business level of activity, we're not trying to sort of handicap the likelihood of closing a transaction. We're not looking to signal anything to anybody about timing, something coming up in six weeks or six months. We're just trying to tell you that we're busy, we're looking at things. It could be that we're looking at a number of earlier stage opportunities. And there are many exit ramps in this process, going from first looking at a transaction to the point of signing one. In the best of all worlds, this thing takes six to eight weeks to close. Everything is lined up, all the information is available, that would be ideal for us. It never happens that way. And I will share with you that over the last 18 months, we were the preferred bidder on three different transactions that did not close. One of which the market knows about, that's ACG. I'm not going to go into the other two that are not public. But just to give you a flavor, what can derail these things, even when you -- you won the contest amongst our peers and yet they still don't close, and it could -- failure to achieve -- that was ACG. Metal price changes, right? You've been working on something for six months, and a company that looks at the gold price going from $1,900 to $2,400, valuation expectations change. But the bigger issue for us, I would say, are the capital markets. Debt and equity, I think, our biggest competitor. And as things go along, if interest rates come down and they said, the debt markets are open, we'd rather do that. The equity market is just open where we can do that. And we've seen these things happen even coming down to the management and the Board may not be on the same side of looking at our product. So it's really, really hard. I would say, six months is probably a good estimate. And Dan, I think you have a couple of examples. It can take a lot longer but it can also be a lot shorter where things come up that we didn't even know about. So I don't know, Dan, is there anything you want to add there?
Dan Breeze: I think I would just add, Tanya, just stepping back, we try not to overpromise on what may come out of our pipeline. And that's why we tend to keep our BD environment comments at a high level, and I appreciate that's a little bit frustrating for the analyst community. It's just a very fluid part of our business. And it can be very uncertain in just thinking about our own transactions, recent transactions. If you look at Khoemacau as an example, I think we learned about that opportunity in early 2016. And we didn't agree on the transaction until early -- I guess, it was early 2019 after the team there decided to to do some further technical studies and whatnot. So we may not see something come through for a number of years. And thinking about looking at, say, Red Chris, the royalty that we acquired there. Sometimes we know about that royalty -- we knew about that royalty well in advance, but the chance to acquire came very quickly. And so we had to act very quickly on that one. And looking at Cortez, after we acquired the Rio Tinto (NYSE:RIO) royalty there in 2022, the additional Cortez idle royalty that came as a result of the private sellers that we had a relationship with for many years deciding that that was the right time for them to sell. The market didn't even know about that opportunity, it just kind of surprised the market to some degree. So to Bill's point, it's very hard to predict. And I think Bill's comment there about sort of two quarters at a minimum, we could do things quicker, but I think that's a reasonable general time line to consider.
Tanya Jakusconek: So two to six months sort of benchmarking, two optimistic, six on average. Just for ourselves to just benchmark when you hear about these things somewhere between two to six months of sort of a reasonable time range.
Bill Heissenbuttel: Yes, two months is an ideal world, six months probably closer to reality.
Tanya Jakusconek: We live in reality. I wish I lived in an ideal world. Maybe I am living in an ideal world. If I could squeeze one more in. Just on the Back River, I haven't had a chance to model the additional royalties that were purchased. But just as a benchmark, if we were to use your guidance pricing and look at this project, would it be safe to assume -- I'm assuming that the [interim] rate of return would be sort of double digit. But again, I haven't done that, I'm just trying to benchmark myself.
Bill Heissenbuttel: Dan, I think you've got that number. I think we looked at it on a spot price basis here.
Dan Breeze: Yes, I think the mid to upper single digits is a reasonable way to think about it at the moment.
Tanya Jakusconek: Mid to upper single digit and that’s on spot pricing…
Dan Breeze: Yes, upper single digits. Yes, somewhere around that $2,350, $2,400 spot price.
Operator: [Operator Instructions] Next question today comes from Brian MacArthur at Raymond James.
Brian MacArthur: It sort of follows on Tanya's last one. So I thought I worked this out, but given your guidance on the slide, Slide 6, which is the Back River royalty. So if I read this from zero to 400,000 ounces, do you just guys get the 0.7% NSR and then from 400 to 780, you get the 2.5 less the 0.7 because you deduct it. And then after 780, you get 3.3 less the 0.7, which eventually goes down to 0.3 once you get $5 million royalty on that thing. Is that the way I'm suppose to think about it? And secondly, if that's true, I'm trying to figure out how we get to the 1.3% GSR that you comment on for KM post 780. And maybe it's easier offline but any guidance on how that works? Because when we're doing these IRRs, obviously, if this thing ramps up more over time, makes a big difference from what you get here.
Bill Heissenbuttel: Brian, let me take a crack at it, but we might want to take this offline just to walk through it. I think what we are trying to do -- to do with the chart, and it's exactly, I think, what we tried to do with Cortez, is take a really, really complicated royalty situation where you've got deductions and sort of boil it down for you to say this is the rate you should apply to the production to do your forecast. And we're trying to do the deductions for you and tell you what the effective rate is. Dan, if I stepped in the wrong direction, please correct me.
Dan Breeze: I think that's right. And Brian, it is fairly complicated, just to Tanya's question about royalties on the property and their deductions and things like that. So that's exactly what we try to do is just to make it as simple as possible. And just think about it in those three buckets, ultimately getting to that 3.3% GSR rate, and very early in the mine plan as well.
Brian MacArthur: But you also say -- that's what I'm trying to get at, because you all just say together, they're equivalent to 1% GSR early on and that's a lot different than getting up to 2% or 3% early on. That's all I'm really asking, I don't need all the details. So should I be using 1.1% through the whole thing or should I be higher in the early years and dropping it off later, because that's, I think, goes to Tanya's question too.
Dan Breeze: So Brian, the 3.3% is the combined CAM and [Hill] royalties, so that's the 1.1% plus our existing royalty there, which is 2.2%. So that's how you get to the 3.3%. So just to step back, this chart is all of our royalties combined into one rate.
Brian MacArthur: Right, which is basically the -- we got that footnote that talked about [indiscernible] 51.25% of it or whatever, so you're bringing that into it as well when you do all that?
Dan Breeze: Yes, that's right.
Operator: [Operator Instructions] We have no further questions on the call. So I'll hand the floor back to Bill to conclude.
Bill Heissenbuttel: Well, everyone, thank you for joining -- 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.
Operator: This concludes the conference. Thank you all very much for joining.
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