Chipotle Mexican Grill Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 15, 2024

There are 11 speakers on the call.

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. I'll now turn the call over to our host, Alastair Baker, Vice President of Investor Relations and Business Development.

Operator

Please go ahead, Alastair.

Speaker 1

Thank you, operator. Good morning, and welcome to our discussion of Royal Gold's 4th 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 Heisenbuttel, President and CEO Martin Raffield, Vice President of Operations and Paul Livner, CFO and Treasurer Randy Sheffman, General Counsel and Dan Breeze, Vice President, Corporate Development with RGAG 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.

Speaker 1

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 and 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.

Speaker 1

After the formal remarks, we'll open the lines for a Q and A session.

Speaker 2

Good morning and thank you for joining the call. I'll begin on Slide 4. During 2023, we delivered revenue of $606,000,000 operating cash flow of $416,000,000 earnings of $239,000,000 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 Q3 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.

Speaker 2

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 $100,000,000 in dividends keeping with our commitment to return capital to shareholders, 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 $325,000,000 standing on a revolving credit facility during the year. After an active year of acquisitions in 2022, we started the year with a revolver balance $575,000,000 and we've quickly reduced that to $250,000,000 increasing our total available liquidity at the end of the year to about $845,000,000 This is in keeping with our capital allocation strategy to use non dilutive financing to acquire high quality And we maintained our low share count during the year to ensure that shareholders have full exposure to our growth.

Speaker 2

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 2,035 and potentially further into the future. The details are in our press release, but in summary, we will receive cash and gold consideration in the near and medium term with a value of approximately $125,000,000 at the current gold price and a longer term free cash flow interest in Mount Milligan. In return, we'll make additional cash payments for gold and copper delivered with any support provided prior to approximately 2,030 contingent upon gold and copper prices being below $1600 per ounce and $3.50 per pound, respectively. These earlier payments are also subject to potential recovery against cost support payments made beyond 2,030 when metal prices permit.

Speaker 3

This is a

Speaker 2

good development for both Royal Gold and Centerra as it should allow for further value to be realized through mine life extension. Mount Milligan has a large resource base and exploration potential. And Centerra's plans include completing a preliminary economic assessment in the first half of twenty twenty five to evaluate resources and projects that could provide further mine life extensions, continuing exploration drilling around the mine and completing a site optimization program to improve cash flow. Royal Gold will benefit from getting further exposure to metal prices over an extended mine life, and we are pleased to provide support to Centerra as they review this potential. I'll now turn the call over to Martin to provide some comments on the portfolio.

Speaker 3

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 were slightly below our 2023 guidance of 320 1000 to 345,000 GEOs. This was due to underperformance at 2 of our principal properties, both of which we have discussed on our last earnings call.

Speaker 3

The first was Penasquito, where there was an unexpected 4 month labor strike And the second was the slower than anticipated ramp up of the plant expansion at Pueblo Viejo. Our DD and A and tax rates 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 4th quarter revenue. Overall revenue for the quarter was $153,000,000 with volume of 77,500 GEOs. Our royalty segment contributed revenue of $54,000,000 in line with the prior year quarter.

Speaker 3

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 $98,000,000 Lower contributions from Mount Milligan and Pueblo Viejo were only partially offset by higher revenue from Andacollo's Aventina 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 2,035 with the potential for work underway to increase this further. Centerra also provided 20.24 production guidance of 180,000 to 200,000 ounces of gold and £55,000,000 to £65,000,000 of copper.

Speaker 3

Centerra expects this production to be evenly weighted throughout the year. At Pueblo Viejo, Eric reported yesterday that construction and commissioning of the plant expansion was substantially complete at the end of December And they have resolved the equipment issues they were dealing with in the second half of the year. They are working on rebuilding the crushed ore stockpile feed conveyor and are targeting completion of this work in the Q2, which is required for the plant to reach full throughput. Our stream is based on Barrick's share of production at PV and Barrick is guiding to gold production of 420,000 to 490,000 ounces in 2024. Approximately 165,000 ounces of silver were deferred during the quarter And the total deferred amount was 854,000 ounces at the end of December.

Speaker 3

In yesterday's report, Barrick commented The focus for the Q1 will be the continued stability and optimization of the flotation circuit, which we expect should result in higher and more silver recovery. This optimization work will likely take some time and the recovery of our deferred silver ounces will depend on the outcome of this work. At Cortez, Barrick announced in mid December that the record of decision was received for Goldrush and they expect to ramp up production from 130,000 ounces this year to about 400,000 ounces per year in 2028. They also announced 2024 guidance for Cortez yesterday of 620,000 to 680,000 ounces, which includes the contribution from Goldrush. This guidance is significantly lower than the 2023 production at Cortez And according to Barrick as it relates to grade reconciliation and resource model changes at Crossroads that will reduce oxide mill feed.

Speaker 3

Our overlapping royalty interest at Crossroads result in an effective gross royalty rate of approximately 9.4%. So the impact of lower production at Crossroads has a disproportionately larger impact on Royal Gold. We are reviewing Barrick's forecast and we'll detail the impact to Royal Gold when we issue our full year guidance. Turning to Slide 8, at Andacollo, Tek has reported are impacting production levels and this is expected to continue while a solution is put in place in 2025. In the meantime, we're expecting production levels this year to remain in line with 2023 and then increase in 2025 through 2027 with the benefit of higher grades.

Speaker 3

At Khoemacau, operations are continuing at full production levels. Komakao is a high quality operation and we are pleased that M and G, a well capitalized and experienced operator, We'll become the new owner after completing the acquisition, which is expected during the current quarter. We have spoken with MMG, And at this point, we don't expect any significant changes to the operating approach put in place by KCM. And finally, we are pleased see continued progress towards full production at King of the Hills and Bellevue mines in Western Australia. We expect to see first production from Cote Gold in Ontario and Marauroza in Brazil in the current quarter and Manchow in Alaska in the second half of the year.

Speaker 3

I'll now turn

Speaker 4

the call over to Paul for a review of our financial results. 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 $153,000,000 for the quarter.

Speaker 4

As Martin mentioned in his remarks, lower contributions from Mount Milligan, Pueblo Viejo and Penasquito 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% 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.

Speaker 4

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 and A expense increased slightly to $9,700,000 from $8,800,000 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 and A cost remained low at about 5% of total revenue. Our DD and A expense decreased to $40,000,000 from $49,000,000 in the prior year. On a unit basis, this expense was $5.18 per GEO for the quarter, compared to $5.21 per GEO in the prior year.

Speaker 4

The lower overall DD and A expense was due to a lower depletion rate at Pueblo Viejo as well as decreased sales from Mount Milligan and Pablo Viejo when compared to the prior year. For the full year, DD and A of $5.29 per GEO was in line our earlier guidance range of $4.90 to $5.40 per GEO. Interest expense was $6,000,000 for the quarter, In line with $6,100,000 in the prior year. The all in interest rate for outstanding borrowings under our credit facility was 6.6% at the end of the 4th quarter. Tax expense for the quarter was $13,400,000 resulting in an effective tax rate of 17.5%.

Speaker 4

This compares to a similar tax expense of $12,600,000 and an effective tax rate of 18.2% in the prior year. For the full year, tax expense was $42,000,000 and the effective tax rate was 14.9%. Our full year tax expense effective tax rate benefited from a previously disclosed discrete tax event during the June quarter and related to the release of a valuation allowance on certain foreign deferred tax assets. Excluding this discrete item, the effective tax rate for the full year was 17.9%, which was in line with our guidance range of 17% to 22%. Net income for the quarter was up 11% over the prior year to $63,000,000 or $0.95 per share.

Speaker 4

The increase in net income was primarily attributable to the lower cost of sales and DD and A expense, along with the $4,000,000 impairment we recognized in the prior year on exploration stage royalty interest. Each of these were partially offset by a decrease in our revenue as I previously mentioned. Our operating cash flow was strong again this quarter at $101,000,000 and in line with the prior year. We expect to provide full year guidance 2024 early in Q2 after most of our counterparties have issued their own production guidance for the year. However, to help you prepare your March quarter estimates, We expect our Stream segment sales to range between 47,052,000 GEO during the Q1 of 2024.

Speaker 4

As with our prior practice, this is the only quarter during the year when we will give quarterly guidance. And this quarterly guidance should not be viewed as indicative of the full year guidance intend to provide early in the Q2. I will now turn to Slide 11 and provide a summary of our financial position at the end of the quarter. During the quarter, we repaid $75,000,000 on our revolving credit facility and reduced the amount drawn to $250,000,000 As Bill mentioned, our strong cash flow during 2023 allows to repay $325,000,000 on a revolver balance during the year. With respect to leverage ratios, we ended 2022 with a one times net debt to EBITDA ratio.

Speaker 4

And by the end of 2023, this ratio was down to 0.3 times. This is a remarkable change in a short period and speaks to the cash flow generation of our portfolio and reinforces our overall capital allocation strategy, which also emphasizes a focus on the balance sheet. Absent significant business development activity and as cash flow allows, We expect to fully repay the remaining revolver balance by sometime early in the second half of twenty twenty four. We ended the year in a very strong financial position with total available liquidity of approximately $845,000,000 made up of $750,000,000 of undrawn revolver capacity and $95,000,000 of working capital. Finally, I'll also mention that upon completion of the acquisition of Khoemacau by MMG, We expect repayment of the subordinated debt facility we provided to KCM as part of the overall development of the Khoemacau mine.

Speaker 4

At the end of December, the total amount outstanding including capitalized interest was approximately $36,000,000 That concludes my comments on our financial performance quarter and I will now turn the call back to Bill for closing comments.

Speaker 2

Thanks, Paul. 2023 was another year of consistent and solid performance from Royal Gold. We maintain 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 finance those transactions as well as continue our long record of increasing our dividend.

Speaker 2

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, Cote, Marrosa and Manchow. We also expect to publish an asset handbook early in the Q2, 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

Thank Our first question comes from Jackie Przybylowski with BMO Capital Jackie, please go ahead.

Speaker 5

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, at 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.

Speaker 5

Can you maybe just give us a little bit more color on what's happening there?

Speaker 2

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

Speaker 5

Sorry. Yes, sir.

Speaker 2

Yes, that's fine. I may 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.

Speaker 3

Yes. Thanks, Jackie. We really don't know much more than what was said on the call yesterday with Mark Bristow. No, 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.

Speaker 3

And it was ascribed to a fault cutting off 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?

Speaker 5

Yes, absolutely. Thank you.

Speaker 3

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 that 49,000 GEOs was sourced from our legacy zone with the high royalty rate of 9.4%. And that was really primarily driven in turn by the Crossroads production. So 2024 guidance for Barrickers is now 6 20,000 to 680,000 ounces, again on a 100% basis.

Speaker 3

And this represents about a decrease of 27% from the 20 23 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.

Speaker 5

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

Speaker 3

Absolutely, yes.

Speaker 5

Okay. Thank you so much.

Speaker 2

Thanks, Taki.

Operator

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

Speaker 6

Hi. Thanks, Bill. Paul Martin and Alistair. Maybe my first question is on your 2024 guidance. Well, I know you haven't put it out yet.

Speaker 6

I'm just trying to figure out the thought process 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 startups 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?

Speaker 2

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.

Speaker 2

And but in others, especially on the royalty side and the smaller royalty side, we don't really know. All we can go on is what the operators are saying publicly. Just as an example, Penasquito 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 Penasquito.

Speaker 2

So That's probably why it takes us a little bit longer than others because we have 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. 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. They may not achieve that grade that they expect.

Speaker 2

So, that's kind of the process, and that's why it takes us another couple of months to put it together.

Speaker 6

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

Speaker 2

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 then 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.

Speaker 6

Understood. Great. Maybe switching gears a little bit, congratulations on getting additional deal or kind of like the agreement with Centerra completed. From that perspective, I had to read it quite a few times, 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?

Speaker 6

And would you would have been easier to kind of rewrite the original agreement because I know this agreement here is in addition to the original agreement, So maybe the thought process around that as well.

Speaker 2

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.

Speaker 2

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.

Speaker 6

Great. Hi Cosmos. Yes, thanks for the question. Hi, Maybe

Speaker 7

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 the Structured generally speaking or do you want to actually get into the numbers?

Speaker 6

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

Speaker 7

Sure. Well, obviously, we had to consider our interest here and what we thought was appropriate and acceptable for our shareholders, but also what CENTERA 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 talk about this yesterday in their call, that will allow them to make investments, if you will, today and going forward over the next year, year and a half to hopefully realize what that longer term plan So that was really the main driver, Cosmos. And then looking at the shorter term between now and say 2,030, What we try 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.

Speaker 7

And so that's what we put into place A structure that is unlikely to be drawn just given the triggers of the commodity prices below 1600 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 2 main factors that fit into or we consider to

Speaker 6

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

Speaker 2

Thanks, Cosmos.

Operator

Before we take our next Our next question comes from Lawson Winder with Bank of America.

Speaker 8

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 full year guidance. How do you guys think about Andacoya for that in terms of production?

Speaker 8

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 4 kind of the right way to think about that. And then, yes, that would be the first question on the guidance.

Speaker 2

Hey, Lawson. So is your question on the quarterly guidance that we just gave because that number we would Pretty much no, because the Andacollo is one of those assets where we received the gold about 5 or 6 months after it's been shipped. So we would have a pretty good idea of what that is.

Speaker 8

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

Speaker 2

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?

Speaker 8

So Yes. So just thinking about Andacoya in particular, like accounting for the fact that they had those Issues with water in Q4. And you've disclosed down 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?

Speaker 8

I don't know. Just any sort of color on that direction would be

Speaker 2

Martin, is there anything that you can think of that we could provide right now?

Speaker 3

Look, Peck have 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 that individual numbers for the production we should be talking about at the moment.

Speaker 8

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 the 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, Sort of when based on the current mine plan would Royal Gold start to get the benefit of that higher rate?

Speaker 8

And is there a point where there's an overlap in the royalty such that the 2 are additive?

Speaker 2

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

Speaker 3

It's far, far in the future. Yes, that's what I thought.

Speaker 8

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

Speaker 6

Thank you.

Operator

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

Speaker 9

Great. Good morning, everyone. Thank you so much for taking my questions. I just wanted to come back to Crossroads. I was the one who asked Barrick on the call yesterday, about Crossroads and what exactly had 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 seem to have was there that they hadn't expected and lost this high grade gold.

Speaker 9

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 reserves and resources in this area?

Speaker 2

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

Speaker 3

Thanks, Tanya. We don't

Speaker 9

I know, sorry Martin, but it was just

Speaker 2

Go ahead.

Speaker 3

Yes. Look, I think we would expect some sort of 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.

Speaker 9

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 49,000 GEOs that was that you achieved in 2023, we can kind of remove maybe $20,000 off that number for 2024.

Speaker 3

That's exactly right.

Speaker 9

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

Speaker 3

Yes, we're done. Congratulations.

Speaker 9

All right. Okay. Maybe we can come back

Speaker 2

and look at that.

Speaker 3

We will try and give more detail around that.

Speaker 9

Okay. All right. Thank you. And maybe I guess I'm just going to come back to just the M and A environment yet again. You mentioned now you've paid off a lot of your debt.

Speaker 9

Just wondering what you are seeing out there and Sort of size wise and how big would you be looking at in terms of potential transactions?

Speaker 2

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

Speaker 7

Thank you. 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.

Speaker 7

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 High cost of debt right now and the equity markets, which maybe they're recovering a little bit now, but generally they've been less supportive of smaller in particular, those with single asset development project type risks. And so I think that's what's driven the smaller royalty financing that we've seen in the market in the last 12 months or so. I think that's going to continue.

Speaker 7

But We do still see that we obviously need the same range $100,000,000 to $300,000,000 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 it's as I said, I think it's being driven by other types of capital just not being readily available right now.

Speaker 9

Okay. And can I ask, you already have Yes? That's thank you. So similar range, similar sort of structure helping these smaller guys. Question for you, obviously, Newmont is looking to solve some of the assets.

Speaker 9

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?

Speaker 7

Well, we're we're doing it pretty broadly. Go ahead, Jeff. Sorry. Go go ahead.

Speaker 2

No. Go ahead. 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.

Speaker 2

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 opportunities based on the disposal process. Mhmm.

Speaker 9

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

Speaker 2

Sorry. Which asset?

Speaker 9

Just in Africa, the Continental Africa, would you take on that as higher geopolitical risk?

Speaker 2

I'll 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 Maybe a handful and you might not need all the fingers on your hand to do it.

Speaker 9

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.

Speaker 2

Yes. Thanks, Tanya. Thank you.

Operator

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

Speaker 10

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, I just want to think of it as other cash items coming through?

Speaker 2

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 of the accounting. So bear with him a little bit.

Speaker 10

Yes, I'm sure.

Speaker 4

Yes. Hey, Brian, how are you? Yes. And Bill is right. Obviously, you 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 Q1, at which time we'll certainly give you more information within our next report.

Speaker 4

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 onto the balance sheet Certainly, as a receivable. And obviously, since that receivable is in the form of gold, a commodity, I do anticipate that we will have to mark to market that receivable through the P and 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 NORA 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.

Speaker 4

It could be other some other form of an income, maybe not revenue, which equals then GEOs. So but again, more to come on that, but that would be where I would see things today.

Speaker 10

So can I maybe just ask, I mean, I can guess I can see the deferred gold maybe one way? But for the 2020, I mean, the money you're going to get in upfront, I mean, I guess where this goes is obviously with Cortez coming down, your growth rate in GEOs isn't going to be that high this year, I suspect. So I mean, you're going to count that $25,000,000 as part of geo growth this year because it is in a way, I guess, part of that stream. And it's not any significant amount of money.

Speaker 2

No. I mean that wouldn't touch revenue.

Speaker 10

Right. That'll just go straight to say if I should think about that'll come in with say the $36,000,000 from the sub debt coming back from Comacao, right? It's just going to be cash in?

Speaker 7

Correct. Exactly.

Speaker 2

Okay,

Speaker 10

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

Speaker 2

Thank you.

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.

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Chipotle Mexican Grill Q4 2023
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