Royal Gold 2026 Third Quarter Conference Call - ROYAL GOLD INC

Explicit Guidance:

• FY2026 Full-Year Sales: Raised guidance for "other metals" (silver and copper); expects sales at or above the top end of the original guidance ranges. Gold sales expected to remain at the midpoint of the original guidance range.
• FY2026 G&A Expense: Expected to finish near the upper end of the $50–$60 million range.
• FY2026 Depletion, Depreciation, and Amortization (DD&A): Expected to finish within the original guidance range of $339–$379 million.
• FY2026 Effective Tax Rate: Expected to remain within the original guidance range of 17–22%.
• FY2027 Potentially Higher Royalty Rates (Cortez): While no explicit numerical guidance was given, management expects a "good year" for 2027 at Cortez due to increased focus on the legacy zone and Crossroads deposit; anticipates production increases compared to the 2026 average blended royalty rate of 3.5–4%.

Business-Segment Outlook:

• Mount Milligan: Sentera reaffirmed that gold and copper production are on track to meet full-year guidance; Q4 deliveries (based on Q2 production) expected to be strong.
• Andacoyo: Plant throughput increased in September, returning to full production by month-end; copper production expected to be at the low end of the 45,000–55,000 ton guidance range for 2026.
• Kansanshi: First Quantum narrowed 2026 copper production guidance to 175,000–185,000 tons (from 175,000–205,000 tons), implying gold stream deliveries of 29,000–31,000 ounces for 2026.
• Zavachina (Zavachina): ERO provided 2026 gold production guidance of 75,000–80,000 ounces (including 30,000–35,000 ounces from mining), implying 22,000–27,000 ounces in the Q4 period.
• Platte Reef: Phase 1 concentrator operated at 70% of design capacity in October; Phase 2 concentrator construction on schedule for completion by end of 2027.
• Cortez: Legacy Zone production ramping up; expected to drive revenue growth in 2027.
• Great Bear: Advanced exploration surface construction substantially complete; detailed engineering >55% complete; permitting progressing. Kinross intends to buy back 25% of Royal Gold's royalty in Q4 for ~$43 million.
• Red Chris (Redcrisp): Newmont outlined block cave parameters; target for investment decision by early 2027; Phase 1 mine life ~13 years; production ramping to 275,000–325,000 ounces gold and 65,000–85,000 tons copper between 2035–2040.
• Greenstone: First major exploration program since 2020 underway to extend mine life and optimize throughput beyond current 27,000 tons/day capacity.
• Antamina: Production suspended since October 27 for investigation; no immediate outlook provided beyond suspension status.
• Mara: Glencore Alhambra restart underway with RIGI approval; considered an important step for de-risking Mara development.
• Hod Madden (Lydia): Project ~30% complete; Royal Gold expects to begin contributing pro-rata share of spending in mid-2027 (post-$50 million final warrant payment).
• Chapada: Lundin Mining expects updated technical report for the mine and associated projects by year-end.
• Fruta del Norte: Near-mine exploration at FDN South, East, and Bonza Sur continues; expected to sustain production levels over the longer term.
• Cote: Iamgold aims to complete updated mine plan/reserve estimate by end of year; target to increase sustained plant throughput to ~40,000 tons/day.

Market and Competitive Outlook:

• Deal Environment: Valuations have come closer to consensus (gold prices ~$2,500-$3,000 range implied vs. historical lows), making negotiation easier compared to earlier periods where long-term prices were significantly below spot.
• Geographic Expansion: Australia market has embraced streaming/streaming; recent large transactions have prompted Australian companies to consider streaming, opening new opportunities. Argentina viewed as "very favorable" despite political cyclicality, with RIGI approvals demonstrating viability.
• Copper Exposure: Management is comfortable with ~10% copper revenue; not actively seeking to reduce it but will strategically evaluate new copper opportunities if they arise.
• Barrick IPO: A potential Barrick North America IPO is viewed as "marginally positive" as it could allow the operator to focus capital and management time on fewer assets (Nevada Gold Mines/Pueblo Viejo) rather than a global portfolio.

Macro / Industry Outlook:

• Interest Rates: Rising interest rates may incentivize building liquidity on the balance sheet to reduce dependency on drawing debt for new investments.
• Currency/FX: No specific FX guidance provided, but revenue composition remains heavily weighted to Western Hemisphere assets (75%+ revenue).
• Metal Prices: Recent price strength (Gold +23%, Silver +59%, Copper +44% YTD) is noted as a driver of revenue, but management focuses on organic growth and portfolio strength rather than price speculation.

Strategic Initiatives:

• Capital Allocation Priorities: (1) Finding new business opportunities (primary focus); (2) Maintaining dividend growth (board review in November); (3) Share buybacks (contingent on liquidity buildup due to rates).
• Debt Strategy: Currently debt-free; full $1.4 billion revolver undrawn with accordion feature up to $2 billion available for future business development.
• M&A/Transactions: Pipeline described as "very busy" across third-party royalty packages, new royalties, and streams for project development; focus on $200–$500 million deal sizing with a mix of early-stage and producing assets.
• Capacity/Expansion:
  • Platte Reef: Phase 2 concentrator completion expected by end of 2027.
  • Red Chris: Potential for up to 70-year mine life via phased development.
  • Great Bear: Detailed engineering and permitting progressing toward eventual production.
• Asset Optimization: Resolution of Newmont/Barrick dispute at Four Mile expected to optimize joint venture and benefit Royal Gold's royalty coverage.

Risks and Headwinds to Outlook:

• Political Risk: Acknowledgement that political changes can occur over multi-decade asset life cycles, requiring caution in jurisdictions like Argentina despite current favorable conditions (RIGI).
• Operational Disruptions: Antamina production suspension highlights the risk of investigations and safety incidents impacting revenue.
• Project Timelines: Development projects (e.g., Hod Madden, Platte Reef Phase 2) depend on permitting and engineering progress; delays could impact cash flow timing.
• Guidance Uncertainty: Management noted "risks and uncertainties" that could cause actual results to differ materially, particularly regarding specific asset production rates (e.g., Cortez, Red Chris) and macroeconomic variables.
• Pricing Volatility: Revenue is heavily correlated with metal prices (Gold 73%, Silver 14%, Copper ~10%); price declines would directly impact top-line growth.

Management Tone on the Future:

• Confidence Level: High. Management described the portfolio performance as an "absolute success," noted record cash flow for three consecutive quarters, and expressed confidence that the market will recognize the value of the business.
• Strategic Confidence: Emphasis on "disciplined capital allocation," "sustainable and high-margin business," and "embedded organic growth" across numerous assets.
• Momentum: Positive; management noted that key assets from the Sandstorm Horizon acquisition (Platte Reef, Mara, Hod Madden) have advanced faster than anticipated.
• Tone Shift: Shifted focus from debt management (historical) to aggressive deal execution and organic growth expansion now that the balance sheet is debt-free.

Miscellaneous:

• Dividend: $1.90 per share annual rate (6% increase YoY); Q4 dividend amount to be determined by board in November.
• Buybacks: $43 million from Kinross Great Bear royalty buyback expected to settle in Q4; 190,000 shares repurchased in Q3 for $49 million.
• Liquidity: $1.5 billion total available liquidity at quarter-end; $226 million working capital plus $1.25 billion undrawn revolver; $150 million revolver balance fully repaid in October.