Royal Gold Inc at BMO Capital Markets Global Metals & Mining Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Paul Brink, I'm going to start on a question for you. The equity prices for the royalty streamers have underperformed gold producers just probably about August. What part of the cycle do you think would be more constructive for the royalty streaming model? And do you think we're getting closer to those conditions in 2021?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : It definitely feels like we're getting closer to a royalty-focused market again. So I think you might be right on that. I'll send a question to Randy Smallwood with this beautiful Vancouver sunrise behind you there.

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : How do you think COVID-19 continues to offer -- to impact operations going forward? I'm asking this to you because it looks like Wheaton saw your sales sort of lagged production in Q4. I think we saw the same with Royal Gold when you reported. And it's -- is that really an impact of logistics in COVID? Or is there a risk that we could see that kind of continuing that lag?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Segue into a discussion on ESG, I think. And ESG, more broadly, is such an important topic in the mining sector. It's just been an important topic at our conference for the past several years. And certainly, this year it's probably even more so. We've had a presentation this morning on environment from Tom Butler, and of course, that will continue through the week with the rest of the ESG theme. And continuing on the splitting of the letters into E, S and G, I figured I'll ask one of those to each of you. So I'll start with Bill Heissenbuttel on the environmental sustainability side. As a royalty streaming company, you don't control most of the mining operations directly, probably none of the mining operations directly in your case. Do you consider the environmental record of companies or management teams when you're thinking about making an investment in a company or in a royalty or stream? And once that investment is in place, is it something that you can do to contribute to sustainability efforts of your partners?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : I was thinking that (inaudible).

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : That's great. And I think you're right, having a diverse portfolio, you definitely have a broader perspective on (inaudible). Randy, I guess we sort of touched on this with the COVID question, but I'll ask you about the social aspect. It's probably an area where miners can make the most or at least a meaningful impact is in social programs. What is the Wheaton view on corporate social responsibility? And how do you complement your partners' programs? How do you choose which initiatives to support? And maybe kind of just cynically, is that something that Wheaton sees value from in terms of contributing to those programs? Or what's the benefit to Wheaton from doing that?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : I think that sounds like a great initiative definitely and then a good motivator, for sure. I'm going to change the subject a little bit and talk about governance. Paul, this is probably the least popular letter of the ESG acronym. What message Franco to do to ensure good governance, to align the management and the Board with your shareholders? You have obviously the largest portfolio of both producing and early-stage royalties and stream. So is it possible for you to reflect that diversity of your portfolio within your company, within your Board? Is that something that you can do or should do, do you think? So maybe there's 2 questions there, but I guess the first one on alignment and then the second one on the diversity side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 02, 2021 / 2:30PM, RGLD.OQ - Royal Gold Inc at BMO Capital Markets Global Metals & Mining Conference (Virtual)

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Yes, that's a very good point. You'll go with Bill finding in the E side, but I don't want to know.

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Absolutely. I think that's a great perception for the industry. I mean, maybe on the technology side too, but also on a openness to different sort of backgrounds and people. I think it'd be great to see more people want to be in mining of all types of people in. Let's shift gears a little bit. I know the title of this session is the differentiated stream or royalty model. And so let's talk a little bit about what differentiates your companies, I guess, from others in the model. And I'm going to start with Bill, but this, I guess, applies to all of you. The large size of your companies generally probably makes it difficult or more difficult to find growth opportunities that move the needle. So Bill, are you seeing opportunities right now for growth of meaningful size, of the size that would catch the interest of the market? I mean, can you give us maybe some high-level commentary on what you're seeing in terms of growth opportunities at the moment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 02, 2021 / 2:30PM, RGLD.OQ - Royal Gold Inc at BMO Capital Markets Global Metals & Mining Conference (Virtual)

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Yes. We have heard, I think, yesterday more talk about growth from all different kinds of miners think -- based on all angles. So it'd be interesting to see how that plays out this year, but potentially good opportunity for all of you, I'm sure. Maybe I'll pass it to Randy. And the feeling, I guess, quickly on Bill's comments, how big do deals need to be before they move the needle for you? Do you have a preference? I mean, in the past, you seemed like you've prioritized deals that are already cash-flowing or assets that are already cash-flowing. Is a longer pipeline something that you would look to add of earlier-stage assets? Or are you really looking for those market-moving transactions right now?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Is it -- funny a lot of people think of contract negotiations and trying to get as much as possible from the other guy, but as an example, a great example of the benefit of the streaming model in general, which is it can be win-win for both parties or for all parties, yes?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Paul, maybe I'll just ask you your thoughts on growth. In fact, if we rewind to maybe September around the Denver forum, you had talked a bit about kind of, I guess, casting a wider net in terms of commodity exposure, looking at other commodities. Is -- are you seeing the same opportunity set now where maybe you can focus your energy more maybe on the precious metals or the conventional space, the space that people kind of want you to be in or expect you to be in? Or are you still looking broadly at other commodities as well for your streaming royalty transaction?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : And on a -- so some of these numbers are maybe a little bit out of date now because -- well, Royal Gold has reported its fourth -- calendar fourth quarter, sorry. Neither Franco nor Wheaton has yet. So Royal Gold has got liquidity, available liquidity of about $1.2 billion as of December. Franco-Nevada as of third quarter at $1.8 billion. Wheaton had $2 billion as of third quarter. So that brings us, between the 3 companies represented here, it's about USD 5 billion in available liquidity, and that's an awful lot of new deals you guys could finance. I know you seem fairly friendly to each other, but is there a competitive tension between the companies at this point for new transactions? Bill, do you feel that competition sort of creeping up?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : That's an interesting question because my -- or an interesting point. My next question to Randy was going to be as your liquidity grows, do you look at capital returns to shareholders? Do you look at raising a dividend or, I mean, maybe a buyback? It doesn't make sense for the royalty streaming model given where you guys trade. But does it -- do you think more about a dividend at this point? Or maybe like Bill just said, maybe that's a problem that's going to solve itself in the near term? How are you thinking about the best use of that liquidity you have available?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Okay. This is not a question I had prepared for you guys. So anybody can answer this whenever something comes to mind. But one thing that we've heard, not just at the conference so far but probably through the fourth quarter earnings season, COVID definitely affected the exploration programs for a lot of mining companies. People were prioritizing production, maybe to the point we talked about earlier about affecting production, but that was certainly a priority. And maybe drilling or exploration was -- fell by the wayside or was less available because of travel restrictions. So a common thing I hear from CFOs or CEOs that get asked about potentially streaming is, well, I don't really know what my asset has yet. We haven't fully explored it. So is that something that would be a delay? Are people reluctant at this point to sign streaming transactions because maybe they have not completed as much exploration as they would have liked to at this point in their development cycle, if they're, say, constructing a new project? Is that something that you think we need to sort of work through before people are going to be comfortable signing streams? Or is there ways around that in the contract where you can share some of that upside or something like that?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : I guess it's that specific. Yes. It's a good point. If there's already drillers on the ground, maybe the drill programs are already still very well. Sorry, does anybody else want to comment?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Sometimes in the equity market, but it depends on the day, I think, yes. I'll circle back to the question of liquidity. And Paul, you have the at-the-market program, which I think both you and Wheaton have. Is that something that makes sense for you in the current climate? You have already good liquidity on the debt side. You're building up cash. Do you need an at-the-market? And the at-the-market that you have, the $300 million, you used about $20 million, $22 million of that for a transaction back in the fall. Is that a meaningful amount? Why add that part into your financing package? Why not just do the whole thing with debt?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : I do remember the last time you guys did a larger bought deal. I think I was a Franco-Nevada shareholder at the time in my previous life. And I think part of the pushback or criticism is that it's difficult to raise a large bought deal when we know a transaction is coming but we don't really know what that transaction is. So is that part of the motivation? Maybe you can put an ATM and that eliminates that sort of timing issue that was maybe the case with the bought deals. Is that fair to say?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Makes sense. I'm going to go back to Bill. I'm going to ask him a question about something you mentioned earlier, the difference between hitting single hits versus home runs. Is asset concentration or portfolio concentration something that you think about? Is there intentional avoidance to concentrate too much of your portfolio to a single asset or jurisdiction or counterparty or any of the above? And so it's a more diversified approach to what you're sort of trying to put together?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Is commodity exposure -- that will be a different issue, though. Obviously, you're not worried about concentration to gold or to certain commodities. Is that fair to say? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 02, 2021 / 2:30PM, RGLD.OQ - Royal Gold Inc at BMO Capital Markets Global Metals & Mining Conference (Virtual)

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : That makes sense. So I'll switch back to Paul. So we've been seeing in the base metal market very strong prices for copper, zinc. Obviously, the precious metals have been strong for a while now, gold and particularly silver. Miners are all earning strong free cash flows. So do we see a -- Paul, do you see a different shift from the traditional growth areas into new business areas as the miners are cash-flowing, as they maybe have other available financing options that you talked about earlier? Is there new business models or new forms of streaming deals that may be something for your future, do you think?

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : Sounds good. And I'll ask Randy the next one. We are seeing more entrants in the space. I think Bill maybe mentioned earlier some small-cap royalty streaming companies. More focus on the royalties I think we're seeing from the smaller entrants these days, buying packages of royalties from producing companies or whatnot. Do you see a shift in the market, in the availability of products, investment options for yourselves at your larger level? Do you have any temptation effort to move more into that royalty model? Or do you still think that there's enough opportunity in the streaming side? It just sort of feels like the trend has kind of shifted. I was just wondering if that's something that you're seeing at the larger level as well.

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : No, that's fair. Not new royalties, but royalties that are maybe becoming publicly available or available for purchase, I guess, would be a better way to phrase it, yes.

Question: Jackie Przybylowski - BMO Capital Markets Equity Research - Analyst : It looks like we're right out of time. Just before I let you guys go, I'm going to mention to the audience that if you missed it last night, you can catch on the replay. Randy Smallwood competes on CEO Jeopardy and raising money for very worthwhile charities along with colleagues, [Tom Palmer] and (inaudible). So please tune in if you missed that last night. It's worth a watch. And thank you Paul and Bill and Randy for joining us for this session. I appreciate your time. Thank you. And best of luck at the rest of the conference.