Royal Gold Inc Q3 FY2025 Earnings Call

Hello all, and thank you for joining us on today's Royal Gold 2025 Third Quarter Conference Call. My name is Drew, and I'll be your operator on the call today. With that, it's my pleasure to hand over to Alistair Baker to begin. Please go ahead when you're ready.

Thank you, operator. Good morning, and welcome to our discussion of Royal Gold's Third Quarter 2025 results. This event is being webcast live, and a replay of this call will be available on our website. Speaking on the call today are Bill Heissenbuttel, President and CEO; Paul Libner, Senior Vice President and CFO; and Martin Raffield, Senior Vice President of Operations. Other members of the management team are also available for questions. During today's call, we will make forward-looking statements, including statements about our projections and expectations for the future. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties are discussed in yesterday's press release and our filings with the SEC. We will also refer to certain non-GAAP financial measures, including adjusted net income, adjusted net income per share, adjusted EBITDA, and cash G&A. 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 the quarter and recent events. Martin will provide portfolio commentary, and Paul will give 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.

Good morning, and thank you for joining the call. I'll begin on Slide 4. We had another quarter of very strong results, and we set new records for revenue and cash flow. Our portfolio performed well and allowed us to benefit directly from materially stronger gold and silver prices. Earnings for the quarter were $127 million or $1.92 per share, and after adjusting for nonrecurring costs related to the Sandstorm and Horizon transactions, they were a record $136 million or $2.06 per share. Gold remained the largest contributor to revenue for the quarter at about 78% of the total, and a strong gold price, combined with our low and stable cash G&A allowed us to maintain an adjusted EBITDA margin of over 80% for the quarter. We continued our focus on shareholder returns and paid our quarterly dividend of $0.45 per share. We added a strong operator to our portfolio in First Quantum with the $1 billion gold stream transaction on the concession. And post quarter end, we received our first gold delivery in early October. We are pleased to add yet another large, long-life, and cash-flowing asset to the portfolio. Also post quarter end, we completed the acquisition of Sandstorm Gold and Horizon Copper on October 20. The strategic rationale for the combination of these companies clearly resonated with our shareholders, and we were pleased with the overwhelming shareholder support for the transactions. Not only have we added a series of quality producing and development assets to the portfolio in recent months, but we also saw very positive news within the pre-existing portfolio with the life of mine extension at Mount Milligan and the Fourmile exploration update, both of which will be covered by Martin later in our presentation. And finally, in October, we received the first tranche of gold as partial consideration for the Mount Milligan cost support agreement. This agreement from early 2024 was a key step for Centerra to begin work on the mine life extension project, and we are pleased to see the initial results of that project study. This is a win-win for both Royal Gold and Centerra shareholders. I'll now turn the call over to Martin to provide a portfolio update.

Thanks, Bill. Turning to Slide 5. Overall revenue for the third quarter was a record $252 million with a volume of 72,900 GEOs. Royalty revenue was up about 41% from the prior year quarter to $86 million. We saw very strong revenue from Peñasquito, the Cortez CC Zone, LaRonde Zone 5, and Voisey's Bay, which was partially offset by weaker revenue from the Cortez Legacy Zone. Revenue from our stream segment was $166 million, up about 25% from last year, with increased sales from Andacollo, Rainy River, Mount Milligan, Khoemacau, and Wassa, partially offset by lower sales from Xavantina. Turning to Slide 6. We saw some material news at Mount Milligan and Cortez in the quarter. At Mount Milligan, Centerra reported the results of the mine life extension project. They are expecting an increase in the mine life from 2036 to 2045, and there is potential to extend that further with expansion of the current mineral resource, future raises on the planned new tailings facility, and other mine life extension opportunities. Centerra has reported encouraging support from the government, and Mount Milligan was given fast track status by the province of BC in line with its commitments to streamlining permitting and regulatory processes for critical mineral projects. Mount Milligan is Royal Gold's largest contributor in terms of revenue, and the mine life extension adds significant value to our largest asset. At Cortez, Barrick provided an update on exploration and development plans for Fourmile, which is described as a multigenerational project. Barrick has completed a preliminary economic assessment that indicates the potential to produce 600,000 to 750,000 ounces annually over a 25-year mine life. Barrick is undertaking a multiyear exploration program, and they expect to set the mine up for initial test stoping shortly after underground development has been put in place by 2029. Barrick believes there is potential to increase the production rates further as confidence in the ore body and geotechnical modeling progresses. The royalties we acquired in 2022 at Cortez provide full coverage of Fourmile at a rate equivalent to an approximate 1.6% gross royalty. At Kansanshi, First Quantum announced last week that the S3 expansion is complete and is transitioning to operations. First Quantum reported that throughput and recoveries at the S3 expansion are ramping up faster than expected, and copper production in the fourth quarter of 2025 is expected to exceed third quarter levels. We received the first gold delivery under our new stream in early October. We've now reached the regular cadence for monthly deliveries, and we're expecting total deliveries and sales of approximately 7,500 ounces in 2025. This is about 5,000 ounces less in 2025 than our estimate when we announced the transaction, and this difference is related to the timing of the initial delivery and is not related to production shortfalls. We also had some notable updates at a handful of our smaller assets. At Rainy River, New Gold reported strong production for the quarter due to processing of higher-grade ore in the open pit. Underground development is also advancing well, and they are expecting 2025 gold production to be above the midpoint of the 265,000 to 295,000-ounce guidance range. At Back River, B2Gold announced that commercial production was achieved on October 2 and reiterated near- and long-term gold production estimates. At Khoemacau, MMG confirmed the timing for the expansion project, and we expect to complete the feasibility study by the end of 2025 and produce the first concentrate in 2028. At Cactus, Arizona Sonoran reported PFS results, which indicate a 22-year mine life with an average copper production of 198 million pounds per year and 226 million pounds per year in the first 10 years. Arizona Sonoran expects to complete a feasibility study in the second half of next year, leading to a final investment decision as early as the fourth quarter of 2026 and first production of copper cathodes in the second half of 2029. At Red Chris, Newmont reported that it aims to deliver a development proposal for the block cave expansion to its Board toward the middle of 2026. In September, the government of Canada recognized the Red Chris expansion as a project of national importance, granting a priority status under the Major Projects Office Fast Track initiative. And at Xavantina, Ero reported an increase in reserves and resources driven by plans to market a high-grade gold concentrate over the next 12 to 18 months, as well as exploration efforts that continue to extend the known limits of mineralization. And finally, while Sandstorm assets weren't part of our portfolio until quarter end, there were a couple of developments at the larger assets that are worth noting. At MARA, Glencore submitted the RIGI application to the government of Argentina in August, which Glencore describes as a significant step towards development. And at Platreef, Ivanhoe announced the first feed of ore into the Phase 1 concentrator last week, and the first concentrate is expected in mid- to late November. We visited the site in October, and we're impressed with how Ivanhoe has advanced the project and is preparing to transition to operations. I'll now turn the call over to Paul.

Thanks, Martin. I will turn to Slide 7 and give an overview of the financial results for the quarter. For the discussion of Slide 7 and 8, I'll be comparing the quarter ended September 30, 2025, to the prior year quarter. Revenue for the quarter was up strongly by 30% to $252 million, which was another record for the company. Metal prices were a primary driver of the revenue increase, with gold up 40%, silver up 34%, and copper up 6% over the prior year. Gold remains our dominant revenue driver, making up 78% of our total revenue for the quarter, followed by silver at 12% and copper at 7%. Royal Gold has the highest gold revenue percentage when compared to our large-cap peers in the royalty and streaming sector. Turning to Slide 8, I'll provide more detail on certain financial items for the quarter. G&A expense was $10.2 million and was relatively unchanged. Excluding noncash stock compensation expense, our cash G&A has dropped to less than 3% of revenue for the quarter, which shows the efficiency of our business model. Our DD&A expense decreased to $33 million from $36 million. The lower overall depletion expense was primarily due to lower depletion rates in our stream segment as a result of reserve increases. The largest reserve increase was at Mount Milligan following the life of mine extension, which dropped the DD&A rate to $220 per ounce from $340 per ounce. The decreases in stream depletion rates were partially offset by higher production at Voisey's Bay compared to the prior year. On a unit basis, this expense was $451 per GEO for the quarter compared to $462 per GEO. We incurred $13 million of acquisition-related costs this quarter related to the Sandstorm and Horizon acquisitions. Acquisition-related costs are attributable to financial advisory, legal, accounting, tax, and consulting services. I'll provide some additional accounting and financial commentary on the Sandstorm and Horizon acquisitions in a moment. Interest and other expenses increased during the quarter to $8.6 million, due primarily to higher average amounts outstanding under the revolving credit facility compared to the previous year. Tax expense for the quarter was $29 million compared to $22 million, and our effective tax rate for the quarter was 17.9%. Net income for the quarter increased significantly over the prior year to $127 million or $1.92 per share. The increase in net income was primarily due to higher revenue, offset by the Sandstorm and Horizon acquisition-related costs and higher income tax and interest expense. After adjusting for the acquisition-related costs, adjusted net income was a record $136 million or $2.06 per share. Our operating cash flow this quarter was also a record at $174 million, up significantly from $137 million in the prior period. The increase in the current quarter was primarily due to higher net cash proceeds received from our stream and royalty interest. With respect to the outlook for the rest of the year, we are maintaining our 2025 guidance ranges for metal sales, DD&A, and the effective tax rate. Note that these guidance ranges were provided in March of 2025. And when we refer to our expectations for the remainder of the year, we are excluding any contributions or impacts from the Kansanshi Stream acquisition, deferred gold consideration from the Mount Milligan cost support agreement, and the Sandstorm and Horizon acquisitions. I'll now provide a few additional comments on the Sandstorm and Horizon accounting treatment and financial results. First, we currently are in the process of finalizing the accounting treatment for both transactions. However, we anticipate both transactions to qualify as business combinations under U.S. GAAP. As a result, approximately $13 million in acquisition-related costs were expensed during the third quarter. We also expect additional deal-related closing costs to be expensed during the fourth quarter. And second, Sandstorm and Horizon will not be publishing third quarter results given the timing of the transaction closing. However, for the third quarter, Sandstorm recognized nearly $58 million of revenue and $37 million of operating cash flow, while Horizon recognized $6 million of revenue and $3 million of operating cash flow. I will point out that these figures are unaudited and were prepared in accordance with IFRS accounting standards, so they are not directly comparable to Royal Gold's financial information prepared in accordance with U.S. GAAP, but they should help the market understand the relative contributions of each company in the quarter. We will provide consolidated results from the transaction closing date within our next quarterly release and audited financial results. I will end on Slide 9 and summarize our financial position. As disclosed in August, we drew $825 million on our $1.4 billion revolving credit facility to help fund the Kansanshi acquisition. We repaid $50 million of that borrowing in September and ended the quarter with $775 million drawn. That left us with approximately $813 million of liquidity between the undrawn and available amounts on the revolver and $188 million of working capital as of September 30. We drew an additional $450 million on the credit facility on October 10 for the closing of the Sandstorm and Horizon transactions, and we currently have $1.225 billion drawn, leaving $175 million undrawn and available. Further, we anticipate making a $75 million repayment towards the revolver balance on November 10. The current all-in borrowing rate on the credit facility is approximately 5.3%. In keeping with our long-standing practice, we intend to pay down our outstanding debt from future cash flows, and we expect to repay the outstanding balance around mid-2027 based on current metal prices, absent further acquisitions. In terms of additional liquidity, after the quarter end, we received the first tranche of gold as part of the deferred gold consideration for the Mount Milligan cost support agreement. In keeping with our previous commentary, we sold those ounces shortly after receipt and realized proceeds of $44 million. Recall that the delivery and sale of these ounces are not revenue and will not be reflected in our calculation of GEOs. The next two tranches of gold to be delivered by Centerra are also tied to production at the Greenstone mine. They are payable upon production of 500,000 ounces and 700,000 ounces of gold. Based on projections by Equinox Gold, these hurdles are expected to be met in the second half of 2026 and the first half of 2027, respectively. With respect to further financial commitments, we have $100 million of funding outstanding for the warrants acquisition. We expect to fund the remaining commitment in two $50 million tranches, with the first tranche expected in the fourth quarter of 2025 and the second in May of 2026. That concludes my comments on our financial performance for the quarter, and I will now turn the call back to Bill for closing comments.

Thanks, Paul. I'd like to welcome several new colleagues to Royal Gold, including those who have recently joined us from Sandstorm. These transactions significantly increased the size of our business, and we are pleased to add some very capable individuals to our team with institutional knowledge of the Sandstorm and Horizon assets, which will help us as we manage this much larger portfolio. And finally, I would like to address the transformative quarter we just completed at Royal Gold. Over the past few years, we have heard criticisms about our revenue and NAV concentration, our limited growth profile, and the shorter duration of our portfolio. I believe we have answered these questions with the transactions we have closed this year and the developments in the portfolio, and I would like to highlight these three areas. We have one of, if not the most, diversified portfolios by revenue and net asset value in our sector. We have added Mara, Hod Maden, Platreef, and Oyu Tolgoi growth potential to our previous growth prospects at Great Bear, Red Chris, and Khoemacau. And we have increased the duration of our portfolio with the Mount Milligan mine life extension, the Fourmile upside potential, Kansanshi, and the longer-dated growth from Sandstorm and Horizon. These events combined position Royal Gold as a premier company in our sector with a well-diversified gold-focused portfolio with organic growth potential. We'll be working over the next few months to make sure the market understands the potential value that exists in the expanded Royal Gold portfolio. Operator, that concludes our prepared remarks. I'll now open the line for questions.

Our first question comes from Cosmos Chiu from CIBC.

Maybe my first question is on the Kansanshi stream, the new stream you have. As you mentioned, 5,000 ounces is deferred, I guess, if that's a word for it, given the need to initiate delivery mechanisms for the new contract. I guess my question is two parts. Number one, could you maybe talk a little bit more about what that means in terms of setting up or initiating these delivery mechanisms? Is it computer systems? Is it the way you report? Or is it actual delivery? And then number two, in terms of the 5,000 ounces that you thought you might get in 2025, is that going to come in, in 2026 then? And is that going to be sort of in addition to what you would expect it in 2026 anyway?

Yes, Cosmos, it's Bill. Thanks for the question. I’ll take this one, and then the others can chime in. There’s really nothing complicated about the system or its setup. To be honest, we had just announced Kansanshi, and we held our earnings call shortly after. When you assess a model, you consider production and the expected ounces. However, we failed to incorporate the delivery timeline, which indicated that the ounces would start arriving in October. This was simply an oversight on our end regarding when we anticipated receiving the ounces. It does not indicate a production shortfall, and there is nothing wrong with the agreement as it’s structured. We just adjusted our model to reflect that some of the expected ounces will be delivered next year.

I guess mathematically, if I were to take your 12,500 ounces that you had expected, that would have been from August to December in 2025. If I were to gross it up for a full year in 2026, that would be 30,000 ounces. And then if that's the case, can I just add the additional 5,000 ounces to it in 2026? Like is that the type of how I should think about it? Or is that not the case?

Well, no, what would happen is when you get to the end of 2026, the ounces that are derived from production in December, for example, are going to be delivered in 2027. So it's not as though you take 30,000 ounces and add a bunch of some new ounces. There's just a delay like there is in our other concentrate operations like Andacollo and Milligan.

Understood. Okay. Great. Maybe switching gears a little bit. Bill, I see that you now have $1.225 billion of debt on your balance sheet. I guess my question is, how comfortable are you with that level of debt? I know you do say that under current metal prices, you can actually repay everything by mid-2027, absent of any further acquisitions. But how realistic is it to assume there won't be any other acquisitions?

I mean you never know in this business, right? I mean if you had told me on January 1 of this year that we were going to make about $5 billion of investments during 2025, I wouldn't have believed you. Certainly, we have gone years where there haven't been many investments. And I think 2024 is probably an example of it. So it is possible that we don't find anything we like, and we just continue to pay down the debt. As to the first part of your question, the debt level, I'm very comfortable with. And I think what we need to show as we move forward through 2026 is what is the running trailing 12-month EBITDA of all these combined companies. and with Kansanshi. And your pro forma leverage is going to be, I don't know, between 1 and 1.5 on a net debt-to-EBITDA basis. And that's extremely comfortable. I'm not concerned at all.

Great. And then maybe one last question. Congratulations on the closing of the deal with Sandstorm Gold and Horizon Copper. Despite simplifying the structure, you will still hold a 30% joint venture interest in Hamadan. Historically, Royal Gold has not focused on holding joint venture partnerships for the long term. I'm not sure if this is a question for SSR Mining, but how do you view the potential for that 30% joint venture interest to convert into a more conventional royalty interest?

Yes, Cosmos, I think we've been pretty consistent saying that our goal is to not be a joint venture partner. It's not what we do. And it is probably very high on our priority list of trying to find a way to convert it into something that is more traditional for our business.

What are some of the key sort of not hurdles, but discussion points then? And when could we expect that to consummate?

I can give you a timeline. You can't I can't give you a timeline. But as you go through this, when you're taking exposure to cost overruns and operating expenses and you want to convert it into something that doesn't have that exposure, there's a value discussion to have with whomever you sell it to and then what gold price do you use. There's a big difference between current gold prices and what you would call long-term consensus prices. So those are all the typical topics that will come up when it comes down to negotiating something.

Our next question today comes from Josh Wolfson from RBC.

I noticed in the text and also in some of Bill's commentary, there was some disclosure about working over the next couple of months to ensure the market understands the business following the deals that were completed. I'm just wondering if you can provide some more insights on what this means given both of these transactions were press released and the information is out there in terms of some of the details.

Yes. When I talk about putting in the effort to ensure everyone understands what the companies together with Kansanshi represent, I mean spending as much time as possible engaging with investors and analysts. A lot has occurred in our company over the past six months, and we need to help people focus on the specifics, illustrating our growth prospects and consistently conveying that message. I genuinely believe there is a valuation gap, and I want to share our story with people, explaining why we believe the Samsung Horizon deal was advantageous and why Kansanshi is a good fit. At the same time, I want to be available to hear any additional concerns that may exist. As I mentioned earlier, I think we have addressed the key issues that were repeatedly raised, but there might be other concerns out there. So, when I refer to working hard to ensure the market comprehends our situation, I'm talking about being in front of people, sharing our narrative, and listening to their feedback.

When it comes to disclosures, the company historically issued and thinking about guidance, both near term and long term, I understand the company's historical views on this. I'm just wondering if there's any refreshed perspectives. And then also when we think about 2026, when will the company look to provide that insight? Is it still going to be in April? Or can we expect something more prompt earlier in the year?

Yes. We are planning an Investor Day for late March, at which point we expect to discuss guidance for 2026. As for long-term guidance, our stance remains unchanged. We don’t own these properties and aren't close enough to predict what will happen in three years, so we maintain some reluctance. In the past, we've looked at each asset individually and shared the operators' insights to forecast on a case-by-case basis. However, I don't anticipate us providing a consolidated three- or five-year guidance. Please stay tuned for our Investor Day early next year.

Got it. And then there was a couple of financial items that I just wanted to drill down on. Specifically, at least on the income statement for cost items, minority interest kind of jumped up this quarter and then LZ 5 on the asset list was quite high in terms of revenues. Is there any insight you can provide there as well as the fourth quarter expenses for the Sandstorm deal?

Paul, can I turn the minority interest question to you?

Yes. The minority interest was a bit higher than usual this quarter. To provide some context, we are a general partner in a partnership that has a small royalty interest in the pipeline and Crossroads deposit at Cortez. We also handle some administrative functions for certain partners. A few of these partners opted to receive their royalty proceeds in kind, specifically in gold. This quarter, we sold some of those gold ounces for one partner, which had a minimal book value compared to the market price at the time of sale. The proceeds from these sales were recorded under interest and other income. However, as the partnership is fully consolidated under U.S. GAAP, that gain was excluded from other comprehensive income and the minority interest before calculating EPS. Ultimately, there was no impact on our results.

And then, sorry, just the deal expenses for the fourth quarter, if there's any insight and then also LaRonde and 5.

Yes, I'm happy to take the deal expenses. Obviously, yes, we're still going through the accounting of those expenses, you can appreciate. But certainly, from the period October 1 through closing, additional, again, legal advisory service type fees, still accounting for all those, but we will have some of those charges come through in Q4 as well. And again, those will be a nonrecurring kind of one-time in nature.

And I can take the Zone 5 question, if you like, Bill. So Josh, Agnico identified a mining area in Q3 that was mistakenly excluded from our partial royalty area, and that exclusion goes back to November 2022. It's quite easy to see why it happened. The various blocks outside of the zone that are plunging into the royalty area. And the area in question was actually accessed from one of the LaRonde mine shafts rather than the Zone 5 decline. They've made that payment up in Q3 and completely covered the November 2022 through June 2025 shortfall.

Okay. So sort of a true-up, I guess you could say, for historical production.

Exactly right.

Our next question comes from Brian MacArthur from Raymond James.

A lot of them have dealt with. But can I just ask on Fourmile. You've been very kind and given us the 1.6% equivalent. But is that a combination of GSR1, GSR2, GSR3, NVR 1? Like is this going to be variable? I just can't remember where all the different pieces cover it? Or is that 1.6% a pretty good thing to use on an annual basis? Or are there going to be years it's 1% and years it's 3%.

No, that's a pretty good number to use. The $1.6 billion is the Rio royalty, and it's part of the Idaho royalty that we acquired towards the end of 2022. So it’s completely separate from all the legacy items you have known for years.

Perfect. So it's that simple $1.6 royalty?

Yes.

Excellent. And just so I can clarify my own mind back to Cosmos' question on Kansanshi. So this 5,000 ounces, it's just an NPV problem, if I want to put it that way, of being delayed a quarter. It's not like those ounces are gone forever just because of the true-up date of the transaction or something. It's just purely a concentrate delivery and all the ounces are the same in the end. Is that right?

All the ounces are the same. It's just a timing issue.

Our next question comes from Lawson Winder from Bank of America Securities.

And I would like to ask just a couple of things. So first of all, on capital returns, we're approaching the time of year where Royal Gold typically considers the next dividend increase. When you think about everything that's happened this year, do you think about there being an opportunity for a bigger-than-usual increase because of the larger portfolio? Or could it just be a smaller increase given the heavy capital spending so far this year? And then sort of related to that, what are your thoughts on share buybacks? And I just kind of occurred to me when you were speaking, Bill, in response to one of the other questions about the valuation gap. I mean, do you see an opportunity to utilize a share buyback to help close that?

Thank you, Lawson. Regarding the dividend, you're correct that our Board will review it in November. I'm not going to speculate on whether it will be high or low. However, during our discussions about Sandstorm, Horizon, and Kansanshi, the Board expressed concerns about the impact of issuing 18 to 19 million shares and taking on debt. We have a long-standing commitment to increasing dividends, and it is important to us to maintain that tradition. This decision rests with the Board, and we will return to the market in a few weeks. Despite having $1.225 billion in debt, we managed to increase the dividend even after spending over $1 billion in capital expenditures in 2015. Now, regarding share buybacks, I think we should take some time to assess the situation. As we work on our market presentation, I want to evaluate how our valuation evolves. Although we currently trade at a premium, which makes justifying share buybacks challenging, I’m interested in seeing how our messaging impacts our value. We also want to prioritize repaying our debt, so there will be a necessity for capital allocation from the cash flow generated over the coming year to support that as well.

Great. Thinking about 2026, very helpful to have that Investor Day kind of in the back of my mind. But then just thinking about the portfolio, so the Kansanshi Stream and Sandstorm, it's changed very substantially. As you look to 2026, conceptually, would you expect a material increase in GEOs next year versus 2025? And then also thinking about when we can get real numbers on those, would we expect the 2026 guidance to then come out with that Investor Day in March? Or could we possibly get something a little earlier here, just given all the moving parts?

No, I think you'll hear about our expectations for 2026 at the Investor Day. It's important to note that our producing assets have only been in our portfolio for 2.5 weeks. Making predictions for next year right now wouldn't be wise. At Investor Day, we'll discuss guidance and the implications of our new portfolio for the upcoming year.

Very helpful. And then just finally, there was an update from Arrow yesterday on Xavantina, this concept of processing stockpiles. Would Royal Gold benefit from that in any way?

Yes. I mean, it's gold production. We expect it will flow through to our interest.

Our next question comes from Tanya Jakusconek from Scotiabank.

Just wanted to finish up just on the Sandstorm transaction. Bill, you mentioned that we'll take another charge in Q4. You've integrating assets people at this point. Is it fair to assume that as we look at '26 besides looking at obviously the depreciation and what the guidance on that basis, all of the noise will be out. So all of the unusual items are going to be closed in 2025, have the people and everything is finalized so 2026 will be to look at.

Yes. Tanya, I have emphasized to the team that I want all nonrecurring items related to this transaction resolved by the end of this year. We need to start establishing a consistent record of quarter-over-quarter recurring business so that we can demonstrate the revenue and cash flow we're generating. My goal is to avoid having a lot of expenses carried over into the first quarter. However, depending on the invoicing we receive, we may not completely achieve this, but I am confident that we can address the remaining transaction expenses by the fourth quarter of this year.

Okay. So that would be good. So like 2026 will be what this would look like with all of these pieces in place.

Yes.

Okay. that's good. And maybe I could go on to Paul. This is an accounting question from a non-accountant. So maybe I just want to make sure that I count correctly the Mount Milligan cost support agreement of that 11,000 ounces, that $44 million that came in on October 3. So nothing through the income statement. Where will it show up in the cash flow? Where is that going to be put exactly? So I have it in the exact place.

Tanya, thanks for the question. Yes, so we've talked on a few calls and had some commentary even today just on that treatment. But yes, the Milligan cost per agreement certainly was a unique transaction for us. But as even Bill mentioned today, certainly, it's a win-win for both companies. But you may recall that the consideration that we received for that additional support that we're going to provide was in the form of cash and then that deferred gold and then the free cash flow interest at Milligan as well. And so I think the easiest way to think about this on how it will impact the financials is all that consideration that we received as part of the agreement will eventually all be recognized as that deferred support liability that's on the balance sheet currently at $25 million, because we have that obligation to provide additional cash payments under the agreement in exchange for that consideration that Milligan or Centerra provided. So with the gold that we received in early October, that deferred support liability is going to increase by the fair value of those ounces that we received and sold. Again, we sell those ounces immediately or shortly after we receive them. So you're not going to see much, if any, likely not much in the form of a P&L impact. But again, as a reminder, when we receive and sell those ounces, they're not part of our sales guidance here in 2025. But even as I mentioned in the prepared remarks that we do anticipate receiving the next delivery in 2026. So you won't see those ounces show up in some of that guidance that we provide in 2026 as well.

I know it's not part of your revenue. I know it's not part of your GEO ounces. Does it go anywhere through the cash flow statement? Or just the balance sheet that I think about.

Just balance sheet.

I just wanted to clarify the balance sheet. Could someone from the team, perhaps Bill, discuss the two significant deals you've completed? I quickly reviewed your available liquidity after accounting for the Sandstorm deal and the $100 million payment that needs to be made. It looks like you have approximately $300 million to $400 million in available liquidity. Are you still pursuing transactions in this market, or have you decided to pause for now?

No, we're still looking. I don't think we'll ever stop looking. There are still opportunities in the market. The ones we're seeing are not of the same scale as the ones we just completed like Kansanshi. One interesting aspect on the BD side is that with the fluctuation in the gold price, it's more challenging to finalize agreements since it's difficult for both the seller and the purchaser to agree on a price. I don't think anyone in our sector is using $4,000 an ounce for valuations. However, at the same time, I'm not sure the seller will accept a long-term consensus price of $3,000. This situation might slow things down a bit. But we're not closed off; we won't just remain idle until we repay our debt. We're still actively pursuing opportunities.

And what would you be comfortable size-wise? Would it be that $100 million to $300 million range?

Yes. I mean that's what we normally see in the market. I think at this point, I would say if we did do something, it would have to be something we really loved because you have a choice, we can continue to pay down the debt or we can make new investments, and I'm happy doing both. But the investment that we might make, I think, would have to be something we found so attractive, we just could not pass it on.

So would it be fair to assume, Bill, that if anything from your existing portfolio became available, such as parts of projects you already have an interest in, that would be considered a bolt-on? Is that what you're suggesting compared to entering new jurisdictions?

No, I mean not only bolt-on acquisitions. If it's part of our existing portfolio, great, we will consider it. If it's a completely new company or project, we will look at that too. If it's appealing, we may decide to make that investment. We just have to manage the situation, as I believe people want to see the debt decrease, although I am comfortable with it. We need to find a balance.

Yes. Fair enough. It's nice to see the $4,000 gold price. We just don't know how long it stays, right?

Our next question comes from Derick Ma from TD Cowen.

I just had a quick accounting question. Is there going to be a bump in the cost base of some of these former Sandstorm assets, i.e., will depreciation for the assets be higher than they were when they were in standalone and Sandstorm?

Yes, as I mentioned in our prepared remarks, we are currently working through the accounting related to the purchase price allocation, which will include the distribution among the various interests at Sandstorm and will affect the depletion rate. We're still in the process of reviewing everything. I believe we will be able to provide more details in our next update call.

Our final question comes from Carey MacRury from Canaccord.

So based on Barrick's 4-mile update, it looks like the mineralization potentially trending maybe off your royalty ground. Is that the case? Or do you see it as all being on your royalty ground?

Martin, can I push that one to you?

Yes. On our royalty ground, Carey, we don't see any of the material that they're identifying at the moment as being off our ground.

Okay. Great. And then I know inclusion in the S&P 500 has always been an elusive target. Do you see with these transactions that that's more likely now? Or have the goalposts moved on that?

I think we're still a bit of ways. Last time we checked, I think that the minimum was like $20.5 billion, and we would still have a ways to go to achieve that one.

That concludes the Q&A portion of today's call. I'll now hand back over to Bill for some closing comments.

Well, thanks, everyone, for taking the time to join us today and for all the good questions. We appreciate your interest in Royal Gold. We look forward to updating you on our progress in the new year. Take care.

Thank you all for joining. That concludes today's call. You may now disconnect your lines.