Royal Gold Inc (NASDAQ: RGLD) Q3 2020 Earnings Call Transcript

Royal Gold Inc (RGLD) Q3 2020 earnings call dated May 07, 2020

Corporate Participants:

Alistair Baker — Director of Business Development

William H. Heissenbuttel — President and Chief Executive Officer

Mark E. Isto — Executive Vice President and Chief Operating Officer

Paul Libner — Chief Financial Officer and Treasurer

Analysts:

Josh Wolfson — RBC Capital Markets — Analyst

Brian MacArthur — Raymond James — Analyst

Adam Graf — B. Riley FBR — Analyst

Tanya Jakusconek — Scotia Bank — Analyst

Presentation:

Operator

Good day, everyone, and welcome to the Royal Gold 2020 Third Quarter Conference Call. [Operator Instructions] [Operator Instructions]

At this time, I’d like to turn the conference call over to Alistair Baker, Vice President of Investor Relations and Business Development. Sir, please go ahead.

Alistair Baker — Director of Business Development

Thank you, operator. Good morning, and welcome to our discussion of Royal Gold’s third quarter 2020 results. This event is being webcast live, and you will be able to access a replay of this call on our website. Participating on the call today are Bill Heissenbuttel, President and CEO; Paul Libner, CFO and Treasurer; Mark Isto, Executive Vice President and COO; Dan Breeze, Vice President, Corporate Development of RGAG; and Randy Shefman, General Counsel. This discussion falls under the safe harbor provision of the Private Securities Litigation Reform Act. A discussion of the company’s current risks and uncertainties is included in the safe harbor and cautionary statement in today’s press release and slide presentation and is presented in greater detail in our filings with the SEC. Bill will give you an overview of the quarter, followed by Mark with an update on our operating results. Paul will then provide a financial update, and Bill will wrap up the call with some closing comments. We’ll then open the lines for a Q&A session.

Now I will turn the call over to Bill.

William H. Heissenbuttel — President and Chief Executive Officer

Good morning, and thank you for joining the call. Before beginning, I would like to note that all Royal Gold participants on this call are doing so remotely. And I ask your understanding if our responses to subsequent questions are perhaps less coordinated than usual. I’ll begin on slide four. Despite the current situation with COVID-19, which I’ll touch on in a minute, this was another solid quarter for Royal Gold. We had a 24% increase in revenue over last year’s quarter to set a new record for quarterly revenue of $136 million. Although gold equivalent ounce volume of 86,200 was up relative to the prior year quarter, the main driver of the record revenue was a significantly higher realized oil price. Earnings for the quarter were a healthy $38.6 million or $0.59 per share, which were $0.68 per share after adding back a $0.05 noncash mark-to-market loss on our equity securities and a onetime noncash charge of $0.04 related to noncash employee stock compensation. Paul will go into more detail on both of these items in his remarks. We saw strong operating cash flow of $99.7 million, which allowed us to make the second advance of $22 million at Khoemacau, pay our quarterly dividend at the new higher rate of $1.12 per share per calendar year and make a further payment on our revolving credit facility of $30 million.

We paid down the balance on our revolving credit facility to $105 million and with a combination of $101 million of working capital and $895 million of revolver capacity, we maintained approximately $1 billion of liquidity for new business opportunities. Turning to the effects of COVID-19. Our employees have been working remotely very successfully for almost two months. And I want to recognize our team’s efforts in adapting so well to the unusual challenges we face in this environment. With respect to our operations, our large, diversified and gold-focused portfolio has helped mitigate the impact to Royal Gold of many of the operational suspensions we have seen across the industry. Only three of our principal properties have publicly announced impacts of varying degrees from the virus. And two of these, Mount Milligan and Rainy River continue to operate and are returning to normal production levels. Only Penasquito remains suspended due to a nationwide shutdown decreed by the Mexican government. The remainder of the interruptions were at smaller royalty assets in our portfolio. Obviously, we do not know how long the situation will continue and whether new suspensions will arise or if suspensions will be reinstated. So it is unclear what the long-term impact may be.

Because the near-term business environment is unclear, we decided to draw $200 million on our revolving credit facility after the end of the quarter as a precautionary measure in order to ensure sufficient liquidity to meet our funding commitments for the foreseeable future. This advance was done out of an abundance of caution and not for any specific purpose. We remain committed to reducing our debt levels, and we’ll manage the revolver balance as the business environment becomes clear. That said, we recognize a significant impact the COVID-19 pandemic is having in the communities where we live and work, and we have made donations to charities in Colorado, Toronto, Vancouver and Lucerne to help address a variety of needs, and we increased our ongoing community support of the Tetlin tribe at the Peak Gold joint venture as well. Our team is pleased to have made an impact in this time of significant need and urgency.

With that, I’ll turn the call over to Mark for a discussion of Khoemacau and a few other notable properties.

Mark E. Isto — Executive Vice President and Chief Operating Officer

Thanks, Bill. On slide five, I’d like to start with an update of Khoemacau project in Botswana, currently under development by the Khoemacau Copper Mining, or KCM. Construction continues to advance well. Overall, project construction completion reached approximately 43% at the end of March quarter, with 80% of the capital committed. We made our third contribution to the advanced stream payment on April three of $47.9 million, and we’ve now advanced approximately $136 million towards the project. The photo on the slide shows an aerial view of Zone five taken in April, where activity is evident across the site. Underground development was initiated in early February and saw four of the five declines located in the Central and North boxcuts advancing by end of the quarter. While the fifth portal in the south boxcut was initiated in early April. Turning to slide six. I selected a few progress photos of the central boxcut, which is the most advanced of the three box cuts. The photo on the left from early February shows the access ramp down to the portal face when handover to the mining contractor Barminco occurred. The photo on the right shows a close up of the portal face marked off for drilling and blasting.

Turning to slide seven. You can see progress on the central boxcut portals on the left, and the photo on the right shows ventilation fan installations in the same portals. A similar sequence of activity is occurring at each of the south and north boxcuts. Good progress occurred elsewhere on the project during the quarter. However, many activities were curtailed starting on April two due to the COVID-19-related travel restrictions imposed by the Botswana government. Although six months state of emergency has been declared by the government of Botswana to help prevent the spread of COVID-19, mining has been declared an essential service and construction of mining activities at the site are continuing with mine development currently at planned rates, but construction at reduced scale. KCM is evaluating risk to the project schedule and has not advised of any changes to the mid-year 2021 date for first concentrate shipment, although this is dependent on evolution of the global COVID pandemic. Turning to slide eight, I’d like to discuss some recent developments at several of our other key properties, starting with Mount Milligan and Rainy River, both of which delivered new life-of-mine plans this quarter. Starting with Mount Milligan, Centerra filed an updated 43-101 technical report on March 26, supporting an update reserve and new life-of-mine plan that included changed metallurgical recoveries, operating costs and an updated resource model.

I’ll reference you to our press release of the same date for details, but the main impacts of this new plan to Royal Gold are a shorter mine life based on lower proven and probable reserves, but higher near-term metal production due to the mining of higher grade material. Centerra estimates a nine year mine life with average payable gold production of 161,000 ounces per year and average copper production of 81.7 million pounds per year. While this is a material reduction in reserve life, we do not need to take an impairment in the value of our stream interest. However, the depletion rates of our interest have increased to $764 per ounce of gold and $1.48 per pound of copper. Mount Milligan remains a significant asset for us, and we’re pleased that the operations are expected to continue with healthy cash flow at current metal prices. We understand that Centerra is working on several initiatives to reduce operating costs, and we hope to see some of the remaining resource material move back into reserves in the next few years and extend mine life. Centerra also reported last week that recent throughput reductions caused by COVID-19 considerations will not have a material effect on calendar 2020 production, and annual guidance remains unchanged.

Turning to Rainy River, New Gold announced the results of an updated life-of-mine plan for Rainy River on February 13, and they filed the corresponding 43-101 technical report on March 27. We issued a press release on February 13 with the details of the new plan. The main impact of the new plan to Royal Gold is a shorter mine life at a higher average gold grade, leading to higher annual gold production. New Gold’s mine plan is focused on optimizing cash flow and considers mining from a smaller, higher grade open pit and a smaller, more selective underground operation. New Gold estimates that production from this new plan will average 289,000 gold equivalent ounces per year for the calendar 2020 to 2028 period, and stated that there may be potential increases to the mine life beyond calendar 2028, depending on gold price and exploration success. We do not need to take an impairment in the value of our stream interest at Rainy River. However, depletion rates of our interest have increased to $848 per ounce of gold and $11.27 per ounce of silver.

Moving on to slide nine, I’ll provide some comments on who Pueblo Viejo and Cortez. At Pueblo Viejo, Barrick provided an update on the progress of the studies and work ongoing to expand production and extend mine life, which Barrick expects will allow the mine to maintain average gold production of approximately 800,000 ounces per year after calendar 2022, and for over a further 20 years. Recent study work has advanced plans for the process flow sheet, resulting in preliminary operating and capital cost estimates and project execution plan and schedule. From a permitting perspective, the process expansion environmental impact study has been completed and ready for submission, and environmental impact studies are ongoing for additional tailings and waste rock management. Based on all this work, Barrick is progressing engineering and evaluation work towards a feasibility study. Pueblo Viejo is a significant asset in our portfolio, and we look forward to hearing more details of this expansion and mine life extension as they become available.

At Cortez, shortly after the end of the quarter, we received the updated reserve statement and life-of-mine plan from Nevada Gold Mines for production attributable to our royalty interests. Recall we have three sliding scale gross smelter return royalties and two net value royalties on the Cortez property, which includes the Crossroads deposit. And some of the areas covered by these royalties overlap. On average, above the gold price of $470 per ounce after the relevant deductions, the combined royalties are equivalent to approximately 8.2% gross smelter return royalty to Royal Gold. Year-end reserves were calculated at a gold price of $1,200 per ounce and contained 3.5 million ounces of gold over the property areas where we have royalty interest. The life-of-mine plan expects gold production from these areas of approximately 175,000 ounces in calendar 2020, increasing to approximately 425,000 ounces in calendar 2021. While there’s variability from year-to-year, 425,000-ounce level is expected to be maintained through calendar 2026.

I’ll now turn the call over to Paul to discuss our financial results.

Paul Libner — Chief Financial Officer and Treasurer

Thanks, Mark. I’ll turn your attention to slide 10 and give an overview of the financial results for the quarter. For purposes of this discussion, I will be comparing the third quarter of fiscal 2020 to the prior year quarter. As Bill mentioned at the beginning of the call, we had another record revenue quarter with revenue of $136.4 million on volume of 86,200 gold equivalent ounces, or GEOs. GEOs were approximately 2% higher year-on-year. As we announced at the beginning of April, stream segment volume for the quarter of 62,000 GEOs was in line with the expectations discussed during our last earnings call in February. Metal prices had a positive effect during the quarter, with gold and silver prices up 21% and 9%, respectively, while copper was down 9% year-on-year. Gold continues to be the most significant driver of our revenue and accounted for 79% of our total revenue for the current quarter, up slightly from 77% in the prior year quarter.

G&A expense for the quarter was $9.6 million, which is up from $6.8 million in the prior year quarter. Our G&A expense each quarter includes noncash compensation expense and generally averages $1.5 million to $2 million per quarter. As highlighted during our last earnings call in February, we expected to recognize additional noncash compensation expense this quarter due to a couple of recent senior management retirements. During the current quarter, we recognized approximately $3.3 million in additional noncash compensation expense attributable to retirement or $0.04 per share net of tax. The additional noncash compensation expense recognized was a onetime item, and we anticipate our quarterly G&A expense to be between $6.5 million and $7.5 million going forward. Our DD&A expense for the quarter was $51.2 million or $594 per GEO. As Mark mentioned in his remarks, recent reserve reductions at both Mount Milligan and Rainy River have caused our depletion rates on those interests to increase. We now expect our DD&A for the fourth fiscal quarter to range between $650 and $675 per GEO, as our revenue mix shifts towards streams and with the ongoing COVID-19 impacts largely limited to a few royalties. Earnings were $38.6 million or $0.59 per share, up 34% compared to the prior year quarter.

After excluding the $3.8 million mark-to-market loss on the value of our equity holdings and the $3.3 million onetime noncash stock compensation expense items, adjusted earnings net of tax were $44.3 million or $0.68 per share. With respect to our effective tax rate, we continue to expect our full year fiscal 2020 effective tax rate, absent any unusual items, be in the range of 19% to 23%. Cash from operations was approximately $99.7 million for the quarter, up significantly from $77.4 million in the prior year quarter. The increase is primarily due to an increase in proceeds received from our stream interest, net of cost of sales. At the end of March, we held approximately 27,000 GEOs in inventory, which was lower than the guidance range we provided during our last quarterly call. The decrease was primarily due to deliveries from Mount Milligan, which were received later than previously forecasted and after our quarter end. Looking forward, and absent any potential new operational impacts due to COVID-19, we expect stream segment sales for the June quarter to be in the range of 50,000 to 55,000 GEOs, and inventories for the quarter end to be in the range of 18,000 to 23,000 GEOs. As we have discussed on our previous calls, sales in the June quarter will be negatively impacted due to the strike that occurred at Andacollo back in October and November of last year. I’ll now turn to slide 11 and provide a summary of our financial position. Our liquidity remained strong, and we ended March with cash of almost $94 million and working capital of $101 million.

During the quarter, we paid down $30 million on our revolving credit facility and ended the period with an outstanding balance of $105 million. The $895 million remaining undrawn on this facility, combined with our working capital, provided us approximately $1 billion of total liquidity at the end of March. As noted earlier, we made our second contribution of $22 million towards the Khoemacau project during the quarter. And after the $48 million contribution we made in April, we expect to contribute approximately $65 million during the remainder of calendar 2020. In calendar 2021, our remaining contribution will be between $11 million and $64 million, depending on whether [Indecipherable] exercises its option to increase the size of the advanced payment from $212 million to $265 million. We expect remaining payments to be on a quarterly basis in proportion to the total capital spend of the project and we anticipate making these payments from our available cash resources. As Bill noted earlier, we drew an additional $200 million on our credit facility in early April, as a precautionary measure to help ensure cash is readily available to support continued business activity during the unprecedented and uncertain environment caused with COVID-19. We believe we have sufficient liquidity to adequately cover our G&A expenditures, commitment to Khoemacau and expected dividend payments for the foreseeable future. We remain committed to reducing our debt and absent the requirement to fund any new business opportunities, we expect to manage our debt levels accordingly once the operating environment returns to normal.

That concludes my comments on our financial performance for the quarter, and I’ll now turn the call back to Bill for closing comments.

William H. Heissenbuttel — President and Chief Executive Officer

Thanks, Paul. The current operating environment has been challenging. And although we are able to continue our daily activities without disruption, we have seen revenue impacts from temporary suspensions at several operations in our portfolio. The impacts to revenue so far have been relatively minor, and the bulk of our asset base has continued to generate revenue and cash flow. This environment has highlighted one of the main benefits of our business model, which is at the combination of a large, diversified portfolio, and modest G&A and fixed cost allow us to absorb short-term revenue reductions at individual portfolio assets without affecting the sustainability of our business. Additionally, our portfolio is relatively unexposed to weak base metal prices as approximately 80% of our revenue in the quarter came from mines that produced more than half their revenue from precious metals. We also believe our financial position will remain strong despite the current environment. We have no near-term debt maturities and our revolver matures in June 2024, and our access to liquidity positions us to act on new business opportunities that may present themselves in the normal course, and as a result of the challenging environment in which all companies now operate.

Operator, that concludes our prepared remarks. I’ll open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question today comes from Josh Wolfson from RBC Capital Markets. Please go ahead with your question.

Josh Wolfson — RBC Capital Markets — Analyst

Thanks. First, I’ll give you guys a shout out, where you lack annual guidance, the quarterly guidance is certainly very, very helpful from our perspective. As it relates to Crossroads and the ramp-up there, now that there’s sufficient information from the Nevada partnership and what the mine plans and the reserves look like, when how would you expect that ramp-up to get to what the steady state rate is, which, I guess, based on your 8% NSR would be 35,000 ounces per year?

William H. Heissenbuttel — President and Chief Executive Officer

Josh, this is Bill. Thanks for the question. I think the best way to direct that question would be to Mark. Mark, are you able to touch on that one?

Mark E. Isto — Executive Vice President and Chief Operating Officer

Yes. I guess the schedule that we were provided by the Cortez team as we explained in our prepared comments that it’ll be fairly consistent to averaging the 175,000 ounces for the year. And there’s a fairly there’s obviously a very significant step-up going into calendar 2021. So the way I would look at it is, really the 175,000 will be spread it out through the year with modest increase towards the end of the year with a pretty significant step-up as you go into the new calendar year. And then you’ll then as the comments said that over the period of time, you’ll see an average of 425,000 ounces from our royalty ground being reported. But you’re between years, there can be some fairly significant swing. So it will be a little bit of a lumpy profile. Is that helpful?

Josh Wolfson — RBC Capital Markets — Analyst

Yes. That helps, I guess so over that 2021 to 2026 period, I think it sounds like based on the different royalty rates by land tenements, if we assume that 8% NSR to then that seems reasonable. But maybe let me just clarify, is that reasonable to assume? And then for 2021, can we just assume a flat 8% across that 175,000 ounces? Or are there different rates that will significantly vary what the production is to Royal Gold?

Mark E. Isto — Executive Vice President and Chief Operating Officer

Yes. Good question. The way it’s we like to lay it out, and it was very consistent with the way we look at the royalties and for our budgeting purposes. So the 8.2% gross value royalty on the production that we just talked about is an excellent way for you to think about the production, yes.

Josh Wolfson — RBC Capital Markets — Analyst

Okay. Great. And then with regards to Khoemacau and the current time lines there, I understand that there was a reiteration of the timelines, but there was also a caveat that potentially could vary based on the impacts of COVID. Is there any sort of additional disclosure you can provide in terms of what sort of buffer exists and the implications of, I guess, the six months sort of restrictions in Botswana and what that means, if it’s extended or if the severity were to increase of the current situation?

William H. Heissenbuttel — President and Chief Executive Officer

Mark, probably another one for you.

Mark E. Isto — Executive Vice President and Chief Operating Officer

Yes, sure. Yes, I can provide a little bit more color around Khoemacau. So the underground development has been tracking on schedule. Effectively, it was a it’s an Australian contractor, and their the miners effectively remained at site during the shutdown period whereas most of the service type construction activities, which are more locally driven with local manpower tended to significantly reduce. So the critical path certainly has been the underground development, but as the reduction in manpower continues, what you’ll see is the mill refurbishment will become the critical path item. Now we understand that there they should start loosening up some of the restrictions here very shortly, but it’s really very difficult for us to make any kind of projection of the impact. But it’s they’ve managed the COVID-19 situation very well so far and can continue underground development I think for at least another two or three months with supplies they have on site.

Josh Wolfson — RBC Capital Markets — Analyst

Okay. And then last question also related to Khoemacau. The deal that was structured with the additional option available was done in a lower price environment. Is it safe to assume that, that will not be exercised by the operator at this point?

William H. Heissenbuttel — President and Chief Executive Officer

Josh, I don’t think we can know one way or the other at this point. A lot of times, whether or not you draw on some extra funding like that has nothing to do with the price environment at the time. It has to do with what your capital cost of doing, what’s happened to the cost to build the project. So I think it’s going to be more of a cash needs base than a strategic what’s the price of silver right now decision. But we’re really not going to know that probably for at least six months or so.

Josh Wolfson — RBC Capital Markets — Analyst

Okay. Those are my questions. Thank you.

William H. Heissenbuttel — President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question comes from Brian MacArthur from Raymond James. Please go ahead.

Brian MacArthur — Raymond James — Analyst

Good morning. I just want to follow-up on Josh’s question. You’ve given nice guidance here for Cortez, but the operator generally has a 10-year plan. Can we assume like it looks like there’s another one million-plus ounces that come out after that Crossroads. Does that I get it, it’s probably going to go down from 400,000 ounces, but is it kind of flatlined after that? Or can you give us any guidance?

William H. Heissenbuttel — President and Chief Executive Officer

Brian, I’m going to make a brief comment, and then I’ll turn it over to Mark to see if he can add to it. But the information that we have provided to you is really what Barrick has given us permission to disclose to the market and the manner in which we can disclose it. So I think for right now, we’re kind of limited to the years where we’re talking about. I do think it’s probably more than we’ve ever given in the past. Mark, do you have a different perspective on that?

Mark E. Isto — Executive Vice President and Chief Operating Officer

No. No. That would have been exactly you’re exactly correct. Yes.

Brian MacArthur — Raymond James — Analyst

Okay. Great. Thank you.

Operator

Our next question comes from Adam Graf from B. Riley FBR. Please go ahead with your question.

Adam Graf — B. Riley FBR — Analyst

Hey, guys. Thanks for taking my question. Just real quick about the two assets you haven’t didn’t speak about today. One is the Holt mine run by Kirkland Lake and your interest there. I think Kirkland announced, was it earlier this week that they’re putting that mine on care and maintenance? And I wonder if you had some comments there? And then also at the Las Cruces mine by First Quantum, I understand that they are they have to make a decision about going after the underground sulfides? And if you’ve gotten any update there.

William H. Heissenbuttel — President and Chief Executive Officer

Thanks, Adam. Let me first I’ll go to Holt, I’ll give mark a little chance to try to think about Holt and Las Cruces. I’m not sure we have a lot of detail on Las Cruces. But yes, we did see Kirkland Lake’s announcement with respect to Holt. It’s clearly a noncore operation for them. I don’t know what plans they have for it. But it wouldn’t surprise me if the asset eventually came up for sale. But beyond that, these things happen from time to time, we sit there with a royalty that does not burden the property. And so I think we’ll just have to see obviously, it’s not core to Kirkland Lake. So we’ll see what happens over the next few months. But beyond that, I can’t really say anything about their management team’s plans for the asset over the next few months. Las Cruces, I can’t help you with. Mark, do you have any thoughts?

Mark E. Isto — Executive Vice President and Chief Operating Officer

Well, we don’t have any new information on the underground project. But it would be worth pointing out that our particular royalty on Las Cruces is for copper only, whereas the underground material is polymetallic. So as you think about that with respect to Royal Gold, you should only be thinking about copper. But we really can’t provide any additional details on their plan.

Adam Graf — B. Riley FBR — Analyst

All right. And maybe if you guys can give us any kind of an update on production out of Robinson and Voisey’s Bay because those companies are not all that transparent about what they produce?

William H. Heissenbuttel — President and Chief Executive Officer

Mark, do you want to comment there?

Mark E. Isto — Executive Vice President and Chief Operating Officer

Well, I think our view on Robinson, certainly, for the next this calendar year would be similar to last year. We don’t particularly get a lot of additional information as well. We do attend annual site visit, but it has been close to a year now since we’ve been there. And on Voisey’s Bay, so they did announce that they curtailed the mining for three months, although the understanding we have is that stockpiles in the hydrometallurgical plant smelter will be used during this three month period. So from a nickel and cobalt perspective, we wouldn’t expect to see much of anything different. There will be some impacts later on to copper production. But as far as the as far as nickel cobalt, we don’t expect to see any change, because it’s a stockpiled concentrate.

Adam Graf — B. Riley FBR — Analyst

And that copper the copper will be will impact this upcoming quarter or the subsequent quarter?

Mark E. Isto — Executive Vice President and Chief Operating Officer

It would be I think it comes in the fourth quarter of this year.

William H. Heissenbuttel — President and Chief Executive Officer

Yes. The sales bit Mark, I think what you’re talking about, there are really two products. It’s all the products that come out of Long Harbour, but it’s also the third-party copper concentrate sales that are done on a seasonal basis, so that part of the royalty tends to be a bit lumpy. That’s the part that would be sort of missing with the mine shutdown. Is that fair, Mark?

Mark E. Isto — Executive Vice President and Chief Operating Officer

Yes. Correct.

Adam Graf — B. Riley FBR — Analyst

Excellent. Thank you, guys. Appreciate the color.

Operator

[Operator Instructions] Our next question comes from Tanya Jakusconek from Scotia Bank. Please go ahead with your question.

Tanya Jakusconek — Scotia Bank — Analyst

Yes. Good morning, everybody. Just wanted to circle back on M&A, if I could, and sort of what sort of opportunities are you seeing in the space right now?

William H. Heissenbuttel — President and Chief Executive Officer

Yes. Tanya, it’s obviously a good period of time for us. I can tell you that our business development team is quite busy looking at opportunities. You obviously have some stress on the base metal side. We’re starting to see some a few transactions that might be. They’re still sort of in the range of the $100 million to $500 million that we always talk about. But maybe more towards the larger end of that range. Obviously, the challenge we’ve got with business development, we can do a lot of things virtually. We can get to know I’m very pleased with the level of activity that we’re seeing.

Tanya Jakusconek — Scotia Bank — Analyst

So would you do a transaction that would be obviously pending due diligence if it came down to that, that you haven’t been able to go on site?

William H. Heissenbuttel — President and Chief Executive Officer

Well, that’s what we’re actually looking at right now is the processes that are running. You do things out of sequence. You usually, these things go in a couple of phases, and your site visit is early on in phase two. Well, you don’t necessarily need to do a site visit that at that point in time, you could continue to negotiate a term sheet, you can work on documentation, you can do as much of the due diligence as you can, and you just move the other stuff to the back of the process. That is that’s something we are seeing in the market.

Tanya Jakusconek — Scotia Bank — Analyst

Okay. All right. Great. Thank you so much.

William H. Heissenbuttel — President and Chief Executive Officer

Thanks, Tanya.

Operator

And ladies and gentlemen, at this time, I’d like to turn the conference call back over to management for any closing remarks.

William H. Heissenbuttel — President and Chief Executive Officer

Great. Thank you for taking the time to join us today, and I hope you all stay healthy in the coming days and months. We appreciate your interest in Royal Gold, and we look forward to updating you on our progress during our next quarterly call. Thanks very much.

Operator

[Operator Closing Remarks]