Royal Gold Inc (RGLD) 2010 Q3 法說會逐字稿

Good morning. My name is Chris and I will be your conference operator today. At this time I'd like to welcome everyone to the Royal Gold fiscal 2010 third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you. Ms. Gross, you may begin your conference.

Thank you, Operator, and hello, everyone. Welcome to our fiscal third quarter 2010 conference call that is being webcast live. You will be able to access a replay of the call on our website at www.royalgold.com. Also, on the website you will find our release detailing our financial results. As always, 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 statement in today's release and is presented in greater detail in our filings with the SEC. Participating on the call today are Tony Jensen, President and Chief Executive Officer; Stefan Wenger, Chief Financial Officer and Treasurer; Bill Heissenbuttel, Vice President Corporate Development; Bill Zisch, Vice President Operations; Bruce Kirchhoff Vice President and General Counsel, and Stan Dempsey, Chairman. A Q&A will follow our comments. We will also be discussing the Company's free cash flow which is a non-GAAP financial measure. There is a free cash flow reconciliation in today's release. Now I will turn the call over to Tony.

Good morning and thank you for joining us today. We are please to bring you up to date on the performance for third fiscal quarter. Our business development activities during the quarter were very important for the future of our Company. In January we closed the Andacollo transaction with Teck. This investment combines the important characteristics of a long-lived gold royalty revenue stream, near-term production and a quality operator operating in the attractive host country of Chile. With the Andacollo concentrator now in ramp-up, we expect this property will quickly become our largest contributor to royalty revenue in just a few more quarters.

In February, we completed the acquisition of the International Royalty Corporation, the largest acquisition in the history of our Company. The combination of Royal Gold and IRC brings together a portfolio of nearly 200 royalty properties and creates a combined company that holds royalty interests in some of the highest quality mines in the world, generates substantial free cash flow and yields one of the most attractive project development pipelines in the entire mineral industry. It is particularly exciting to add the IRC assets to our portfolio at this time as both Andacollo and Penasquito mines are ramping up initial production. It is also impressive to see the effect this business activity had on our reserves.

As of the end of December, gold reserve subject to our royalty interest increased 22% to 78.4 million ounces. Silver reserves subject to our royalty interest increased 12% to 1.3 billion ounces and on a royalty ounce basis we calculate our equity gold reserves increased 148% to 3.3 million ounces. Of course as a royalty company, these ounces are essentially cash free as we are not responsible for the development or operating cost to recover them. This gold growth is largely driven by the Andacollo transaction and the additional royalty interest at Pascua-Lama as a result of the IRC transaction.

Our portfolio of 33 revenue generating royalties performed well. We had record revenues for the fifth consecutive quarter. However, our financial results for the quarter were impacted by the acquisition costs related to the IRC transaction. I will now ask Stefan Wenger, our CFO, to report on those details and after Stefan, Bill Zisch, Vice President of Operations, will provide an update on certain development and operating royalties. Stefan?

Thank you, Tony, and good morning, everyone. For the third quarter we had royalty revenue of $35 million and free cash flow of approximately $14 million. Our revenue increased 68% over the comparable period. However, due to expenses associated with the IRC transaction, our free cash flow decreased by 22%. After adjusting for the IRC costs, our free cash flow is nearly $31 million which was a 75% increase over the prior quarter and 87% of total revenue. The contribution from gold represented 81% of our total revenue. One-time transaction costs of $16.9 million associated with IRC impacted our net income, free cash flow and earnings per share for the quarter. In addition, we accrued a tax charge of approximately $2 million associated with our intention of making a 338 tax election which would step up the basis of the assets we acquired in the IRC transaction for US income tax purposes. We believe the benefit associated with the step up election will be significant over the life of the IRC properties. The impact of $0.33 per share associated with these IRC and tax election related costs resulted in a net loss of $5.8 million or $0.13 per share in the current quarter compared with net income of $4.1 million or $0.12 per share for the third quarter of fiscal 2009. Excluding the IRC related costs, net income would have been $8.9 million or $0.20 per share.

Over the nine-month period, we achieved record revenue and free cash flow with royalty revenue of $96 million and free cash flow of $65 million. This was an 86% increase in revenue and a 53% increase in free cash flow over the comparable period despite the impact on cash flow from the IRC charges.

Free cash flow for the nine-month period was 68% of revenue. Net income was $11 million or $0.26 per share as compared to $31.3 million or $0.92 per share in the prior year. For the nine-month period, IRC transaction expenses and tax charges were about $0.39 per share. It's important to remember that last year's comparable period included the effects of a one-time gain of $31.5 million or $0.60 per basic share resulting from the restructuring of our Cortez royalties in connection with the Barrick transaction. Excluding the IRC transaction related costs and the one-time gain in the prior year, net income for the current nine month period would have been $27.1 million or $0.65 per share compared to net income of $10.8 million or $0.32 per share in the prior year. Adjusted free cash flow for the current nine month period would have been $81.9 million or 88% of revenues.

On the cost side our total cash costs for the quarter, excluding IRC transaction costs, were approximately $3.8 million compared with $3 million in the prior year. Approximately half of the increase was associated with higher production taxes that are directly associated with revenue growth while the remaining increase was associated with increased accounting, tax and legal fees. Non-cash compensation expenses increased to $2.5 million during the quarter compared with about $700,000 in the prior year consistent with our expectation of vesting of performance based stock grants as a result of the completion of both the IRC and the Andacollo acquisitions during the quarter.

Moving to DD&A our average DD&A rate for the quarter on a per gold equivalent ounce basis declined slightly to $410 per ounce compared with $435 per ounce in the prior year. We expect our average DD&A rate to remain in the low $400 per gold equivalent ounce range during the remainder of calendar 2010. We ended the quarter with cash and receivables on the balance sheet totaling $90 million and we had outstanding debt of $255 million.

During the quarter we amended our term loan facility with HSBC by adding the Bank of Nova Scotia as a lender and increasing the principal balance available to $130 million which allowed us to retire CAD30 million of debentures that were inherited from IRC. We also extended the final maturity date to 36 months from the initial funding which gives us a final maturity date of February 2013. Not only was this restructuring cost effective, but it also provides Royal Gold with more financial flexibility. We are very pleased to have two strong partners like HSBC and Scotia involved with Royal Gold to our debt facilities. Now I'll turn the call over to Bill Zisch for an update on our portfolio properties.

Thank you, Stefan, and good morning everyone. Before I discuss the performance of some of our principal properties, I would like to take a moment to talk about the changes we have seen within our portfolio as we integrate the IRC assets and as development properties move into operations. In total, we added ten paying properties, almost a 50% increase in our producing assets. Two of these properties, the Southern Cross and Gwalia Deeps operations are located in western Australia and operated by St. Barbara Limited. Southern Cross is maintaining its production at 120,000 ounces per year. Gwalia Deeps recently reached its design production rate of 100,000 ounces per year and they expect rising ore grades will provide continued growth in 2011 and 2012.

Two other properties moved from the development stage to become producing properties since the first of the year, Avocet and (inaudible) mine in Burkina Faso targeted to produce 120,000 ounces per year, ship its first gold in February and Sarasin's South [Laurton] mine in western Australia designed to be 100,000 to 120,000 ounce producer poured its first gold in January and made their first shipment in February. I also want to say that we are monitoring the Australian tax situation. It is too early in the process to determine if and how Royal Gold will be affected by this tax. I can say, however, for the past three and nine month periods about 4% of our revenue came from Australia.

In addition to these new IRC properties, we currently have 23 development projects in our portfolio. Teck's Andacollo mine continued on its path towards full scale operations, ramp-up of operations began in mid February after commissioning was completed with first ore having been fed to the mill in mid January. Andacollo's ramp up to a designed target of 55,000 tons per day is expected to be completed in the third quarter of this year. Currently, throughput is running about half of the design rate with periodic runs at about two-thirds of capacity. The first shipment of concentrates is scheduled for this week.

A new project added from IRC is Yukon Zinc's Wolverine mine. This silver rich polymetallic deposit is located in southeast Yukon. At current silver prices, we have a 9.45% royalty on the gold and silver. Construction of the surface facilities and development of the underground mine commenced in 2009 and mine operation is scheduled for mid 2010.

Development also continues on schedule at Osisko's Canadian Malartic project in the Abitibi mining district in Quebec. The project is about 80% committed on construction capital and all major components are on site. Osisko has maintained its guidance for commercial production in the second quarter of 2011 with pre production stripping currently underway. Our expanded portfolio continues to perform well with first quarter production results that were about 10% above expectations.

I'll now focus on the quarterly performance of some of these principal producing properties. At Cortez, royalty revenue for the quarter was significantly above the operator's plan as a sequencing of ore and realization of higher grades within the pipeline complex covered by our royalty interests were positive. Barrick received a favorable court ruling allowing them to continue mining at Cortez Hills as planned. As we mentioned before, as mining shifts to Cortez Hills, the production related to our royalty interest will decline. In 2009, Cortez production from our GSR-3 royalty totaled about 360,000 ounces. With this year's operating plan we expect about 240,000 ounces to be produced from our royalty interest. Taparko had another successful quarter with sales of almost 29,000 ounces. They have increased their plan production from prior years with a target of 137,000 ounces to be produced in 2010.

As I mentioned last quarter, in December Somita began a 90-day operational completion test period in an attempt to satisfy conditions of the Royal Gold funding agreement. Their performance during this test period was good and we are currently reviewing the report that has been submitted with regard to satisfying the completion test. While Taparko continues to be one of our most revenue contributors, if they continue to perform as they have over the last two quarters, they will likely meet the $35 million payment threshold associated with GSR-1 in the fourth quarter calendar 2010. At that time our royalty will convert to a 2% gross mill to return. They currently pay $25 million of the $35 million. Operating results at Penasquito now reflect combined oxide and sulfide production of gold silver lead and zinc as concentrates are now being produced from the sulfide circuit.

During the project's inaugural ceremony on March 23, Gold Corp reported that ramp-up of the first sulfide processing line is likely to sustain designed pressure levels of 50,000 tons per day during the third quarter of this year. In fact, their productivity in March was about 46,000 tons per day. An additional 50,000 tons per day are expected out of the second sulfide processing line in the fourth calendar quarter of this year. Lead and zinc concentrate recoveries in grades appear to be trending towards plan despite processing of transition ore. Gold Corp's production guidance for 2010 is for 180,000 ounces of gold, 13.4 million ounces of silver, 107 million pounds of lead and 135 million pounds of zinc.

At Robinson, coal access has been re-established into the veteran pit, additional flotation sales are fully operational and concentrate contracts allow for more flexibility with respect to concentrate grades. Although the complex nature of its ore body is likely to introduce monthly variability, Robinson expects to finish the year at its annual production guidance of 135 million pounds of copper and 80,000 ounces of gold. During the first quarter, gold production met plan and copper production was about 15% below plan.

The acquisition of a royalty interest in Vale's Voisey Bay property in Newfoundland and Labrador as part of the IRC transaction has added another world-class asset to our portfolio. In spite of current labor issues we believe this long lived high quality asset represents a great value now and in the future. During the quarter the operation produced nickel and copper as partial operations continue to feed stockpile material. Valet reported that it had resumed production in the Voisey's Bay (inaudible) mine and mill, which supplies nickel concentrate to Vale's operations at Thompson and Sudbury and copper concentrates to clients in Europe. The Voisey's Bay site is operating two weeks on and two weeks off producing about 3.5 million pounds of nickel per month and 2.8 million pounds of copper per month. This is about half of their normal monthly production capacity. The Dolores mine is ramping up to design rates. While stacking the material on the heaps continues at 18,000 tons per day, mine finders guidance trends up quarter-over-quarter as grade improves and volume and duration of ore under leach increases.

Performance during the first quarter exceeded planned gold production and silver was within 1% of plan. Mine finders expects production to ramp-up through 2010 to a steady state run rate of 120,000 ounces per year. The other four primary contributors to our revenue continue to perform as expected, Leeville, Mulatos, and Goldstrike exceeded plan and Siguiri was slightly below plan levels. The portfolio of producing and development properties that we have constructed has performed well and as Cortez production declines, Taparko royalty rate decreases as Siguiri reaches its revenue cap, development properties like Andacollo, Canadian Malartic, Wolverine and Penasquito are well positioned to offset these declines and to continue the growth of our revenue stream. With that, I'll turn the call back over to Tony.

Thanks Bill. We are starting to give you a work out on these conference calls with that expanded portfolio. Thank you. Let me just come back to reserves for just a moment before some closing remarks. Compiling reserve information from our operators has become a much greater task than it was once was. Five years ago we had a total of six properties and five different royalty operators. With the current portfolio of 56 producing and development stage properties, we now reach out to 35 operators to get updated reserve and production information. We will be releasing our complete annual reserve, resource and production guidance from the operators for calendar 2010 within just the next few weeks.

In summary then, this has been a pivotal quarter of growth for the Company with the closing of the Andacollo and IRC transactions. We now have close to 200 royalty properties in our portfolio of which 33 are in production. These producing properties performed well this quarter resulting in record quarterly revenue. And we look forward to even more robust results in the coming quarters with increasing revenue from Andacollo and Penasquito and a full quarter of revenue from the IRC properties. Operator, with that our prepared remarks are finished and we'd be happy to answer any questions, if there were some for us.

Certainly. (Operator Instructions). Your first question comes from Cosmos Chiu from CIBC. Your line is open.

Good morning, guys.

Good morning.

I think this question is for Stefan here. Just want to chat more about the US tax election to step up the basis of the IRC asset. Are you trying to get it to step it up to your acquisition cost of IRC and have you had a chance to quantify what cash tax impact you might have? And how difficult is it to get the step up? Does it need to get approved by someone?

Thanks for the question and I can address that. What we are looking at doing is making a 338 election under the US tax rules and there's no approval that is required. It's really just condition on the company making the appropriate filings. It's fairly typical for a US company that is making a foreign acquisition to make this election. It does have a fairly significant future cash impact positive future cash tax impact on us because it allows us to step up to that purchase value for US tax purposes. That means when the net income comes up from our foreign corporations under the US rules, we'll be able to use that step up basis to shield some of that income coming up from the foreign locations. I'm not at a position where I could quantify that benefit but it's a significant enough benefit that it is well worth the upfront tax that we are incurring to get there. Just one point -- that up front tax relates to a small gain that we had on some of the IRC US assets that is are under the Canadian assets. We've evaluated that pretty thoroughly.

So that tax charge you had in the current quarter, is that a one-time thing or will we be seeing more tax charges going forward?

Yes. That is a one-time charge that we accrued into this quarter based on our intention to make that election.

That's all I have. Thank you.

Your next question comes from the line of Adam Schatzker from RBC Capital. Your line is open.

Hello everyone. A few questions if I could. Now that you've had more time to digest the IRC transaction, any surprises positive or negative that you've uncovered as you look at the assets, especially some of the ones perhaps that you didn't know as much about in the early parts of the process?

No. There hasn't been any material surprises. I think we were somewhat conservative and a bit generic in our tax modeling and I think Stefan's work, as he just described, is probably an upside in value that we've been able to harness here. But apart from that I don't think there's any material difference in the assets now versus when we were in the acquisition process.

Looking at some of these things like the frac sands and the potash, are these still interesting for you or do you have different thoughts on those now that you see a little more about them?

Well, we are very much focused on the gold side of the portfolio. We would always be looking to maximize value in any of the rest of that that we could. Those just aren't material drivers to our business and so we just act opportunistically if some way came up that we can create value out of those.

Okay. Fair enough. I guess the other question is part of your game plan in the longer term is to build through new royalty acquisitions. Are you guys getting to the point now or close to the point where you are done with the IRC stuff and you can start looking at those again seriously?

I think we are at that point. This has been a heavy quarter for our legal team and our accounting team to integrate the IRC transactions but we never stopped in our business development activities because, as you know, Adam, it takes several months to get serious about an opportunity and get engaged. So we never slow down on that side of it and I think now the rest of the Company is catching up with our business development side and we are certainly ready to continue to look at new things.

Great. Thank you very much.

Thanks.

Your next question comes from Imaru Casanova from BJM. Your line is open.

Hi, everyone. I just had a couple of questions. The first is regarding what we should expect going forward with your cost of operations and G&A. They were a little bit higher this quarter than the previous quarter, a bit higher than my expectation. So I was wondering, Stefan, maybe you can give us an idea of what we should expect going forward?

Sure. I'd be happy to. I'll point out and I said it in my remarks as well, the biggest impact on our costs and this impacted the cost of operations line, G&A and business development to a smaller extent, was the non-cash stock option expense or stock expense costs. Those were $2.5 million this quarter compared to about $700,000 in the last quarter and that gets allocated to those three line items that I spoke of. The reason for that is we have some performance base stock compensation and based on the Andacollo and IRC deals, some of those have accelerated vesting and I expect to see that remain high for our fourth fiscal quarter. Then I would expect to see that charge drop off into fiscal 2011.

As far as the cash costs, we have had a growing business and we have incurred higher cash costs over the last several quarters just with, when there's a lot of activity there is certainly some more general costs that are impacting our business as well, particularly on the auditing side where every transaction we do has additional audit costs. There is a lot of tax work going on. I don't really have an outlook on those costs. We are still going to look to be very cautious with respect to our spending. We are a very cost cautious organization so I look to manage that going forward.

Thank you. The other question I have is again in the income statement part, your DD&A expenses, for us to calculate that or estimate that going forward, will you be providing us with a breakdown of how you are going to split basically the cost of the IRC transaction amongst the different assets there?

Yes, Imaru. We'll be putting out our 10-Q in a couple of days and that will have a break out but it won't be as detailed as what you are looking for. If you recall for the Barrick transaction we also put out an 8-K that had a more detailed breakdown of our final purchase allocation and I expect we'll do that again once this IRC allocation is final. At this point, we are still calling that preliminary as we button up a few valuation items, but we'll make this a much quicker process than we did on the Barrick valuation exercise. We would expect to get something out on that.

Okay. Thank you. A couple more questions just to make sure I got the numbers right. What is your current number of shares outstanding as of today?

Yes. The current number of shares outstanding is 49.2 million.

Okay.

That includes about 47 million Royal Gold common shares and we also have some exchangeable shares that you need to add to that number, and both of those are on our balance sheet that we put out.

So the 49.2 million already includes the 1.8 exchangeable in the Canadian subsidiary?

That's correct. That would be on the front of our 10-Q for your information.

Last question is on the, I wanted to know if you had any news on the Holt-Holloway royalty and the legal dispute there? It's pretty significant royalty at this gold price. I am wondering if there's any developments there?

Imaru, Tony here. We are watching that closely and we have Bruce Kirchhoff, our General Counsel, that I will ask to respond to that.

We are still waiting for a schedule for briefs to the Appellate Court and following briefing and oral argument to the Appellate Court. The short answer is no, there are no developments.

That's it for me. Thank you guys.

Your next question comes from Andy Schopick from Nutmeg Securities. Your line is open.

Thank you and good morning. Yes, this has become a much more complicated and difficult Company to understand. Am awful lot has taken place here in a short period of time. Stefan, I am going to ask you if you would comment on just a few financial issues here on the balance sheet. Now the long-term debt of $229 million, how comfortable is management with the current leverage position and are there really any plans to begin to reduce that debt over time?

Yes, Andy. Thanks for the question.

I got more.

To answer your question directly I'll be happy to take more. We are very comfortable with the amount of leverage based on our existing and future cash flow. We have really put a lot of new cash flow into this Company so the debt is not a concern as far as a debt service perspective. What is -- what does become challenging is balancing our capital needs with respect to business development. That is something that we are very comfortable dealing with as we go forward and I'm very tied in with Bill and Tony on those efforts to make sure we are capitalizing the Company properly as needed.

Andy, I would also just offer up our LIBOR rate on this and the rate of the interest on the debt makes it very attractive capital for us. So we are quite pleased (multiple speakers).

At this time, and that could be subject to dramatic changes as well down the road.

Surely it can and we are watching that closely, obviously.

Okay. Also does this have any impact or bearing on your dividend policy at all?

No. It does not.

Okay. If I could ask Stefan to also comment a little bit more on the interests in mineral properties which have now risen to about $1.5 billion. I assume that number reflects all of your properties, both those that are revenue producing and otherwise. Is that correct?

Yes. That's correct. There would be a good table that shows where that is broken out in our 10-Q that will get filed. All of that relates to properties. We split out to our producing properties, the development stage and also to some exploration stage assets.

Okay. Finally, on the balance sheet. If you would just comment a little bit on the net deferred tax liabilities of $155 million, how is that broken down and can you just elaborate a little bit on that?

Yes. The vast majority of that came to us with the IRC acquisition and really reflects the tax basis difference between what we are putting on our books and what the Canadian tax base's difference is for those assets. I mentioned that tax step-up election that we've made, [for less] purposes, it didn't take away the Canadian tax difference for which we will get credited in US for any taxes paid in Canada. That's really how the purchase accounting works. You put all the value on the assets and then also book up that liability for future taxes relating to the basis difference.

Okay. One final thing here on IRC. I did hear on CNBC the other day, and I wasn't paying that close attention, but I heard that nickel prices have come down very sharply and of course as I recall nickel is the predominant royalty here from the IRC property. Just any comment about how that royalty stream looks going forward based on recent developments?

Andy, of course the strike is still going there on at Voisey Bay. As Bill Zisch reported we are at about a little less than 50% production capacity now with them operating two weeks on and two weeks off. We just don't have clarity into the likelihood of when that strike might come to an end. It's been going on since October 1 and we very much would like to see the parties come together on that. We are hopeful that at the very least that they'll be able to continue to operate at the existing production levels and then ramp-up in a very reasonably quick fashion as soon as the strike is settled.

Tony, my question was more directly related to the nickel pricing. I know nickel has been a terrific play here over the last year but more recently I think it has taken a big hit. I don't know, again, how that royalty stream is going to be affected by the overall pricing in nickel, how it's generally tied to the price of nickel.

Actually, it would be tied to the near-term price. I can't say whether it's spot or exactly how that contract reads, but I don't know what you are referring to with regard to a big reversal in nickel price.

Something happened in the last day or two where nickel prices have come down a lot. Again, I only peripherally kind of heard it.

Andy, we've seen with some of the Greek issues we've seen a lot of sell off in some of the base metal but not significantly. We saw it in copper as well. So I'm not particularly worried about the long-term value of that asset.

Okay. I'll pass it on. Thank you.

Thanks, Andy.

Your next question comes from Mike Jalonen from Banc of America. Your line is open.

Good morning.

Good afternoon here in Toronto. Thank you, Tony. At least my name got spelled right that time. Question for Stefan. Just wondering. Going back to the depreciation, you gave us low $400 per ounce for depreciation, but I guess I'm taking the lazy man's way, just trying to get millions of dollars from you. Because I see your depreciation and you're running $11 million, $12 million the first two quarters and $13 million with one month of IRC. Would it be safe to say maybe more $16 million, $17 million in the fourth quarter?

Mike, this is Stefan. I'm not comfortable giving out a dollar number for DD&A because it's heavily tied to our production at the properties and it's just too hard to say. I think if you take it on a per ounce basis, it's a better comparison. I can say that right now we are in that $400 ounce range on the low side. The two biggest contributors to that are probably Taparko and Siguiri. As Bill mentioned, we are going to be reaching the cap on Taparko and once that has been reached, actually expect a decrease in DD&A on a per ounce basis, but on a gross dollar basis you will see DD&A increase substantially as these IRC assets come on to full stream, also as Andacollo comes in and Penasquito come on. But I can say that on a per ounce basis, Andacollo and Penasquito are below as far as an average cost where we are at today.

Okay. Thank you.

Your next question comes from John Doody from Gold Stock Analysts. Your line is open.

Hi guys. A couple of more questions on the debt level. The current term loan I guess you are paying back at $6.5 million a quarter, that's what the $26 million implies.

That's correct, John.

Okay. And there is a bullet on the revolver a couple of years down the road. What kind of -- is there any interest on the part of the Company to accelerate the repayment of the debt?

I think we would look to do that, John, as we build cash flow we'll continue to balance the capital needs of the Company and new acquisitions with accelerating the debt (multiple speakers).

As you are able to?

Yes. I think in the near term you'll see us build some cash and as we talked about a couple of calls back, watch that LIBOR rate. If we start getting concerned about that, we can pay down those facilities but I think we would attack those a little quicker than the amortization rate of the term loan.

The stock seems to be stuck for the last 18 months around $50 plus or minus $5 and I'm just wondering with so many wonderful things coming on line for the Company if Mr. Market isn't afraid of some kind of a share sale that might get rid of the debt but dilute further the shareholder interest.

That could very well be, John. I don't have any particular comment on that.

Yes, I know you are not going to tell me. Okay. Great. Thanks. Keep up the good work, and I'm glad to see -- Andacollo has got enough water now so it's not an issue?

They seem to be operating just fine and the long-term solution there is progressing well. That seems to be in hand.

Thanks a lot.

Thanks John.

(Operator Instructions). Your next question comes from Adam Schatzker from RBC Capital. Your line is open.

Actually, my question was just answered. Thank you.

Thanks Adam.

Your next question comes from Andy Schopick from Nutmeg Securities. Your line is open.

Thank you. Although you did touch upon this in your prepared remarks relative to giving us some guidance that Taparko and Cortez are going to start to decline and that you hope that much of that effect will be offset by other royalty properties now in the stream, I certainly hope that management is going to take every measure to communicate to the investment community as well as it can the potential impact on upcoming quarters from some of these shifts that are going to be fairly significant here, some things kind of either come off or decline sharply with others hopefully coming on stream here. I'm really not clear at this time what the effects are going to be and my concern is that one or two or three quarters down the road here there could be some kind of a hiccup. It's hard for me to know right now how this is all going to balance out and I don't know if you want to comment any further about it.

Andy, we have given the production guidance for Cortez. We've also given very clear guidance when Taparko is likely to come (technical difficulty) as well as Siguiri. That side of the equation I think is pretty well known, but the ramp-up scenario is probably more where you are -- (multiple speakers)

Yes, yes.

--so we look to Penasquito and they've given guidance and we have no reason that they won't meet that guidance. They've done a very good job coming along the entire production milestones that they've set out and Andacollo seems to be coming along quite nicely as well. We were just with Teck last week and had good conversation with them and have no reason to believe that they aren't going to be up to full production in the third quarter. I'm sure happy to sit down with you if there are some more concerns that you would like to talk about there.

That would be fine. Thank you.

Thanks, Andy.

You have no further questions at this time.

Well, thank you very much for joining us today. We very much appreciate your interest in Royal Gold and we look forward to, as Andy just mentioned, continue to update you as we go forward in the coming quarters. Thanks very much.

This concludes today's conference call. You may now disconnect.