Royal Gold Inc. RGLD-Q made a splash this summer with two significant deals in four weeks, including the US$3.5-billion acquisition of Canada’s Sandstorm Gold Ltd. SSL-T, yet its shares have dropped 10 per cent since the takeover was announced in early July.
To win back investors, chief executive officer Bill Heissenbuttel is pounding the table about the diversification the acquisition will provide, something he says rival companies tend to lack.
“Diversification is extremely important,” he said in an interview Wednesday. “The weighting of our net asset value is very much toward producing assets,” while Sandstorm, which is based in Vancouver, is skewed toward mines that are in development, he added. “We saw the opportunity to put two complementary portfolios together.”
Streaming companies such as Royal Gold provide miners with cash upfront to fund exploration and development, and in return, the streamers get the right to buy gold from producers at a discounted price in the future. Profits are made by selling this discounted gold in the open market.
While their contracts tend to have high profit margins, streaming companies are exposed to operational issues that arise at the mines. On Wednesday, Centerra Gold Inc. CG-T announced that the grade of gold it mined at its Mount Milligan mine in British Columbia – effectively the amount of gold in the dirt – was lower than expected. The streaming contract on Mount Milligan is Royal Gold’s largest asset, accounting for roughly 25 per cent of its net asset value.
Mr. Heissenbuttel downplayed the impact on Royal Gold’s long-term profits, saying it is common for miners to have periods when they produce lower-grade resources. “We go through this all the time,” he said. But scenarios like this also illustrate why the company’s transformation this summer should help in the long-run.
“Having a more diversified portfolio will mute the impact on our results,” he said.
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To this end, Royal Gold also announced a significant new streaming deal with First Quantum Minerals Ltd. FM-T this week, backed by First Quantum’s Kansanshi copper-gold mine in Zambia. Under the arrangement, Royal Gold is providing US$1-billion up front and in return will be able to purchase a substantial amount of gold from the mine for between 20 and 35 per cent of the market price.
At the moment, 41 per cent of Royal Gold’s net asset value is weighted toward Canadian and American mines, and another 36 per cent comes from Latin American mines. While expanding in Africa could add geopolitical risk, Mr. Heissenbuttel said Zambia has had a good relationship with miners for decades.
The sticking point for investors, however, seems to be the price Royal Gold paid for Sandstorm, which amounted to 17-per-cent premium. Sandstorm had also already jumped 64 per cent in 2025. Royal Gold’s shares, meanwhile, had climbed 36 per cent this year.
After the deal was announced in early July, Royal Gold’s shares dropped 16 per cent even though the underlying gold price kept rising. The shares have since recovered somewhat, partly fuelled by the new streaming contract with First Quantum.
Asked about the sell-off, Mr. Heissenbuttel pushed back on the notion of investor frustration. “The feedback has been overwhelmingly positive,” he said of the company’s calls with shareholders. Asked to square that with the weaker share price, the CEO said to give it time. “All we can do is focus on the things we can control,” he said.
Based in Denver, Royal Gold’s shares are up 22 per cent this year, while its largest rivals, Wheaton Precious Metals Corp. and Franco-Nevada Corp., are up 67 per cent and 39 per cent, respectively.
Since January, the price of gold has climbed 29 per cent. During this rise, share prices of many gold producers have soared, with the S&P/TSX Capped Gold Index soaring 66 per cent this year. Producers, on average, have benefited more than streamers because their profit margins have exploded in this environment.
Agnico Eagle Mines Ltd. is one of Canada’s best-known gold producers, and in 2015, it produced gold at an all-in sustaining cost, or AISC, of US$810 an ounce. (AISC is an industry metric that incorporates the majority of a miner’s expenses.) In the first half of 2025, Agnico’s AISC was US$1,235 an ounce – a 52-per-cent increase over the past decade.
Over the same period, the price of gold jumped to roughly US$3,400 an ounce, up from US$1,160 an ounce – a nearly 200-per-cent increase.