From Mine Engineer to CEO of Royal Gold: Tony Jensen on the Gold Market and Deal Making

Trevor Hall [00:00:07] And a Good Friday to everybody. Thank you for tuning into Mining Stock Daily. Boy, what a week. Finally, some great price action in gold breaking through some of that consolidation and recording this Thursday, and we are above sixteen hundred. Seems like we're holding it there. Good job. The miners are moving up, finally. It's been a good week for us. Thanks for tuning in, we got an in-depth interview today, a very special guest on the show. I've actually been trying to get Mr. Tony Jensen, who is now the former CEO of Royal Gold, onto the show for quite some time. Tony's been very kind to me over the years, always giving me a lot of his insight and voice stops to say hi and asks how the show's going, and I ask him how Royal Gold is doing, how his time up into his retirement was looking. So happy to welcome Tony Jenson on the show finally after a number of years of knowing him, and it's just a great interview. We go through a lot about his time and career from turning mining engineer to financier to CEO of arguably one of the biggest royalty companies in the game right now in the gold space. So it's a great conversation, glad you can tune in. It did go a little long, about 30 minutes total in length. So if you are listening on Amazon, Alexa, you are listening to an abbreviated version. You can find the full interview anywhere else you get your podcasts.

Trevor Hall [00:01:38] I would like to thank our sponsors for the show that includes Corvus Gold, Integra Resources, Western Copper and Gold, and Pacific Empire Minerals. Thank you so much for your continued support. And be sure to check the show of the Medals Money Markets Weekly with me and Mickey Pholpa later today, Friday afternoon after the market closed, and we're going to wrap up all the numbers from the markets and the precious metals today on kitco.com, which is going to deliver that show. Please be sure to tune into that. If you are attending Pidac next week and we'll be in Toronto, I will be presenting at the letter writer's presentation Sunday afternoon around the 2 o'clock area. That's a room 801. I'm going to be delivering a little bit of a different note, mainly focused on the young investor, young speculator. So if you are interested in that type of discussion, please be sure to come into the presentation 2 o'clock hour there at Picac. So without further ado, here is my conversation with Tony is a great discussion and I'm just really happy we get done and celebrate his career as he moves more thoroughly into retirement. Thanks so much, everybody. We'll catch you on the flip side.

Trevor Hall [00:02:54] And welcome back to Mining Stock Daily, this is Trevor Hall. Thanks so much for tuning in. I have a very special in-depth interview with somebody I've known for a number of years because well, basically because we're both local here in Denver. That is the now-former CEO of Royal Gold, Mr. Tony Jensen. Tony, welcome to the show. This is an interview I've trying to get for quite some time.

Tony Jensen [00:03:17] Trevor a pleasure to be here. Thanks for having me.

Trevor Hall [00:03:19] I have a number of things I want to ask you because I been I think a lot of people are just very curious now that your time with Royal Gold is coming to an end. I mean, you're officially retired, but you're still in this suit and tie here in the office. You haven't gone too far away from home. But talk about, you know, you came on 2006 as a CEO. I believe you were COO before that.

Tony Jensen [00:03:43] Right.

Trevor Hall [00:03:45] And if you can summarize your time as CEO, you know, in the multiple cycles that we saw, we've seen in gold over that timeframe. What do you tell your friends now?

Tony Jensen [00:03:57] Well, look, it was I have to tell you that it was more of an accident than it was a plan all along to be able to work with Royal Gold and build it into the company that it has today. In the earlier days, we were focused very much on buying existing royalties. In about 2005, it was Wheaten Precious Metals, Silver Wheaton at the time and Brueghel that started financing. And as I think about that now, that has mushroomed into a much bigger opportunity for us to participate in. And even today, much bigger deals that are available to us is, I think, about all of what was close to thirteen years, I guess, as a CEO, fourteen years. And in something in the order of sixteen or seventeen years with the company, those cycles have certainly experienced during that period of time. The thing that amazes me about the royalty product or the streaming product is it was always applicable. In every kind of environment that we found ourselves in, in a time where industry had overinvested and over-leveraged their companies, we were there to provide capital when no other capital is there to help those companies balance the balance sheet into a more productive environment. And when the growth was happening, we were there to help fuel that growth. So we've been able to be relevant in periods of high activity, in periods of low activity, in periods of real crisis in the business. It's a very, very flexible and malleable business model that we have. Being in the business for that period of time, it's just been an absolute pleasure to be associated with the colleagues that we've had over the last 40 years now in the business. So we've seen a few different cycles through that period.

Trevor Hall [00:06:07] You know, it's interesting as we're having this conversation the day gold actually closes above sixteen hundred on a healthy move, it wasn't a big fear move like we saw back in January. And so I keep on thinking, you know, where we are in the cycle. You know, I've heard anywhere from we are in a second or third inning of a cycle here to we are in the fourth or fifth inning. And, you know, you can listen to all those pundits online say, you know, gold's going to 10,000, 20,000. And I think the smart ones kind of just sit back and watch and make sure that gold still healthy no matter what. But where you see, what do you see now this cycle? I mean, with sixteen hundred are we, is gold back in a place where you thought it would have been 10 years ago?

Tony Jensen [00:06:52] Yeah. You know, your baseball analogy, let me just build on that just a little bit and say that we are in an inning of an infinite amount of innings because we're you know, I don't think of gold in a short term cycle. We had a good peak of gold in early 2013, late 2012. And then it pulled back for a bit. Now we're starting to build momentum back again. But, you know, I look at that trough and it really doesn't bother me very much at all because I'm looking at decades out to the future. I've been long for gold for 40 years. I'll continue to be long gold during my entire life. And it's not that then I'm a gold bull, not at all. I'm a dollar bear. I'm a fiat currency bear. And that's not the end of the world type of statement that I'm making. What what I mean by that is that in today's political world, we're not ever going to see liquidity pull back. There's going to continue to be more and more liquidity pumped into the system. And we're going to live in an inflation environment. However skinny that inflation might be, I don't think we're going to live in deflation for very long. I think our economic system would collapse if we did that. So what that means is that the value of a dollar tomorrow is less than what it is today. And gold is going to keep pace and maintain its value during that period of time. And so it's just going to be a store of value. And they don't really get too concerned about whether gold's up or down a hundred dollars, because, again, I'm looking at the decade back into the decade into the future. And gold is going to do well. It's going to continue to go well. Sixteen hundred dollars today does not at all seem overheated to me, not compared to the amount of liquidity that's been put into the system all around the world.

Trevor Hall [00:08:56] It's funny because I've actually had a conversation, some people would, probably if they were listening in, would have called it a heated conversation just about the purpose of the dollar and the forcing of liquidity in the money printing and the repo madness that's going on right now. And my side of the conversation was there's nothing guaranteed. You wake up tomorrow and the dollar doesn't exist or doesn't have the same oof as it does right now. And I don't want that to scare you, but that's just simple facts. Right? So this is where silver and gold kind of play a matter into it. Now, that's a lot for people to swallow and want to understand or even acknowledge. Right? So in your time in your lifespan, like when you've had those conversations with people that maybe don't understand that other aspect outside of fiat currency, how do you appropriately have those conversations with people?

Tony Jensen [00:09:54] You know, it seems obvious to me and it may be obvious to you, but you're right. It isn't obvious to a lot of people because, in our youth, we've been brought up to understand what money is. And money is, what's that piece of paper, that's U.S. dollar. Maybe it's a yen or a euro. And we really understand that's a value that we can trade upon. But as you know, it's simply something that is declared fiat currency. And then so it may not have value, and if we don't respect the amount of dollars that we're pumping into the system, we may not maintain that value. And so it serves a delicate balance. The interesting thing that we see today, I mean is gold hitting highs in different currencies. And why is that? Because everybody else is putting a lot of money into the system as well, a lot of currency into the system. So everybody's playing by that game. And the only way to be counter-cyclic to that game and prevent to preserve your wealth is to have a little bit of that in gold. So in it, I certainly hope that we don't wake up someday and the dollar has gone south in a big way or like any other currency.

Trevor Hall [00:11:22] So we'll have bigger problems.

Tony Jensen [00:11:23] They've got much bigger problems. And I don't want to scare anybody I don't think that's where we're going. I'm just saying that you don't have to be an Armageddon type of person to believe that gold is a good economic piece of insurance in your portfolio.

Trevor Hall [00:11:39] You mentioned you've been a gold bug for 40 years. I mean, you started out as a mining engineer at the South Dakota School of Mines.

Tony Jensen [00:11:49] Correct.

Trevor Hall [00:11:50] And as I guess just kind of curious, like you worked a number of different projects as a mining engineer, before you wouldn't jump button to the finance side. And I'm just kind of curious, why did you make that jump?

Tony Jensen [00:12:04] Well, you know, I love being a mining engineer, love working at different operations. I worked at three different operations during my career in Montana, in Copiapo, Chile, and then back in Elko, Nevada. And it was during my early years, it must have been in my early thirties. I would imagine, when I realized that there is so much in this business I didn't understand. I mean, I knew reserves, I knew operations and cost of production and I understood the elements that were right in front of me, but I couldn't read a balance sheet or income statement. And I realized that that's a skill that I really would like to have had. I had a chance in my early marriage to to have some time to study for the GMAT. And I really wanted to go to school at Stanford or maybe St. Mary's or Berkeley in the Bay Area. One or all of those schools are in the Bay Area because our corporate office and plastered home us at the time was in San Francisco. And I'd hoped to be able to do a sabbatical and perhaps work in the summertime because I already had a couple of children. A dear colleague and mentor and friend of mine was called McFarland. He was the president of Astrodome US, and he came to the mine site in Whitehall, Montana. And I approached him about possibly going and getting my MBA and just going on a sabbatical basis and would I be able to work in the summer times. And he said, Tony, I don't really think that you need an MBA. I think it's overrated, and you probably will do just fine without it in this business. And I was really, really disappointed because I knew that modern mining is definitely going to have to have a blend of engineering and finance to be successful. And that same gentleman called me up about two weeks later who said, I still don't think you need that MBA, but come to San Francisco and be my assistant and I'll teach you everything you need to know. What an opportunity. Right? So I jumped at it. Next thing you knew, we were headed to to the Bay Area. And I still went to night school at Goldengate University to get my finance degree. And it was the most important inflection point in my career. I think it was able to use that so much more effectively than with my engineering skills and understand both sides of the business. Not immediately, it came with time, and it came with opportunity. I was next pushed to Lacoypa into an operational role. I say push, that's not the proper word. We moved around a lot and masterdomed to the benefit of the employees. And there was just a great opportunity. And shortly after a couple, two and a half years of another mine experience, I was asked to be a treasurer of the Plasville Latin America Group in Santiago. And I said, yes, and I said, what does a treasurer do? And so I had another great mentor, Bill Hayes, that is still with the Royal Gold Board Chairman of the Royal Gold Board. He was the president of the Latin America division at the time, and he took a chance, just gave me an opportunity to learn. And that just continued to take advantage of my financial side of my my degrees or my skill set. In that, it wasn't until I made the move out of the Plasville completely in 2003 and joined Royal Gold, that that became a bigger focus than the operational side. And I truly believe it's such a critical weapon to have. And it's a huge advantage if you have both sides of the of the business, the technical and the financial.

Trevor Hall [00:16:20] You know, my father is agriculture based, but he has an economics degree. And we lost the dairy farm in the 80s when it was never good to farm. And I remember one time I asked him, I was like, well, what do you miss about farming and he's like, "Well, I miss working with animals". You know, he's on like the finance side, you know, he just retired from the finance side.

Tony Jensen [00:16:44] Still in the egg business?

Trevor Hall [00:16:45] It's still, on the loan side, actually. So, you know, I'm just wondering, like, do you miss working in the pit? Getting your hands dirty and all that stuff? Moving rock?

Tony Jensen [00:16:56] I'm right there with your father. And you know, you can't do, you can't be highly successful, I don't think in the royalty and streaming business, without understanding and having a little dirt under your fingernails. It's so important to be able to sit at the same tables, understand the issues that your partner is having. And I miss absolutely, I miss all of those things. There are some of the funnest days of my career were operationally based.

Trevor Hall [00:17:28] What about the way the business, you know, mineral exploration is set up now? You know, one could argue that there's, we have a lot of geologists that go from one project to the other. And some of those companies, even as they move, still exist. Right? So now there's a saturation of companies with questionable projects. I mean, do you think the business model itself is poised for some sort of change and needs to happen to get these companies with not viable projects to just disappear?

Tony Jensen [00:18:05] Well, look, nature will take care of itself there. I mean, those projects will not get funded if they're not viable. It may take some time for those companies to die on the vine. But I mean, that's just nature. The whole industry will continue to evolve. The thing about all of those folks that are out there breaking rock today with a pick and looking for a mineral in that rock, we'd be lost without them because the larger companies exploration budgets just aren't nearly sufficient enough to feed how much replacement reserves they have to do on an annual basis. So thank goodness they're all those folks that do have that passion and some of them do find really, really good projects. So I don't want to, those things will take care of themselves over time. If there's a project or a company that just really doesn't have a sustainable business model, it will all be revealed.

Trevor Hall [00:19:11] We mentioned earlier about cycles. So I actually want to take a step back and ask you about that 2012, you know, when gold reached nineteen hundred dollars, he was the CEO of, arguably probably one of the most well-known royalty companies in the gold space. I mean, what was that time like? And how do you, looking at where we're at now, do you see similarities in the build-up now, as you saw in, say, 2010, 2011?

Tony Jensen [00:19:41] Well, you know, I often would think it rarely would I have the opportunity to say that I'm not sure if I'm rooting for a good gold price or a pure gold price. Because sometimes when the gold price runs like it did, the other financing opportunities were so prevalent for producers.

Trevor Hall [00:20:04] Everybody wanted it.

Tony Jensen [00:20:04] They could go and they could issue equity just boom boom boom, or they could go in and get a big chunk of debt and say, and then, of course, price expectations on the side of the deal were really inflated. And so, you know, if you look back at Royal Gold's history, we didn't do a lot of deals and that higher gold price and the deals that we did do, we didn't price in at the spot gold price. We priced in something we thought was a little bit more steady, fine with anticipating a higher gold price in the future, but I don't like to buy things high on peaks. And so we were a little bit more quiet at that time. In fact, we did financing in September of 2012 and it wasn't very long after that the gold price had moved away. But the good news was, is that we were completely financed up, that we had a billion dollars of firepower. And we talked a little bit about nature just in the last questions you're asking about the exploration group. Well, nature took its course on all the major producers that had over-levered the balance sheet, and it took a few years. What a really exciting time in our business was, was 2015, when all of a sudden we had major gold mining companies and major base metal companies that needed to sell some assets. And one of the ways they could sell assets to help the balance sheet was to sell the stream on some of the finest assets in the world. And so we had a great opportunity to get involved, and we invested, I think it was 1.4 billion dollars in three months, four months, something like that. We were very, very active. And that's a very exciting time because these assets were multiple decade assets, at least to a few of them were multiple decade assets. And not only us, our competitors did it as well. And we were able to layer in twenty-year going to thirty-year assets within a very small period of time. We used to have a board of director member that just was fabulous in his guidance and he said always be in a position to buy. Make sure you're always in a position to buy. And that was a lesson we kind of learned the hard way at one point where we missed a deal. We weren't in a position to buy, but we had ever since then we've put ourselves in a position to buy.

Trevor Hall [00:22:39] It almost seems like a very contrarian way of running a company.

Tony Jensen [00:22:42] Well, it is, it is. But, you know, in business school, they teach just to buy low and sell high. So it's not really that contrarian, it's just a matter of being patient. And the hardest thing that a CEO has to do is to be patient.

Trevor Hall [00:23:00] I could understand that, especially when you're answering to shareholders who, anymore are demanding action all the time. Right?

Tony Jensen [00:23:08] They are, and their desires tend to change over time. Sometimes they're very much focused and disciplined. Other times you're focused on growth. And I think we're in a much healthier place, industry and investor today than what we were seven years ago.

Trevor Hall [00:23:26] I wanted to ask you about you, Tony, the deal maker. Because I've asked a few people in leading up to this conversation, and I'm meeting Tony, I want to ask him about, you know, his version of the art of the deal. You know, and a couple of times people have mentioned, you know, you have a reputation of being a tough negotiator at the table. And I just am kind of curious, you know, how do you when you get two parties at the table and they each want something different out of the same outcome? You know what type of, did it take some practice for you to really understand how to approach these deals, how to approach people, how to respect the person across the table, and then also ultimately sometimes just walking away and say it's not going to happen?

Tony Jensen [00:24:22] So there's there's all different degrees of negotiating. But when you're locked in, when you're locked in and you've got to an executed term sheet and both parties realize that this is a good deal for both companies, you know, you're in a position where you're going to find a way through. Now, I may feel stronger about one position than you feel about another, but you can recast that deal and make it on the same economic terms for both parties, and both parties can be happy with the outcome. Maybe you need more flexibility, maybe I need more security. It might not be necessarily an economic factor upfront. Maybe you need a line of credit. Things like that. We can talk about other things that can enhance the deal, yet still keep it economically neutral. And in, I love dealmaking. I really do. And the smarter and more capable the counterparty, the more I enjoy it because that means you're only talking about the really important issues. If you're working with an inexperienced counterpart, you know, there's a level of trust that you have to build over a period of time and to make sure that one doesn't feel like you're getting taken advantage of. But when you come with a very experienced group of people and the conversations move fast, it's just a thrill.

Trevor Hall [00:25:57] Do you feel like the royalty company comes to the table with more tools in its tool kit than the producing company does?

Tony Jensen [00:26:06] No, my gosh. We've done deals with smaller companies and larger companies and you can find lots of tools in their tool kit. I mean, just islands of brilliance that we've encountered. And again we really want, you really want to, you shouldn't single up against that's not really what we do at Royal Gold. In my experience, I don't speak for Royal Gold today, but when I was was working with them, we come with a partner attitude and we start with it. We negotiate with it and we operate with it.

Trevor Hall [00:26:41] So we're those traits of some negotiation, you know, what were those first, you know, you as CEO early days, that were doing those negotiations. Was it difficult for you? I mean, and how did you evolve to make those dealmakers better?

Tony Jensen [00:26:59] Well, you know, again, I had, I just had a bunch of great mentors that I was close to for 20 years in Placer Dome, where I had a chance to get close to a number of different things. And maybe it wasn't doing a billion-dollar royalty and streaming transaction. Maybe it was negotiated on a fleet of trucks at a mine site, or maybe it was a blasting contract or maybe it was a chance to work alongside the Latin America team to sell our interest in Zaldivar. But there is just, I mean, it just doesn't happen overnight. You have to be given an opportunity and you don't have to have a formal mentor, but watch people and see what they do and see what works to see what doesn't. And then the deals we started here at Royal Gold were, you know, a five million dollar deal was a big deal for us in the early days. Royal Gold was only a 400 million dollar market cap company in 2003. So it doesn't matter where you come to the table, the matter of the deal size with the same magnitude, the same respect for your counterparty.

Trevor Hall [00:28:11] If this interview, say, makes the rounds throughout the office here, you know, and these were some parting words of yours, I mean, what advice would you give your colleagues in the entire royalty space as they move forward?

Tony Jensen [00:28:30] Maintain your business model. Stick to your knitting, do what you do best. Protect the integrity of the business model. The thing that we have been so fortunate to do in the streaming royalty sector is having the complement of market to provide us with a premium in the marketplace. The streaming sector, royalty sector, I'll use those terms interchangeably, has always been since I've been involved with it at a higher premium valuation than any other sector of this business. And that can be destroyed in a heartbeat by going too far adrift from the principles of what investors invest in. They're investing in growth. They're investing in a lower-risk vehicle, a vehicle that doesn't necessarily have capital and in operating risk obligations to it, something that's very simple, scalable and diverse. If you can keep all those things available, the premium will still be there. And you know, growth happens when growth happens, you can't force it. When you do, you're probably doing a dilutive deal. And so patients in protecting the business model, the two things I would leave behind.

Trevor Hall [00:29:53] How about for management executives who are on the other side of the table negotiating with royalty companies, what advice would you give them?

Tony Jensen [00:30:01] I would say that one is equally quick to tell, and I would say give royalty financing a fair shake. As an operator, often royalties and streams were thought of as parasites and those were put in place for a very good reason. Often their previous owners or something of the property and they gave the operating company the venue to move into production. Today, it's a much more sophisticated product, but compare equity, compare debt, and compare streaming royalty financing on a per-share basis over time. Equity is not free, and this is another thing that I've always considered by my operating philosophy more back to the basics than anything new. At Royal Gold, we had the lowest share count, still do, of any company in the GDX. We really, really coveted and cared for and stewarded the shares. We didn't simply issue every time an investment banker came by and said, you know, you've got all kinds of people that are interested in a piece of it because we knew that the dilution would catch up to us. And so we only wanted to issue as much as we needed to continue to grow the business and that we couldn't fund out of cash flow because funny or not, cash flow is probably the most creative thing that anybody can do in their company. So if you compare as an operator stream in royalty financing, I think if you pull all your guards down, you would find out that it has a significant amount of attributes and it's very competitive, especially when a company thinks about risk diversification and they think, well, maybe I'm in a country I just don't want to put two billion dollars into. I'm okay with a billion, but don't risk the whole company in that country, on that country or that deposit or whatever it might be. Instead of bringing me a jayvee partner, which has a lot of the attributes of a stream, except the streamer doesn't sit at the table and doesn't get in the way of operational decisions. I think if you keep that with an open mind, it can be a very good cost of capital. First and secondly, a good replacement for other business models that we have, other structures that we have in business.

Trevor Hall [00:32:45] I don't want to take up too much more of your time, so I want to start trying to wrap things up, Tony. But I do want to say that, you know, in the last few years that I have known you like, you have always given me a little bit of your time. So I really appreciate that.

Tony Jensen [00:32:58] You're welcome. I know you've given me your time as well. Thank you.

Trevor Hall [00:33:00] You're one of the nicest guys I've ever met in the space. Some years of wisdom. So thank you so much for that. But I don't want to hog all that. I don't want to keep him for myself. And so, you know, for people as we now enter this bull market and maybe the explorers and the juniors will finally start catching on and we'll see more volumes into their stocks from people investing. What would your advice be to them as they continue to maybe reallocate capital from general markets over to resource investing?

Tony Jensen [00:33:36] So, first of all, I look at gold as an investment for all times, not just in a potential uprising of the gold price. If you look at the World Gold Council in, I think it's called Gold Hub, they have a very interesting chart there that shows how gold performed in the last 15 years, last 10 years. Last five years against the S&P 500 and in the U.S. dollar and all kinds of different things. And it's an attractive investment in many different environments. So I would say don't necessarily look to gold as a short term play and an option or a sectoral play. Look at it as a long term investment. And then once you've crossed over that, then picking a gold investment is probably the most challenging thing that a new entrant would have to do. And it's very, very difficult for a new entrant to go in and pick that one asset company. You live and die by that one, that one asset. And so I would say look for a diverse portfolio, look for a solid record, track record, and then do your homework and look at the trading multiples for that particular company, how that company trades and see if it's the right time to invest.

Trevor Hall [00:35:02] Do I ask you, stock picks now?

Tony Jensen [00:35:06] Never. I won't give you any of that.

Trevor Hall [00:35:09] Tony, thank you so much for your time. I'm really glad and congratulations on your retirement.

Tony Jensen [00:35:13] Thank you very much.

Trevor Hall [00:35:14] What's the next chapter in your life?

Tony Jensen [00:35:17] Oh, okay. I've already joined one board. I've agreed to join.

Trevor Hall [00:35:20] So you're still working?

Tony Jensen [00:35:21] You know, I love the business, and I'm not really too interested in managing anything anymore. I don't want to go too far away from the business. One of the companies that I'm involved with is in the utility electric and natural gas. So I love learning things and I'm learning a lot there. And the other one is in the mining sector. But there's that, there's family, there are all kinds of things I have interests in and there's a lot of debt that I need to pay back to society. So I hope to find some good things to do with my time socially as well.

Trevor Hall [00:35:55] Well, I hope you enjoy that.

Tony Jensen [00:35:57] Thanks.

Trevor Hall [00:35:58] Thank you so much, Tony. Tony Jensen, the now-former CEO of Royal Gold.