Royal Gold Reports Record Operating Cash Flow in its Second Quarter 2017
DENVER--(BUSINESS WIRE)-- Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports net income attributable to stockholders (“net income”) of $28.1 million, or $0.43 per share, on revenue of $107.0 million in its fiscal second quarter ended December 31, 2016 (“second quarter”). Earnings increased significantly compared to the prior year quarter net income of $15.1 million, or $0.23 per share, on revenue of $98.1 million.
Second Quarter Highlights as Compared to the Prior Year Quarter:
- Record operating cash flow of $69.7 million, an increase of 34%
- Revenue of $107.0 million, an increase of 9%
- Earnings per share of $0.43, an increase of 87%
- Volume of 87,600 Gold Equivalent Ounces (“GEOs”1), in line with prior year
- Dividends paid of $15.0 million, an increase of 5%
- Average gold price of $1,222, an increase of 10%
“In the second quarter, a higher gold price combined with strong portfolio contributions to yield our highest operating cash flow in Company history,” commented Tony Jensen, President and CEO. “Our investment commitments at Rainy River and Golden Star are now complete, and Royal Gold has no other required funding commitments. Our growth profile is among the most compelling in the gold streaming business, and it is fully bought and paid for.”
Amended Stream at Mount Milligan
On October 20, 2016, Royal Gold amended its streaming interest at the Mount Milligan mine, now owned by a subsidiary of Centerra Gold Inc. (“Centerra”).
Under the terms of the amendment, our 52.25% gold stream at Mount Milligan has been amended to a 35.0% gold stream and an 18.75% copper stream. We will continue to pay $435 per ounce of gold delivered and will pay 15.0% of the spot price per metric tonne of copper delivered. Mount Milligan gold in concentrate that was in transit prior to October 20, 2016 will be delivered to us under the current 52.25% stream. Under the terms of both the original and amended agreements, there is a maximum of five months between concentrate shipment and final settlement, and the Company expects to begin receiving gold and copper deliveries reflecting the amended stream agreement in April 2017.
After transition to the amended stream, Royal Gold expects that, on the basis of its current stream and royalty portfolio, approximately 85% of total future net revenue will come from precious metals and 15% from base metals.
Rainy River Gold and Silver Stream Acquisition
The Company’s final scheduled payment of $75.0 million, as part of its Rainy River gold and silver stream acquisition, was made in November 2016. The Company has no further upfront payment obligations associated with the Rainy River gold and silver stream.
Wassa and Prestea Gold Stream Acquisition and Amendment
On January 3, 2017, the Company made the final scheduled payment of $10.0 million. The Company has no further upfront payment obligations associated with the Wassa and Prestea gold stream.
Second Quarter Overview
Second quarter revenue of $107.0 million included stream revenue of $74.0 million and royalty revenue of $33.0 million. Stream segment gold purchases and sales totaled approximately 53,000 ounces. Stream segment silver purchases were approximately 323,000 ounces and silver sales were approximately 543,000 ounces. The Company had approximately 24,000 gold ounces and 323,000 silver ounces in inventory at December 31, 2016, as previously announced, compared to approximately 24,000 ounces of gold and approximately 544,000 ounces of silver at September 30, 2016.
Second quarter cost of sales was $22.5 million, in line with the year ago quarter. Cost of sales is specific to our stream agreements and is the result of Royal Gold’s purchase of gold and silver for a cash payment.
General and administrative expenses were $7.5 million in the second quarter, compared to $5.8 million in the year ago quarter. The increase was primarily related to increased legal and litigation costs, as well as higher non-cash compensation charges.
Exploration costs, which are related to our Peak Gold joint venture in Alaska, totaled $2.5 million in the second quarter, compared to $1.1 million in the year ago quarter. As of December 31, 2016, Royal Gold had earned a 20.6% interest in the Peak Gold joint venture.
Interest and other income increased to $7.5 million from $0.4 million a year ago. The increase was due to non-recurring gains on restructuring of certain stream and royalty interests.
We recognized a second quarter income tax expense of $5.0 million, compared with income tax expense of $4.7 million during the year ago quarter. This resulted in an effective tax rate of 15.7% in the current period, compared with 25.4% in the quarter ended December 31, 2015.
At December 31, 2016, we had current assets of $136.2 million compared to current liabilities of $22.3 million, resulting in working capital of $113.9 million. This compares to current assets of $164.8 million and current liabilities of $22.7 million at June 30, 2016, resulting in working capital of $142.1 million. As of December 31, 2016, the Company had $305 million available and $345 million outstanding under its revolving credit facility. Working capital, combined with the Company’s undrawn revolving credit facility, resulted in approximately $418.9 million of total liquidity at December 31, 2016.
A summary of second quarter and historical production can be found on Tables 1 and 2. Calendar year 2016 production estimates versus actual production at certain producing properties can be found on Table 3. Results of our streaming business for the second quarter, compared to the year ago quarter, can be found on Table 4. Highlights at certain of the Company’s principal producing and development properties during the second quarter, compared to the year ago quarter, are detailed in our Form 10-Q.
Royal Gold is a precious metals stream and royalty company engaged in the acquisition and management of precious metal streams, royalties and similar production based interests. The Company owns interests on 193 properties on six continents, including interests on 38 producing mines and 22 development stage projects. Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol “RGLD.” The Company’s website is located at www.royalgold.com.
Note: Management’s conference call reviewing the second quarter results will be held on Thursday, February 2, 2017, followed by a conference call that day at noon Eastern Time (10:00 a.m. Mountain Time). The call will be webcast and archived on the Company’s website for a limited time.
Second Quarter Earnings Call Information:
|Dial-In Numbers:||855-209-8260 (U.S.); toll free|
|855-669-9657 (Canada); toll free|
|Conference Title:||Royal Gold|
www.royalgold.com under Investors, Events & Presentations
|Three Months Ended||Three Months Ended|
|December 31, 2016||December 31, 2015|
|Wassa and Prestea||Gold||$||4,921||4,000||oz.||$||9,776||8,800||oz.|
|Total stream revenue||$||74,007||$||67,312|
|Total royalty revenue||$||32,954||$||30,806|
|Stream/Royalty||Metal(s)||Six Months Ended||Six Months Ended|
|December 31, 2016||December 31, 2015|
|Wassa and Prestea||Gold||$||10,920||8,600||oz.||$||13,400||12,000||oz.|
|Total stream revenue||$||159,511||$||105,168|
|Total royalty revenue||$||65,398||$||67,005|