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 $23.7 million, or $0.36 per share, on revenue of $107.0 million in its fiscal third quarter ended March 31, 2017 (“third quarter”). Earnings increased significantly compared to the prior year quarter net loss attributable to stockholders of $67.7 million, or ($1.04) per share, on revenue of $93.5 million.
Third Quarter Highlights as Compared to the Prior Year Quarter:
- Record operating cash flow of $76.1 million, an increase of 15%
- Revenue of $107.0 million, an increase of 14%
- Volume of 87,700 Gold Equivalent Ounces (“GEOs”1), an increase of 11%
- Dividends paid of $15.7 million, an increase of 4%
- Average gold price of $1,219, an increase of 3%
“We generated our second straight quarter of record operating cash flow, and paid down $45 million of debt,” commented Tony Jensen, President and CEO. “With no additional funding requirements, cash flow from our diverse stream and royalty portfolio on 38 operating properties will continue to strengthen our balance sheet. At the same time, we look forward to three new or expanding sources of revenue currently in development, including New Gold’s Rainy River mine, Barrick’s Cortez Crossroads mine, and Goldcorp’s Pyrite Leach Project at the Peñasquito mine. We expect these new projects to be commissioned in calendar 2017, 2018 and 2019, respectively, providing further growth and revenue diversification.”
___________
| 1 | GEOs are calculated as revenue divided by the average gold price for the same period. GEOs net of stream payments were 69,400 in the third quarter, compared to 63,900 a year ago. |
Third Quarter Overview
Third quarter revenue of $107.0 million included stream revenue of $76.6 million and royalty revenue of $30.4 million. Stream segment gold purchases were approximately 50,000 ounces, while sales totaled approximately 58,000 ounces. Stream segment silver purchases were approximately 374,000 ounces and silver sales were approximately 322,000 ounces. The Company had approximately 15,000 gold ounces and 375,000 silver ounces in inventory at March 31, 2017, as previously announced, compared to approximately 24,000 gold ounces and 323,000 silver ounces in inventory at December 31, 2016.
Total revenue increased 14% from the prior year quarter. Higher sales from our Mount Milligan and Pueblo Viejo streams relative to the prior year quarter more than offset lower sales from our Andacollo stream, which was due to timing of concentrate shipments.
Third quarter cost of sales was $22.4 million, compared to $17.9 million in the prior year quarter. The increase was primarily due to higher gold sales from Mount Milligan and increased gold and silver sales from Pueblo Viejo. Cost of sales is specific to our stream agreements that call for Royal Gold’s purchase of gold and silver for a cash payment per ounce.
General and administrative expenses decreased to $5.4 million in the third quarter, compared to $7.7 million in the prior year quarter. The decrease was primarily related to lower non-cash stock-based compensation charges.
Exploration costs, which are related to our Peak Gold joint venture (“Peak Gold”) in Alaska, totaled $2.6 million in the third quarter, compared to $1.9 million in the prior year quarter. As of March 31, 2017, Royal Gold had earned a 24.9% interest in the joint venture. Peak Gold is currently preparing a resource estimate which is expected to be complete by the end of the June 2017 quarter.
Interest and other income decreased during the third quarter to $1.3 million from $3.1 million in the prior year quarter. The decrease was primarily due to a realized gain on the sale of marketable securities during the prior year quarter and a decrease in the fair value of certain warrants we own.
We recognized a third quarter income tax expense of $6.5 million, compared with an income tax benefit of $8.3 million during the prior year quarter. This resulted in an effective tax rate of 23.2% in the current period. The prior year effective tax rate of 10.6% reflected impairment charges recorded a year ago.
At March 31, 2017, we had current assets of $134.2 million compared to current liabilities of $24.8 million, resulting in working capital of $109.4 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 March 31, 2017, the Company had $350 million available and $300 million outstanding under its revolving credit facility. In the third quarter, the Company repaid $45.0 million of the outstanding borrowings under the revolving credit facility. Working capital, combined with the Company’s undrawn revolving credit facility, resulted in approximately $459.4 million of total available liquidity at March 31, 2017.
Recent Developments
Mount Milligan Stream Amendment
We began receiving gold and copper deliveries reflecting the amended Mount Milligan stream agreement in April 2017. Under the terms of the amendment, our 52.25% gold stream 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. Under the terms of both the original and amended agreements, there is a maximum of five months between concentrate shipment and final settlement.
Royal Gold expects that, on the basis of its current stream and royalty portfolio, approximately 85% of the next several fiscal years’ revenue will come from precious metals.
Wassa and Prestea Gold Stream Acquisition
On January 3, 2017, the Company made the final scheduled payment of $10.0 million under the Wassa and Prestea streaming agreement. The Company has no further upfront payment obligations associated with the Wassa and Prestea gold stream. Commercial production was achieved at Wassa Underground on January 1, 2017. Commercial production at Prestea Underground is currently expected to be achieved in the third calendar quarter of 2017. Upon the earlier of either commercial production from Prestea Underground or January 1, 2018, our streaming interest associated with Golden Star’s Ghanaian assets will increase from 9.25% to 10.5%.
Attributable Reserves
Royal Gold announces updated estimates of ore reserves and mineralized material1 attributable to the Company’s stream, royalty and similar interests as of December 31, 2016. These figures are provided by the operators of properties on which the Company holds these interests, or are obtained by Royal Gold through publicly available information.
On a gold equivalent basis2, using a silver to gold ratio of approximately 70:1 and a copper to gold ratio of 450:1, metals reserves attributable to Royal Gold were 6.7 million ounces, on a net reserve basis, compared with 6.8 million ounces for the same period ended 2015. The complete Royalty/Metal Stream Portfolio, which includes the ore reserves and mineralized material1 subject to the Company's interests on producing and development properties, can be found on our website.
___________
| 1 | The U.S. Securities and Exchange Commission does not recognize this term. Mineralized material is that part of a mineral system that has potential economic significance but cannot be included in the proven and probable ore reserve estimates until further drilling and metallurgical work is completed, and until other economic and technical feasibility factors based upon such work have been resolved. Investors are cautioned not to assume that any part or all of the mineral deposits in this category will ever be converted into reserves. | |
| 2 | Gold equivalent basis is calculated as total attributable gold ounces, plus silver ounces calculated as 70 silver ounces equivalent to one gold ounce, plus copper calculated as 450 pounds of copper equivalent to one gold ounce. |
PROPERTY HIGHLIGHTS
A summary of third quarter and historical production can be found on Tables 1 and 2. Calendar year 2017 production estimates of the operators of certain properties in which we have interests versus actual production at those properties can be found on Table 3. Results of our streaming business for the third quarter, compared to the prior year quarter, can be found on Table 4. Highlights at certain of the Company’s principal producing and development properties during the third quarter, compared to the prior year quarter, are detailed in our Form 10-Q.
CORPORATE PROFILE
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 third quarter results will be held on Thursday, May 11, 2017, 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.
Third Quarter Earnings Call Information:
| Dial-In Numbers: | 855-209-8260 (U.S.); toll free | ||||
| 855-669-9657 (Canada); toll free | |||||
| 412-542-4106 (International) | |||||
| Conference Title: | Royal Gold | ||||
| Webcast URL: |
www.royalgold.com under Investors, Events & Presentations |
