Royal Gold Reports Second Quarter 2020 Results

DENVER–(BUSINESS WIRE)–Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports net income of $41.3 million, or $0.63 per share, on revenue of $123.6 million in its fiscal second quarter ended December 30, 2019 (“second quarter”).

Second Quarter Key Metrics Compared to Prior Year Quarter:

  • Revenue of $123.6 million, an increase of 26.7%
  • Operating cash flow of $78.3 million, an increase of 33.0%
  • Volume of 83,500 GEOs1, an increase of 4.9%
  • Dividends paid of $17.4 million, an increase of 6.1%
  • Repaid $35.0 million on revolving credit facility
  • Average price of $1,481 per gold ounce, an increase of 20.8%

Royal Gold delivered another solid operating quarter. Continuing our disciplined approach to capital allocation, we strengthened the balance sheet further by paying down our credit facility, and we remain well positioned with approximately $1 billion of liquidity available for new business opportunities,” commented Bill Heissenbuttel, President and CEO. “Our strong operating cash flow allowed us to raise our calendar year dividend in November to $1.12 per share, which is the 19th consecutive annual increase since we started paying a dividend in calendar 2000. We are the only member of the VanEck Vectors Gold Miners ETF (the “GDX”) that has raised its dividend every year since the GDX was formed in 2006.”

“With respect to our portfolio,” Mr. Heissenbuttel continued, “we saw positive developments during the quarter with good progress at the Khoemacau project, and solid operating results at both Mount Milligan and Rainy River. We were also pleased to see long term resolutions to some recent issues, with the signing of a new 36-month collective agreement with the Workers’ Union at Andacollo, and a new 30-year agreement to secure sustainable water for the San Juan de Cedros community at Peñasquito. Both operations have returned to normal production levels after these agreements were reached.”

________________________

  1. Gold Equivalent Ounces (“GEOs”) are calculated as revenue divided by the average gold price for the same period. GEOs, net of stream payments, were 69,300 in the second quarter, compared to 64,800 in the prior-year quarter.

Recent Developments

Khoemacau Project

According to Khoemacau Copper Mining (Pty.) Limited (“KCM”), progress continued at the Khoemacau Project (“Khoemacau”) in Botswana, and the project reached approximately 26% of construction completion at the end of the second quarter with 77% of the capital committed. Also, according to KCM, there are approximately 1,600 workers currently on site, with activities focused on completing excavation of the boxcuts, construction of accommodation, power and water infrastructure at Zone 5, completing construction of the access road between Zone 5 and the Boseto mill, and refurbishment of the Boseto mill. The mining contractor has been mobilized and much of the initial underground mining fleet has arrived on site and is being commissioned, with handover of the first boxcut from KCM to the contractor scheduled to begin in early February, which is slightly delayed from previous estimates due to slower than planned excavation advance.

On February 5, 2020, Royal Gold made the second advance payment of $22.0 million under the Khoemacau stream agreement. Royal Gold’s remaining commitment ranges from $124.2 million for the base stream of 80% of payable silver up to $177.2 million should KCM elect to increase the stream from 80% up to 100% of payable silver. Further payments are subject to certain conditions and are scheduled to be made on a quarterly basis using an agreed formula and certification process as project spending progresses.

KCM continues to expect the first shipment of concentrate by mid-2021.

Mount Milligan

On October 30, 2019, Centerra Gold Inc. (“Centerra”) reported that it is preparing an updated 43-101 technical report on the Mount Milligan mine that will incorporate changes to long-term gold recoveries, operating costs, optimization studies and exploration drilling. The publication of this report is expected within the coming months. Centerra expects a material reduction in the mineral reserves and mineralized material at Mount Milligan, although it has acknowledged that the extent of any changes in reserves and mineralized material cannot be precisely determined until all relevant studies and modeling have been completed. It is unclear at this point what impact, if any, the results of this work will have on the carrying value of Royal Gold’s stream interest at Mount Milligan. As of December 31, 2019, Royal Gold’s depletion rate of its interest at Mount Milligan was $402 per ounce of gold and $0.81 per pound of copper production.

Andacollo

On October 13, 2019, Teck Resources Limited (“Teck”) reported that the Carmen de Andacollo Workers Union gave notice that a strike would commence on October 14, 2019. Operations were suspended except for essential activities required to maintain safety and the environment. On December 5, 2019, Teck reported that the Workers Union ratified a new 36-month collective agreement and operations had resumed.

The impact of the strike on Royal Gold is expected to be reflected in the Company’s financial results beginning with the quarter ended June 30, 2020, as gold deliveries from Andacollo are generally received within six months of concentrate shipment.

Peñasquito

Royalty revenue for the quarter was impacted by a shutdown of mine operations resulting from a blockade of the mine by a trucking contractor and members of the San Juan de Cedros community (one of 25 neighboring communities) that started on September 14, 2019. Newmont, as operator, reported that the blockade of the Peñasquito mine was lifted on October 8, 2019, concentrate shipments resumed immediately thereafter, and that the site returned to full operation after a 10-day restart process which commenced on October 22, 2019. Despite the shutdown, gold, silver and lead production attributable to our royalty interest at Peñasquito increased approximately 79%, 85% and 71%, respectively, while zinc production decreased approximately 13% when compared to the prior year quarter.

On December 13, 2019, Newmont further reported that the Peñasquito mine and the San Juan de Cedros community had agreed to a 30-year infrastructure solution securing sustainable water availability for the community’s domestic and agricultural uses, which represents a significant milestone and an important step in the ongoing negotiations between the parties.

For calendar 2020, Newmont expects a full year of operations at Peñasquito with higher grades, leading to production of an estimated 575,000 ounces of gold, 30 million ounces of silver, 425 million pounds of zinc and 200 million pounds of lead.

Rainy River

New Gold Inc. (“New Gold”) reported total gold production from Rainy River for the December 2019 quarter of 51,100 ounces and 253,800 ounces for calendar 2019, achieving the lower end of annual gold production guidance of 245,000 to 270,000 ounces. New Gold reported average mill throughput for the December 2019 quarter of 22,521 tonnes per day, including average throughput of 24,858 tonnes per day for November and December, exceeding the target range of 24,000 tonnes per day and original design of 21,000 tonnes per day. New Gold also reported that mill availability averaged 89% for the quarter and gold recovery averaged 91%, in line with plan.

New Gold reported that it continued to advance a comprehensive mine optimization study at Rainy River that includes a review of alternative open pit and underground mining scenarios. New Gold expects the results of this study to be released on February 13, 2020. As of December 31, 2019, Royal Gold’s depletion rate of its interest at Rainy River was $591 per ounce of gold and $6.34 per ounce of silver production.

Wassa

Golden Star Resources Ltd. (“Golden Star”) reported total gold production from Wassa for the quarter of 41,000 ounces and 156,000 ounces for calendar 2019, achieving its revised annual gold production guidance of 150,000 to 160,000 ounces. During the quarter, Wassa delivered grades of 3.78 grams per tonne, 33% higher than the September 2019 quarter, as mining progressed in the 595 and 620 Levels. Wassa continued to deliver mining rates in excess of 4,000 tonnes per day during the quarter. For calendar 2020, Golden Star expects mining rates to average in excess of 4,000 tonnes per day, with resulting production between 155,000 and 165,000 ounces.

On November 13, 2019, Golden Star reported it continues to intersect significant higher-grade gold mineralization from infill and step out surface drilling on the southern extensions of the Wassa deposit. The drilling has been successful in converting portions of the Inferred Mineral Resource to Indicated as well as better defining the Inferred Mineral Resource at depth and along the hanging wall and footwall lodes peripheral to the main B-Shoot mineralization. According to Golden Star, a better understanding of the mineralization at depth resulting from this drilling will be incorporated into the ongoing geological interpretation update that will be the basis for Golden Star’s calendar 2019 year-end mineral resource estimation.

Alturas Royalty Acquisition

Subsequent to the end of the quarter, on January 29, 2020, a subsidiary of the Company entered into an agreement with various private individuals for the acquisition of a net smelter return royalty of up to 1.06% on gold and up to 1.59% on copper on mining concessions located in the Coquimbo Region of Chile held by Compañia Minera Salitrales Limitada (“CMSL”), a wholly owned subsidiary of Barrick Gold Corporation (“Barrick”), for total consideration of up to $41.0 million, including an upfront payment of $11.0 million and potential future payments of up to $20.0 million on a construction decision and up to $10.0 million on first production from the concessions. The potential future payment for a construction decision may be reduced depending on the mineable material in a mine plan at the date of a construction decision. As of December 31, 2018, Barrick disclosed mineralized material of 261 million tonnes at a gold grade of 1.06 grams per tonne at the Alturas Project, which is located on the CMSL concessions.

Second Quarter 2020 Overview

Second quarter revenue was $123.6 million compared to $97.6 million in the prior year quarter, with second quarter stream revenue totaling $89.6 million and royalty revenue totaling $34.0 million. The increase in total revenue for the second quarter compared to the prior year quarter resulted primarily from an increase in stream revenue and an increase in average gold and silver prices. The increase in stream revenue was primarily attributable to an increase in gold sales at Andacollo, Pueblo Viejo and Rainy River, and higher copper sales at Mount Milligan. This increase was partially offset by lower gold sales at Mount Milligan primarily due to timing of deliveries.

Second quarter cost of sales was approximately $21.1 million, compared to $18.2 million in the prior year quarter. The increase was primarily due to increased gold sales at Andacollo and increased gold and silver prices when compared to the prior year quarter. Cost of sales, which excludes depreciation, depletion and amortization, is specific to the Company’s stream agreements and is the result of the purchase of gold, silver and copper for a cash payment.

Interest and other expense decreased to $2.2 million in the second quarter from $7.4 million for the prior year quarter. The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding when compared to the prior period.

The Company recognized a second quarter income tax expense of $11.1 million, compared to an income tax benefit of $2.1 million during the prior year quarter, which resulted in an effective tax rate for the second quarter of 21.6% compared to (10.3)% for the prior year quarter. The lower effective tax rate for the prior year quarter was primarily attributable to the Company’s updated analysis of the tax impacts of H.R. 1, originally known as the Tax Cuts and Jobs Act.

As of December 31, 2019, the Company had current assets of $136.4 million compared to current liabilities of $44.1 million, resulting in working capital of $92.3 million. This compares to current assets of $154.7 million and current liabilities of $33.6 million at June 30, 2019, resulting in working capital of $121.1 million.

During the second quarter, liquidity needs were met from net cash provided by operating activities and available cash resources. During the three months ended December 31, 2019, the Company repaid $35 million of the outstanding borrowings under the revolving credit facility. As of December 31, 2019, the Company had $135 million outstanding and $865 million available under its revolving credit facility. Working capital, combined with the undrawn portion of the Company’s revolving credit facility, resulted in approximately $1.0 billion of total liquidity at December 31, 2019.

Property Highlights

A summary of second quarter and historical production reported by operators of the Company’s principal stream and royalty properties can be found on Tables 1 and 2. Calendar year 2019 operator production estimates for these properties compared to actual production at those properties through December 31, 2019 can be found on Table 3. Results of the streaming business for the second 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 second quarter, compared to the prior year quarter, will be detailed in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2019.

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. As of December 31, 2019, the Company owned interests on 187 properties on five continents, including interests on 43 producing mines and 15 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 6, 2020, 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

 

 

412-542-4106 (International)

Conference Title:

 

Royal Gold

Webcast URL:

 

www.royalgold.com under Investors, Events & Presentations

Cautionary “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained in this release. These forward-looking statements include, among others, statements about portfolio developments, including progress at the Khoemacau Project and operators’ production estimates for Peñasquito and Wassa; the estimated timeframe for the first shipment of concentrate at Khoemacau; Centerra’s expectation of reduced reserves and the uncertain impact on the Company of the results of the anticipated updated 43-101 technical report at Mount Milligan; the timing of deliveries from Andacollo resulting from the previous suspension of operations; the anticipated release of the mine optimization study at Rainy River; and potential future payments in connection with the Alturas royalty acquisition. Factors that could cause actual results to differ materially from projections include, among others: precious metals, copper and nickel prices; performance of and production at the Company’s stream and royalty properties; decisions and activities of the operators of the Company’s stream and royalty properties; unanticipated grade, environmental, geological, seismic, metallurgical, processing, liquidity or other problems the operators of the Company’s stream and royalty properties may encounter; operators’ inability to access sufficient raw materials; water or power problems; changes in operators’ project parameters as plans continue to be refined, including reductions in estimates of reserves and mineralization by the operators of the Company’s stream and royalty properties; the ability of operators to finance project construction to completion and bring projects into production as expected, including development stage mining properties, mine and mill expansion projects and other development and construction projects; operators’ delay in securing or inability to secure or maintain necessary governmental permits; contests to the Company’s stream and royalty interests and title and other defects in the properties where the Company holds stream and royalty interests; errors or disputes in calculating stream deliveries and royalty payments, or deliveries or payments not made in accordance with stream and royalty agreements; the risks associated with conducting business in foreign countries, including application of foreign laws to contract and other disputes, foreign environmental laws and enforcement of those laws; economic and market conditions; changes in laws governing the Company and its stream and royalty interests or the operators of the properties subject to the interests, and other subsequent events; as well as other factors described in the Company’s most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made in this press release. Readers are cautioned not to put undue reliance on forward-looking statements.

Statement Regarding Third-Party Information: Certain information provided in this press release, including without limitation production estimates, has been provided to us by the operators of the relevant properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission. Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for the accuracy, completeness or fairness of any third-party information and refers the reader to the public reports filed by the operators for information regarding those properties.

Information in this press release concerning the Khoemacau Project mine life, average annual payable copper and silver production, silver contribution to mine revenue, cost information and initial deliveries of silver under the streaming agreement was provided to the Company by Cupric Canyon Capital L.P., the privately held owner and developer of Khoemacau. This information may not have been prepared in accordance with applicable laws, stock exchange rules or international standards governing preparation and public disclosure of technical data and information relating to mineral properties. Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for the accuracy, completeness or fairness of this third-party information, and investors are cautioned not to rely on this information.

TABLE 1

Second Quarter Fiscal 2020

Revenue and Operators’ Reported Production for Principal Stream and Royalty Interests

(Amounts in thousands, except reported production in oz. and lbs.)

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

 

December 31, 2019

 

December 31, 2018

 

 

 

 

 

 

Reported

 

 

 

Reported

Stream/Royalty

 

Metal(s)

 

Revenue

 

Production(1)

 

Revenue

 

Production(1)

Stream:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mount Milligan

 

 

 

$

30,629

 

 

 

 

$

28,169

 

 

 

 

 

Gold

 

 

 

 

12,900

oz.

 

 

 

 

17,700

oz.

 

 

Copper

 

 

 

 

4.3

Mlbs.

 

 

 

 

2.4

Mlbs.

Pueblo Viejo

 

 

 

$

23,614

 

 

 

 

$

18,230

 

 

 

 

 

Gold

 

 

 

 

10,500

oz.

 

 

 

 

8,900

oz.

 

 

Silver

 

 

 

 

462,400

oz.

 

 

 

 

509,500

oz.

Andacollo

 

Gold

 

$

20,665

 

13,900

oz.

 

$

7,635

 

6,200

oz.

Rainy River

 

 

 

$

7,562

 

 

 

 

$

4,095

 

 

 

 

 

Gold

 

 

 

 

4,500

oz.

 

 

 

 

2,900

oz.

 

 

Silver

 

 

 

 

51,100

oz.

 

 

 

 

36,000

oz.

Wassa

 

Gold

 

$

4,794

 

3,300

oz.

 

$

6,459

 

5,300

oz.

Other(2)

 

 

 

$

2,361

 

1,600

oz.

 

$

3,091

 

2,500

oz.

Total stream revenue

 

 

 

$

89,625

 

 

 

 

$

67,679

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peñasquito

 

 

 

$

7,577

 

 

 

 

$

4,660

 

 

 

 

 

Gold

 

 

 

 

95,800

oz.

 

 

 

 

53,400

oz.

 

 

Silver

 

 

 

 

9.3

Moz.

 

 

 

 

5.0

Moz.

 

 

Lead

 

 

 

 

61.5

Mlbs.

 

 

 

 

36.1

Mlbs.

 

 

Zinc

 

 

 

 

72.1

Mlbs.

 

 

 

 

83.1

Mlbs.

Cortez

 

Gold

 

$

3,292

 

28,000

oz.

 

$

2,335

 

19,900

oz.

Other(2)

 

Various

 

$

23,149

 

N/A

 

 

$

22,918

 

N/A

 

Total royalty revenue

 

 

 

$

34,018

 

 

 

 

$

29,913

 

 

 

Total Revenue

 

 

 

$

123,643

 

 

 

 

$

97,592

 

 

 

TABLE 1

Second Quarter Fiscal 2020

Revenue and Operators’ Reported Production for Principal Stream and Royalty Interests

(Amounts in thousands, except reported production in oz. and lbs.)

 

 

 

 

 

Six Months Ended

 

Six Months Ended

 

 

 

 

December 31, 2019

 

December 31, 2018

 

 

 

 

 

 

 

Reported

 

 

 

 

Reported

Stream/Royalty

 

Metal(s)

 

Revenue

 

Production(1)

 

Revenue

 

Production(1)

Stream:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mount Milligan

 

 

 

$

61,126

 

 

 

 

$

37,015

 

 

 

 

 

Gold

 

 

 

 

29,500

oz.

 

 

 

 

23,300

oz.

 

 

Copper

 

 

 

 

6.7

Mlbs.

 

 

 

 

3.2

Mlbs.

Pueblo Viejo

 

 

 

$

45,232

 

 

 

 

$

37,717

 

 

 

 

 

Gold

 

 

 

 

20,000

oz.

 

 

 

 

18,100

oz.

 

 

Silver

 

 

 

 

938,000

oz.

 

 

 

 

1.0

Moz.

Andacollo

 

Gold

 

$

41,269

 

27,900

oz.

 

$

35,378

 

28,900

oz.

Rainy River

 

 

 

$

14,728

 

 

 

 

$

9,995

 

 

 

 

 

Gold

 

 

 

 

9,100

oz.

 

 

 

 

7,400

oz.

 

 

Silver

 

 

 

 

85,600

oz.

 

 

 

 

67,500

oz.

Wassa

 

Gold

 

$

10,113

 

6,900

oz.

 

$

11,784

 

9,600

oz.

Other(2)

 

Gold

 

$

4,138

 

2,800

oz.

 

$

5,827

 

4,800

oz.

Total stream revenue

 

 

 

$

176,606

 

 

 

 

$

137,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peñasquito

 

 

 

$

11,997

 

 

 

 

$

8,297

 

 

 

 

 

Gold

 

 

 

 

131,300

oz.

 

 

 

 

103,700

oz.

 

 

Silver

 

 

 

 

13.9

Moz.

 

 

 

 

9.2

Moz.

 

 

Lead

 

 

 

 

91.2

Mlbs.

 

 

 

 

65.9

Mlbs.

 

 

Zinc

 

 

 

 

179.2

Mlbs.

 

 

 

 

147.3

Mlbs.

Cortez

 

Gold

 

$

7,709

 

63,100

oz.

 

$

2,939

 

26,900

oz.

Other(2)

 

Various

 

$

46,105

 

N/A

 

 

$

48,633

 

N/A

 

Total royalty revenue

 

 

 

$

65,811

 

 

 

 

$

59,869

 

 

 

Total revenue

 

$

242,417

 

 

 

 

$

197,585

 

 

 

TABLE 2

Operators’ Historical Production

 

 

 

 

 

Reported Production For The Quarter Ended1

Property

Operator

Stream/Royalty

Metal(s)

Dec. 31, 2019

Sep. 30, 2019

Jun. 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Stream:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mount Milligan

Centerra

35% of payable gold

Gold

12,900

oz.

16,600

oz.

23,100

oz.

15,200

oz.

17,700

oz.

 

 

18.75% of payable copper

Copper

4.3

Mlbs.

2.4

Mlbs.

2.5

Mlbs.

2.6

Mlbs.

2.4

Mlbs.

Pueblo Viejo

Barrick (60%)

7.5% of gold produced up to 990,000 ounces; 3.75% thereafter

Gold

10,500

oz.

9,500

oz.

12,400

oz.

10,400

oz.

8,900

oz.

 

 

75% of payable silver up to 50 million ounces; 37.5% thereafter(3)

Silver

462,400

oz.

475,600

oz.

553,000

oz.

469,000

oz.

509,500

oz.

Andacollo

Teck

100% of gold produced

Gold

13,900

oz.

14,000

oz.

14,100

oz.

12,000

oz.

6,200

oz.

Rainy River

New Gold

6.50% of gold produced up to 230,000 ounces; 3.25% thereafter

Gold

4,500

oz.

4,600

oz.

3,500

oz.

5,000

oz.

2,900

oz.

 

 

60% of payable silver up to 3.1 million ounces; 30% thereafter

Silver

51,100

oz.

34,500

oz.

36,400

oz.

40,900

oz.

36,000

oz.

Wassa

Golden Star

10.5% of gold produced up to 240,000 ounces; 5.5% thereafter(4)

Gold

3,300

oz.

3,600

oz.

3,500

oz.

4,400

oz.

5,300

oz.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty:

 

 

 

 

 

 

 

 

 

 

 

 

 

Peñasquito

Newmont Corp.

2.0% NSR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold

95,800

oz.

35,500

oz.

17,800

oz.

37,300

oz.

53,400

oz.

 

 

 

Silver

9.3

Moz.

4.6

Moz.

2.3

Moz.

4.9

Moz.

5.0

Moz.

 

 

 

Lead

61.5

Mlbs.

29.7

Mlbs.

17.0

Mlbs.

34.5

Mlbs.

36.1

Mlbs.

 

 

 

Zinc

72.1

Mlbs.

107.1

Mlbs.

(3.9)

Mlbs.

72.8

Mlbs.

83.1

Mlbs.

Cortez

Nevada Gold Mines

LLC

GSR1, GSR2, GSR3, NVR1, NVR1C

Gold

28,000

oz.

35,100

oz.

37,000

oz.

32,700

oz.

19,900

oz.

Contacts

Alistair Baker

Director, Business Development

(720) 554-6995

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