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Royal Gold Reports First Quarter 2018 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 $28.6 million, or $0.44 per share, on revenue of $112.5 million in its fiscal first quarter ended September 30, 2017. Subsequent to our first quarter-end, New Gold declared commercial production at Rainy River.

Fiscal First Quarter Highlights Compared to Prior Year Quarter:

  • Revenue of $112 million, a decrease of 5%
  • Operating cash flow of $72 million, an increase of 30%
  • Volume of 88,000 GEOs,1 in line with the prior year quarter
  • Dividends paid of $16 million, an increase of 4%
  • Repaid $50 million on revolving credit facility
  • Average gold price of $1,278, down 4%

“The first fiscal quarter reflected steady results, strong cash flow generation, debt reduction, and growth that is already bought and paid for,” commented Tony Jensen, President and CEO. “Our gold and silver stream at Rainy River will further complement Royal Gold’s results in the December quarter. We congratulate New Gold on achieving commercial production at Rainy River ahead of schedule, and we are very pleased to add another Canadian property to our portfolio of 40 worldwide producing interests.”

Recent Developments

New Gold’s Rainy River

On October 19, 2017, New Gold announced that its Rainy River mine, located near Fort Frances, Ontario, achieved commercial production approximately two weeks ahead of schedule. In its first 30 days of operation, New Gold reported that Rainy River successfully processed approximately 457,000 tonnes of ore and that both grade and recoveries have been consistent with its commissioning plan. For the period October 1 to October 24, Rainy River processed an average of 18,500 tonnes per day, which is approximately 88% of nameplate capacity.

On September 28, New Gold announced the approval of its Schedule 2 Amendment that was required to complete construction of the main tailing storage facility.

Royal Gold has a streaming interest on 6.5% of the gold (3.25% after delivery of 230,000 ounces) and 60% of the silver (30% after delivery of 3,100,000 ounces) produced at Rainy River. At calendar year-end 2016, New Gold reported reserves of approximately 3.9 million ounces of gold reserves and 10 million ounces of silver reserves at Rainy River.2

First Fiscal Quarter 2018 Overview

First quarter revenue was $112.5 million compared to $118.0 million in the prior year quarter. Stream and royalty revenue totaled $78.8 million and $33.7 million, respectively, for the quarter. Revenue decreased due to a lower gold price and lower gold sales at Mount Milligan and Andacollo, partially offset by higher sales at Wassa and Prestea and new copper sales from Mount Millligan. Copper deliveries from Mount Milligan began in the June 2017 quarter.

First quarter cost of sales of $20.4 million was below the $22.7 million recorded in the prior year quarter, driven by lower gold sales from Andacollo and Mount Milligan.

General and administrative expenses decreased to $6.9 million in the first quarter, compared to $10.5 million in the prior year quarter. The decrease was primarily related to $1.8 million in lower non-cash stock-based compensation charges and a decrease in legal costs of approximately $1.1 million.

Exploration costs, which are related to our Peak Gold Joint Venture, were $3.2 million in the first quarter, which was in line with the prior year quarter.

Interest and other expense of $8.6 million was in line with the prior year quarter of $8.3 million.

We recognized first quarter income tax expense of $7.5 million, compared to $7.2 million during the prior year quarter. This resulted in an effective tax rate of 22.1% compared to 21.1% in the prior year quarter. The increase was primarily related to a re-measurement of Canadian dollar deferred tax liabilities due to foreign exchange rate changes.

At September 30, 2017, we had current assets of $155.8 million compared to current liabilities of $39.7 million, resulting in working capital of $116.1 million. This compares to current assets of $143.6 million and current liabilities of $34.3 million at June 30, 2017, resulting in working capital of $109.3 million.

During the first quarter, liquidity needs were met from our available cash resources and $84.6 million in revenue net of our streaming payments. The Company repaid $50 million of the outstanding revolving credit facility during the quarter resulting in $800 million available and $200 million outstanding under its revolving credit facility as of September 30, 2017. Working capital, combined with the Company’s undrawn revolving credit facility, totals $916 million of liquidity at September 30, 2017.

______________________________

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 72,000 in the first quarter, compared to 71,300 in the prior year quarter.

2 Cautionary Note to U.S. Investors Concerning Estimates of Proven and Probable Mineral Reserves and Measured and Indicated Mineral Resources: The mineral reserve estimates reported by New Gold were prepared in accordance with Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves. Royal Gold has not reconciled the reserve estimates provided by New Gold with definitions of reserves used by the U.S. Securities and Exchange Commission.

PROPERTY HIGHLIGHTS

A summary of first quarter and historical production reported can be found on Tables 1 and 2. Calendar year 2017 operator production estimates of certain properties in which we have interests compared to actual production through September 30, 2017 can be found on Table 3. Results of our streaming business for the first 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 first quarter, compared to the prior year quarter, are detailed in our Annual Report on Form 10-K.

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 197 properties on six continents, including interests on 40 producing mines and 23 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 first quarter results will be held on Thursday, November 2, 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.

First 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 herein. Such forward-looking statements include statements about cash flow growth, debt reduction and growth already bought and paid for; Rainy River as a new source of revenue providing further growth and revenue diversification; and operators’ production estimates for calendar year 2017. Net gold and metal reserves attributable to Royal Gold’s stream, royalty and other interests are subject to certain assumptions and, like reserves, do not reflect actual ounces that will be produced. Like any stream, royalty or similar interest on a non-producing or not-yet-in-development project, our interests on development projects are subject to certain risks, such as the ability of the operators to bring the projects into production and operate in accordance with their feasibility studies and mine plans, and the ability of Royal Gold to make accurate assumptions regarding valuation and timing and amount of payments. In addition, many of our interests are subject to risks associated with conducting business in a foreign country, including application of foreign laws to contract and other disputes, foreign environmental laws and enforcement and uncertain political and economic environments. Factors that could cause actual results to differ materially from the projections include, among others, precious metals, copper and nickel prices; performance of and production at the Company's stream and royalty properties, including gold and copper production at Mount Milligan and gold and silver production at Pueblo Viejo; the ability of operators of development properties to finance project construction to completion and bring projects into production as expected; operators’ delays in securing or inability to secure or maintain necessary governmental permits; 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; changes in operators’ project parameters as plans continue to be refined; changes in estimates of reserves and mineralization by the operators of the Company’s stream and royalty properties; contests to the Company’s stream and royalty interests and title and other defects to the Company’s stream and royalty properties; errors or disputes in calculating stream deliveries and royalty payments, or deliveries or payments not made in accordance with stream and royalty agreements; economic and market conditions; changes in laws governing the Company and its stream and royalty interests or the operators of the properties subject to such interests, and other subsequent events; as well as other factors described in the Company's Annual Report on Form 10-K, 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 herein. 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 production estimates for calendar 2017, 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 such third-party information and refers the reader to the public reports filed by the operators for information regarding those properties.

TABLE 1

First Quarter Fiscal 2018

Revenue and Reported Production for Principal Stream and Royalty Interests

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

Three Months Ended Three Months Ended
September 30, 2017 September 30, 2016

Reported Reported

Stream/Royalty

Metal(s)

Revenue

Production1 Revenue Production1
Stream:
Mount Milligan $ 31,952 $ 38,386
Gold 18,600 oz. 28,900 oz.
Copper 2.6 Mlbs. N/A
Pueblo Viejo2 $ 25,403 $ 20,950
Gold 12,900 oz. 11,000 oz.
Silver 536,600 oz. 323,300 oz.
Andacollo Gold $ 12,337 9,700 oz. $ 20,169 15,200 oz.
Wassa and Prestea Gold $ 9,070 7,100 oz. $ 5,999 4,500 oz.
Total stream revenue $ 78,762 $ 85,504
Royalty:
Peñasquito $ 7,796 $ 5,821
Gold 134,000 oz. 100,100 oz.
Silver 5.9 Moz. 5.2 Moz.
Lead 36.2 Mlbs. 33.0 Mlbs.
Zinc 92.4 Mlbs. 73.0 Mlbs.
Cortez Gold $ 2,988 29,900 oz. $ 2,040 21,800 oz.
Other3 Various $ 22,930 N/A $ 24,582 N/A
Total royalty revenue $ 33,714 $ 32,443
Total revenue $ 112,476 $ 117,947

TABLE 2

Historical Production

Reported Production For The Quarter Ended1

Property

Stream/Royalty

Operator

Metal(s) Sep. 30, 2017 Jun. 30, 2017 Mar. 31, 2017 Dec. 31, 2016 Sep. 30, 2016
Stream:
Mount Milligan4

35.00% of payable
gold; 18.75% of
payable copper

Centerra Gold 18,600 oz. 19,800 oz. 28,900 oz. 25,700 oz. 28,900 oz.
Copper 2.6 Mlbs. 2.6 Mlbs. N/A N/A N/A
Pueblo Viejo

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

Barrick (60%) Gold 12,900 oz. 10,500 oz. 15,600 oz. 13,700 oz. 11,000 oz.

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

Silver 536,600 oz. 374,500 oz. 322,000 oz. 543,300 oz. 323,300 oz.
Andacollo

100% of gold
produced

Teck Gold 9,700 oz. 14,900 oz. 8,500 oz. 9,200 oz. 15,200 oz.
Wassa and Prestea

9.25% of gold
produced up to
240,000 ounces;
5.5% thereafter

Golden Star Gold 7,100 oz. 6,300 oz. 5,400 oz. 4,000 oz. 4,500 oz.
Royalty:
Peñasquito 2.0% NSR Goldcorp
Gold 134,000 oz. 133,300 oz. 137,500 oz. 185,400 oz. 100,100 oz.
Silver 5.9 Moz. 5.6 Moz. 4.8 Moz. 5.0 Moz. 5.2 Moz.
Lead 36.2 Mlbs. 27.4 Mlbs. 31.3 Mlbs. 33.6 Mlbs. 33.0 Mlbs.
Zinc 92.4 Mlbs. 85.7 Mlbs. 88.5 Mlbs. 70.5 Mlbs. 73.0 Mlbs.
Cortez

GSR1 and GSR2,
GSR3, NVR1

Barrick Gold 29,900 oz. 16,600 oz. 11,300 oz. 14,500 oz. 21,800 oz.

FOOTNOTES
Tables 1 and 2

1 Reported production relates to the amount of metal sales that are subject to our stream and royalty interests for the stated period, as reported to us by operators of the mines.
2 The first silver stream deliveries were in March 2016, with the first silver sales made during the June 2016 quarter.
3 Individually, no stream or royalty included within the “Other” category contributed greater than 5% of our total revenue for the entire period.
4 Reflects the October 20, 2016 amendment to our Mount Milligan streaming agreement. Prior to the amendment, Royal Gold held a 52.25% gold stream. Gold concentrate that was in transit at October 20, 2016 was delivered to us under the 52.25% gold stream. Royal Gold began receiving gold and copper deliveries reflecting the amended stream agreement in April 2017.

TABLE 3

Calendar 2017 Operator’s Production Estimate vs Actual Production

Calendar 2017 Operator's Production Calendar 2017 Operator's Production
Estimate1 Actual2,3
Gold Silver Base Metals Gold Silver Base Metals
Stream/Royalty (oz.) (oz.) (lbs.) (oz.) (oz.) (lbs.)
Stream:
Andacollo4 61,600 40,500
Mount Milligan5 235,000-255,000 55 - 65 million 164,000 41.3 million
Pueblo Viejo6 635,000-650,000 Not provided 468,000 Not provided
Wassa and Prestea7 255,000-280,000

195,800

Royalty:
Cortez GSR1 102,200 57,200
Cortez GSR2 1,600 600
Cortez GSR3 103,800 57,800
Cortez NVR1 63,900 29,900
Peñasquito8 410,000 Not provided 393,000 16.0 million
Lead 125 million 96.8 million
Zinc 325 million 263.2 million
1 Production estimates received from our operators are for calendar 2017. There can be no assurance that production estimates received from our operators will be achieved. Please refer to our cautionary language regarding forward-looking statements and the statement regarding third party information contained in this press release, as well as the Risk Factors identified in Part I, Item 1A, of our Fiscal 2016 Form 10-K for information regarding factors that could affect actual results.
2

Actual production figures shown are from our operators and cover the period January 1, 2017 through September 30, 2017.

3 Actual production figures for Cortez are based on information provided to us by Barrick Gold Corporation, and actual production figures for Andacollo, Mount Milligan, Pueblo Viejo, Peñasquito (gold) and Wassa and Prestea are the publicly reported figures of the operators of those properties.
4 The estimated and actual production figures shown for Andacollo are contained gold in concentrate.
5 The estimated and actual production figures shown for Mount Milligan are payable gold and copper in concentrate.
6 The estimated and actual production figures shown for Pueblo Viejo are payable gold in doré and represent Barrick’s 60% interest in Pueblo Viejo.
7 The estimated gold production figures shown for Wassa and Prestea are payable gold in concentrate and doré.
8 The estimated and actual gold production figures shown for Peñasquito are payable gold in concentrate. The operator did not provide estimated silver, lead and zinc production.

TABLE 4

Stream Summary

Three Months Ended Three Months Ended As of As of
September 30, 2017 September 30, 2016 September 30, 2017 June 30, 2017
Gold Stream Purchases (oz.) Sales (oz.) Purchases (oz.) Sales (oz.) Inventory (oz.) Inventory (oz.)
Mount Milligan 18,767 18,618 29,900 28,900 227 100
Pueblo Viejo 10,482 12,889 13,700 11,000 10,482 12,900
Andacollo 13,023 9,655 15,300 15,200 3,518 100
Wassa and Prestea 7,351 7,073 4,500 4,500 1,213 1,000
Total 49,623 48,235 63,400 59,600 15,440 14,100
Three Months Ended Three Months Ended As of As of
September 30, 2017 September 30, 2016 September 30, 2017 June 30, 2017
Silver Stream Purchases (oz.) Sales (oz.) Purchases (oz.) Sales (oz.) Inventory (oz.) Inventory (oz.)
Pueblo Viejo 470,007 536,605 543,300 323,300 470,212 536,800
Three Months Ended Three Months Ended As of As of
September 30, 2017 September 30, 2016 September 30, 2017 June 30, 2017
Copper Stream Purchases (tonnes) Sales (tonnes) Purchases (tonnes) Sales (tonnes) Inventory (tonnes) Inventory (tonnes)
Mount Milligan 1,169 1,169 N/A N/A - -

ROYAL GOLD, INC.

Consolidated Balance Sheets

As of September 30,

(In thousands except share data)

September 30, 2017 June 30, 2017
ASSETS
Cash and equivalents $ 88,395 $ 85,847
Royalty receivables 29,079 26,886
Income tax receivable 26,023 22,169
Stream inventory 7,794 7,883
Prepaid expenses and other 4,488 822
Total current assets 155,779 143,607
Stream and royalty interests, net 2,852,598 2,892,256
Other assets 57,518 58,202
Total assets $ 3,065,895 $ 3,094,065
LIABILITIES
Accounts payable $ 2,924 $ 3,908
Dividends payable 15,708 15,682
Income tax payable 11,686 5,651
Foreign withholding taxes payable 3,462 3,425
Other current liabilities 5,915 5,617
Total current liabilities 39,695 34,283
Debt 539,772 586,170
Deferred tax liabilities 121,731 121,330
Uncertain tax positions 28,120 25,627
Other long-term liabilities 6,391 6,391
Total liabilities 735,709 773,801
Commitments and contingencies
EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued - -
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,306,271 and 65,179,527 shares outstanding, respectively 653 652
Additional paid-in capital 2,184,639 2,185,796
Accumulated other comprehensive income 1,076 879
Accumulated earnings 100,972 88,050
Total Royal Gold stockholders’ equity 2,287,340 2,275,377
Non-controlling interests 42,846 44,887
Total equity 2,330,186 2,320,264
Total liabilities and equity $ 3,065,895 $ 3,094,065

ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands except for per share data)

For The Three Months Ended
September 30, September 30,
2017 2016
Revenue $ 112,476 $ 117,947
Costs and expenses
Cost of sales 20,419 22,662
General and administrative 6,899 10,507
Production taxes 543 497
Exploration costs 3,203 3,288
Depreciation, depletion and amortization 39,692 40,102
Total costs and expenses 70,756 77,056
Operating income 41,720 40,891
Interest and other income 989 1,557
Interest and other expense (8,617 ) (8,305 )
Income before income taxes 34,092 34,143
Income tax expense (7,544 ) (7,188 )
Net income 26,548 26,955
Net loss attributable to non-controlling interests 2,083 2,832
Net income attributable to Royal Gold common stockholders $ 28,631 $ 29,787
Net income $ 26,548 $ 26,955
Adjustments to comprehensive income, net of tax
Unrealized change in market value of available-for-sale securities 197 -
Comprehensive income 26,745 26,955
Comprehensive loss attributable to non-controlling interests 2,083 2,832
Comprehensive income attributable to Royal Gold stockholders $ 28,828 $ 29,787
Net income per share available to Royal Gold common stockholders:
Basic earnings per share $ 0.44 $ 0.46
Basic weighted average shares outstanding 65,235,496 65,116,686
Diluted earnings per share $ 0.44 $ 0.46
Diluted weighted average shares outstanding 65,404,680 65,280,904

Cash dividends declared per common share

$ 0.24 $ 0.23

ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(In thousands)

For The Three Months Ended
September 30, September 30,
2017 2016
Cash flows from operating activities:
Net income $ 26,548 $ 26,955
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 39,692 40,102
Amortization of debt discount and issuance costs 3,679 3,351
Non-cash employee stock compensation expense 2,373 4,144
Deferred tax expense (benefit) (727 ) (1,030 )
Other (223 ) (153 )
Changes in assets and liabilities:
Royalty receivables (2,193 ) (7,048 )
Stream inventory 89 (3,125 )
Income tax receivable (3,854 ) (3,215 )
Prepaid expenses and other assets (1,654 ) (1,724 )
Accounts payable (985 ) 1,777
Income tax payable 6,035 (13,264 )
Foreign withholding taxes payable 37 1,086
Uncertain tax positions 2,493 6,374
Other liabilities 299 878
Net cash provided by operating activities $ 71,609 $ 55,108
Cash flows from investing activities:
Acquisition of stream and royalty interests (5 ) (90,083 )
Other 100 (226 )
Net cash provided by (used in) provided by investing activities $ 95 $ (90,309 )
Cash flows from financing activities:
Borrowings from revolving credit facility - 70,000
Repayment of revolving credit facility (50,000 ) -
Net payments from issuance of common stock (3,529 ) (2,038 )
Common stock dividends (15,682 ) (15,012 )
Purchase of additional royalty interest from non-controlling interest - (1,025 )
Other 55 (315 )
Net cash (used in) provided by financing activities $ (69,156 ) $ 51,610
Net increase in cash and equivalents 2,548 16,409
Cash and equivalents at beginning of period 85,847 116,633
Cash and equivalents at end of period $ 88,395 $ 133,042

SCHEDULE A

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (“GAAP”). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; in communications with the board of directors, stockholders, analysts and investors concerning our financial performance; as useful comparisons to the performance of our competitors; and as metrics of certain management incentive compensation calculations. We believe that these measures are used by and are useful to investors and other users of our financial statements in evaluating our operating performance because they provide an additional tool to evaluate our performance without regard to special and non-core items, which can vary substantially from company to company depending upon accounting methods, book value of assets and capital structure. We have provided reconciliations of all non-GAAP measures to their nearest U.S. GAAP measures and have consistently applied the adjustments within our reconciliations in arriving at each non-GAAP measure. We consider these items to be necessary adjustments for purposes of evaluating our ongoing business performance and are often considered non-recurring. Such adjustments are subjective and involve significant management judgment.

Adjusted EBITDA Reconciliation

Adjusted EBITDA is defined by the Company as net income (loss) plus depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of mining assets, less non-controlling interests in operating loss (income) of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. Other companies may define and calculate this measure differently. Adjusted EBITDA identifies the cash generated in a given period that will be available to fund the Company's future operations, growth opportunities, shareholder dividends and to service the Company's debt obligations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. See the table below for a reconciliation of net income to Adjusted EBITDA.

For The Three Months Ended
September 30,
(Unaudited, in thousands)
2017 2016
Net income $ 26,548 $ 26,955
Depreciation, depletion and amortization 39,692 40,102
Non-cash employee stock compensation 2,373 4,144
Interest and other, net 7,628 6,748
Income tax expense 7,544 7,188
Non-controlling interests in operating loss of consolidated subsidiaries 2,083 2,984
Adjusted EBITDA $ 85,868 $ 88,121

View source version on businesswire.com: http://www.businesswire.com/news/home/20171101006939/en/

Royal Gold
Karli Anderson, 303-575-6517
Vice President Investor Relations

Source: Royal Gold