- Earnings of $0.14 per share mark a 17% quarter-over-quarter increase
- Free cash flow (a non-GAAP financial measure) totals 76% of revenue
- Higher gold prices result in GSR1 royalty rate step-up to 4.5%
DENVER, Nov. 3 /CNW/ -- ROYAL GOLD, INC.
(Nasdaq: RGLD; TSX: RGL) today announced revenues of $6.8 million for the
first quarter of fiscal year 2006 (ended September 30th), an increase of 15%,
compared to revenues of $5.9 million for the same period in fiscal 2005. Net
income was $3.1 million or $0.14 per basic share for the quarter, compared to
$2.5 million or $0.12 per basic share for the same period in fiscal 2005.
Stronger revenues were largely derived from higher gold prices resulting in a
step-up of Royal Gold's sliding-scale royalty rate at the Pipeline Mining
Complex to 4.50%, as well as increased production from the SJ Claims.
"Once again we experienced excellent performance from our royalty
portfolio due to higher gold prices and the resulting leverage created from
our GSR1 sliding-scale royalty at the Pipeline Mining Complex," said Stanley
Dempsey, Chairman and Chief Executive Officer. "In addition, we were pleased
to be able to put our strong balance sheet to work and broaden our property
portfolio during the quarter with the recently announced non-binding term
sheet for the High River Gold transaction, which is expected to close in
mid-November. Our appetite for growth remains strong and we are optimistic
about the current economic factors that support a bull market for gold."
During the quarter, free cash flow was approximately $5.2 million, or 76%
of revenues compared to $4.2 million or 71% of revenues for the same period in
fiscal 2005. Free cash flow, a non-GAAP financial measure, is defined as
operating income plus depreciation, depletion and amortization, non-cash
charges, and any impairment of mining assets. (See, Schedule
A - Reconciliation.)
Included in our results for the first quarter of fiscal 2006 is a non-cash
stock compensation expense of $238,341, or $0.01 per basic share, related to
our equity compensation plans. The non-cash compensation expense has been
allocated to cost of operations, general and administrative, and exploration
and business development in our consolidated statements of operations and
comprehensive income. The allocation resulted in $28,585, $121,955 and
$87,801 charged to each line item, respectively. The non-cash charges were
the result of the Company adopting SFAS 123(R), a new accounting standard that
requires all stock-based compensation to be recognized in the financial
statements, beginning with our first fiscal quarter of 2006.
At September 30, 2005, the Company had a working capital surplus of
$110.5 million. Current assets were $116.1 million, compared to current
liabilities of $5.6 million for a current ratio of nearly 21 to 1. This high
level of liquidity provides the Company with the flexibility to immediately
capitalize on royalty acquisition opportunities when they arise.
REVIEW OF OPERATIONS
Pipeline Mining Complex, Lander County, Nevada
At the Pipeline Mining Complex in Lander County, Nevada, the Company holds
two sliding-scale gross smelter return royalties ("GSR1" and "GSR2"), and a
fixed rate gross smelter return royalty ("GSR3"). A GSR royalty is a defined
percentage of the gross revenue from a resource extraction operation, with no
deduction for any costs paid by or charged to the operator. In addition, the
Company holds a net value royalty ("NVR1") at this complex. This NVR is
defined as a passive interest in a resource extraction operation that is
determined on the basis of deducting contract-defined processing-related and
associated capital costs, but not mining costs. The GSR1 royalty covers the
current mine footprint, and the GSR2 ("Super") royalty covers any reserves
that are developed on the claim block lying outside the current mine
footprint. The GSR2 royalty pays out at a rate that is 80% higher than that
of the GSR1, at all gold prices. The GSR3 royalty rate is fixed at 0.71% for
the life of the mine. The 0.39% NVR1 royalty covers production from the GAS
Claims, an area of interest of approximately 4,000 acres that includes the
South Pipeline deposit and Crossroads area, but not the Pipeline deposit.
Current production from the Pipeline Mining Complex is subject to GSR1, GSR3,
and NVR1 royalties.
The Pipeline Mining Complex is owned by the Cortez Joint Venture
("Cortez"), a joint venture between Placer Cortez Inc. (60%), a subsidiary of
Placer Dome Inc., and Kennecott Explorations (Australia) Ltd. (40%), a
subsidiary of Rio Tinto plc.
During the first quarter of fiscal 2006, the Pipeline Mining Complex
produced 227,981 ounces of gold, providing approximately $5.4 million of
royalty revenue to Royal Gold. This compares to 249,469 ounces of gold
produced, providing approximately $5.0 million of royalty revenue to Royal
Gold, for the same quarter in fiscal 2005. The 8% increase in revenue mainly
reflects higher gold prices for the period resulting in a higher GSR1 royalty
rate at this property.
For the first quarter of fiscal 2006, the average gold price was $439 per
ounce resulting in a GSR1 royalty rate of 4.50% of production. This compares
to an average gold price of $401 per ounce for the first quarter of fiscal
2005, resulting in a GSR1 royalty rate of 4.0% of production.
Leeville Project, Eureka County, Nevada
Royal Gold holds a 1.8% carried working interest, which calculates as a
net smelter return ("NSR") royalty covering a portion of the Leeville project
("Leeville"). An NSR royalty is a defined percentage of the gross revenue
from a resource extraction operation, less a proportionate share of incidental
transportation, insurance and smelting costs.
In the past, Royal Gold's share of production on the Leeville royalty land
was derived from underground operations on a portion of the Leeville South
(formerly known as Carlin East) mine. Beginning with the first quarter of
fiscal 2006, the Company's royalty includes production from the recently
developed Leeville North underground mine, as well as the production from
Leeville South. Both of these mines are operated by Newmont Mining
Corporation.
During the first quarter of fiscal 2006, Leeville South produced 19,111
ounces of gold that were subject to Royal Gold's royalty interest providing
royalty revenue to Royal Gold of $153,477. This compares to 33,406 ounces of
gold produced, providing $315,296 of royalty revenue to Royal Gold, for the
same quarter in 2005. Also during the first quarter of fiscal 2006, Leeville
North produced 580 ounces of gold subject to Royal Gold's royalty interest
providing royalty revenue of approximately $5,000. This was the first quarter
of production for the Leeville North operation which will continue its ramp up
into calendar year 2006.
SJ Claims (Goldstrike Mine), Eureka County, Nevada
Royal Gold holds a 0.9% NSR royalty covering a portion of the Betze-Post
mine, known as the SJ Claims. The Betze-Post mine, which is a portion of the
larger Goldstrike operation, is operated by Barrick Gold Corporation
("Barrick").
During the first quarter of fiscal 2006, the SJ Claims produced 229,459
ounces of gold, providing royalty revenue of $913,061, compared to 131,357
ounces of gold produced and royalty revenue of $477,392 for the same quarter
in fiscal 2005. This 75% increase in production is due to an increased
proportion of total mine production moving onto ground that is subject to the
Company's royalty interest.
Troy Mine, Lincoln County, Montana
In the second quarter of fiscal 2005, Royal Gold obtained the right to
receive payments equivalent to a 7.0% GSR royalty that covers the Troy
underground mine operated by Revett Silver Company, a subsidiary of Revett
Minerals Inc. ("Revett").
As reported by Revett at the time of Royal Gold's initial transaction in
August 2004, total proven and probable reserves at Troy contained 13.6 million
ounces of silver and 113 million pounds of copper.
Royal Gold's 7% GSR royalty will extend until either cumulative production
of approximately 9.9 million ounces of silver and 84.6 million pounds of
copper, or Royal Gold receives $10.5 million in cumulative payments, whichever
occurs first.
Royal Gold also acquired a perpetual GSR royalty that begins at 6.1% on
any production in excess of 11.0 million ounces of silver and 94.1 million
pounds of copper. This 6.1% GSR royalty steps down to a perpetual 2.0% GSR
royalty after cumulative production has exceeded 12.7 million ounces of silver
and 108.2 million pounds of copper.
During the first fiscal quarter, the Troy mine produced 191,416 ounces of
silver and 1,583,471 million pounds of copper that were subject to Royal
Gold's interest, providing approximately $268,514 in royalty revenue. A
quarter-to-quarter comparison is not available for fiscal 2005 as production
from the Troy mine did not begin until January 2005.
Bald Mountain, White Pine County, Nevada
Royal Gold holds a 1.75% to 3.5% NSR sliding-scale royalty on a portion of
the Bald Mountain mine, operated by Placer Dome U.S. Inc. The sliding-scale
moves up 0.25% for each $25 per ounce of gold price movement, starting at a
per-ounce price of $375, in 1986 dollars. This means the royalty rate remains
at 1.75% until gold reaches a price of approximately $575 per ounce in today's
dollars.
During the first quarter of fiscal 2006, Bald Mountain produced
approximately 9,000 ounces of gold, providing royalty revenue of $69,219,
compared to 7,300 ounces of gold produced providing royalty revenue of $51,265
for the same quarter in fiscal 2005.
Martha Mine, Santa Cruz Province, Argentina
The Company holds a 2.0% NSR royalty on the Martha silver mine operated by
Coeur d'Alene Mines Corporation. Royalty revenue for the first quarter of
fiscal 2006 was $48,261, compared with $39,395 for the same quarter in fiscal
2005.
Other Events
Several other transactions took place during the quarter. Royal Gold
completed an underwritten public offering of approximately 2.2 million shares
of common stock that was conducted pursuant to a shelf registration filed with
the U.S. Securities and Exchange Commission. The offering was priced at
$26.00 per share, and proceeds to the Company from the offering, net of
expenses, were approximately $54.7 million.
The Company also signed a term sheet whereby it will provide a total of
$35 million, over the next year, to Somita SA, a 90%-owned subsidiary of High
River Gold Mines, Ltd. ("High River") for the construction and development of
High River's Taparko open pit gold project, located in Burkina Faso, West
Africa. The remaining 10% ownership in Somita SA is held by the Burkina Faso
government. The Tarparko project also includes the Bouroum deposit located
approximately 29 miles (49 kilometers) northwest of Taparko ("Taparko-Bouroum
Project"). In exchange for the $35 million in financing, Royal Gold will
receive two concurrent production payments, a tail royalty and a milling
royalty. The transaction has been approved by the Board of Directors of Royal
Gold and High River, but is conditional upon final documentation and
completion of other pre-closing requirements. Closing is expected during
November 2005.
Corporate Profile
Royal Gold is a precious metals royalty company engaging in the
acquisition and management of precious metals royalty interests. Royal Gold
is publicly traded on the Nasdaq Market System under the symbol "RGLD," and on
the Toronto Stock Exchange under the symbol "RGL." The Company's web page is
located at www.royalgold.com.
NOTE: Management's conference call reviewing its first quarter of fiscal
2006 results will be held today at 12:00 noon Eastern, 10:00 a.m. Mountain.
The call will be simultaneously carried on the Company's web site at
www.royalgold.com under the "Presentations" section. A replay of the call
will be available on the Company's website approximately two hours after the
call ends. The conference call is also available live by calling 800-603-2779
or 706-634-7230. Replays will be available until November 10th by dialing
800-642-1687 or 706-645-9291, access number 1604951.
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 regarding economic factors supporting a bullish
market for gold, the sliding-scale features of our royalty structure at the
Pipeline Mining Complex, production estimates and reserve estimates from the
operators, closing of the High River transaction, royalty acquisition and
financing opportunities which could result in the addition of new royalties in
our portfolio, and our growth outlook. Factors that could cause actual
results to differ materially from projections include, among others, precious
metals prices, decisions and activities of the operators of our royalty
properties, unanticipated grade, geological, metallurgical, processing or
other problems the operators of the mining properties may encounter, changes
in project parameters as plans continue to be refined, results of current or
planned exploration activities, economic and market conditions, future
financial needs or opportunities, satisfactory completion of due diligence and
contract negotiations regarding the High River transaction, the ability to
make acquisitions on economically favorable terms, and the impact of any
future acquisitions, as well as other factors described elsewhere in this
press release and in our Annual Report on Form 10-K, 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.
The Company discloses information on free cash flow and free cash flow as
a percentage of revenues in its reporting. The Company defines free cash flow
by operating income plus depreciation, depletion and amortization, non-cash
charges, and any impairment of mining assets. While we believe free cash flow
is a useful measure of the Company's performance, we also want to advise that
this is not a measure recognized by generally accepted accounting principles.
See Schedule A - Reconciliation, attached to this press release.
ROYAL GOLD, INC.
Consolidated Balance Sheets
(Unaudited)
September 30, June 30,
2005 2005
Current assets
Cash and equivalents $109,484,240 $48,840,371
Royalty receivables 5,883,825 6,601,329
Deferred tax assets 418,908 452,730
Prepaid expenses and other 323,611 333,883
Total current assets 116,110,584 56,228,313
Royalty interests in mineral
properties, net 43,949,736 44,817,242
Available for sale securities 689,120 554,812
Deferred tax assets 183,393 160,417
Other assets 652,481 557,771
Total assets $161,585,314 $102,318,555
Current liabilities
Accounts payable $1,916,050 $1,140,509
Federal income taxes payable 1,756,171 253,496
Dividend payable 1,162,913 1,050,628
Accrued compensation 514,250 278,500
Other 201,154 175,095
Total current liabilities 5,550,538 2,898,228
Deferred tax liabilities 7,271,441 7,586,402
Other long-term liabilities 90,034 96,634
Total Liabilities 12,912,013 10,581,264
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value,
authorized 40,000,000 shares;
and issued 23,487,488 and
21,258,576 shares, respectively 234,874 212,585
Additional paid-in capital 158,572,102 104,163,515
Accumulated other comprehensive income (198,963) (284,920)
Deferred compensation -- (524,659)
Accumulated deficit (8,837,840) (10,732,358)
Less treasury stock, at
cost (229,224 shares) (1,096,872) (1,096,872)
Total stockholders' equity 148,673,301 91,737,291
Total liabilities and
stockholders' equity $161,585,314 $102,318,555
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
For The Three Months Ended
September 30, September 30,
2005 2004
Royalty revenues $6,827,619 $5,924,091
Costs and expenses
Costs of operations 489,698 459,281
General and administrative 959,508 815,863
Exploration and business development 434,710 455,616
Depreciation, depletion and amortization 898,025 860,188
Total costs and expenses 2,781,941 2,590,948
Operating income 4,045,678 3,333,143
Interest and other income 437,095 131,165
Interest and other expense (21,007) (29,018)
Income before income taxes 4,461,766 3,435,290
Current tax expense (1,763,491) (658,934)
Deferred tax benefit (expense) 359,156 (277,930)
Net income $3,057,431 $2,498,426
Adjustments to comprehensive income
Unrealized change in market
value of available for
sale securities 85,957 51,143
Comprehensive income $3,143,388 $2,549,569
Basic earnings per share $0.14 $0.12
Basic weighted average
shares outstanding 21,126,609 20,783,359
Diluted earnings
per share $0.14 $0.12
Diluted weighted average
shares outstanding 21,366,843 21,090,329
ROYAL GOLD, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For The Three Months Ended
September 30, September 30,
2005 2004
Cash flows from operating activities
Net income $3,057,431 $2,498,426
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation, depletion and amortization 898,025 860,188
Deferred tax (benefit) expense (359,156) 277,930
Non-cash employee stock compensation
expense 238,341 --
Changes in assets and liabilities:
Royalty receivables 717,504 206,760
Prepaid expenses and other assets (109,890) (72,121)
Accounts payable 775,541 197,306
Federal income taxes payable 1,502,675 609,462
Accrued liabilities and other
current liabilities 268,498 124,672
Other long-term liabilities (6,600) (6,600)
Net cash provided by operating
activities $6,982,369 $4,696,023
Cash flows from investing activities
Capital expenditures for property
and equipment $(5,066) $(50,889)
Net cash used in investing activities $(5,066) $(50,889)
Cash flows from financing activities:
Tax benefit from exercise of
stock options $816 $--
Dividends paid (1,050,628) (779,377)
Net proceeds from issuance of
common stock 54,716,378 --
Net cash provided by (used in)
financing activities $53,666,566 $(779,377)
Net increase in cash and equivalents 60,643,869 3,865,757
Cash and equivalents at
beginning of period 48,840,371 44,800,901
Cash and equivalents at end of period $109,484,240 $48,666,658
Supplemental cash flow information:
Cash paid during the period for:
Income taxes $260,000 $--
Non-cash financing activities:
Declared dividends $1,162,913 $779,377
Non-GAAP Financial Measures
The Company computes and discloses free cash flow and free cash flow as a
percentage of revenues. Free cash flow is a non-GAAP financial measure. Free
cash flow is defined by the Company as operating income plus depreciation,
depletion and amortization, non-cash charges, and any impairment of mining
assets. Management believes that free cash flow and free cash flow as a
percentage of revenues are useful measures of performance of our royalty
portfolio. Free cash flow identifies the cash generated in a given period
that will be available to fund the Company's future operations, growth
opportunities, and shareholder dividends. Free cash flow, as defined, is most
directly comparable to operating income in the Statements of Operations.
Below is reconciliation to operating income:
For The Three Months Ended
September 30, September 30,
2005 2004
Operating income $4,045,678 $3,333,143
Depreciation, depletion
and amortization 898,025 860,188
Non-cash employee stock
compensation expense 238,341 --
Free cash flow $5,182,044 $4,193,331
