DENVER, May 4 /CNW/ -- Royal Gold, Inc.
(Nasdaq: RGLD; TSX: RGL), the leading publicly-traded precious metals royalty
company, today announced fiscal third quarter 2006 net income of $1.8 million,
or $0.08 per basic share, on royalty revenue of $5.8 million. This compares
to net income for the third quarter of fiscal 2005 of $2.7 million, or
$0.13 per basic share, on royalty revenue of approximately $5.9 million.
Net income for the nine-month period ended March 31, 2006, was $7.8
million, or $0.34 per basic share, on royalty revenue of $20.2 million. This
compares to net income of $7.8 million, or $0.38 per basic share, for the
nine-month period ended March 31, 2005, on royalty revenue of $17.8 million.
Included in the three and nine-month reporting periods were expenses of
approximately $696,000, or $0.02 per basic share, net of tax, and
approximately $2.0 million, or $0.06 per basic share, net of tax,
respectively, for non-cash stock compensation related to the Company's equity
compensation plans. These non-cash compensation expenses have been allocated
among cost of operations, general and administrative, and exploration and
business development in the Company's consolidated statements of operations
and comprehensive income. In the prior three- and nine-month periods for
fiscal 2005, non-cash stock compensation expense was approximately $43,000 and
$162,000, respectively.
Free cash flow for the third fiscal quarter of 2006 was approximately
$3.4 million, or 59% of revenues. For the nine-month period ended
March 31, 2006, free cash flow was approximately $14.0 million, or 69% of
revenues. The Company defines free cash flow, a non-GAAP financial measure,
as operating income plus depreciation, depletion and amortization, non-cash
charges and any impairment of mining assets (see, Schedule A-Reconciliation).
At March 31, 2006, the Company had a working capital surplus of
approximately $81.3 million. Current assets were $85.5 million (including
$80.0 million in cash) compared to current liabilities of $4.2 million
resulting in a current ratio of 20 to 1. The Company has no debt.
Stanley Dempsey, Chairman and CEO, commented, "Our third quarter results
were lower than the prior comparable period primarily due to a decline in the
level of production at Pipeline, stock compensation expense, and exploration
expenses related to the funding of our Taranis strategic alliance. The
decline at Pipeline was partially offset by a step-up of our sliding-scale
royalty to 5.0%, higher metal prices, and higher royalty revenues from our
other producing royalties. Happily, the continued ramp-up of production at
Leeville, the start of royalty payments from the Mulatos property in the
fourth quarter of fiscal 2006, and the expected commencement of payments from
the Robinson and Tarparko royalties in fiscal 2007 will provide revenue growth
in future periods."
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 Barrick Gold Corporation (60%), the
world's largest gold producer, and Kennecott Explorations (Australia) Ltd.
(40%), a subsidiary of Rio Tinto plc.
During the third quarter of fiscal 2006, the Pipeline Mining Complex
produced 98,802 ounces of gold providing royalty revenue of $3.2 million,
compared to 216,851 ounces of gold produced providing royalty revenue of
$4.8 million for the same quarter in fiscal 2005. This 54% decrease in
production is mainly due to lower grade ore. During the quarter, the average
gold price was $554 per ounce, resulting in a royalty rate of 5.0% compared to
an average gold price of $427 per ounce and a royalty rate of 4.25% for the
same period in fiscal 2005.
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 at Leeville was derived from
underground operations on a portion of the Leeville South mine. Beginning
with the first quarter of fiscal 2006, the Company's royalty also 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 third fiscal quarter of 2006, the Leeville property produced
25,582 ounces of gold subject to Royal Gold's royalty interest providing
royalty revenue to Royal Gold of approximately $252,000. This compares to
19,253 ounces of gold produced, providing approximately $146,000 of royalty
revenue to Royal Gold, for the same quarter in 2005. Leeville North began
production in late calendar 2005 and the mine is expected to continue to ramp
up production through 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.
During the third quarter of fiscal 2006, SJ Claims produced 261,602 ounces
of gold, providing royalty revenue of approximately $1.3 million, compared to
127,031 ounces of gold produced providing royalty revenue of approximately
$500,000 for the same quarter in fiscal 2005. This 106% increase in
production was due to a greater proportion of total mine production being
derived from property subject to the Company's royalty interest.
Troy Mine, Lincoln County, Montana
Royal Gold holds a 7.0% GSR royalty that covers the Troy underground mine
operated by Revett Silver Company, a subsidiary of Revett Minerals Inc.
("Revett"). This 7.0% GSR royalty extends until either cumulative production
reaches 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 holds 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 third fiscal quarter of 2006, the Troy mine produced 225,580
ounces of silver and 1.8 million pounds of copper that were subject to Royal
Gold's interest, providing approximately $432,000 in royalty revenue. This
compares to 214,595 ounces of silver and 1.9 million pounds of copper
produced, providing approximately $304,000 of royalty revenue for the same
quarter in 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 Barrick Gold Corporation. The
sliding-scale moves up 0.25% for each $25 per ounce of gold price increase,
starting at a per-ounce price of $375, inflated by the Producer Price Index
commencing in 1986. This quarter our royalty rate was 1.75%.
During the third quarter of fiscal 2006, Bald Mountain produced
39,714 ounces of gold, resulting in royalty revenue of approximately
$428,000. This compares to 9,522 ounces of gold produced providing royalty
revenue of approximately $75,000 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 third quarter of
fiscal 2006 was approximately $145,000 compared with approximately $21,000 for
the same quarter in fiscal 2005.
Mulatos, Sonora, Mexico
In December 2005, Royal Gold acquired a sliding-scale NSR royalty at the
Mulatos Project, an open pit, heap leach gold mine. The sliding-scale ranges
from 0.30%, at an average quarterly gold price of $299.99 or below, up to
1.5% when the price of gold averages $400 per ounce or higher. The mine is
owned and operated by Alamos Gold, Inc. The operator informed the Company
that commercial production was achieved effective April 1, 2006, and Royal
Gold will begin earning royalty revenue during its fourth quarter of fiscal
2006. The royalty is capped at two million ounces of production.
Robinson, White Pine County, Nevada
In December 2005, Royal Gold acquired a 3.0% NSR royalty on the Robinson
mine, an open pit copper mine with significant gold and molybdenum credits,
operated by Quadra Mining Ltd. The Company expects to receive revenue from
this royalty when a $20.0 million reclamation trust account is fully funded.
As of March 31, 2006, the trust account balance was approximately
$18.4 million. If metal prices continue at current levels, Royal Gold expects
to receive royalty revenue in the first quarter of fiscal 2007.
Taparko-Bouroum, Burkino Faso, West Africa
As of March 31, 2006, Royal Gold has funded $13.8 million of its
$35.0 million funding agreement with High River Gold Mines, Inc. ("High
River").
Royal Gold holds two initial concurrent production payments, both
equivalent to GSR royalties, and two subsequent GSR royalties at the
Taparko-Bouroum project, an open pit gold operation currently under
construction. The operator, High River, expects the majority of project
construction to be completed in the fourth quarter of calendar 2006, with
production commencing in the first quarter of calendar 2007.
The first GSR royalty ("TB-GSR1") is fixed at a rate of 15.0%. The second
GSR royalty ("TB-GSR2") pays out at a rate of 4.3% when the average monthly
gold price ranges between $385 and $430 per ounce, and changes to a
sliding-scale royalty when the average monthly gold price is outside of this
range. The calculated rate, expressed as a percentage, is determined by
dividing the average monthly gold price by 100 for gold prices above $430 per
ounce, or by dividing the average monthly gold price by 90 for gold prices
below $385 per ounce (e.g., a $625 per ounce gold price results in a rate of
625/100 = 6.25%). Both TB-GSR1 and TB-GSR2 royalties continue until either
production reaches 804,420 ounces of gold or payments totaling $35.0 million
under the TB-GSR1 royalty are received by Royal Gold, whichever comes first.
The two subsequent royalties consist of a 2.0% GSR tail royalty
("TB-GSR3"), applicable to gold production from defined portions of the
Taparko-Bouroum Project area, and a 0.75% milling royalty ("TB-MR1"). The
TB-MR1 applies to ore that is mined outside of the defined area of the
Taparko-Bouroum Project that is processed through the Taparko facilities to a
maximum of 1.1 million tons per year. Both the TB-GSR3 and TB-MR1 royalties
commence once TB-GSR1 and TB-GSR2 royalties described earlier have ceased.
Taranis Strategic Alliance
Royal Gold entered into an Exploration and Earn-In Agreement with Taranis
Resources, Inc. to fund $500,000 for exploration work on the Kettukuusikko
property, in Lapland, Finland, in exchange for a 2.0% NSR royalty on the
property. Royal Gold also has an option to fund up to an additional
$600,000 of exploration costs. If Royal Gold funds the entire additional
amount of $600,000, it will earn a 51% joint venture interest in the
Kettukuusikko project and surrender its 2.0% NSR royalty. However, if Royal
Gold ceases funding prior to reaching $600,000 it will retain its 2.0% NSR
royalty. The Company has elected to exercise this option and will continue
funding on-going exploration at Kettukuusikko.
CORPORATE PROFILE
Royal Gold, a precious metals royalty company, engages 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 third quarter 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 May 11th by
dialing 800-642-1687 or 706-645-9291, access number 8264281.
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 the sliding-scale features of our
royalty structure and future production at the Pipeline Mining Complex,
continued ramp-up in production at the Leeville project, the receipt of
revenue from the Mulatos, Robinson and Tarparko properties, future revenue
growth, the ability to find and fund exploration plays, and mine construction
completion. 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,
management's ability to increase our reserves and cash flow, and economic and
market conditions, 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
as 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
March 31, June 30,
2006 2005
(Unaudited)
Assets
Current assets
Cash and equivalents $79,910,270 $48,840,371
Royalty receivables 4,729,696 6,601,329
Deferred tax assets 152,707 452,730
Prepaid expenses and other 739,206 333,883
Total current assets 85,531,879 56,228,313
Royalty interests in mineral
properties, net 81,000,050 44,817,242
Available for sale securities 2,016,564 554,812
Deferred tax assets 623,386 160,417
Other assets 405,086 557,771
Total assets $169,576,965 $102,318,555
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable $2,418,215 $1,140,509
Income taxes payable 67,398 253,496
Dividend payable 1,297,620 1,050,628
Accrued compensation 187,500 278,500
Other 243,621 175,095
Total current liabilities 4,214,354 2,898,228
Deferred tax liabilities 7,290,639 7,586,402
Other long-term liabilities 76,834 96,634
Total Liabilities 11,581,827 10,581,264
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value,
authorized 40,000,000 shares;
and issued 23,762,035 and
21,258,576 shares,
respectively 237,619 212,585
Additional paid-in capital 165,043,413 104,163,515
Accumulated other comprehensive
income (loss) 516,348 (284,920)
Deferred compensation -- (524,659)
Accumulated deficit (6,705,370) (10,732,358)
Treasury stock, at cost
(229,224 shares) (1,096,872) (1,096,872)
Total stockholders' equity 157,995,138 91,737,291
Total liabilities and
stockholders' equity $169,576,965 $102,318,555
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
For The Three Months Ended
March 31, March 31,
2006 2005
Royalty revenues $5,760,750 $5,868,538
Costs and expenses
Costs of operations 475,682 400,885
General and administrative 1,325,572 939,935
Exploration and business
development 1,210,452 391,980
Depreciation, depletion and
amortization 1,006,467 695,152
Total costs and expenses 4,018,173 2,427,952
Operating income 1,742,577 3,440,586
Interest and other income 815,692 202,827
Gain on sale of available for sale
securities -- 51
Interest and other expense (61,537) (22,034)
Income before income taxes 2,496,732 3,621,430
Current tax expense (976,681) (599,445)
Deferred tax benefit (expense) 299,088 (295,896)
Net income $1,819,139 $2,726,089
Adjustments to comprehensive income
Unrealized change in market value
of available for sale
securities, net of tax 576,114 65,448
Realization of the change in
market value on sale of available for
sale securities, net of tax -- (33)
Comprehensive income $2,395,253 $2,791,504
Basic earnings per share $0.08 $0.13
Basic weighted average shares
outstanding 23,522,539 20,894,921
Diluted earnings per share $0.08 $0.13
Diluted weighted average shares
outstanding 23,810,698 21,099,404
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
For The Nine Months Ended
March 31, March 31,
2006 2005
Royalty revenues $20,163,677 $17,824,462
Costs and expenses
Costs of operations 1,582,889 1,385,182
General and administrative 3,933,077 2,844,608
Exploration and business
development 2,671,702 1,446,438
Depreciation, depletion, and
amortization 2,934,936 2,422,461
Total costs and expenses 11,122,604 8,098,689
Operating income 9,041,073 9,725,773
Interest and other income 2,269,347 515,241
Gain on sale of available for sale
securities -- 163,577
Interest and other expense (116,315) (80,069)
Income before income taxes 11,194,105 10,324,522
Current tax expense (4,331,408) (1,807,979)
Deferred tax benefit (expense) 921,168 (673,708)
Net income $7,783,865 $7,842,835
Adjustments to comprehensive income
Unrealized change in market value
of available for sale
securities, net of tax 801,268 142,042
Realization of the change in
market value on sale of available
for sale securities, net of tax -- (104,689)
Comprehensive income $8,585,133 $7,880,188
Basic earnings per share $0.34 $0.38
Basic weighted average shares
outstanding 22,635,447 20,830,368
Diluted earnings per share $0.34 $0.38
Diluted weighted average shares
outstanding 22,909,476 21,027,613
ROYAL GOLD, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For The Nine Months Ended
March 31, March 31,
2006 2005
Cash flows from operating activities:
Net income $7,783,865 $7,842,835
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 2,934,936 2,422,461
Gain on available for sale
securities -- (163,577)
Deferred tax (benefit) expense (921,168) 673,708
Non-cash employee stock option
compensation expense 2,008,584 162,213
Tax benefit from exercise of
stock options (890,695) --
Changes in assets and
liabilities:
Royalty receivables 1,871,633 95,846
Prepaid expenses and other
assets (321,728) 33,403
Accounts payable 1,277,706 755,936
Income taxes payable 704,597 --
Accrued liabilities and other
current liabilities (15,822) 86,310
Other long-term liabilities (19,800) (19,800)
Net cash provided by operating
activities 14,412,108 11,889,335
Cash flows from investing activities:
Capital expenditures for property
and equipment (9,618) (130,558)
Acquisition of royalty interests
in mineral properties (39,039,035) (7,500,000)
Purchase of available for sale
securities (204,715) (1,000,000)
Proceeds from sale of available
for sale securities -- 539,960
Net cash used in investing activities (39,253,368) (8,090,598)
Cash flows from financing activities:
Tax benefit from exercise of stock
options 890,695 --
Dividends paid (3,509,885) (2,601,415)
Net proceeds from issuance of
common stock 58,530,349 882,766
Net cash provided by (used in)
financing activities 55,911,159 (1,718,649)
Net increase in cash and equivalents 31,069,899 2,080,088
Cash and equivalents at beginning of
period 48,840,371 44,800,901
Cash and equivalents at end of period $79,910,270 $46,880,989
Supplemental cash flow information:
Cash paid during the period for:
Income taxes $3,642,212 $1,755,000
Non-cash financing activity:
Deferred compensation (equity
offset) $-- $729,960
ROYAL GOLD, INC.
SCHEDULE A - RECONCILIATION
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 For The Nine Months Ended
March 31, March 31, March 31, March 31,
2006 2005 2006 2005
Operating income $1,742,577 $3,440,586 $9,041,073 $9,725,773
Depreciation, depletion
and amortization 1,006,467 695,152 2,934,936 2,422,461
Non-cash employee
stock compensation
expense 695,758 43,088 2,008,584 162,213
Free cash flow $3,444,802 $4,178,826 $13,984,593 $12,310,447
