Royal Gold, Inc. (NASDAQ: RGLD) (together with its
subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports
a net loss of $15 million, or ($0.23) per share, on revenue of $114
million in its fiscal second quarter ended December 31, 2017
(“second quarter”). Second quarter reported earnings reflected the
impact of recently enacted U.S. tax legislation and a non-cash
functional currency election. Absent these impacts, adjusted net
income1 was $28 million, or $0.41 per share, up 16% from the prior
year quarter.
An expense of $26.4 million, or $0.40 per share related to U.S.
tax legislation was recorded during the second quarter. As a United
States domiciled company, we expect that the U.S. tax legislation
will have a positive long-term impact on Royal Gold’s future
financial results through the reduction in the U.S. corporate tax
rate from 35% to 21% and by allowing us to efficiently repatriate
future foreign earnings.
We also recorded an expense of $15.9 million, or $0.24 per
share, related to a non-cash functional currency election to file
certain Canadian income tax returns in U.S. dollars. This election
is intended to reduce the volatility of Royal Gold’s effective tax
rate due to quarterly mark-to-market adjustments.
Second Quarter Highlights Compared to Prior Year
Quarter:
- Revenue of $114 million, an increase of
7%
- Operating cash flow of $76 million, an
increase of 8%
- Volume of 89,700 GEOs,2 an increase of
2%
- Dividends paid of $16 million, an
increase of 5%
- Repaid an additional $50 million on
revolving credit facility
- Average gold price of $1,275, an
increase of 4%
“We are pleased to deliver another quarter of strong, steady
performance,” commented Tony Jensen, President and CEO. “While
one-time and non-cash adjustments impacted our reported earnings,
we demonstrated solid revenue and cash flow growth. We received our
first deliveries of gold and silver from Rainy River, continued to
pay down debt, and increased our dividend for the 17th straight
year. Looking forward to the rest of calendar 2018, we expect to
see growth from new production at Rainy River, a higher stream rate
at Wassa and Prestea, initial production from Cortez Crossroads,
and the implementation of the Peñasquito Pyrite Leach Project.”
Recent Developments
US Tax Reform
On December 22, 2017, H.R. 1, originally known as the Tax Cuts
and Jobs Act (the “Act”), was enacted and is effective for tax
years including January 1, 2018. Certain effects of the Act are
recognized in the period of enactment, or the period ending
December 31, 2017. Certain other aspects of the Act are not
effective for fiscal June 30 companies until July 1, 2018.
The Act, among other things, reduced the U.S. corporate income
tax rate to 21% starting January 1, 2018. As a United States
domiciled company, we expect that the Act will have a positive
long-term impact on Royal Gold’s future financial results through
the reduction in the U.S. corporate tax rate from 35% to 21% and by
allowing us to efficiently repatriate future foreign cash flows
from our foreign subsidiaries. As the Company is a fiscal year
taxpayer, we applied a blended federal U.S. income tax rate of
approximately 28.1% for the fiscal year ending June 30, 2018. The
blended percentage was calculated on a pro-rata percentage of the
number of days in the fiscal year occurring before and after
January 1, 2018. Our U.S. statutory federal corporate income tax
rate will be 21% for the fiscal year commencing on July 1, 2018 and
all future years. We estimate that our effective tax rate in the
second half of fiscal 2018 will be between 17% and 23%.
As a result of the Act, we recorded an expense of $26.4 million
in the second quarter. This amount, which is included in income tax
expense on our consolidated statements of operations and
comprehensive income, consists of three components: (i) an $11.5
million charge relating to the one-time mandatory tax on the net
accumulated post-1986 untaxed earnings and profits of the Company’s
foreign subsidiaries, which we will elect to pay over an eight-year
period, (ii) a $2.3 million benefit resulting from the
re-measurement of the Company’s net deferred tax assets and
liabilities, and (iii) a $17.2 million charge related to
re-measurement of the U.S. income tax impacts resulting from
foreign uncertain tax positions.
Functional Currency Election
As indicated above, we recorded an expense of $15.9 million
related to the effects of a non-cash functional currency election
to file certain Canadian income tax returns in U.S. dollars. Prior
to the functional currency election, certain deferred tax
liabilities were measured on the difference between adjusted
Canadian dollar acquisition cost and Canadian dollar tax basis.
These deferred tax liabilities were then marked-to-market every
quarter, for income tax expense (benefit) purposes, to account for
changes in the Canadian dollar to U.S. dollar exchange rate.
Post-election, the applicable deferred tax liabilities will be
measured on the difference between U.S. GAAP value and U.S. dollar
tax basis, and eliminating volatility in the effective tax rate
caused by this mark-to-market adjustment.
Mount Milligan
On December 27, 2017, Centerra reported that mill processing
operations at Mount Milligan were temporarily suspended due to a
lack of sufficient water resources, as a result of Mount Milligan
experiencing a drier than normal spring and summer in calendar
2017, with lower than average spring snow melt.
On February 5, 2018, Centerra reported that it recommenced mill
processing operations at partial capacity. During the recent
shutdown, Centerra completed a number of steps to increase the flow
of water into the tailings storage facility (“TSF”) from which the
Mount Milligan mill draws all of its water requirements to supply
milling operations. Such steps included adding pumps to existing
water wells, increasing pump sizes to increase the flow rate, and
drilling additional wells. Current make-up water sources for the
TSF are from normal surface run-off, groundwater wells internal to
the TSF, and from base underdrain towers that access process water
underlying the TSF.
Centerra expects to resume milling operations at full capacity
in April, when additional fresh water becomes available from
surface run-off after the spring melt. As a further, longer-term
mitigation measure, Centerra filed an amendment to Mount Milligan’s
Environmental Assessment to allow pumping of water from a nearby
lake (Phillip Lake) and has received additional related
permits.
Due to the timing of shipments and deliveries of gold and
copper, the impact of the temporary shutdown is likely to be
reflected in Royal Gold’s mid-calendar 2018 results, as some of the
deliveries of gold and copper that were expected in the June
through August 2018 period will be deferred to a later date.
Pascua-Lama
On January 18, 2018, Barrick reported that it is analyzing a
revised sanction related to the Pascua-Lama project issued by
Chile’s Superintendencia del Medio Ambiente (“SMA”) on January 17,
2018. The sanction is part of a re-evaluation process ordered by
Chile’s Environmental Court in 2014 and relates to historical
compliance matters at the Pascua-Lama project. According to
Barrick, the SMA has not revoked Pascua-Lama’s environmental
permit, but has ordered the closure of existing facilities on the
Chilean side of the project, in addition to certain monitoring
activities.
Barrick also reported that closure of existing surface
facilities in Chile is consistent with its plan to advance a
prefeasibility study for underground mining operations at
Pascua-Lama, which would address a number of community concerns by
reducing the overall environmental impact of the project. Barrick
reported that it is currently undertaking a number of optimization
studies in order to complete the prefeasibility study.
On February 6, 2018, in light of the SMA order to close surface
facilities in Chile, and current plans to evaluate an underground
mine, Barrick announced it is reclassifying Pascua-Lama’s proven
and probable gold reserves3 of approximately 14 million ounces,
which are based on an open pit mine plan, as mineralized material.4
Barrick reported that it will include further details in its
February 14, 2018 year-end results release and an update on the
Pascua-Lama project at its February 22, 2018 Investor Day.
We own a 0.78% to 5.45% sliding-scale net smelter return (“NSR”)
gold royalty and a 1.09% NSR copper royalty on the Pascua-Lama
project. Our royalty interests are applicable to all gold and
copper production from the portion of the Pascua-Lama project lying
on the Chilean side of the border. The Company’s carrying value for
its royalty interests at Pascua-Lama is approximately $416.8
million as of December 31, 2017. We are currently evaluating
Barrick’s reserves reclassification announcement to properly assess
the impact, if any, of our carrying value at Pascua-Lama.
Wassa and Prestea
Under our stream agreement, the gold stream percentage at Wassa
and Prestea increased to 10.5%, from 9.25%, effective January 1,
2018. Golden Star expects consolidated calendar 2018 gold
production to be between 230,000 and 255,000 ounces.
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. The milling
rate for the month of December averaged 21,000 tonnes per day,
which is the nameplate capacity for the facility. New Gold
estimates that approximately 21,500 ounces of gold and 185,000
ounces of silver will be delivered to Royal Gold in calendar
2018.
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.3
Second Quarter Overview
Second quarter revenue was $114.4 million compared to $107.0
million in the prior year quarter. Stream and royalty revenue
totaled $79.3 million and $35.1 million, respectively, for the
second quarter. Revenue increased due to higher gold production at
Andacollo, Wassa and Prestea, and new gold production from our
Rainy River stream, partially offset by a net revenue decrease at
Mount Milligan.
Second quarter cost of sales of $19.9 million was below the
$22.5 million recorded in the prior year quarter, driven by lower
gold sales from Mount Milligan.
General and administrative expenses increased to $9.6 million in
the second quarter, compared to $7.5 million in the prior year
quarter. The increase was primarily related to an increase in legal
costs of approximately $1.7 million.
Exploration costs, which are related to our Peak Gold Joint
Venture, were $1.4 million in the second quarter, a decrease from
the prior year quarter.
Interest and other income was $0.6 million, down from $7.5
million in the prior year quarter, when the Company recognized
several one-time items.
Income tax expense totaled $48.4 million, compared with an
income tax expense of $5.0 million in the prior year quarter. This
resulted in an effective tax rate of 148.5% in the current period,
compared with 15.7% in the prior year quarter. The increase in the
effective tax rate is primarily attributable to the effects of U.S.
tax reform and a non-cash functional currency election at certain
of our Canadian subsidiaries.
At December 31, 2017, we had current assets of
$165.5 million compared to current liabilities of
$41.6 million, resulting in working capital of $123.9
million. This compares to current assets of $155.8 million and
current liabilities of $39.7 million at September 30, 2017,
resulting in working capital of $116.1 million.
During the second quarter, liquidity needs were met from our
available cash resources and $94.5 million in revenue net of
our streaming payments. The Company repaid $50 million of the
outstanding revolving credit facility during the quarter resulting
in $850 million available and $150 million outstanding
under its revolving credit facility as of December 31, 2017.
Working capital, combined with the Company’s undrawn revolving
credit facility, totaled approximately $975 million of
liquidity at December 31, 2017.
PROPERTY HIGHLIGHTS
A summary of second 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 December 31, 2017
can be found on Table 3. Results of our 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, are detailed in our Annual Report on Form
10-K.
_____________
1
Adjusted Net Income is a non-GAAP measure.
Please see Schedule A for reconciliation.
2 Gold Equivalent Ounces, (“GEOs”) are calculated as revenue
divided by the average gold price for the same period. GEOs net of
stream payments were 74,100 in the second quarter, compared to
69,100 in the prior year quarter. 3 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 Barrick and 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 Barrick and New Gold with definitions of reserves used
by the U.S. Securities and Exchange Commission. 4 The U.S.
Securities and Exchange Commission does not recognize this term.
Mineralized material is that part of a mineral system that has
potential economic significance but cannot be included in the
proven and probable ore reserve estimates until further drilling
and metallurgical work is completed, and until other economic and
technical feasibility factors based upon such work have been
resolved. Investors are cautioned not to assume that any part or
all of the mineral deposits in this category will ever be converted
into reserves.
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 194 properties on six continents,
including interests on 39 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 second
quarter results will be held on Thursday, February 8, 2018, 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 herein. Such forward-looking
statements include statements about the impact of recently-enacted
tax reform on Royal Gold’s financial results, the impact of the
Company’s non-cash functional currency election, the impact of the
temporary shutdown and subsequent re-start of mill processing
operations at Mount Milligan, the reclassification of gold reserves
to mineralized material at Pascua-Lama, Rainy River as a new source
of production growth, a higher stream rate at Wassa and Prestea,
initial production from Cortez Crossroads, the implementation of
the Peñasquito Pyrite Leach Project; and operators’ production
estimates for calendar year 2017 and 2018. 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 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’ 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; operators’ inability to access sufficient raw materials,
water or power; 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 and 2018, 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 Second Quarter Fiscal 2018 Revenue
and Operators’ Reported Production for Principal Stream and Royalty
Interests (In thousands, except reported production in oz.
and lbs.)
Three Months Ended Three Months Ended
December 31, 2017 December 31, 2016
Reported Reported Stream/Royalty
Metal(s) Revenue
Production1 Revenue
Production1 Stream:
Pueblo Viejo2 $ 26,355 $ 26,437
Gold 14,500 oz. 13,700 oz. Silver 469,600 oz. 543,300 oz.
Mount Milligan Gold $ 21,632 12,600 oz. $ 31,664 25,700 oz. Copper
1.8 Mlbs. N/A Andacollo Gold $ 21,601 17,000 oz. $ 10,985 9,200 oz.
Wassa and Prestea Gold $ 8,629 6,800 oz. $ 4,921 4,000 oz. Rainy
River Gold $ 1,070 800 oz. $ N/A N/A Total stream revenue $ 79,287
$ 74,007
Royalty:
Peñasquito $ 6,190 $ 7,134 Gold 71,100 oz. 185,400 oz. Silver 5.1
Moz. 5.0 Moz. Lead 33.4 Mlbs. 33.6 Mlbs. Zinc 94.4 Mlbs. 70.5 Mlbs.
Cortez Gold $ 2,934 25,000 oz. $ 1,834 14,500 oz. Other3 Various $
25,937 N/A $ 23,986 N/A Total royalty revenue $ 35,061 $ 32,954
Total Revenue $ 114,348 $
106,961
TABLE 1 Second Quarter Fiscal 2018 Revenue
and Operators’ Reported Production for Principal Stream and Royalty
Interests (In thousands, except reported production in oz.
and lbs.) Six Months Ended
Six Months Ended December 31, 2017 December
31, 2016 Reported Reported
Stream/Royalty Metal(s) Revenue
Production1 Revenue
Production1 Stream:
Mount Milligan $ 53,584 $ 70,050
Gold 31,300 oz. 54,600 oz. Copper 4.4 Mlbs. N/A Pueblo
Viejo2 $ 51,758 $ 47,387 Gold 27,400 oz. 24,600 oz. Silver 1.0 Moz.
866,600 oz. Andacollo Gold $ 33,938 26,700 oz. $ 31,154 24,400 oz.
Wassa and Prestea Gold $ 17,699 13,900 oz. $ 10,920 8,600 oz. Rainy
River Gold $ 1,070 800 oz. N/A N/A Total stream revenue $
158,049 $ 159,511
Royalty:
Peñasquito $ 13,986 $ 12,955 Gold 205,100 oz. 285,500 oz.
Silver 11.0 Moz. 10.3 Moz. Lead 69.6 Mlbs. 66.6 Mlbs. Zinc 186.8
Mlbs. 143.5 Mlbs. Cortez Gold $ 5,922 54,900 oz. $ 3,874 36,300 oz.
Other3 Various $ 48,867 N/A $ 48,569 N/A Total royalty revenue $
68,775 $ 65,398
Total revenue $ 226,824
$ 224,909
TABLE 2 Operators’ Historical
Production
Reported Production For The Quarter
Ended1
Property
Stream/Royalty
Operator
Metal(s) Dec. 31, 2017 Sep.
30, 2017 Jun. 30, 2017 Mar. 31,
2017 Dec. 31, 2016 Stream:
Mount Milligan4
35.00% of payable gold; 18.75% of payable copper Centerra
Gold 12,600 oz. 18,600 oz.
19,800 oz. 28,900 oz. 25,700
oz. Copper
1.8 Mlbs. 2.6 Mlbs. 2.6 Mlbs.
N/A N/A Pueblo Viejo
7.5% of gold produced up to 990,000
ounces; 3.75% thereafter
Barrick (60%) Gold 14,500 oz. 12,900
oz. 10,500 oz. 15,600 oz. 13,700
oz.
75% of payable silver up to 50 million
ounces; 37.5% thereafter
Silver 469,600 oz.
536,600 oz. 374,500 oz. 322,000
oz. 543,300 oz. Andacollo 100% of gold
produced Teck Gold 17,000 oz.
9,700 oz. 14,900 oz. 8,500 oz.
9,200 oz. Rainy River
6.5% of gold produced up to 230,000
ounces; 3.25% thereafter
New Gold Gold 800 oz. N/A
N/A N/A N/A
Wassa and Prestea
9.25% of gold produced up to 240,000
ounces; 5.5% thereafter
Golden Star Gold 6,800 oz. 7,100
oz. 6,300 oz. 5,400 oz.
4,000 oz.
Royalty:
Peñasquito 2.0% NSR Goldcorp
Gold 71,100 oz. 134,000 oz.
133,300 oz. 137,500 oz. 185,400
oz. Silver 5.1 Moz. 5.9 Moz.
5.6 Moz. 4.8 Moz. 5.0
Moz. Lead 33.4 Mlbs. 36.2 Mlbs.
27.4 Mlbs. 31.3 Mlbs. 33.6 Mlbs.
Zinc 94.4
Mlbs. 92.4 Mlbs. 85.7 Mlbs. 88.5
Mlbs. 70.5 Mlbs. Cortez GSR1 and GSR2,
GSR3, NVR1 Barrick Gold 25,000 oz.
29,900 oz. 16,600 oz. 11,300
oz. 14,500 oz.
FOOTNOTESTables 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
54,500 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
255,000-280,000 267,600
Royalty:
Cortez GSR1
102,200 81,800
Cortez GSR2 1,600
1,000 Cortez GSR3
103,800 82,800
Cortez NVR1 63,900
43,800 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 2017 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 December 31, 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
December 31, 2017 December 31, 2016 December 31,
2017 June 30, 2017 Gold Stream Purchases
(oz.) Sales (oz.) Purchases (oz.)
Sales (oz.) Inventory (oz.)
Inventory (oz.) Mount Milligan 17,700 12,700 23,500 25,700
5,200 100 Andacollo 13,500 17,000 9,200 9,200 - 100 Pueblo Viejo
12,600 14,500 15,600 13,700 8,500 12,900 Wassa and Prestea 6,000
6,800 4,300 4,000 500 1,000 Rainy River 1,000 800 - - 200 - Total
50,800 51,800 52,600 52,600 14,400 14,100
Three Months
Ended Three Months Ended As of As of
December 31, 2017 December 31, 2016 December 31,
2017 June 30, 2017 Silver Stream Purchases
(oz.) Sales (oz.) Purchases (oz.) Sales
(oz.) Inventory (oz.) Inventory (oz.) Pueblo
Viejo 260,200 469,600 322,500 543,300 260,800 536,800 Rainy River
11,900 - - - 11,900 - Total 272,100 469,600 322,500 543,300 272,700
536,800
Three Months Ended Three Months Ended
As of As of December 31, 2017 December 31,
2016 December 31, 2017 June 30, 2017 Copper
Stream Purchases (tonnes) Sales (tonnes)
Purchases (tonnes) Sales (tonnes) Inventory
(tonnes) Inventory (tonnes) Mount Milligan 1,245 819 N/A
N/A 426 -
Six Months Ended Six Months
Ended As of As of December 31, 2017
December 31, 2016 December 31, 2017 June 30,
2017 Gold Stream Purchases (oz.) Sales
(oz.) Purchases (oz.) Sales (oz.) Inventory
(oz.) Inventory (oz.) Mount Milligan 36,400 31,300
53,400 54,600 5,200 100 Andacollo 26,500 26,700 24,500 24,400 - 100
Pueblo Viejo 23,100 27,400 29,200 24,600 8,500 12,900 Wassa and
Prestea 13,400 13,900 8,900 8,600 500 1,000 Rainy River 1,000 800 -
- 200 - Total 100,400 100,100 116,000 112,200 14,400 14,100
Six Months Ended Six Months Ended As of As
of December 31, 2017 December 31, 2016
December 31, 2017 June 30, 2017 Silver Stream
Purchases (Moz.) Sales (Moz.) Purchases (oz.)
Sales (oz.) Inventory (oz.) Inventory (oz.)
Pueblo Viejo 730,200 1,006,200 865,800 866,600 260,800 536,800
Rainy River 11,900 - - - 11,900 - Total 742,100 1,006,200 865,800
866,600 272,700 536,800
Six Months Ended Six
Months Ended As of As of December 31, 2017
December 31, 2016 December 31, 2017 June 30,
2017 Copper Stream Purchases (tonnes) Sales
(tonnes) Purchases (tonnes) Sales (tonnes)
Inventory (tonnes) Inventory (tonnes) Mount Milligan
2,414 1,988 N/A N/A 426 -
ROYAL GOLD, INC.
Consolidated Balance Sheets
(In thousands except share data)
December 31, 2017 June
30, 2017 ASSETS Cash and equivalents $ 98,132 $ 85,847
Royalty receivables 29,285 26,886 Income tax receivable 27,366
22,169 Stream inventory 7,359 7,883 Prepaid expenses and other
3,337 822 Total current assets 165,479 143,607 Stream
and royalty interests, net 2,810,616 2,892,256 Other assets
53,305 58,202 Total assets $ 3,029,400 $ 3,094,065
LIABILITIES Accounts payable $ 2,251 $ 3,908 Dividends
payable 16,363 15,682 Income tax payable 15,097 5,651 Foreign
withholding taxes payable 3,451 3,425 Other current liabilities
4,413 5,617 Total current liabilities 41,575 34,283
Debt 493,486 586,170 Deferred tax liabilities 147,548 121,330
Uncertain tax positions 30,187 25,627 Other long-term liabilities
16,787 6,391 Total liabilities 729,583
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 65,307,285 and 65,179,527 shares outstanding, respectively 653
652 Additional paid-in capital 2,186,648 2,185,796 Accumulated
other comprehensive income 687 879 Accumulated earnings
69,842 88,050 Total Royal Gold stockholders’ equity
2,257,830 2,275,377 Non-controlling interests 41,987
44,887 Total equity 2,299,817 2,320,264 Total
liabilities and equity $ 3,029,400 $ 3,094,065
ROYAL GOLD, INC.
Consolidated Statements of Operations and
Comprehensive (Loss) Income
(In thousands except for per share
data)
Three Months Ended Six Months
Ended December 31, December 31,
December 31, December 31, 2017
2016 2017 2016 Revenue $ 114,348 $ 106,961 $
226,824 $ 224,909 Costs and expenses Cost of sales 19,863
22,502 40,282 45,163 General and administrative 9,555 7,538 16,455
18,045 Production taxes 602 445 1,145 942 Exploration costs 1,358
2,476 4,561 5,764 Depreciation, depletion and amortization
42,008 39,519 81,701
79,621 Total costs and expenses 73,386
72,480 144,144 149,535
Operating income 40,962 34,481 82,680 75,374 Interest and
other income 645 7,488 1,634 9,045 Interest and other expense
(9,034 ) (9,823 ) (17,651 ) (18,128 )
Income before income taxes 32,573 32,146 66,663 66,291
Income tax expense (48,360 ) (5,044 ) (55,904
) (12,232 ) Net (loss) income (15,787 ) 27,102 10,759 54,059
Net loss attributable to non-controlling interests 1,022
960 3,105 3,791
Net (loss) income attributable to Royal Gold common stockholders $
(14,765 ) $ 28,062 $ 13,864 $ 57,850
Net (loss) income $ (15,787 ) $ 27,102 $ 10,759 $ 54,059
Adjustments to comprehensive (loss) income, net of tax Unrealized
change in market value of available-for-sale securities (390
) 822 (193 ) 822 Comprehensive
(loss) income (16,177 ) 27,924 10,566 54,881 Comprehensive loss
attributable to non-controlling interests 1,022
960 3,105 3,791
Comprehensive (loss) income attributable to Royal Gold stockholders
$ (15,155 ) $ 28,884 $ 13,671 $ 58,672
Net (loss) income per share available to Royal Gold common
stockholders: Basic (loss) earnings per share $ (0.23 ) $ 0.43
$ 0.21 $ 0.89 Basic weighted average shares
outstanding 65,306,766 65,149,518
65,271,131 65,133,102 Diluted (loss)
earnings per share $ (0.23 ) $ 0.43 $ 0.21 $ 0.88
Diluted weighted average shares outstanding
65,306,766 65,253,209 65,460,430
65,264,137 Cash dividends declared per common share $
0.25 $ 0.24 $ 0.49 $ 0.47
ROYAL GOLD, INC.
Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended Six Months
Ended December 31, December 31, December 31, December
31, 2017 2016 2017 2016 Cash flows from operating activities: Net
(loss) income $ (15,787 ) $ 27,102 $ 10,759 $ 54,059 Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: Depreciation, depletion and amortization 42,008 39,519
81,701 79,621 Amortization of debt discount and issuance costs
3,734 3,400 7,413 6,751 Non-cash employee stock compensation
expense 2,021 2,299 4,395 6,443 Deferred tax expense (benefit)
29,685 (2,181 ) 28,958 (3,211 ) Other 65 (4,485 ) (158 ) (4,638 )
Changes in assets and liabilities: Royalty receivables (206 ) (87 )
(2,399 ) (7,135 ) Stream inventory 435 2,436 524 (689 ) Income tax
receivable (1,343 ) 3,163 (5,197 ) (52 ) Prepaid expenses and other
assets 1,326 889 (328 ) (835 ) Accounts payable (673 ) (3,609 )
(1,658 ) (1,832 ) Income tax payable 3,410 1,144 9,445 (12,120 )
Foreign withholding taxes payable (11 ) 550 26 1,636 Uncertain tax
positions 2,067 (322 ) 4,560 6,052 Other liabilities 8,894
(54 ) 9,193 822 Net cash
provided by operating activities $ 75,625 $ 69,764 $
147,234 $ 124,872 Cash flows from investing
activities: Acquisition of stream and royalty interests - (102,735
) - (192,818 ) Other (189 ) 2,000 (94 )
1,774 Net cash used in investing activities $ (189 )
$ (100,735 ) $ (94 ) $ (191,044 ) Cash flows from financing
activities: Borrowings from revolving credit facility - - - 70,000
Repayment of revolving credit facility (50,000 ) - (100,000 ) - Net
payments from issuance of common stock (12 ) (282 ) (3,541 ) (2,320
) Common stock dividends (15,709 ) (15,023 ) (31,391 ) (30,035 )
Purchase of additional royalty interest from non-controlling
interest - (413 ) - (1,438 ) Other 22 (2,365 )
77 (2,680 ) Net cash (used in) provided by
financing activities $ (65,699 ) $ (18,083 ) $ (134,855 ) $ 33,527
Net increase (decrease) in cash and equivalents 9,737
(49,054 ) 12,285 (32,645 ) Cash and equivalents at beginning of
period 88,395 133,042 85,847
116,633 Cash and equivalents at end of period
$ 98,132 $ 83,988 $ 98,132 $ 83,988
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.
Three Months Ended Six Months
Ended December 31, December 31, (Unaudited, in
thousands) (Unaudited, in thousands) 2017
2016 2017 2016 Net (loss)
income $ (15,787 ) $ 27,102
$ 10,759 $ 54,059 Depreciation,
depletion and amortization 42,008 39,519 81,701 79,621 Non-cash
employee stock compensation 2,021 2,299 4,395 6,443 Interest and
other, net 8,389 2,335 16,017 9,083 Income tax expense 48,360 5,044
55,904 12,232 Non-controlling interests in operating loss of
consolidated subsidiaries 1,022 2,091
3,105 5,076
Adjusted EBITDA $ 86,013
$ 78,390 $ 171,881 $
166,514
SCHEDULE A
Adjusted Net (Loss) Income Reconciliation
Management of the Company uses adjusted net income (loss) to
evaluate the Company’s operating performance, and for planning and
forecasting future business operations. The Company believes the
use of adjusted net income (loss) allows investors and analysts to
understand the results relating to receipt of revenue from its
royalty interests and purchase and sale of gold from its streaming
interests by excluding certain items that have a disproportionate
impact on our results for a particular period. The net income
(loss) adjustments are presented net of tax generally at the
Company’s statutory effective tax rate. Management’s determination
of the components of adjusted net income (loss) are evaluated
periodically and based, in part, on a review of non-GAAP financial
measures used by mining industry analysts. Net income (loss)
attributable to Royal Gold stockholders is reconciled to adjusted
net income (loss) as follows:
Three Months Ended Six Months
Ended December 31, December 31, (Unaudited, in
thousands) (Unaudited, in thousands) 2017
2016 2017 2016 Net (loss)
income attributable to Royal Gold common stockholders $
(14,765 ) $ 28,062 $
13,864 $ 57,850 Preliminary impacts of
U.S. tax legislation 26,400 - 26,400 - Income tax foreign currency
election 15,900 - 15,900 - Non-recurring gains on restructuring of
certain stream and royalty interests, net of tax - (4,717 ) -
(4,717 )
Adjusted net income
attributable to Royal Gold common stockholders $
27,535 $ 23,345 $ 56,164
$ 53,133
Net (loss)
income attributable to Royal Gold common stockholders per basic
share $ (0.23 ) $ 0.43
$ 0.21 $ 0.89 Preliminary
impacts of U.S. tax legislation 0.40 - 0.40 - Income tax foreign
currency election 0.24 - 0.24 - Non-recurring gains on
restructuring of certain stream and royalty interests, net of tax -
(0.07 ) - (0.07 )
Adjusted net
income attributable to Royal Gold common stockholders per basic
share $ 0.41 $ 0.36
$ 0.85 $ 0.82 Net
(loss) income attributable to Royal Gold common stockholders per
diluted share $ (0.23 ) $
0.43 $ 0.21 $ 0.88
Preliminary impacts of U.S. tax legislation 0.40 - 0.40 - Income
tax foreign currency election 0.24 - 0.24 - Non-recurring gains on
restructuring of certain stream and royalty interests, net of tax -
(0.07 ) - (0.07 )
Adjusted net
income attributable to Royal Gold common stockholders per diluted
share $ 0.41 $ 0.36
$ 0.85 $ 0.81
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180207006201/en/
Royal Gold, Inc.Karli Anderson, 303-575-6517Vice
President Investor Relations
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