Royal Gold Reports Record Revenue and Free Cash Flow for Fourth Quarter and Fiscal 2010
- Fiscal 2010 revenue and free cash flow1
increased 85% and 62%, respectively, year-over-year to record levels - Fourth quarter revenue and free cash flow1
increased 83% and 81%, respectively, year-over-yearto
record levels - Significant expansion of portfolio in fiscal 2010 including
Andacollo, International Royalty, and Pascua-Lama transactions - Gold reserves2 increased 22%
year-over-year to 78.6 million ounces; silver reserves2
increased 12% to 1.3 billion ounces year-over-year - July 2010 agreement with Thompson Creek to acquire 25% gold stream
on the Mt. Milligan project3
Royal Gold, Inc. (NASDAQ: RGLD) (TSX: RGL) today announced record
royalty revenue of $136.6 million for fiscal 2010 (ended June 30), an
85% increase over revenues of $73.8 million in fiscal 2009. Net income
available to Royal Gold common stockholders totaled $21.5 million, or
$0.49 per basic share, compared with net income available to Royal Gold
common stockholders of $38.3 million, or $1.09 per share, in fiscal
2009. Net income available to Royal Gold common stockholders for fiscal
2010 was impacted by pre-tax effects of severance and acquisition costs
of approximately $19.4 million, related to the Company's acquisition of
International Royalty Corporation ('IRC?). The after tax effect of these
IRC related costs on basic earnings per share was $0.33. Excluding theafter tax effect of these items, net income available to Royal Gold
common stockholders would have been $35.8 million, or $0.82 per basic
share for fiscal 2010. Net income available to Royal Gold common
stockholders for fiscal 2009 was impacted by two one-time gains related
to the Barrick royalty portfolio acquisition and the Benso royalty
buy-back by Golden Star. The effect of these gains was $0.62 per basic
share, after taxes. Excluding these gains, fiscal 2009 net income
available to Royal Gold common stockholders would have been $16.4
million, or $0.47 per share.
For the fourth quarter ended June 30, 2010, royalty revenue reached a
record high of $40.7 million, an 83% increase over royalty revenue of
$22.3 million for the same period in fiscal 2009. The Company reported
fourth quarter net income available to Royal Gold common stockholders of
$10.5 million, or $0.21 per basic share, as compared with net income
available to Royal Gold common stockholders of $7.1 million, or $0.18
per basic share for the fourth quarter of fiscal 2009. Net income for
the fourth quarter of fiscal 2009 was impacted by a $2.2 million gain
due to the Benso royalty buy-back. Excluding this one-time gain, the
Company′s net income for the fourth quarter ended June 30, 2009 was $5.6
million or $0.14 per basic share.
Free cash flow1 for fiscal 2010 was $100.1 million ($2.29 per
basic share), representing 73% of revenue. This compares to free cash
flow for fiscal 2009 of $61.7 million ($1.75 per basic share), or 84% of
revenue. Free cash flow as a percentage of revenue for fiscal 2010 was
negatively impacted due to $19.4 million of costs relating to the
acquisition of IRC. Before IRC related costs, free cash flow for the
year was 87% of revenue. Free cash flow for the fourth quarter was $35.1
million ($0.74 per basic share), or 86% of revenue, compared to free
cash flow of $19.4 million ($0.49 per basic share), or 87% of revenue,
for the prior period.
The 85% increase in revenue for fiscal 2010 was largely driven by
production increases at Taparko, Cortez, Peñasquito, and Dolores, new
revenue from the IRC royalty portfolio and initial production at
Andacollo, and higher average gold prices. The average price of gold in
fiscal 2010 was $1,089 per ounce compared with $874 per ounce in fiscal
2009, representing a 25% increase.
The percentage of revenue from precious metal royalties for fiscal 2010
was 84% compared with 87% for fiscal 2009. Gold royalty revenue for
fiscal 2010 was 81% compared with 84% for fiscal 2009.
As of June 30, 2010, the Company had a working capital surplus of $335.5
million. Current assets were $371.3 million (including $324.8 million in
cash and equivalents), compared to current liabilities of $35.8 million,
resulting in a current ratio of 10 to 1. Total long-term debt
outstanding under the Company′s credit facilities was $248.5 million as
of June 30, 2010.
Tony Jensen, President and CEO, commented, 'We are very pleased to
report record revenue and free cash flow on both a gross and per share
basis for fiscal 2010 as we mark our ninth straight year of growth. This
past year was exceptional with regard to acquisitions as well. We
increased the number of properties in our portfolio by 60% including the
cornerstone assets of Andacollo, a greatly expanded interest at
Pascua-Lama, and Voisey′s Bay. Fiscal 2011 is also shaping up to be an
exciting year for Royal Gold with our July announcement of the Mt.
Milligan transaction and our expectation of full commercial production
from the Peñasquito, Andacollo, Wolverine, Las Cruces and Dolores mines,
as well as initial production from the Canadian Malartic mine.?
RECENT DEVELOPMENTS
Common Stock Offering
In June 2010, Royal Gold sold 5,980,000 shares of common stock,
including 780,000 shares of common stock pursuant to the exercise of the
underwriters′ over-allotment option, at a price of $48.50 per share.
Proceeds to the Company from the offering, net of commission and
estimated expenses, were approximately $276.2 million. The proceeds from
the offering will be used for general corporate purposes, including
funding of the Mt. Milligan transaction.
Acquisition of Additional Royalty Interests on the Pascua-Lama
Gold Project
In July 2010, Royal Gold announced that it has acquired the rights to an
additional 1.0% net smelter return sliding-scale gold royalty on the
Pascua-Lama project, owned by Barrick Gold. The additional interest was
purchased in separate transactions from three private individuals for a
total acquisition price of $68 million. Of this amount, $40 million has
been paid to immediately acquire 0.60% of the additional royalty
interest, and a deferred payment of $28 million will be made on or
before October 29, 2010 to acquire the remaining 0.40% royalty interest.
Once the acquisition is complete, Royal Gold′s total royalty interest
will increase to 5.23% NSR at gold prices at or above $800 per ounce.
The transactions also include a 0.20% fixed-rate copper royalty which
takes effect after January 1, 2017, increasing Royal Gold′s total copper
royalty interest to 1.05%.
Agreement Signed to Acquire 25% Gold Stream on the Mt. Milligan
Project
In July 2010, the Company announced it has agreed to acquire 25% of the
payable gold produced from the Mt. Milligan copper-gold project in
British Columbia from Thompson Creek concurrent with the closing of
Thompson Creek′s proposed acquisition of Terrane. Royal Gold will
provide $226.5 million at closing of Thompson Creek′s acquisition of
Terrane and thereafter $85.0 million over the construction period of the
Mt. Milligan project. In addition, Royal Gold will pay Thompson Creek a
cash payment equal to the lesser of $400 or the prevailing market price
for each payable ounce of gold until 550,000 ounces have been delivered
to Royal Gold and the lesser of $450 or the prevailing market price for
each additional ounce thereafter. This transaction is subject to the
completion of Thompson Creek′s acquisition of Terrane, which requires
the approval Terrane′s stockholders. Terrane has scheduled a
shareholders′ meeting in September to approve the transaction.
PROPERTY HIGHLIGHTS
Highlights at the Company′s principal producing and development
properties are listed below:
Andacollo ? In July 2010, Teck reported that ramp up to full
production continues with the expectation that design capacity will be
reached in the fourth quarter of calendar 2010. Three shipments of
concentrates were made during the quarter ended June 30, 2010, with the
first occurring in early May.
Peñasquito ? In June 2010, Goldcorp announced that the second
sulfide processing line achieved mechanical completion ahead of schedule
and is ramping up toward its 50,000 tonne-per-day design capacity. The
operator expects commercial production to be reached in the third
calendar quarter of 2010, construction of the high pressure grinding
roll circuit to be completed in the fourth calendar quarter, and full
production ramp up to the planned 130,000 tonne per day capacity to be
reached in early calendar 2011.
Taparko ? At the current gold price, the Company expects that the
$35 million cap on the 15% (TB-GSR1) royalty could be met during our
first fiscal quarter of 2011. As of June 30, 2010, Royal Gold has
recognized approximately $30.6 million in royalty revenue associated
with the TB-GSR1 royalty and a total of $50.0 million in aggregate from
the Taparko royalties. When the cap is reached, both the TB-GSR1 royalty
and the sliding-scale (TB-GSR2) royalty (currently paying at a rate of
10%) will cease and a 2.0% (TB-GSR3) perpetual royalty, applicable to
gold production from defined portions of the Taparko-Bouroum project
area, will take effect.
Siguiri ? The Company expects that the $12.0 million cap on our
royalty could be reached in the first half of fiscal 2011. Approximately
$1.8 million remains unrecognized as of June 30, 2010.
Voisey′s Bay ? Currently, the strike at Voisey′s Bay has not been
resolved. Vale is presently operating at about 40% of capacity and is
working on ramping up to full production.
Dolores ? During the quarter, production at Dolores was below
their guidance due to lower gold grades. The operator expects production
to increase through the second half of calendar 2010 due to increasing
grades, completion of tertiary screen repairs, and loading of ore onto
the phase 2 leach pad beginning in late August.
Las Cruces ? Inmet′s Las Cruces copper operation continues to
experience difficulties as they start-up. They have reported that a
number of equipment failures and operational issues delayed the ramp up
of the plant and limited the ability to operate continuously. Beginning
in July, Inmet has been focused on increasing available plant capacity
and reducing the causes of equipment failures. Inmet expects to produce
20,000 to 30,000 tonnes of copper cathode in calendar 2010.
Wolverine? Yukon Zinc is completing the construction of
its facilities at the Wolverine Mine. In June, wet commissioning was
completed and batches of low grade ore were put through the processing
plant for testing of unit operations. The plant is scheduled to begin
the ramp up process as ore is introduced into the mill on a continuous
basis in September.
Canadian Malartic ? Constructionof the mine and mill
facilities continue to advance. As of early June, the mining fleet was
being deployed and the installation of the SAG and ball mills was
scheduled to begin. Osisko estimates the project will be fully
operational in the second quarter of calendar 2011.
Pascua-Lama ? Barrick has reported that detailed engineering and
procurement is nearing completion and the project is on track to enter
production in the first quarter of calendar 2013. Barrick stated that
major, long lead items have been ordered and the Barriales Camp in Chile
is essentially complete. Roadwork is progressing well and about three
million tons have been moved as a part of initial earthworks.
Full-year and fourth quarter fiscal 2010 production and revenue for the
Company′s principal royalty interests are shown in Tables 1 and 2. For
more detailed information about each of our principal royalty
properties, please refer to the Company′s most recent Annual Report on
Form 10-K, our Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K filed with the SEC and available on the SEC′s website located
at www.sec.gov,
or our website located at www.royalgold.com.
CORPORATE PROFILE
Royal Gold is a precious metals royalty company engaged in the
acquisition and management of precious metal royalty and similar
production based interests. The Company owns royalties on 189 properties
on six continents, including royalties on 33 producing mines and 24
development stage projects. Royal Gold is publicly traded on the NASDAQ
Global Select Market under the symbol 'RGLD,? and on the Toronto Stock
Exchange under the symbol 'RGL.? The Company′s website is located at www.royalgold.com.
Note: Management′s conference call reviewing the fourth quarter
and year-end results will be held todayat 10:00 a.m. Mountain
Time (noon Eastern Time) and will be available by calling (800) 603-2779
(North America) or (973) 200-3960(international), access
#50475268. The call will be simultaneously broadcast on the Company′s
website at www.royalgold.com
under the 'Presentations? section. A replay of this webcast will be
available on the Company′s website approximately two hours after the
call ends.
___________________________
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
Company's performance in fiscal 2011, including the acquisition of a
gold stream interest at Mt. Milligan; the operators′ expectation of
commercial production in fiscal 2011 at the Peñasquito, Andacollo,
Wolverine, Las Cruces and Dolores mines; the commencement of production
in fiscal 2011 at the Canadian Malartic mine; the commencement of
production in fiscal 2013 at the Pascua-Lama project; that the Company
will make a deferred payment of $28 million on or before October 29,
2010 to acquire the remaining 0.40% royalty interest at Pascua-Lama; the
operators′ estimates of the various stages of construction, ramp up and
achievement of production levels at Andacollo, Peñasquito, Las Cruces,
Wolverine, Canadian Malartic and Pascua-Lama; that the $35 million cap
on the
TB-GSR1 royalty at Taparko could be met during the first quarter of
fiscal 2011; that the $12 million royalty cap at Siguiri could be
reached in the first half of fiscal 2011; and the operators′ estimates
regarding production at the Company′s other royalty properties. Factors
that could cause actual results to differ materially from the
projections include, among others, precious metals prices, performance
of and production at the Company's royalty properties, decisions and
activities of the operators of the Company's royalty properties,
unanticipated grade, geological, metallurgical, processing or other
problems the operators of the mining properties may encounter, delays in
the operators securing or their inability to secure necessary
governmental permits, changes in operator′s project parameters as plans
continue to be refined, economic and market conditions, possible
liquidity and production problems at the Company′s royalty properties,
the Company′s exercise of its rights under the Taparko Funding
Agreement, buy-down rights at Canadian Malartic, litigation, the ability
of the various operators to bring projects into production as expected,
and other subsequent events, as well as other factors described in the
Company's Annual Report on Form 10-K, Quarterly Report 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.
*Free Cash Flow: The Company discloses information on free cash
flow and free cash flow as a percentage of revenues in its reporting.
Free cash flow is a non-GAAP financial measure. The Company defines free
cash flow as operating income plus depreciation, depletion and
amortization, non-cash charges, and any impairment of mining assets less
non-controlling interests in operating income of consolidated
subsidiaries. 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,
attached to this press release for a GAAP reconciliation.
| 1 | The Company defines free cash flow, a non-GAAP financial measure, as operating income plus depreciation, depletion and amortization, non-cash charges and impairment of mining assets, if any, less non-controlling interests in operating income from consolidated subsidiaries (see Schedule A). | ||
| 2 | Reserves subject to Royal Gold′s royalty interests. | ||
| 3 | Royal Gold′s acquisition is subject to the completion of Thompson Creek′s acquisition of Terrane Metals Corp. ('Terrane?) which requires the approval of Terrane′s shareholders. |
TABLE 1 Fiscal 2010 Royalty Production and Revenue for Principal Royalty Interests | ||||||||||||||
| FISCAL YEAR ENDED JUNE 30, 2010 | FISCAL YEAR ENDED JUNE 30, 2009 | |||||||||||||
PROPERTY | ROYALTY | OPERATOR | METAL | Royalty | Reported | Royalty | Reported | |||||||
Taparko | TB-GSR1 2
| High River | Gold | 32.2 | 117,505 oz. | 10.4 | 48,105 oz. | |||||||
Cortez | GSR1 and GSR2 3
| Barrick | Gold | 25.1 | 357,595 oz. | 16.3 | 268,327 oz. | |||||||
Robinson 4 | 3.0% NSR | Quadra | Gold Copper | 12.1 | 86,101 oz.
| 7.7 | 113,740 oz.
| |||||||
Leeville | 1.8% NSR | Newmont | Gold | 9.9 | 454,148 oz. | 6.7 | 429,122 oz. | |||||||
Mulatos | 1.0 - 5.0% NSR 5 | Alamos | Gold | 9.0 | 164,954 oz. | 6.1 | 167,907 oz. | |||||||
Siguiri 6 | 0.00 - 1.875% NSR 7 | AngloGold Ashanti | Gold | 6.0 | 296,223 oz. | 4.0 | 241,817 oz. | |||||||
Peñasquito | 2.0% NSR | Goldcorp | Gold Silver Lead Zinc | 6.0 | 117,963 oz. 7.2M oz. 36.7M lbs. 48.5M lbs. | 1.5 | 52,932 oz. 2.5M oz. - - | |||||||
Goldstrike 6 | 0.9% NSR | Barrick | Gold | 3.9 | 348,802 oz. | 5.6 | 724,368 oz. | |||||||
Voisey′s Bay | 2.7% NSR | Vale | Nickel
| 3.9 8 | 19.0M lbs. 8
| - 8 | - 8 | |||||||
Andacollo | 75% NSR 9 | Teck | Gold | 3.8 | 4,145 oz. |
| - 9 | |||||||
Dolores | 3.25% NSR 2.0% NSR | Minefinders | Gold Silver | 3.0 | 73,463 oz.
| 0.9 10 | 38,819 oz. 10
| |||||||
Gwalia Deeps 11 | 1.5% NSR | St Barbara | Gold | 0.9 | 47,626 oz. | - 12 | - 12 | |||||||
Las Cruces 11 | 1.5% NSR | Inmet | Copper | 0.9 | 20.8M lbs. | - 12 | - 12 | |||||||
Other Royalty Properties 13 | - | - | Various | 19.9 | - | 14.6 | - | |||||||
| Total Royalty Revenue | 136.6 | 73.8 | ||||||||||||
Footnotes follow below.
TABLE 2 Fourth Quarter Fiscal 2010 Royalty Production and Revenue for Principal Royalty Interests | ||||||||||||||
| QUARTER ENDED JUNE 30, 2010 | QUARTER ENDED JUNE 30, 2009 | ||||||||||||
PROPERTY | ROYALTY | OPERATOR | METAL | Royalty | Reported | Royalty | Reported | |||||||
Taparko | TB-GSR1 2
| High River | Gold | 9.3 | 31,158 oz. | 3.9 | 17,519 oz. | |||||||
Andacollo | 75% NSR 9 | Teck | Gold | 3.8 | 4,145 oz. | - 9 | - 9 | |||||||
Voisey′s Bay | 2.7% NSR | Vale | Nickel
| 3.3 8 | 15.9M lbs.8
| - 8 | - 8 | |||||||
Robinson 4 | 3.0% NSR | Quadra | Gold Copper | 3.2 | 19,797 oz.
| 2.3 | 23,152 oz.
| |||||||
Cortez | GSR1 and GSR2 3
| Barrick | Gold | 3.1 | ||||||||||