Royal Gold Reports Record Revenue for Fiscal 2013, the Acquisition of a Royalty on El Morro, and Com

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Royal Gold Reports Record Revenue for Fiscal 2013, the Acquisition of a Royalty on El Morro, and Commissioning at Mt. Milligan

DENVER--(BUSINESS WIRE)-- Royal Gold, Inc. (NAS: RGLD) (TSX: RGL) ("Royal Gold" or the "Company") today announced net income attributable to Royal Gold stockholders ("net income") of $69.2 million, or $1.09 per basic share, on record annual royalty revenue of $289.2 million for fiscal 2013 (ended June 30). This compares to net income for fiscal 2012 of $92.5 million, or $1.61 per basic share, on royalty revenue of $263.1 million. The Company also announced that it has acquired a 70% interest in a 2.0% net smelter return royalty on certain portions of the El Morro copper gold project ("El Morro") in Chile, from Xstrata Copper Chile S.A., for $35 million.

Fiscal 2013 Highlights:

  • Royalty revenue of $289.2 million, up 10% from fiscal 2012;
  • Operating cash flow of $172.6 million, up 6% from fiscal 2012;
  • Net income of $69.2 million, down 25% from fiscal 2012 due mainly to a non-cash impairment loss recorded in the fiscal third quarter and higher interest expense;
  • Adjusted EBITDA1 of $4.12 per basic share, or 90% of revenue; and
  • Cash dividends of $43.9 million, representing a payout ratio of 25% of operating cash flow.

Other Highlights:

  • Acquisition of a royalty on the El Morro copper-gold project in Chile for $35 million;
  • Announcement that Barrick intends to re-sequence construction of the process plant and other facilities in Argentina to target first production at Pascua-Lama by mid-2016; and
  • A phased start-up of the concentrator at Mt. Milligan is planned for early August, with all circuits expected to be operational in September.

Tony Jensen, President and CEO, commented, "Royal Gold is reporting record annual revenue today despite a lower gold price, due to production increases at several of our principal properties in fiscal 2013. We expect to build on this success and enter a new phase of growth as Mt. Milligan begins processing ore this month, and as we continue to look for opportunities to put our $1 billion in available liquidity to work for our shareholders on other quality properties. In addition, we have acquired a royalty at El Morro, which is among the world's highest grade undeveloped gold and copper porphyries with reserves of 9.5 million ounces of gold and 7 billion pounds of copper."

Net income for the fiscal year was impacted by an impairment loss recognized on available-for-sale securities recorded in the third fiscal quarter that had an effect, net of tax, of $0.23 per basic share. Net income was also impacted by an increase in depletion expense as several properties reported higher production during the year. The decrease in earnings per share was also attributable to an increase in interest expense associated with the Company's 2019 Notes and the issuance of 5.25 million shares of common stock in October 2012 as part of a registered offering. These impacts were partially offset by higher royalty revenue.

Adjusted EBITDA for fiscal 2013 was $260.8 million ($4.12 per basic share), representing 90% of revenue. This compares to Adjusted EBITDA for fiscal 2012 of $237.6 million ($4.15 per basic share), or 90% of revenue. Operating cash flow for fiscal 2013 totaled $172.6 million, up 6% from $162.2 million in the prior year.

The increase in fiscal 2013 revenue was largely driven by increased production at Andacollo, Robinson, Mulatos, Holt, Canadian Malartic, Las Cruces and Wolverine. These increases were partially offset during the period by lower revenue from Voisey's Bay and production declines at Cortez and Leeville. The average gold price in fiscal 2013 of $1,605 per ounce was 4% lower than the average gold price of $1,673 per ounce in fiscal 2012.

As of June 30, 2013, the Company had a working capital surplus of $709.4 million. Current assets were $744.5 million (including $664.0 million in cash and equivalents), compared to current liabilities of $35.1 million, resulting in a current ratio of 21 to 1.

For the fourth quarter ended June 30, 2013, net income was $10.7 million, or $0.16 per basic share compared with net income of $20.6 million, or $0.35 per basic share for the quarter ended June 30, 2012. Royalty revenue was $57.3 million for the fourth fiscal quarter of 2013, compared with royalty revenue of $60.1 million for the same period in fiscal 2012. Adjusted EBITDA for the fourth quarter of fiscal 2013 was $50.3 million ($0.78 per basic share), or 88% of revenue, compared to Adjusted EBITDA of $54.3 million ($0.91 per basic share), or 90% of revenue, for the prior year quarter. Operating cash flow was essentially unchanged from the prior year quarter.

Results for the fourth quarter were impacted by a lower average gold price of $1,414 per ounce, representing a 12% decrease over the prior year quarter, lower production at Peñasquito and lower contribution from Cortez relative to the prior year quarter, along with higher depreciation and interest expense.

RECENT DEVELOPMENTS

Mt. Milligan

Thompson Creek reports that commissioning of all major equipment in the mill is underway and progressing on schedule. The primary crusher and conveyor have been commissioned, the coarse ore stockpile has been bedded, and the mine is positioned to deliver ore to the crusher. A phased start-up of the concentrator is scheduled to commence in early August, with the first ore feed expected to occur by mid-August. All of the concentrator grinding and flotation circuits are expected to be operational in September.

El Morro

On August 7, 2013, Royal Gold acquired a 70% interest in a 2.0% net smelter return royalty on certain portions of the El Morro copper gold project in Chile ("El Morro"), from Xstrata Copper Chile S.A., for $35 million. Goldcorp holds 70% ownership of the El Morro project and is the operator, with the remaining 30% held by New Gold. Goldcorp and New Gold reported that as of December 31, 2012, proven and probable reserves totaled 9.5 million ounces of gold and 7 billion pounds of copper on a 100% basis. This royalty encompasses some legacy BHP concessions that are currently estimated by Royal Gold to cover approximately one-third of the total reserve.

Goldcorp has indicated that all El Morro project field construction activities have been suspended since April 27, 2012 pending the definition and implementation by the Chilean environmental permitting authority (the Servicio de Evaluación Ambiental or SEA) of a community consultation process which corrects certain deficiencies in that process as specifically identified by the Antofogasta Court of Appeals. The Chilean authorities and local communities continue to refine and advance this new consultation process with Goldcorp's support.

Pascua-Lama

In mid-July 2013, Barrick announced that a ruling from the Chilean Court of Appeals requires it to complete Pascua-Lama's water management system to the satisfaction of Chile's Environmental Superintendent before resuming construction activities in Chile.

In early July, Barrick stated that it has submitted a plan to construct the project's water management system in compliance with permit conditions for completion by the end of 2014. After this, Barrick expects to complete remaining construction works in Chile, including pre-stripping. Barrick also stated that it intends to re-sequence construction of the process plant and other facilities in Argentina in order to target first production by mid calendar 2016, replacing the previous schedule which called for production in the second half of calendar 2014.

PROPERTY HIGHLIGHTS

Highlights at certain of the Company's principal producing and development properties during the fiscal year ended June 30, 2013, compared with the prior fiscal year ended June 30, 2012 are listed below. Production for our producing properties reflects the actual production subject to our interests reported to us by the various operators through June 30, 2013.

Producing Properties

Andacollo - Production increased 33% over the prior year primarily due to higher mill throughput and higher ore grades, with mill throughput averaging about 47,000 tonnes per day during our fourth fiscal quarter of 2013.

Cortez - Production decreased 30% over the prior year as Barrick continues to prioritize production from their higher grade Cortez Hills operation that is not covered by our royalty interest. During our fiscal fourth quarter, mining resumed at the Pipeline Complex, which is subject to our royalty interests, as surface mining equipment returned from the Cortez Hills pit. Our royalty interests cover all of the Pipeline pit and part of the Gap pit.

Holt - Production increased 37% over the prior year as underground operations at Holt continued to ramp-up and are now at steady state production levels.

Las Cruces - Production increased 29% over the prior year due to a full year run rate at design capacity. First Quantum Minerals completed an acquisition of Inmet Mining in April 2013 and now operates the Las Cruces mine. First Quantum plans to test the plant at higher ore throughput and lower grade to assess the effects on plant performance before Las Cruces enters into lower copper grade areas of the mine, which is expected in calendar 2014.

Mulatos - Production increased 29% over the prior year due to the contribution of the high grade mill installed during the year and higher crusher throughput for the heap leach operations. Alamos expects to have sufficient Escondida high-grade zone reserves to continue processing until the first quarter of calendar 2014, at which point the Escondida Deep zone is expected to provide additional feed to continue mill production to the end of the second quarter of calendar 2014. The Mulatos royalty is capped at 2.0 million gold ounces of production. As of June 30, 2013, approximately 1.1 million cumulative ounces of gold have been produced.

Peñasquito - Gold production increased 26% over the prior year, while reported production for silver, lead and zinc decreased. Goldcorp's annual guidance for Peñasquito anticipated lower production in the first half of calendar 2013 as the mine moved from a lower grade portion of the pit to higher grade ore. The sulphide plant achieved throughput of over 105,000 tonnes per day during the second calendar quarter of 2013 following the completion of crusher maintenance, blasting improvements, and the addition of new fresh water wells. In June, 2013, the sulphide plant achieved throughput of over 120,000 tonnes per day.

Goldcorp announced that it has identified a new water source within their current permitted basin that has the potential to supply sufficient water necessary to reach full design capacity. The Company is currently working to acquire necessary rights-of-way and is evaluating alternative routes to access the well field. The new water source will provide the flexibility to resume ramp-up to the design throughput of 130,000 tonnes per day. Construction is expected to begin in the fourth quarter of 2013 with completion expected in the second half of calendar 2014.

Robinson - Copper production increased 39% over the prior year, primarily due to improved mill recovery and higher productivity at the mine. Mining of higher grade gold areas has resulted in favorable gold production during calendar 2013. Production during the remainder of calendar 2013 is likely to return to more normal gold grades.

Voisey's Bay - Nickel production increased 9% over the prior year, while copper production decreased approximately 5%. We note that the timing of port schedules impacts the shipping calendar, generally favoring the quarters ended March and September.

In late March 2013, the Government of Newfoundland and Labrador, announced amendments to their Voisey's Bay Development Agreement including a commitment from Vale to pursue underground mining to extend the mine life. The agreement also allows Vale to continue processing concentrate outside of the province while construction is being finalized at the Long Harbour processing plant.

Wolverine -Production increased significantly over the prior year. Yukon Zinc reported that process circuit modifications and the integration of new equipment have improved plant performance. In June 2013, Yukon Zinc announced that it reduced production at Wolverine by 40% and its workforce by 30% in an effort to reduce costs. Yukon Zinc has committed to review the project economics later this year and evaluate the possibility of resuming full production.

Full-year and fourth quarter fiscal 2013 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 interests on 204 properties on six continents, including interests on 36 producing mines and 20 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 #85827803. 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 expectation of a new phase of growth as Mt. Milligan begins production (in August); the Company's ability to invest in additional quality properties; and the operators' expectation of construction, ramp up, production, mine life, resolution of regulatory and legal proceedings and other developments at various mines. 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 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; completion of feasibility studies; delays in the operators securing or their inability to secure necessary governmental permits; changes in operators' project parameters as plans continue to be refined; economic and market conditions; 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 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.

TABLE 1

Fiscal 2013

Royalty Production and Revenue for Principal Royalty Interests

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

 

Property

 

Royalty

 

Metal(s)

 

Metal(s)

 

Fiscal Year Ended
June 30, 2013

 

Fiscal Year Ended
June 30, 2012

 

Royalty
Revenue

 

Reported
Production
1

 

Royalty
Revenue

 

Reported
Production
1

      

Andacollo2,3

 

75% NSR

 

Teck

 

Gold

 

$

82,272

 

68,600 oz.

 

$

64,075

 

51,400 oz

 

Voisey's Bay3

2.7% NSR

Vale

$

32,517

 

$

36,030

Nickle

143.9 million lbs.

131.6 million lbs.

   

Copper

   

101.9 million lbs.

   

107.2 million lbs.

 

Peñasquito3

2.0% NSR

Goldcorp

$

28,500

$

28,468

Gold

371,100 oz.

294,500 oz.

Silver

21.1 million oz.

21.5 million oz.

Lead

126.3 million lbs.

164.0 million lbs.

   

Zinc

   

282.3 million lbs.

   

312.6 million lbs.

 

Holt

 

0.00013 x quarterly
average gold price

 

St Andrew Goldfields

 

Gold

 

$

19,028

 

56,400 oz.

 

$

14,966

 

41,200 oz.

 

Mulatos4

 

1.0% - 5.0% NSR

 

Alamos

 

Gold

 

$

17,376

 

218,000 oz.

 

$

13,794

 

169,300 oz.

 

Robinson3

3.0% NSR

KGHM

$

15,664

$

11,687

Gold

49,100 oz.

31,000 oz.

   

Copper

   

146.2 million lbs.

   

105.3 million lbs.

 

Cortez5

 

GSR1 and GSR2,
GSR3, NVR1

 

Barrick

 

Gold

 

$

8,980

 

82,100 oz

 

$

13,160

 

116,700 oz.

 

Canadian Malarctic6

 

1.0% - 5.0% NSR

 

Osisko

 

Gold

 

$

8,043

 

347,000 oz

 

$

7,133

 

297,500 oz.

 

Las Cruces3

 

1.5% NSR

 

First Quantum

 

Copper

 

$

8,012

 

153.4 million lbs.

 

$

6,448

 

119.1 million lbs.

 

Leeville

 

1.8% NSR

 

Newmont

 

Gold

 

$

6,893

 

232,000 oz.

 

$

9,159

 

305,100 oz.

 

Wolverine3,7

0.0% - 9.445% NSR

Yukon Zinc

$

6,353

$

2,155

Gold

11,300 oz.

1,300 oz.

   

Silver

   

2.8 million oz.

   

1.0 million oz.

 

Dolores

3.25% NSR

Pan American Silver

$

4,767

$

5,323

2.0% NSR

Gold

56,700 oz.

61,200 oz.

    

Silver

   

3.2 million oz.

   

3.1 million oz.

 

Other8

 

-

 

-

 

Various

 

$

51,314

 

N/A

 

$

50,656

 

N/A

 

Total Royalty Revenue

 

$

289,224

   

$

263,054

  
 

TABLE 2

Fourth Quarter Fiscal 2013

Royalty Production and Revenue for Principal Royalty Interests

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

 

Property

 Royalty 

Metal(s)

 Metal(s) 

Fiscal Quarter Ended
June 30, 2013

 

Fiscal Quarter Ended
June 30, 2012

 Royalty
Revenue
 

Reported
Production1

 Royalty
Revenue
 

Reported
Production1

      

Andacollo2,3

 75% NSR Teck Gold $

16,330

 

15,700 oz.

 $

14,275

 

11,

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