Royal Gold Reports Results for Third Quarter Fiscal Year 2013
Royalty revenue of $74.2 million, a 7% increase year-over-year
Operating cash flow totaled $68.1 million, a 43% increase year-over-year
DENVER--(BUSINESS WIRE)-- Royal Gold, Inc. (NAS: RGLD) (TSX:RGL) today announced net income attributable to Royal Gold stockholders of $6.5 million, or $0.10 per basic share, on royalty revenue of $74.2 million for the third quarter of fiscal 2013. This compares to net income attributable to Royal Gold stockholders of $26.0 million, or $0.44 per basic share, on royalty revenue of $69.6 million for the third quarter of fiscal 2012.
Results for the quarter were impacted by two items. First, a non-cash loss was recognized on available-for-sale securities of $12.1 million associated with the common shares of Seabridge Gold, Inc. that were acquired as part of the June 2011 transaction regarding the Kerr-Sulphurets-Mitchell Project. Second, a higher income tax expense of $6.9 million was recognized during the quarter related to adjustments resulting from the filing of our June 30, 2012 income tax return. The after tax effect of the securities loss and tax adjustments on basic earnings per share was $0.17 and $0.10, respectively. Excluding these items, net income attributable to Royal Gold stockholders would have been $24.3 million, or $0.37 per basic share for the fiscal third quarter.
For the nine-month period ended March 31, 2013, royalty revenue was a record $231.9 million and net income attributable to Royal Gold stockholders was $58.5 million, or $0.93 per basic share. This compares to nine-month royalty revenue of $202.9 million and net income attributable to Royal Gold stockholders of $71.9 million, or $1.27 per basic share, for the nine-month period ended March 31, 2012. The after tax effect of the securities loss and tax adjustments (described above) on net income attributable to Royal Gold stockholders for the nine-month period ended March 31, 2013, was $12.1 million, or $0.17 per basic share, and $6.9 million, or $0.11 per basic share, respectively. Excluding these items, net income attributable to Royal Gold stockholders for the nine-month period ended March 31, 2013, would have been $76.3 million, or $1.22 per basic share.
Adjusted EBITDA1 for the third quarter of fiscal 2013 was $66.1 million representing 89% of revenue, compared to Adjusted EBITDA of $63.6 million or 91% of revenue for the prior year period. Cash flow from operations for the quarter was $68.1 million, or $1.05 per basic share, compared with $47.5 million, or $0.81 basic per share, for the third quarter of fiscal 2012.
The 7% increase in revenue for the quarter was largely driven by increased production at Andacollo and Holt, and the continued ramp up at Wolverine. These increases were partially offset during the period by production declines at Peñasquito and Voisey's Bay, as well as lower gold and other metal prices. The average price of gold for the quarter was $1,632 per ounce compared with $1,691 per ounce for the comparable period, a decrease of 3%.
As of March 31, 2013, the Company had a working capital surplus of $727.4 million. Current assets were $749.0 million (including $673.1 million in cash and equivalents), compared to current liabilities of $21.6 million, resulting in a current ratio of approximately 35 to 1. In addition to available working capital, the Company has $350 million available under its revolving line of credit.
Tony Jensen, President and CEO, commented, "Achieving another quarter of strong royalty revenue despite lower year-over-year average gold prices, highlights the strength of our royalty portfolio. We expect to add Mt. Milligan to our producing portfolio of assets in the near future as production is scheduled to commence in the third calendar quarter of this year. In addition, our strong financial position allows us to seek new business opportunities as we look to expand our high quality portfolio."
Highlights at certain of the Company's principal producing and development properties during the quarter ended March 31, 2013 are listed below. We advise readers to refer to the public statements of the operators of each of these properties for more complete information.
Andacollo- Teck reported that average daily throughput for the quarter was about 47,000 tonnes. Production increased primarily due to higher mill throughput and higher ore grades. Over the past few quarters, Andacollo has established steady state operations.
Holt - St Andrew Goldfields reported that progress continues on mine development that should allow for an incremental increase in production by the end of calendar 2013.
Mulatos - Alamos reported that increased gold production was primarily attributable to higher crusher throughput and a full quarter of production from the Escondida high-grade zone that was in commissioning in the prior year.
Peñasquito - Goldcorp's annual guidance for Peñasquito anticipated lower production in the first half of calendar 2013 as the mine moves from a lower grade portion of the pit to higher grade ore. Goldcorp also reported that ongoing studies to develop a long-term water strategy continue to progress and that they have identified a new water source within their current permitted basin that has the potential to supply sufficient water to continue the plant ramp-up to full design capacity. Goldcorp noted that current water availability is expected to be sufficient to achieve calendar 2013 production guidance of 360,000 to 400,000 ounces of gold.
Robinson -KGHM reported that copper production increased due to improved mill recovery and higher productivity in the mine.
Voisey's Bay - Vale reported that copper production was impacted during the quarter due primarily to feed availability as a result of a crusher failure and a severe snow storm that delayed haulage from the mine.
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 -Yukon Zinc continues to make production improvements at the Wolverine mine. They have reported that process circuit modifications and the integration of new equipment have enabled these improvements.
Mt. Milligan - As of the end of December 2012, Thompson Creek estimated that project completion was at 81%. They also reported that the Mt. Milligan project remains on schedule with initial production to commence in the third calendar quarter of 2013, followed by commercial production expected in the fourth calendar quarter of 2013.
Pascua-Lama - As of March 31, 2013, Barrick reported it had spent approximately $4.8 billion on the construction of the Pascua-Lama project. About 70% of the structural steel was erected for the process plant facility, 65% of the concrete has been poured, 55% of earthworks was completed, and the ore conveyance tunnel was approximately 80% complete.
During the fourth quarter of calendar 2012, Barrick reported that pre-stripping activities in Chile were halted to address increased dust in the open pit area and that the project has since strengthened dust mitigation and control measures. In addition, regulatory restrictions have also been placed on the project due to the need to repair and improve certain aspects of the water management system in Chile. Completion of measures to address these aspects is targeted for the first quarter of calendar 2014.
Subsequently, Barrick suspended construction work on the Chilean side of the project in April in response to a preliminary injunction issued by a Chilean court. The action alleges non-compliance with the environmental requirements of the project's Chilean environmental approval. Construction activities in Argentina, where the majority of the project's critical infrastructure is located, including the process plant and tailings storage facility, were not affected.
Given these pending regulatory and legal issues, Barrick stated on April 24, 2013, that they were unable to fully assess the impact on the capital budget, operating costs and schedule of the project.
Additional Property Information
Third quarter fiscal 2013 production and revenue for the Company's principal interests are shown in Table 1 and historical production data is shown in Table 2. For more detailed information about each of our principal interests, 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.
Royal Gold is a precious metals royalty company engaged in the acquisition and management of precious metals royalties and similar interests. The Company owns interests on 205 properties on six continents, including interests on 36 producing mines and 23 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 third quarter 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 #85827550. The call will be simultaneously broadcast on the Company's website at www.royalgold.com under "Events and Presentations" in the Investor section of the website. 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 adding revenue from Mt. Milligan in the near future; that production at Mt. Milligan will commence in the third calendar quarter with commercial production in the fourth calendar quarter; that our strong financial position will allow us to seek new business opportunities and expand our high quality portfolio; the impact on the Pascua-Lama project of pending regulatory issues and the preliminary injunction suspending construction work on the Chilean side of the project; and the operators' expectation of production, construction, mine development, reaching design capacity, throughput, water availability and other developments. 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 various 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; the ability of the various operators to bring projects into production as expected; regulatory and legal issues; the suspension of certain activities on the Pascua-Lama project; 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.
The Company defines Adjusted EBITDA, a non-GAAP financial measure, as net income 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 income from consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses (see Schedule A).
Third Quarter Fiscal 2013
Royalty Production and Revenue for Principal Royalty Interests
THREE MONTHS ENDED
THREE MONTHS ENDED
MARCH 31, 2013
MARCH 31, 2012
0.00013 x quarterly
average gold price
1.0% to 5.0% NSR
1.0% to 1.5% NSR
GSR1 and GSR2
Total Royalty Revenue
Reported production relates to the amount of metal sales that are subject to our royalty interests for the periods ended March 31, 2013 and March 31, 2012, as reported to us by the operators of the mines.
The royalty rate is 75% until 910,000 payable ounces of gold have been produced - 50% thereafter. There have been approximately 155,000 cumulative payable ounces produced as of March 31, 2013. Gold is produced as a by-product of copper.
Revenues consist of provisional payments for concentrates produced during the current period and final settlements for prior production periods.
The Company's royalty is subject to a 2.0 million ounce cap on gold production. There have been approximately 1.1 million ounces of cumulative production, as of March 31, 2013. NSR sliding-scale schedule (price of gold per ounce - royalty rate): $0.00 to $299.99 - 1.0%; $300 to $324.99 - 1.50%; $325 to $349.99 - 2.0%; $350 to $374.99 - 3.0%; $375 to $399.99 - 4.0%; $400 or higher - 5.0%.
NSR sliding-scale schedule (price of gold per ounce - royalty rate): $0.00 to $350 - 1.0%; above $350 - 1.5%.
Royalty percentages: GSR1 and GSR2 - 0.40 to 5.0% (sliding-scale); GSR3 - 0.71%; NVR1 - 0.39%.
Gold royalty rate is based on the price of silver per ounce. NSR sliding-scale schedule (price of silver per ounce - royalty rate): Below $5.00 - 0.0%; $5.00 to $7.50 - 3.778%; >$7.50 - 9.445%.
"Other" includes all of the Company's non-principal producing royalties for the periods ended March 31, 2013 and 2012. Individually, no royalty included within "Other" contributed greater than 5% of our total royalty revenue for any of the periods.
FOR THE QUARTER ENDED
1.0% to 1.5%
GSR1 and GSR2