Royal Gold

Royal Gold, Inc.

Type	Public
Traded as	NASDAQ: RGLD S&P 400 Component TSX: RGL FWB: GR3
Industry	Mining
Founded	1991[1]
Headquarters	Denver, Colorado, USA
Key people	William Hayes, Chairman of the Board Tony Jensen, President and CEO Bill Heissenbuttel, CFO and Vice President Strategy
Products	Gold Silver Lead Copper Molybdenum Cobalt Zinc Potash
Revenue	$136.57 mil'10[2]85.1%
Operating income	$41.03 mil'10[2]50.35%
Net income	$29.4 mil'10[2]28.8%
Total assets	$1.863 bil[3]
Total equity	$1.4415 bil[3]
Number of employees	20[1]
Divisions	14[4] including Calgom Mining Inc RG Russia, RG Mexico
Website	Royal Gold, Inc.

Royal Gold is a precious metals company with royalty claims on gold, silver, copper, lead and zinc at mines in over 20 countries (12 in the Americas, most of the rest spread between Africa, Western Europe and Australia). Over half of the developmental properties it has interests in are producing however most (130 representing 70% of all properties) have not passed the exploration stage. Not all contracts are the same, some like the one it has with Thompson Creek Metals regarding a quarter of the gold produced at Mount Milligan lasts the length of the mine's life while others like Taparko in West Africa which ranges depending on the price of gold and the one in Pascua Lama (El Indio Gold Belt) where the 5.23% royalty is contingent on gold prices (must be higher than $800 an ounce) are structured differently; Most claims are between 1% and 5% but a few like Andacolo (75%) and Taparko (15%) are over 10%.^[5] It also has an interest in Osisko Mining's Malartic gold project within the abitibi gold belt (1.0-1.5%, will be Canada's largest when production begins in 2012).

The royalties are either bought (paid Thompson Creek Metals $311.5 million in October 2010 for a guaranteed, fixed share of gold production at Mount Milligan) or acquired through project financing arrangements.^[6] Similar to silver streaming companies, royalty companies are not exposed to the operational risks associated with mining. Royal Gold's business has over a short period of time become more internationalized and diversified (in 2010 60% of revenue came from abroad compared to 44% the year before). In 2010 40% of revenue came from the USA compared to 79% in 2008; Canada down to 4% from 27% in 2008 however most assets in Canada are in the developmental phase while Africa nearly tripled to 29%.^[2]

Royal Gold is one of the world's leading precious metals royalty companies.^[7][8] In the 2009 edition of the Fortune Small Business Magazine (FSB) it ranked 10th among the fastest growing small businesses in the United States, 79 spots higher than in 2008.^[9]

Royal Gold reported record operating cash flow of $69.7 million during fiscal Q2 2017 as well as $107 million in revenue and earnings per share of $0.43. ^[10]

History

2010 was the year the company experienced the most growth with over a billion of the $1.86 billion in assets it has (September 2010) added during the year. In 2007 it purchased an interest in the Penasquito mine which did not begin producing until 2010. January 2010 acquired 75% of gold produced at Andacolo copper mine in Chile from Teck Resources. The royalty claim gets cut by 33.3% (down to 50% total) after it receives 910,000 ounces.

February 2010 completed the acquisition of another royalty company, IRC which has claims in Chile (Pascua Lama) and Canada (Voisey's Bay). International Royalty Company was quick to accept the $702 million deal from Royal Gold after Franco-Nevada attempted a hostile $640 million takeover.^[8]

In the summer of 2011 Royal Gold paid Seabridge Gold C$160 million for a 2% net smelter return royalty claim on the KSM gold-copper-silver-molybdenum project in northern British Columbia.

By the end of the 2010 fiscal year the company was receiving royalty payments from 34 mines (July 2010).

Key assets

The developmental projects in which Royal Gold has the highest percentage claims are Wolverine, Yukon (9.445% of the gold and silver) and Pine Cove, Newfoundland (7.5% of the gold).^[5] There are two molybdenum properties, one in Saskatchewan (Allan that has started producing) and another in British Columbia (Schaft Creek, not producing).

Andacollo, the property Royal has the highest stake in (75%) was estimated by Teck Resources to have 2P reserves (Proved + Probable) of 1.631 million ounces of gold. Voisey's Bay (3-4% royalty) has reserves of about 1.5 billion pounds of nickel, 873 million pounds of copper and 74 million pounds of cobalt.

Mines producing metals other than gold

In the first nine months of 2010 the largest producing mines that it has a royalty interest on were Leeville for gold (321,247 ounces), Robinson for copper (83.1 million pounds), Penasquito for lead (56 million pounds), zinc (86.3 million pounds), nickel (37.2 million pounds) and silver (8.5 million ounces).^[11] In addition to the following properties there are another 19 in production that only produce gold.

In the last three months of the 2011 calendar year Royal Gold relied on Andacollo (23.5%), Voisey's Bay (17.5%), Penasquito (9.2%), Holt (6.1%) for more than half of its revenue. Those mines produced in total 92,358 ounces of gold during the quarter up from 65,862 ounces during the same period a year earlier, only two of them produced anything besides gold. Voisey's Bay and Las Cruces are the only major mining operations that don't produce gold.^[12]

References