Royal Gold, Inc. (RGLD)

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Royal Gold, Inc. (RGLD)

F3Q09 (Qtr End 3/31/09) Earnings Call

May 07, 2009 10:00 AM ET


Karen P. Gross - Vice President and Corporate Secretary

Tony Jensen - President and Chief Executive Officer

Stefan L. Wenger - Chief Financial Officer

William Heissenbuttel


Andrew Schopick - Nutmeg Securities

Victor Flores - HSBC Securities

Imaru Casanova - BJM Research

John Doody - Gold Stock Analyst

Adam Schatzker - RBC Capital Markets

Cosmos Chiu - CIBC World Markets



Good morning. My name Ken and I'll be your conference operator today. At this time I'd like to welcome everyone to the Royal Gold Fiscal 2009 Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there we'll be a question and answer session. (Operator Instructions).

And now I'd like to turn the call over of Ms. Karen Gross. Ma'am, go ahead.

Karen P. Gross

Thank you, operator and hello everyone. Welcome to our third quarter fiscal '09 conference call that's being webcast live today.

You'll be able to access a replay of the call on our website at www.royalgold.com. Also on the website, you'll find our release detailing our financial results.

As always, this discussion falls under the Safe Harbor provision of the Private Securities Litigation Reform Act. A discussion of the company's current risks and uncertainties is included in the Safe Harbor statement in today's release and is presented in greater detail in our filings with the SEC.

Participating on the call today are Tony Jensen, President and Chief Executive Officer; Stefan Wenger, Chief Financial Officer and Treasurer; Bill Heissenbuttel, Vice President Corporate Development; Bruce Kirchhoff, Vice President and General Counsel; and Stan Dempsey, Chairman.

A Q&A will follow our comments. We will also be discussing the company's free cash flow which is a non-GAAP financial measure. There is a free cash flow in reconciliation in today's press release.

Now, let me turn the call over to Tony.

Tony Jensen

Good morning. And thank you for joining us today. There's been quite a bit of news during the quarter and certainly additional news has come out this morning.

So we very much look forward to updating you on all those issues. Our portfolio of assets once again generated strong revenue during the period as we reached an all-time quarterly high of nearly $21 million.

Goldstrike, Leeville and Mulatos achieved solid operating results and with combined revenue of $5.4 million.

Taparko provide at another $5 million and received about $3.6 million from the royalty interest that we acquired this past October from Barrick.

Combined these assets more than offset revenue declined at Cortez and Robinson, which together contributed $5.6 million.

This continues to demonstrate the strength of our diversified royalty portfolio.

Our Royalty interest, we're focused on precious metals. This quarter gold production contributed to 89% of revenue, while silver contributed an additional 3%.

Now; let me turn the call over to Stefan for a more detail discussion on our financial results.

Stefan L. Wenger

Thank you, Tony. Highlights for the quarter include revenue of 20.8 million, compared with revenue of 18.7 million for the comparable period.

Net income of 4.1 million or $0.12 per share, compared with 6.9 million or $0.11 per share for the third quarter of fiscal 2008.

The decrease in net income was due mainly, to increased DD&A cost of $4 million in the quarter.

Free cash flow of 17.5 million or 84% of revenues, compared with free cash flow of 15.5 million or 83% of revenues for the prior year period.

And we ended the quarter with the cash balance of 51 million and no long term debt. Our current cash balance as of April 30, was approximately 292 million; reflecting the proceeds from our recent equity offering.

Of course, about 218 million has been set aside for the closing of the Andacollo transaction. For the nine month period, royalty revenue was 51.5 million.

Net income was 31.3 million or $0.92 per share and free cash flow was 42.3 million or 82% of revenues.

Revenue of Robinson was down by 2.6 million on a quarter-over-quarter basis. This was primarily due to the impact of lower copper prices, a decrease in copper and gold sales and a final negative pricing adjustment for the quarter totaling approximately $200,000.

As we discussed last quarter, our Robinson royalty will continue to be impacted by positive and negative pricing adjustments in future periods.

Our DD&A cost increased to about 10 million for the third quarter, compared with about 6 million for the comparable quarter of fiscal 2008. This quarter's increased depletion cost is the result of lower production at Cortez. And strong revenues from our recent royalty acquisitions, which carry a higher cost per ounce in our more mature properties like Cortez and Robinson.

Now, I'll turn the call back to Tony to review the operational and development elements of the business with you.

Tony Jensen

In reviewing our portfolio this quarter Goldstrike, Leeville, Mulatos and Siguiri all turned in solid performances.

Our production at Cortez was lower than expected during the period, mainly due to lower grades been mined. Barrick reported that they expect production to improve in the coming quarters as higher grade ores mined.

Production continues to ramp up at Dolores and just this morning Minefinders announced that they reached commercial production at the end of April.

This stretched hold is important to us as it triggers the payment of our 2% NSR royalty and gold and silver production; which is in addition to our 2.15 -- sorry, our 1.25 NSR royalty on gold that is currently providing us revenue.

Read the rest of this transcript for free on seekingalpha.com