Royal Gold, Inc. (RGLD)

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Royal Gold, Inc. (RGLD)

F2Q10 (Qtr End 12/31/09) Earnings Call

February 4, 2010 12:00 pm ET


Karen P. Gross - Vice President, Corporate Secretary

Tony Jensen - President, Chief Executive Officer, Director

Stefan L. Wenger- Chief Financial Officer, Treasurer

William Heissenbuttel - Vice President - Corporate Development

William M. Zisch - Vice President - Operations

Bruce C. Kirchhoff - Vice President, General Counsel

Stanley Dempsey - Chairman of the Board


Adam Schatzker - RBC Capital Markets

Andrew Schopick – Nutmeg Securities

Imaru Casanova - BJM Securities

John Tomaso (ph) - John Tomaso Very Independent Research

Brian MacArthur - UBS



Good afternoon, my name is Kim and I’ll be your conference operator today. At this time I would like to welcome everyone to the Royal Gold fiscal second quarter 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. (Operator’s instructions).

Thank you. Ms. Karen Gross you may begin your conference.

Karen P. Gross

Thank you operator and hello everyone. Welcome to our second quarter conference call that is being web cast live. You will be able to access a replay of the call on our website at www.royalgold.com. Also on the website you will find our release detailing our financial results.

As always this discussion falls under the Safe Harbor Provision of the private securities litigation reformat. A discussion of the company’s current risks and uncertainties as included in the Safe Harbor statement in today’s press release and is presented in greater detail in our filings with the SEC.

Participating on the call today are Tony Jenson, President and CEO, Stefan Wenger, Chief Financial Officer and Treasurer, Bill Heissenbuttel, Vice President in Corporate Development, Bill Zisch, Vice President in Operations and Bruce Kirchhoff, Vice President and General Counsel.

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

Now I’ll turn the call over to Tony.

Tony Jensen

Good morning and thank you for joining us today. We are pleased to report another quarter of record financial performance. Our fourth consecutive quarter of record revenues and free cash flow.

During the quarter we achieved $34.7 million in royalty revenue and free cash flow of $28.6 million or $0.71 per share. Free cash flow was 82% of total revenue. Net income was $9.6 million or $0.24 per basic share. And our percentage of revenue from gold was 84%.

In looking at our financial performance, over the first six months of our fiscal, Royal Gold achieved record revenue and free cash flow for this period as well.

In our first half royalty revenue was $60.9 million. Free cash flow was $51.2 million. And net income was $16.7 million for $0.41 per basic share. This compares to royalty revenue of $30.7 million. Free cash flow of $24.8 million. And net income of $27.1 million or $0.80 per basic share for the first half of fiscal 2009.

It is important to remember that last year’s comparable periods included the effects of a one-time gain of $31.5 million or $0.60 per basic share resulting from the restructuring of our Cortez royalties in conjunction with the Barrick transaction.

So excluding that one time event you can see that our earnings were significantly higher in the current period.

Our top performing properties in the second quarter were Cortez and Taparko. Together these two properties generated nearly $18 million in revenue. While Robinson, Leeville and Mulatos contributed a combined total of $9 million during the period.

The average price of gold for the quarter was $1,100 per ounce compared with $795 per ounce for the period ending December 31, 2008.

While this represents a 38% increase, our revenue increased by 138%. This demonstrates the strength of the production performance of our portfolio.

And these record results come prior to any meaningful contribution from the Penasquito in Andacollo royalties. Both of these projects are in the commissioning and ramp up stage and are expected to become our two largest revenue contributors over the next six to nine months.

Now I’ll turn the call over to Bill Zisch for an update on our key assets.

William M. Zisch

Thank you, Tony, and good morning everyone. While there were many contributors to the quarter’s record performance, I will once again focus my comments on the principle properties that have had notable accomplishments or changes since our last conference call.

I’ll start with Penasquito. As I reported during last quarter’s call, the first lead and zinc concentrates were shipped in early November. And Goldcorp has continued to produce and ship concentrates since that time.

They began operational production in January and expect commercial production for both the first and second sag lines to be reached in the third quarter of this year.

Goldcorp expects 2010 production to be over 150,000 ounces of gold, 10 million ounces of silver, and 100 million pounds of both zinc and lead.

At Canadian Malartic as of the end of December, construction start up at Canadian Malartic is complete and the relocation program is about 95% complete. Osisko has identified good advanced stages of detailed engineering, sound planning and collaboration with all stake holders as keys to their progress.

Investments today represent about 30% of the project budget with commitments slightly over 60% of budget. Full project funding is in place and Osisko remains on track for a 2011 start up.

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