Royal Gold, Inc. (RGLD)

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Royal Gold, Inc. (RGLD)

F4Q09 (Qtr End 6/30/09) Earnings Call

August 13, 2009 9:00 am 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

Victor Flores - HSBC Securities

Imaru Casanova - BJM Securities

Mike Jalonen - Merrill Lynch Canada

Andrew Schopick – Nutmeg Securities

John Doody - Unidentified Company



Good morning. My name is Chrissy and I will be your conference operator today. At this time I would like to welcome everyone to the Royal Gold Official 2009 Conference Call. (Operator's Instructions) After the speakers' remarks there will be a question-and-answer session. (Operator's Instructions) Thank you. Miss Gross, you may begin your conference.

Karen P. Gross

Thank you, operator, and hello, everyone. Welcome to our fourth quarter and fiscal year end conference call that is being webcast 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 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, President of Corporate Development, Bill Zisch, Vice President of Operations, 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 reconciliation in today's press release. With that I'll turn the call over to Tony.

Tony Jensen

Thank you for joining us today and good morning, everybody. We are pleased to share with you today our record financial results for fiscal 2009 and the fourth quarter. While fiscal 2009 was a challenging year for many companies both domestically and globally, we leveraged our gold-focused royalty business model to achieve our best results ever.

Our strong performance is driven by our focus in execution on profitable long-term growth, steady performance from our expanding realty portfolio, and a continuation of healthy precious metal prices.

We not only have realized record revenue and cash flow, but also continue to execute on our strategic plan to expand and diversify our portfolio of precious metal assets, with the addition of over 70 new royalties across all stages of our portfolio from producing to expiration assets.

We received new revenue from the Barrick properties acquired in October of 2008, and we began to receive revenue from investments made over the past several years at Peñasquito and Dolores.

Fiscal 2009 has been a great year of growth in revenue and royalty assets for the company and fiscal 2010 is shaping up to be an exciting year as well. We anticipate continued ramp up of production from Dolores to full capacity over the next few months. We also look forward to initial concentrate production from the first sulphide processing mine at Peñasquito with commercial production in January 2010.

And assuming we close the Andacollo transition, we expect that the ramp up to commercial production will occur in the second half of the fiscal year, adding yet another important revenue stream.

Now I’ll turn the call over to Stefan for a review of the financial highlights.

Stefan L. Wenger

Thank you, Tony, and good morning, everyone. For the full fiscal year we had record revenue of $73.8 million, an increase of 11% over the comparable fiscal year revenue $66.3 million. Including two one-time gains, net income was $38.3 million or $1.09 per basic share, compared with $24 million or $0.62 per basic share for fiscal 2008.

Free cash flow was a record at $61.7 million, or 84% of revenues, compared with $52.9 million or 80% of revenues for the prior year. Revenue from gold was 84% versus 74% of total revenues in fiscal 2008.

Working capital as of June 30th was $312.5 million. We ended the year with a cash balance of $295 million, of which approximately $218 million will be used when we close the Andacollo transaction. And during the year we also increased our annual dividend to $0.32 per share.

In October we expanded our credit facility from $80 million to $125 million. Our healthy financial position allowed us to lock in favorable terms at a time when many companies were unable to access credit at any price, let alone expand their limit. This expanded credit line enhances our liquidity position and provides the flexibility necessary to pursue our goals.

In April, we completed the sale of 6.5 million shares for net proceeds of $235 million. Successful completion of this financing will allow us to close the Andacollo transaction while maintaining strong liquidity thereafter.

Last quarter I talked about how our DD&A costs had increased for the period compared with the prior year. That is true for the fiscal year as well. In fiscal 2009 our DD&A costs increased to $36 million or about $385 per royalty ounce, compared with $18 million or $227 per royalty ounce for fiscal 2008.

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