Royal Gold (RGLD) Provides Update on Operations for Q1

Royal Gold, Inc. RGLD recently issued an update for first-quarter fiscal 2021 (ended Sep 30, 2020) operations. During the quarter, RGLD Gold AG — the fully-owned subsidiary of Royal Gold — sold 56,000 gold equivalent ounces comprising 44,000 gold ounces, 474,000 silver ounces and 1,800 tons of copper related to its streaming agreements. The figure was higher than 51,000 gold equivalent ounces sold during fourth-quarter fiscal 2020.
Stream sales during the first-quarter fiscal 2021 were in line with the guided range of 53,000 to 58,000 gold equivalent ounces. The average realized price of gold was $1,897 per ounce in the quarter, up 13% sequentially. Average realized price of silver was up 46% sequentially to $22.97 per ounce. Average realized copper prices were $6,494 per ton, up from the previous quarter’s $5,235 per ton. The company ended first-quarter fiscal 2021 with 36,000 gold equivalent ounces in inventory, including 26,000 ounces of gold, 461,000 silver ounces and 1,100 tons of copper.

In first-quarter fiscal 2021, cost of sales was around $389 per gold equivalent ounce compared with fourth-quarter fiscal 2020 figure of $406 per gold equivalent ounce. The cost of sales is based on the quarterly average silver-gold ratio of roughly 79 to 1, and copper-gold ratio of approximately 0.29 tons per ounce.

The company is scheduled to report first-quarter fiscal 2021 results on Nov 5, 2020. The Zacks Consensus Estimate for first-quarter earnings is pegged at 92 cents, suggesting an improvement of 53% from the prior-year reported figure. The estimate has remained stable over the past 30 days.

Despite the COVID-19 crisis, Royal Gold reported record revenues, operating cash flow and earnings in fiscal 2020 (ended Jun 30, 2020). Revenues were $499 million, up 18% from fiscal 2019. Gold equivalent ounces were 320,000, down slightly from the prior year owing to impact from COVID-19-related production disruptions. However, this volume reduction was mitigated by substantially higher realized gold prices, which drove revenues.
During fiscal 2020, Royal Gold reduced net debt by $115 million, paid $71.5 million in dividends, and funded $135.7 million in advance payments toward its silver stream at Khoemacau. The company has raised dividend for the 19th consecutive year. The company has a low total debt-to-total capital of 11.5%, which compares favorably with the industry's 22.8%. Its times interest earned is a healthy 20.6, higher than the industry’s 16.9. Royal Gold’s strong balance sheet and liquidity position poise it well to navigate through the coronavirus-induced crisis while returning value to shareholders.

Royal Gold is a precious metals stream and royalty company engaged in the acquisition and management of precious metal streams, royalties and similar production-based interests. As of Sep 30, 2020, the company owned interests on 188 properties on five continents, including interests on 40 producing mines and 17 development stage projects. Gold continues to be the most significant revenue driver for Royal Gold and accounts for more than 80% of total revenues. Gold prices have been up 25% so far this year primarily due to the coronavirus pandemic. Ongoing concerns regarding spiking COVID-19 infection rates and uncertainty over the upcoming U.S presidential election will also bolster safe-haven demand for the yellow metal.

Silver prices have climbed 34% year to date and is currently riding on the back of recovery in the industrial sector. Copper prices have also gained lately on pickup in Chinese industrial demand, stimulus measures from the world's largest economies such as the United States, Japan and the Europe, and supply worries in Chile owing to the pandemic. This is likely to get reflected in Royal Gold’s top-line performance in the forthcoming quarters.

Price Performance

The company’s shares have gained 1.4% so far this year compared with the industry’s growth of 43.2%.

Zacks Rank & Key Picks

Royal Gold currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same industry include Agnico Eagle Mines Limited AEM, Eldorado Gold Corporation EGO and Barrick Gold Corporation GOLD. All of these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines has a projected earnings growth rate of 104% for the current year. The company’s shares have gained 35% year to date.

Eldorado Gold has an estimated earnings growth rate of 2444% for fiscal 2020. Its shares have appreciated 63% so far this year.

Barrick Gold has an expected earnings growth rate of 94% for fiscal 2020. Year to date, the company’s shares have surged 50%.

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