Royal Gold Reports Fourth Quarter and Fiscal Year 2020 Results

Key Fiscal 2020 Highlights:

• Exceptional financial performance with new records for revenue of $498.8 million, operating cash flow of $340.8 million and earnings of $199.3 million
• Volume of 320,000 GEOs²
• Transitioned to new leadership
• Funded growth with $135.7 million of advance payments towards Khoemacau silver stream and reduced net debt¹by $115 million, from free cash flow¹ with no new shares issued
• Increased per share dividend for the 19th consecutive year and paid total dividends of $71.5 million

Fourth Quarter Key Metrics Compared to Prior Year Quarter:

• Revenue of $120.0 million, an increase of 3.7%
• Operating cash flow of $91.6 million, an increase of 26.7%
• Volume of 70,100 GEOs², a decrease of 20.7%
• Dividends paid of $18.4 million, an increase of 5.7%
• Average price of $1,711 per gold ounce, an increase of 30.7% 

 

DENVER–(BUSINESS WIRE)–Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports fiscal year 2020 (“fiscal 2020”) net income of $199.3 million, or $3.03 per share, on record revenue of $498.8 million and operating cash flow of $340.8 million. Adjusted net income¹ was $162.4 million, or $2.47 per share, after excluding a gain on changes in the fair value of equity securities of $0.02 per share, a one-time non-cash employee stock compensation expense item of $0.05 per share, a non-cash impairment charge of $0.02 per share for the write-down of a royalty interest, and a tax benefit of $0.61 per share due to the combination of Swiss tax reform and the release of an uncertain tax liability.

“Fiscal 2020 was a standout year for Royal Gold, and our portfolio delivered record revenue of approximately $500 million, 79% of which came from gold,” commented Bill Heissenbuttel, President and CEO. “We successfully transitioned to a new generation of leadership in the company, and despite unprecedented challenges caused by an uncertain external environment, I am pleased with how we maintained our strategic focus on strengthening the balance sheet, growing our dividend, and funding future growth through cash flow. We reduced our net debt by $115 million, paid $71.5 million in dividends, and funded $135.7 million in advance payments towards our silver stream at Khoemacau, which we expect will provide a near-term contribution to portfolio growth when it begins production in calendar 2021.

“Royal Gold has developed a reputation for operational and financial discipline, and I look forward to further building on this reputation as we review new business opportunities in a positive gold price environment, all with the ultimate goal of growing per share metrics.”

Fiscal Fourth Quarter Results

For the fiscal fourth quarter ended June 30, 2020 (“fourth quarter”), net income of $49.0 million, or $0.75 per share, was reported on revenue of $120.0 million and operating cash flow of $91.6 million. Adjusted net income ¹ was $34.2 million, or $0.53 per share, after excluding a gain on changes in the fair value of equity securities of $0.10 per share, a discrete tax benefit from the reversal of an uncertain tax liability in a foreign jurisdiction of $0.17 per share, a non-cash impairment charge of $0.02 per share for the write-down of a royalty interest, and a reversal of $0.03 per share for the combined tax effect of these adjustments.

¹ Adjusted net income, net debt and free cash flow are non-GAAP financial measures. See Schedule A of this press release for additional information.

² See Schedule A of this press release for additional information about gold equivalent ounces, or GEOs

Recent Developments

Khoemacau Project

According to Khoemacau Copper Mining (Pty.) Limited (“KCM”), progress continued at the Khoemacau Project (“Khoemacau”) in Botswana, and the project reached approximately 54% of construction completion as of June 30, 2020 with 81% of the capital committed. According to KCM, activities are focused on refurbishment of the Boseto mill, underground development, completion of accommodation, power and water infrastructure at Zone 5 and completing construction of the haul road between Zone 5 and the Boseto mill. Also according to KCM, underground development has cumulatively advanced 2,360 meters in the five declines, which is in line with planned development rates.

On July 5, 2020, Royal Gold made its fourth advance payment of $11.1 million, which brings the total contribution to $146.8 million. Royal Gold expects to commit $35-45 million during the remainder of calendar year 2020, and assuming a funding commitment at the midpoint of this range, the total remaining commitment in calendar year 2021 is expected to range from approximately $25 million for the base stream of 80% of payable silver to approximately $78 million should KCM elect to increase the stream from 80% to 100% of payable silver. Further payments are subject to certain conditions and are scheduled to be made on a quarterly basis using an agreed formula and certification process as project spending progresses.

According to KCM, although a six-month state of emergency has been declared by the Government of Botswana to help prevent the spread of COVID-19, mining has been designated an “essential service” and activity at Khoemacau is continuing. However, due to reduced activity by certain critical contractors engaged in the process plant refurbishment during April and May, and the impacts experienced from travel restrictions, some activities have been slowed or rescheduled. Barring any potential further impacts caused by COVID-19 considerations, KCM now expects the first shipment of concentrate to occur late in the third calendar quarter of 2021.

Mount Milligan

On April 1, 2020, Centerra Gold Inc. (“Centerra”) announced that reductions of manpower and throughput at Mount Milligan would occur as a result of actions implemented to combat the COVID-19 pandemic. Centerra has since reported that workforce numbers returned to normal over the month of May resulting in mining and plant tonnages returning to planned levels. According to Centerra, process plant throughput averaged approximately 60% of target levels and mining operations experienced a four week partial shutdown during the reduction period, and during April, the process plant was shut down for eleven days to perform routine maintenance and reline the SAG mill.

Centerra also reported that stored water inventory at Mount Milligan, which is critical to the ability to process ore through the mill on a sustainable basis, was in excess of six million cubic meters as at June 30, 2020. Centerra reported that spring water pumping started in April, and substantial snowpack and a wet spring led to volumes pumped as of the end of June that exceeded those of the entire 2019 pumping season. In addition, Centerra reported that Mount Milligan continued to access ground water from the Lower Rainbow Valley wellfield and other groundwater wells near the tailings storage facility during the quarter ended June 30, 2020. Centerra also reported that it continued exploration activities focused on extending the groundwater capacity in the vicinity of the existing infrastructure, and these activities will continue for the remainder of 2020. Further, Centerra reported that it continues to pursue a longer-term solution to its water requirements at Mount Milligan.

On July 31, 2020, Centerra confirmed that there is no change to the previously issued production guidance for Mount Milligan for calendar year 2020 of 140,000 to 160,000 payable ounces of gold and 80 to 90 million pounds of copper.

Peñasquito

On May 5, 2020, Newmont Corporation (“Newmont”) announced that operations at Peñasquito were placed on care and maintenance on April 12 due to a Mexican federal government decree to temporarily suspend all non-essential activities in Mexico as part of a nationwide effort to help slow the spread of COVID-19. According to Newmont, a phased ramp-up began in mid-May with milling and mining activities ramping up at the beginning of June, and production in the plant was back to pre-COVID levels by mid-June.

On July 30, 2020, Newmont provided full year 2020 production guidance for Peñasquito of 510,000 ounces of gold, 28 million ounces of silver, 360 million pounds of zinc, and 190 million pounds of lead.

Wassa

On July 27, 2020, Golden Star Resources Ltd. (“Golden Star”) announced that it signed a binding agreement with Future Global Resources Limited (“FGR”) for the sale of the Prestea and Bogoso mines.

Royal Gold owns the right to purchase 10.5% of the gold produced from Golden Star’s Wassa, Prestea and Bogoso mines until an aggregate 240,000 ounces have been delivered, after which the stream percentage will decrease to 5.5%. The cash purchase price for gold is 20% of the spot price per ounce delivered until 240,000 ounces of gold have been delivered, and 30% of the spot price per ounce delivered thereafter. As of June 30, 2020, approximately 110,500 ounces of payable gold have been delivered to Royal Gold from the Wassa, Prestea and Bogoso mines, 69,700 ounces of which have been delivered from Wassa.

The transaction contemplated by Golden Star and FGR requires the separation of the Royal Gold stream agreement into separate stream agreements for each of Wassa and Prestea/Bogoso, which is conditional on, among other things, the approval of the Board of Directors of Royal Gold. Further, on July 28, 2020, Golden Star announced that, if approved, the separated Wassa stream agreement would require Golden Star to deliver 10.5% of the gold produced from Wassa in return for a cash purchase price of 20% of the spot price per ounce delivered, until the delivery of 240,000 ounces, after which the obligation would decrease to 5.5% of the gold produced from Wassa in return for a cash purchase price for gold of 30% of the spot price per ounce delivered. Royal Gold continues negotiations with Golden Star and FGR to separate the stream agreement with a target closing date of September 30, 2020.

On July 28, 2020 Golden Star reported 2020 gold production guidance for Wassa of between 165,000 to 170,000 ounces, up from the previous guidance range of 155,000 to 165,000 ounces.

Commitment to Maintaining a Strong Balance Sheet

On April 3, 2020, due to the uncertain environment caused by the COVID-19 pandemic, the Company drew an additional $200 million on its revolving credit facility as a precautionary measure to help ensure cash is readily available to support continued business activities. There was no immediate requirement for the additional funds and the funds remain available on the balance sheet. The Company remains committed to maintaining a strong balance sheet, and absent the requirement to fund any new business opportunities, expects to manage debt levels once the operating environment returns to normal.

On July 2, 2020, the Company repaid $30 million of the outstanding borrowings under its revolving credit facility, which decreased the amount outstanding to $275 million and increased the amount available to $725 million.

Fiscal 2020 Overview

For fiscal 2020, the Company recorded net income of $199.3 million, or $3.04 per basic share and $3.03 per diluted share, as compared to net income of $93.8 million, or $1.43 per basic and diluted share, for the fiscal year ended June 30, 2019 (“fiscal 2019”). The increase in earnings, when compared to fiscal 2019, was primarily attributable to (i) an increase in revenue, (ii) a decrease in interest expense and (iii) discrete income tax benefits recognized, primarily attributable to Swiss tax reform and the release of an uncertain tax liability resulting from a settlement agreement with a foreign tax authority related to withholding tax. Each are discussed further below.

Fiscal 2020 total revenue of $498.8 million was comprised of stream revenue of $359.9 million and royalty revenue of $138.9 million, at an average gold price of $1,560 per ounce, an average silver price of $16.90 per ounce and an average copper price of $2.57 per pound, compared to fiscal 2019 total revenue of $423.1 million which was comprised of stream revenue of $305.8 million and royalty revenue of $117.2 million, at an average gold price of $1,263 per ounce, an average silver price of $15.00 per ounce and an average copper price of $2.79 per pound.

The increase in total revenue for fiscal 2020 compared with fiscal 2019 resulted primarily from an increase in stream revenue and an increase in the average gold and silver prices. The increase in stream revenue was primarily attributable to an increase in gold and copper sales at Mount Milligan and gold sales at Pueblo Viejo. These increases were partially offset by lower gold sales at Andacollo due to a decrease in deliveries resulting from a temporary suspension of operations during the December 2019 quarter due to a workers’ strike. Royalty revenue also increased during fiscal 2020 compared to fiscal 2019 primarily due to an increase in production at Peñasquito and Cortez and an increase in the average gold and silver prices.

Cost of sales, which excludes depreciation, depletion and amortization, increased to $83.9 million for fiscal 2020 from $77.5 million for fiscal 2019. The increase was primarily due to increased gold and copper sales from Mount Milligan and an increase in gold sales from Pueblo Viejo, partially offset by a decrease in silver sales from Pueblo Viejo. Cost of sales is specific to the Company’s stream agreements and is the result of the purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for all other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.

Depreciation, depletion and amortization increased to $175.4 million for fiscal 2020 from $163.1 million for fiscal 2019. The increase was primarily attributable to higher gold and copper sales at Mount Milligan and an increase in gold sales at Pueblo Viejo. An increase in depletion rates at Mount Milligan as a result of updated reserves also contributed to the increase in the Company’s depletion expense during the current period.

The Company recognized a gain in fair value changes in equity securities of $1.4 million for fiscal 2020 compared to a loss in fair value changes in equity securities of $6.8 million for fiscal 2019.

Interest and other expense decreased to $9.8 million for fiscal 2020 from $29.7 million for fiscal 2019. The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding when compared to the prior period. During the prior period, the $370 million aggregate principal amount due under the convertible senior notes matured and was settled in June 2019.

During fiscal 2020, the Company recognized an income tax benefit totaling $3.7 million compared with an expense of $17.5 million during fiscal 2019. This resulted in an effective tax rate of (1.9%) during the current period, compared with 16.4% in the prior period. The effective tax rate for fiscal 2020 was primarily impacted by a net step-up of tax assets due to the enactment of the Federal Act on Tax Reform and AHV Financing in Switzerland and the release of an uncertain tax position resulting from a settlement agreement with a foreign tax authority related to withholding tax.

Net cash provided by operating activities totaled $340.8 million for fiscal 2020 compared to $253.2 million for fiscal 2019. The increase was primarily due to an increase in proceeds received from the Company’s stream interests, net of cost of sales, of approximately $49.5 million, and lower income taxes paid of $12.9 million.

At June 30, 2020, the Company had current assets of $362.2 million compared to current liabilities of $43.6 million resulting in working capital of $318.6 million. This compares to current assets of $154.7 million and current liabilities of $33.6 million at June 30, 2019, resulting in working capital of $121.1 million.

During fiscal 2020, liquidity needs were met from $340.8 million in net cash provided by operating activities and available cash resources. As of June 30, 2020, the Company had $695 million available and $305 million outstanding under the revolving credit facility. Working capital, combined with available capacity under the revolving credit facility, resulted in approximately $1 billion of total liquidity at June 30, 2020.

On July 2, 2020, the Company repaid $30 million of the outstanding borrowings under the revolving credit facility, which increased the amount available under the revolving credit facility to $725 million and decreased the amount outstanding to $275 million.

Fourth Quarter 2020 Overview

Fourth quarter revenue was $120.0 million compared to $115.7 million in the prior year quarter, with stream revenue totaling $85.8 million and royalty revenue totaling $34.2 million. The increase in total revenue for the fourth quarter compared to the prior year quarter was due to higher average gold and silver prices and higher royalty revenue primarily from Peñasquito and Cortez. These increases were partially offset by a lower average copper price and lower sales volumes from the stream segment, primarily gold stream sales volumes at Andacollo, Mount Milligan and Pueblo Viejo.

Cost of sales, which excludes depreciation, depletion and amortization, decreased to $20.7 million for the fourth quarter from $23.8 million for the prior year quarter. The decrease was primarily due to lower gold sales from Andacollo, Mount Milligan and Pueblo Viejo, partially offset by increased gold prices when compared to the prior year quarter. Cost of sales is specific to the Company’s stream agreements and is the result of the purchase of gold, silver and copper for a cash payment.

Depreciation, depletion and amortization increased to $45.4 million for the fourth quarter from $42.3 million for the prior year quarter. The increase was primarily due to higher depletion rates at Mount Milligan as a result of a reserve update completed during fiscal 2020.

An impairment expense of $1.3 million was recognized in the fourth quarter related to the Company’s royalty interest in the El Toqui property in Chile. Information was obtained during the fourth quarter with respect to insolvency proceedings and it was determined that the carrying value of the Company’s interest is not recoverable and was reduced to nil.

During the fourth quarter, the Company recognized a gain of $6.4 million on changes in fair value of equity securities related to the holdings in Contango ORE, Inc. and Battle North Gold Corporation, and warrants to purchase common shares of TriStar Gold Inc., compared to a loss of $3.5 million in the prior year period.

Interest and other expense decreased to $2.7 million for the fourth quarter, from $6.9 million for the prior year period. The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding when compared to the prior year quarter. As discussed in the Company’s Form 10-K for the fiscal year ended June 30, 2019, in June 2019 the Company repaid at maturity the $370 million aggregate principal amount due under its 2.875% convertible senior notes.

During the fourth quarter, the Company recognized an income tax expense of $0.05 million, compared with an income tax expense of $6.1 million during the prior year period. The current period tax expense was primarily impacted by the release of an uncertain tax liability resulting from a settlement agreement with a foreign tax authority related to withholding tax.

Property Highlights

A summary of fourth quarter and historical production reported by operators of the Company’s principal stream and royalty properties can be found on Tables 1 and 2. Calendar year 2020 operator production estimates for these properties compared to actual production at these properties through June 30, 2020 can be found on Table 3. Results of the streaming business for the fourth quarter, compared to the prior year quarter, can be found on Table 4. Highlights at certain of the Company’s principal producing and development properties during the fourth quarter, compared to the prior year quarter, are detailed in the Annual Report on Form 10-K.

CORPORATE PROFILE

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 June 30, 2020, the Company owned interests on 187 properties on five continents, including interests on 41 producing mines and 16 development stage projects. Royal Gold is publicly traded on the Nasdaq Global Select Market under the symbol “RGLD.” The Company’s website is located at www.royalgold.com.

Note: Management’s conference call reviewing the fourth quarter and fiscal year 2020 results will be held on Thursday, August 6, 2020, at noon Eastern Time (10:00 a.m. Mountain Time). The call will be webcast and archived on the Company’s website for a limited time.

Fourth Quarter and Fiscal Year 2020 Call Information:

Dial-In	855-209-8260 (U.S.); toll free
Numbers:	855-669-9657 (Canada); toll free 412-542-4106 (International)
Conference Title:	Royal Gold
Webcast URL:	www.royalgold.com under Investors, Events & Presentations

Forward-Looking Statements: This press release includes “forward-looking statements” within the meaning of U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from these statements. Forward-looking statements are often identified by words like “will,” “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” or negatives of these words or similar expressions. Forward-looking statements include, among others, the following: statements about our expected financial performance, including revenue, expenses, earnings or cash flow; operators’ expected operating and financial performance, including production, deliveries, mine plans and reserves, development, cash flows and capital expenditures; planned and potential acquisitions or dispositions, including funding schedules and conditions; liquidity, financing and dividends; our overall investment portfolio; macroeconomic and market conditions including the impacts of COVID-19; prices for gold, silver, copper, nickel and other metals; potential impairments; or tax changes.

Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the following: a low-price environment for gold, silver, copper, nickel or other metals; operating activities or financial performance of properties on which we hold stream or royalty interests, including variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, changes to mine plans and reserves, liquidity needs, mining and environmental hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, contractual issues involving our stream or royalty agreements, or operational disruptions due to COVID-19; risks associated with doing business in foreign countries; our ability to identify, finance, value and complete acquisitions; adverse economic and market conditions; changes in laws or regulations governing us, operators or operating properties; changes in management and key employees; and other factors described in our reports filed with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended June 30, 2019, and subsequent Quarterly Reports on Form 10-Q.

Contacts

Alistair Baker

Vice President Investor Relations and Business Development

(720) 554-6995

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