Royal Gold, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; compared with the three months ended March 31, 2022. Royal Gold acquires and manages precious-metal streams and royalties and does not operate the mines underlying its interests. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted. The interim statements are unaudited.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $170.4 | $162.4 |
| Operating income | $86.1 | $80.6 |
| Net income attributable to Royal Gold stockholders | $63.9 | $65.7 |
| Diluted EPS | $0.97 | $1.00 |
| Cash provided by operating activities | $108.7 | $101.1 |
| Cash dividends declared per share | $0.375 | $0.35 |
- Revenue increased about 5%; operating income rose about 7%. Operating margin was approximately 50.5%, versus 49.6% a year earlier. Net income attributable to common stockholders fell about 3%, with net margin of approximately 37.5%, versus 40.5%.
- Stream revenue was $115.0 million, up from $105.3 million; royalty revenue was $55.4 million, down from $57.1 million. Gold represented 71% of revenue; silver 12%, copper 14%, and other 3%.
- Average realized market reference prices reported were $1,890/oz gold, $22.55/oz silver, and $4.05/lb copper. Revenue growth reflected higher Mount Milligan sales, newly contributing Cortez royalties, and Khoemacau’s ramp-up, partly offset by lower Andacollo and Peñasquito sales.
- Interest and other expense increased to $9.2 million from $0.9 million, primarily due to borrowings; the company reported $8.5 million of interest expense, including debt-cost amortization. Income tax expense was $15.9 million, with a 19.9% effective tax rate, versus 18.8%.
- Cash and equivalents were $126.8 million at March 31, versus $118.6 million at year-end. Current assets of $189.2 million exceeded current liabilities of $55.0 million; reported working capital was $134.2 million and the current ratio approximately 3:1.
- Net cash from operations was $108.7 million; investing used $0.2 million and financing used $100.2 million. Financing outflows included a $75 million revolver repayment and $24.6 million of dividends.
- Revolver principal was $500 million outstanding, with $500 million available; balance-sheet debt net of issuance costs was $496.8 million. The stated all-in borrowing rate was 6.2%. The company reported covenant compliance and approximately $634 million of total liquidity, combining working capital and available revolver capacity.
Material changes and operating developments
- Khoemacau silver deliveries increased with the mine ramp-up; the operator reported nameplate capacity achieved in December 2022. Its 2023 payable silver production estimate is 1.5–1.7 million ounces.
- New Cortez royalty interests contributed to higher royalty revenue. Cortez gold production attributable to Royal Gold’s interests was approximately 223,800 ounces, versus approximately 102,000 ounces in Q1 2022.
- Peñasquito attributable production was lower year over year across reported metals. The operator cited lower grades and recoveries, concentrate inventory buildup, and shipment timing.
- Andacollo stream deliveries declined; the operator expects lower grades through 2023 before a planned transition to higher-grade ore in later years.
- Stream and royalty interests, net, declined to $3.19 billion from $3.24 billion at December 31, 2022, primarily reflecting depletion. No stream or royalty interest acquisitions were reported in investing cash flows for the quarter, compared with $37.8 million spent in Q1 2022.
Outlook, risks, and unusual items
- The filing provides operator-level production estimates, not a clear consolidated Royal Gold revenue or earnings forecast. Operator estimates are uncertain and may be revised. Mount Milligan’s operator expects 160,000–170,000 ounces of gold and 60–70 million pounds of copper in 2023, with production weighted toward the second half. Pueblo Viejo’s operator expects 470,000–520,000 ounces of gold from its 60% interest.
- Pueblo Viejo had approximately 518,400 ounces of deferred silver deliveries at quarter-end. Royal Gold does not expect material deferred-ounce deliveries while the plant ramps up during 2023; timing of the full amount is uncertain. The operator reported first ore processed through the expansion crusher and expected commissioning to be substantially completed in Q2 2023. Tailings storage permitting and feasibility work remain relevant to the mine-life extension.
- On April 20, after quarter-end, Royal Gold advanced $2.4 million for Xavantina exploration-related targets; a further $4.4 million may be payable through 2024 if targets are met. The Ilovica conditional funding schedule of $163.75 million remained subject to conditions at March 31.
- Key risks include metal-price volatility, mine performance and delivery timing, operator project execution, permitting, foreign-country exposure, and acquisition and financing risks. The filing reports no material change to the risk factors in the 2022 Form 10-K, no legal proceedings, and no material internal-control changes; disclosure controls were assessed as effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether operators achieve 2023 production estimates and whether production, shipment, and settlement timing affects Royal Gold’s reported sales.
- Progress and timing of Pueblo Viejo’s plant expansion, tailings storage approvals, and delivery of deferred silver ounces.
- Debt costs and revolver borrowing levels, including the 6.2% stated rate and covenant headroom; the filing gives covenant compliance but not specific headroom values.
- Metal-price sensitivity: the filing estimates that a 10% change in average gold, copper, or silver prices would change quarterly revenue by approximately $12.4 million, $4.4 million, or $1.2 million, respectively, all else equal.
- Conditions and possible payments under the Xavantina and Ilovica commitments, and the extent to which acquisition activity may require additional financing.