Royal Gold, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2021. The request metadata says “2020 Q3,” but the filing itself reports the quarter ended March 31, 2021 (fiscal 2021 Q3). Dollar amounts below are USD unless otherwise noted.
Business context
Royal Gold acquires and manages precious-metals streams and royalties; it does not operate the mines. For the quarter, streams generated 67% of revenue and royalties 33%. The filing is unaudited.
Key financial results
| Metric | Three months ended March 31, 2021 | Prior-year quarter | Nine months ended March 31, 2021 | Prior-year nine months |
|---|---|---|---|---|
| Revenue | $142.6 million | $136.4 million | $447.8 million | $378.9 million |
| Operating income | $71.1 million | $52.3 million | $251.6 million | $154.4 million |
| Net income attributable to Royal Gold | $54.0 million | $38.6 million | $220.9 million | $150.3 million |
| EPS, basic and diluted | $0.82 | $0.59 | $3.36 basic; $3.36 diluted | $2.30 basic; $2.29 diluted |
- Quarterly revenue rose 4.5% year over year; attributable net income rose about 40%. Higher metal prices and increased Peñasquito production supported revenue, while Andacollo revenue declined.
- Quarterly operating margin was approximately 49.8%, versus 38.3% a year earlier; attributable net margin was approximately 37.9%, versus 28.3%.
- Nine-month operating income includes a $33.9 million gain on the sale of the Peak Gold/Manh Choh joint-venture interest. Nine-month results also include $21.8 million of discrete tax benefits, primarily from settling a foreign uncertain tax position and releasing a deferred-tax valuation allowance.
- Average metal prices increased year over year. In the quarter, gold averaged $1,794/oz, silver $26.26/oz and copper $3.86/lb; the prior-year quarter averages were $1,583/oz, $16.90/oz and $2.56/lb, respectively.
Cash flow, balance sheet and capital
- For the nine months, operating cash flow was $286.3 million, compared with $249.2 million; investing cash outflow was $21.6 million, compared with $105.1 million; and financing cash outflow was $213.5 million, compared with $169.9 million.
- Cash and equivalents were $370.3 million at March 31, 2021, up from $319.1 million at June 30, 2020. Working capital was $383.6 million and the current ratio approximately 7:1.
- Debt was $150 million principal ($146.3 million net of issuance costs) at March 31, with $850 million available on the revolving facility. Royal Gold repaid the remaining $150 million on April 1; the facility then had no borrowings and $1 billion available. The company reported covenant compliance at March 31.
- Stream and royalty interests, net, were $2.224 billion, compared with $2.319 billion at June 30, 2020. Total assets were $2.754 billion and total equity $2.440 billion at March 31.
- The quarterly dividend declared was $0.30 per share. The company announced a 2021 annual dividend of $1.20 per share, 7% above calendar 2020.
Material changes, outlook and risks
- In September 2020, Royal Gold sold its 40% Manh Choh project interest and Contango shares for total cash consideration of $61.3 million, received additional royalties, and recognized a $33.9 million gain on the project-interest sale.
- Khoemacau construction was reported approximately 92% complete at March 31. The operator expected commissioning through calendar Q2 2021, first concentrate shipments in Q3, and ramp-up to nameplate capacity by early 2022, subject to potential COVID-19 impacts. Royal Gold had $49.4 million of remaining committed funding available to the project at the company’s or borrower’s election, as applicable.
- The filing does not provide company-wide revenue or earnings guidance. It reports operator estimates, which are not guarantees: examples include calendar 2021 production guidance of 180,000–200,000 oz gold and 70–80 million lb copper at Mount Milligan, 470,000–510,000 oz gold at Pueblo Viejo, and 660,000 oz gold at Peñasquito.
- At Pueblo Viejo, silver-circuit issues reduced deliveries; approximately 362,000 oz of deferred silver were expected to be delivered incrementally as the operator resolved the issue.
- COVID-related curtailments and uncertainty have affected some counterparties’ operations and production forecasts, although Royal Gold said its results and financial condition had not been materially affected to date. Other key exposures include metal-price volatility, mine performance, permitting, foreign-country risks, and the ability to complete acquisitions. A 10% move in average metal prices over the nine-month period would have changed reported revenue by about $22.5 million for gold, $3.8 million for copper, or $3.3 million for silver.
- No legal proceedings were reported, and the company said there were no material changes to the risk factors in its fiscal 2020 10-K.
Important facts for investors to verify
- Confirm the reporting period: this filing is for the quarter ended March 31, 2021, not 2020.
- Separate recurring operating performance from the $33.9 million asset-sale gain and discrete tax benefits when assessing nine-month earnings.
- Check subsequent operator updates on Khoemacau commissioning, production ramp-up and Royal Gold’s remaining funding commitments.
- Monitor the timing of Pueblo Viejo deferred silver deliveries and production at other major counterparties.
- Assess exposure to gold, silver and copper prices, which materially affect revenue and cash flow.