Royal Gold's CEO Discusses F3Q2012 Results - Earnings Call Transcript

Royal Gold, Inc. (RGLD)

F3Q2012 Results Earnings Call

May 3, 2012 12:00 PM ET


Karen Gross – Vice President and Corporate Secretary

Tony Jensen – President and CEO

Stefan Wenger – CFO and Treasurer

Bill Heissenbuttel – VP, Corporate Development

Bill Zisch – VP, Operations

Bruce Kirchhoff – VP and General Counsel

Stan Dempsey – Chairman


John Doody – Gold Stock Analyst

Shane Nagle – National Bank Financial



Good afternoon. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Royal Gold Fiscal 2012 Third Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Ms. Karen Gross, you may begin your conference.

Karen Gross

Thank you, Operator, and good morning. And thank you everyone for joining us today to discuss our third quarter fiscal 2012 results. This event is being webcast live and you will be able to access a replay of the call on our website.

Participating on the call are Tony Jensen, President and CEO; Stefan Wenger, CFO and Treasurer; Bill Heissenbuttel, VP, Corporate Development; Bill Zisch, VP, Operations; Bruce Kirchhoff, VP and General Counsel; and Stan Dempsey, Chairman.

Tony will open with an overview of the quarter followed by Bill Zisch who will review our operations. After management completes their opening remarks, we’ll open the line for a Q&A session.

Before we begin, I want to remind everyone that 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 press release and is presented in greater detail in our filings with the SEC.

With that, I’ll turn the call over to Tony.

Tony Jensen

Thanks Karen. Good morning and thank you for joining us today. I’m pleased to report yet another quarter of solid financial performance, as we achieved record revenue, net income and operating cash flow.

Specifically, net income rose to $26 million or $0.44 per share, and royalty revenue of nearly $70 million, an increase of 25% over the prior period. And operating cash flow increased to 16% to approximately $48 million.

And looking at our financial performance on the nine-month basis, Royal Gold achieved record results in all three financial measures of revenue, net income and operating cash flow. 53% of our revenue for the quarter came from Andacollo, Voisey’s Bay and Peñasquito, our three cornerstone producing properties.

All of these long-term high-quality assets reported year-over-year improvements in metal sales and revenues, and are at or close operating at their full production potential. Andacollo was again our largest revenue source contributing approximately $17 million, with Voisey’s Bay at $11 million followed closely by Peñasquito at $9 million.

Compared to the December quarter we saw significant volume expansion within the portfolio at Peñasquito in Canadian market. These increases more than offset lower product at Holt, Dolores and Leeville.

Our percentage of revenue from precious metals is 72%. We derived our revenue evenly between Canada, Chile, and Mexico, each contributing nearly 25% of the total, while the United States operations contributed 15%.

We expect to see revenue from Chile and Canada increased significantly as two of our growth properties Pascua-Lama and Mt. Milligan began production. We understand that both of these properties remain on schedule for production in mid to late calendar 2013.

In addition to strong quarterly financials, we also had two other financial events that took place during the quarter followed -- following our acquisitions involving Mt. Milligan and task achieved last December.

The first was an equity offering in January and which we sold 4 million shares of Royal Gold common stock, resulting net proceeds of $268 million. We also repaid $170 million outstanding on our revolving credit facility.

This resulted in a cash balance at the end of the quarter $183 million and we now have $225 million available under our credit facility, position us well for additional opportunities.

And, with that, I would like to turn the call over to Bill Zisch for review of the operations.

Bill Zisch

Thank you, Tony, and good morning, everyone. Today, I will talk about three aspects of our operating portfolio, performance of the portfolio in total, our two key development projects and a review of our annual reserve statement.

First, let me start with review of the overall portfolio. With the gold price virtually unchanged from the proceeding quarter, the 1% increase in revenue compared to the December quarter affects the impact of new production contributions from our current growth properties and the portfolio effect of our steady-state producers.

Properties with production contributions that continued to ramp up over the quarter, included Canadian Malartic which, with the commissioning of the first two crushers underway and increased grading recovery was up 68%.

Las Cruces, after strong performance in the fourth calendar quarter of 2011, was up another 6% as the plant achieved record production of copper cathode in the first two months of 2012.

And Peñasquito gold production increased 29%, as the high pressure grinding rolls supplemental feed system was successfully commissioned and sustainable throughput began to approach design levels of 130,000 tons per day.

Wolverine continued to progress toward design levels, increasing production by about 10%. Additionally, Robinson copper production was about 13% above the preceding quarter, as mill availability returned to normal, following a maintenance shutdown in the prior quarter.

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