Royal Gold reported record quarterly revenues of $35 million, a 68% increase in year-over-year.
Author: Dorothy Kosich
Author: Dorothy Kosich
RENO, NV -
Denver's Royal Gold Thursday announced a 22% increase in gold reserves to 78.4 million ounces, while silver reserves increased 12% to 1.3 billion ounces during the company's fiscal 2010 third quarter results.
Although the company achieved record royalty revenue of $35 million for the third quarter, Royal Gold reported a net loss of $5.8 million or negative 13-cents per share, compared to royalty revenue of $20.8 million and net income of $4.1 million or 12-cents per share for the third quarter of fiscal 2009.
Higher revenues during the third quarter of the current fiscal year were driven by increased year-over-year production at Cortez and Taparko, ramp up of production at Dolores and Peñasquito, higher gold and copper prices, and approximately one month of revenues related to Royal Gold's acquisition of International Royalty Corporation.
For the first nine months of fiscal year 2010, which ended March 31, 2010, Royal Gold reported a royalty revenue of $95.9 million and net income of $11 million or 26-cents per share, compared to royalty revenue of $51.5 million and net income of $31.3 million or 92-cents per share for the nine-month period ended March 31, 2009.
Despite the loss, Royal Gold CEO Tony Jensen called the fiscal year 2010 third quarter "a very successful quarter in the history of Royal Gold...Although our financials were impacted by IRC-related costs, our portfolio of 33 revenue-producing royalties performed extremely well."
During a conference call with analysts Thursday Jensen said the US$300 million gold royalty transaction with Teck Cominco's Andacollo copper mine in Chile "combines the important characteristics of a long-life gold royalty revenue stream, near-term production and the quality operator operating in an attractive close country of Chile.
"With the Andacollo concentrator now in ramp up, we expect this property will quickly become our largest contributor to royalty revenue in just a few more quarters."
Under the agreement, Royal Gold is entitled to payment based on 75% of the payable gold produced until total cumulative production reaches 910,000 ounces of payable gold, and thereafter payment based on 50% of any payable gold production above 910,000 ounces.
Teck is currently ramping up a concentrate project that is expected to produce 168 million pounds of copper and 53,000 ounces of gold in concentrate annually over the first 10 years of production. Andacollo is transitioning from copper cathode production to producing copper in concentrate, a move that will help quadruple copper production. Full commercial production of the concentrator is expected to be reached in the first half of this year.
Meanwhile, Royal Gold COO Bill Zisch told analysts the Taparko gold mine in Burkina Faso, West Africa, is continuing to be "one of our more substantial revenue contributors."
Goldcorp's Peñasquito mine is also expected to be a substantial contributor to Royal Gold's revenues, which owns a 2% NSR for the life of the mine. Goldcorp's production guidance this year is for 180,000 ounces of gold, 13.4 million ounces of silver, 107 million pounds of lead and 135 pounds of zinc.
Royal Gold has also acquired a royalty interest in Vale's Voisey Bay operations. "In spite of current labor issues, we believe this long-life high quality asset represents a great value now and in the future, Zisch said. Voisey Bay is currently operating at half their normal production capacity.
In the meantime, Minefinders' Delores gold and silver mine in Mexico is ramping up to design rates. Minefinders expects production to ramp up through this year to a steady run rate of 120,000 ounces per year. Royal Gold holds NSRs for both gold and silver production.
Finally, Zisch said the company is monitoring the Australian tax situation. "It is too early in the process to determine if and how Royal Gold would be affected by this tax. I can't say, however, that for the past three and nine month periods about 4% of our revenue came from Australia."