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WIKI ANALYSIS
Royal Gold Inc. is a highly diversified, multinational mineral resource company with operations in over 20 countries and 4 continents. Like silver wheaton royal gold doesn't directly operate most of the mines associated with it, instead it purchases a fraction (majority (75%) of at least one mine (Andacolo run by Goldcorp) of the precious metal produced by the mine over either its lifetime (Mount Milligan) or a specified length of time; the claim it has is called a royalty similar to what some governments demand when authorizing mining projects (like in the case with Ivanhoe Mines and Mongolia). Although most claims are only very small (1-5% for the majority) altogether they combine to form a significant cash flow especially considering there's no accountability for costs (and so little risk exposure) associated with mining facilities. It acquires the royalties through either direct purchases or aggreements with mining companies to fund projects periodically in exchange for more of the production when it begins. During 2010 the company officially went from being more depandant on revenue from the USA (79% in 2008-2009, 98% from the USA and Canada) to more dependant on business on abroad (74% by the first quarter of fiscal 2011(September 2010), in that quarter Royalty sales from Chile showed the most growth when compared to the same quarter in 2010 (19% versus 1%). In 2009 Forbes recognized the company as America's tenth fastest growing publicly traded small business (2005-2008 annualized rate return to investors 13.3%, the company ranked 89 the year before and didn't make the list in 2007).[1]
Royal Gold also has interests in potash (Saskatchewan and British Colombia, Canada) and molybdenum. Also of interest is that it is one of only a few companies that owns interest in both the Abitibi Gold Belt (prolific gold producing region in the Canadian Malartic by way of Osisko Mining) and the El Indio Gold Belt a region at the border of Chile and Argentina that has recently attracted a number of startup companies, much of its 40 million ounces of gold have yet to be exploited. It went public on the Toronto Stock Exchange in 2009 with an IPO of $235 million. The money raised was used to purchase 50% of gold production from Chile's Andacollo mine (owned by Tech Resources (cost the company 4.5 million of its shares and $100 million). The Andacollo mine has 1.6 million ounces of 2P gold reserves and a mine life of 20 years.[2] Royal Gold also owns a 2% NSR royalty on Seabridge Gold's KSM gold-copper poryphry mega project in British Columbia. KSM has 38.5 million ounces of 2P gold reserves (July 2011) as well as 214 million ounces of 2P silver reserves.
Comany Overview
Though the company has had significant assets for a while (at least half a billion for a couple years, latest is over 1.5 billion mostly due to acquisitions in 2010) operational revenue has been slow to grow and unstable due to many projects (developmental and exploraty, 2008 revenue came mostly from royalty restructuring) being in early, hard to predict stages of production, initial construction. Even though only about 30% of all assets are producing (November 2010, most of those are still in early production phases) revenue from royalties is already beginning to show strong growth (late 2010 production from Australia came on tap as Canada and Chile (first quarter fiscal 2010 they only contributed a combined 3% to revenue).
The royalty interest in the properties associated with it are highest in Mexico, Africa and Canada (43%, 28% and 26% respectively) and lowest in Africa, the USA and Australia (2%, 5% and 6% respectively).[3]
Total mine production that Royal Gold has a royalty claim to
| gold production subj to royalty [4] | 9M10 | 2011 | 2q2012 | gold production subj to royalty[4] | 9M10 | 2011 | 2q2012 | |
|---|---|---|---|---|---|---|---|---|
| Andacollo 75% | 13,050 | 42,344 | 13,070 | Cortez GSR1 0.4-5% | 169,653 | |||
| Cortez GSR2 0.4-5% | 1,239 | Cortez GSR3 0.71% | 170,892 | 192,162 | 23,069 | |||
| Cortez NVR1 0.39% | 123,558 | Dolores 3.25% | 43,332 | 59,983 | 20,663 | |||
| Gwalia Deeps 1.5% | 74,270 | 132,253 | Leeville 1.8% | 321,247 | 443,317 | 102,946 | ||
| Mulatos 1-5% | 103,611 | 150,536 | 43,223 | Peñasquito 2% | 102,568 | 206,726 | 67,827 | |
| Robinson 3% | 62,787 | 49,712 | 7,193 | Goldstrike 2% | 483,008 | |||
| Malartic 1-1.5% | 54,141 | |||||||
For the period ended June 30, 2010 gold contributed 84% of revenue, silver less than 2% and other base metals the other 14%.[5]
2010 Reported Production of Copper, Lead, Zinc, Nickel and Silver
| 9M10 mil lbs[6] | Peñasquito 2% | Dolores 2% ag | Las Cruces 1.5% | Robinson 3% | Voisey’s Bay 2.7% |
| copper | 0 | 0 | 38.3 | 83.1 | 12.6 |
| lead | 56 | 0 | 0 | 0 | 0 |
| zinc | 86.3 | 0 | 0 | 0 | 0 |
| nickel | 37.2 | 0 | 0 | 0 | 0 |
| silver (mil oz) | 8.5 | 0.6 | 0 | 0 | 0 |
Business and Financials
2012 Second Quarter
$95.8M of the company's $166.1M of current assets represent cash and cash equivalents. Liabilities are only $30.2M. Total debt outstanding is $288.3M. The average price of gold was up 23% to $1,688/oz. Total cash flow increased only 7% even though profit was up 28% and revenue 22%.[7] $170 million in debt was paid on a credit facility making more credit available for company use.
$16.18 million of the comany's $68.84 million in royalty revenue (23.50% up from 20.12%) came from Andacollo, the gold mine that Royal Gold has a 75% interest in. The only other mine that contributed over 10% of RG's revenue is Voisey's Bay (2.7% net smelter return royalty) gave the company 17.49% ($12.04M) of its second quarter 2012 revenue (up from $8.06M in the corresponding period of 2011).
2011
In June 2011 Royal Gold paid Seabridge Gold C$160 million for a 2% NSR royalty on the KSM mega gold-copper-silver-molybdenum project in northern BC. Royal Gold also bought C$30 million worth of Seabridge Gold shares (1.01 out of 41.36 million shares or about 2.4% of the company).
2010
(fiscal 2009 into fiscal 2010) was a big year for the company. The acquisition of 100% of privately held Canadian royalty company International Royalty Corporation (IRC) through Royal Gold's Canadian subsidiary RG Exchangeco cost the company $350 million in cash (including $100 million loan debt) and about another $350.2 million in stock, gave it a lucrative interest in Barrick Gold's Pascua Lama deposit as well as Newfoundland's Voisey Bay; Voisey Bay further diversified the company's assets away from Gold (still highly exposed but more balanced), increasing its reserves of copper, nickel (up over 20% in price during fiscal 2010) and cobalt.[8] Royalty revenue increased 85% from $73.8 million up to $136.6 million.
| USD million | 2009[9] | 2010[10] | 1q10[11] | 1q11[4] | (10,11)% | 9M10[12] | 9M11[12] | Dec.'11 | USD million | 2009[9] | 2010[10] | 1q10[11] | 1q11[4] | (10,11)% | 9M10[12] | 9M11[12] | 6M2011 | 6M2012[7] |
| Total current assets | 318.7 | 371.268 | 333.676 | 366.361 | 9.80% | 93.0 | 185.0 | 166.1 | revenue | 73.771 | 136.565 | 26.113 | 45.338 | 73.62% | 112.447 | 157.21 | 101.70 | 133.3 |
| Total assets | 809.924 | 1,861.333 | 793.503 | 1,862.807 | 134.76% | 1,586.73 | 1,912.73 | 1,994.379 | operating income | 27.292 | 41.035 | 10.754 | 20.810 | 93.51% | 30.276 | 135.02 | 52.416 | 76.888 |
| total equity | 760.411 | 1,433.548 | 764.854 | 1,441.498 | 88.47% | 1,120.46 | 1,442.62 | 1,489.829 | ebit | 63.214 | 43.586 | 12.152 | 19.929 | 64.0% | 31.438 | 82.67 | ||
| Long term debt | 19.250 | 248.5(incl cur) | na | 216.0 | na | 229.0 | 229.4 | 272.70 | net income | 38.348 | 29.422 | 9.122 | 13.002 | 42.53% | 12.368 | 49.71 | 33.721 | 50.39 |
| costs and expenses | 46.479 | 95.530 | 15.359 | 24.528 | 59.70% | 80.171 | 72.91 | 56.419 | earnings per share | 1.09 | 0.49 | 0.18 | 0.22 | 22.22% | 0.55 | 0.83 |
References
- ↑ 10. Royal Gold Inc. (August 2009).
- ↑ Royal Gold Raises $235 million in public offering (2009-04-15).
- ↑ 3.0 3.1 Royal Gold 2011 First Quarter SEC Report (2010-11-05).
- ↑ 4.0 4.1 4.2 4.3 SEC 2010 Report page 22 (2010-11-05).
- ↑ royal gold revenue by metal
- ↑ SEC 2010 Report page 20 and 22 (2010-11-05).
- ↑ 7.0 7.1 Royal Gold Inc 2012 Second Quarter Release (February 2, 2012).
- ↑ Royal Gold Secures $100 million loan to Buy IRC (2010-01-21).
- ↑ 9.0 9.1 Royal Gold 2009 Annual Report (2009-08-21).
- ↑ 10.0 10.1 Royal Gold 2010 Annual Report page 71 (2010-08-26).
- ↑ 11.0 11.1 Royal Gold First Quarter 2010 Report (2009-11-06).
- ↑ 12.0 12.1 12.2 12.3 Royal Gold, Inc Profile
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