Press Release Details

DENVER--(BUSINESS WIRE)-- Royal Gold, Inc. (NASDAQ:RGLD; TSX:RGL) (together with its subsidiaries, “Royal Gold” or the “Company”) generated net income attributable to Royal Gold stockholders of $20.1 million, or $0.31 per basic share, on revenue of $57.7 million for the third quarter of fiscal 2014. This compares to net income attributable to Royal Gold stockholders of $6.5 million, or $0.10 per basic share, on revenue of $74.2 million for the third quarter of fiscal 2013. The average gold price was $1,293 per ounce in the third quarter, down 21% from the prior year quarter.

Q3 Fiscal Year (“FY”) 2014 Highlights

• Adjusted EBITDA¹ of $0.76 per basic share or 86% of revenue
• Revenue of $6.0 million from Thompson Creek Metals Company’s (“Thompson Creek”) Mt. Milligan mine
• Gold Equivalent Ounces (“GEOs”)² of 44,662
• Completed three acquisitions of additional precious metal interests totaling commitments of $94.5 million
• Cash dividends of $13.7 million

Tony Jensen , President and CEO, commented, “Our third quarter results were positively impacted by a strong quarter at Peñasquito, the continued ramp-up of production at Mt. Milligan, and a higher level of activity at Cortez. We were also successful in adding three quality interests to our portfolio including a royalty at each of the Pipeline mining complex and the Goldrush deposits, both at Cortez, and a gold stream in the prolific Red Lake District on the Phoenix Gold Project.”

Third quarter revenue was impacted by 21% lower average metal prices and 2% lower production volume subject to our interests than the prior year quarter. As expected, volume at Andacollo was lower as Teck continued its shift into a lower grade phase of mining. This impact was offset by higher production at Cortez and Peñasquito, as well as a new contribution from Mt. Milligan.

As of March 31, 2014, the Company had a working capital surplus of $686.9 million. Current assets were $712.4 million (including $646.1 million in cash and equivalents), compared to current liabilities of $25.5 million, resulting in a current ratio of approximately 28 to 1. In addition to available working capital, the Company had $450 million available under its revolving line of credit at quarter end.

RECENT DEVELOPMENTS

52.25% Stream on Thompson Creek’s Mt. Milligan Mine

Thompson Creek reported that concentrate production at Mt. Milligan for the quarter ended March 31, 2014 totaled 39,200 ounces of payable gold. Royal Gold purchased 4,780 ounces of physical gold, consisting of approximately 700 ounces upon final settlement of Thompson Creek’s first shipment from the Mt. Milligan mine in November 2013 and approximately 4,080 ounces upon provisional payment relating to Thompson Creek’s second shipment in January 2014. We sold 4,460 ounces at an average price of $1,335 per ounce, with 320 ounces remaining in inventory at quarter-end.

Thompson Creek reported that the third and fourth concentrate shipments were made in March. Subsequent to quarter end, Royal Gold received delivery of approximately 10,700 ounces of gold associated with provisional payments for these shipments.

Deliveries of gold to Royal Gold are a product of the gold ounces contained in concentrates from Mt. Milligan, a 97% payable factor, and our 52.25% stream interest; and, for the first 12 concentrate shipments from Mt. Milligan, are based on Thompson Creek’s receipt of first provisional payments under each of its concentrate sales agreements. For shipments 1-4, 75% of the gold is delivered based upon Thompson Creek’s receipt of the first provisional payment under each concentrate sales agreement and 25% of the gold ounces are delivered based upon final settlement under each agreement. For shipments 5-8, those percentages are 50% and 50%, respectively, and for shipments 9-12, the percentages are 25% and 75%, respectively. Thereafter, all deliveries to Royal Gold will be based solely on final settlement timing and volumes under Thompson Creek’s concentrate sales agreements.

Deliveries to Royal Gold can be affected by several factors that make it difficult to calculate our quarterly Mt. Milligan revenue based solely on Thompson Creek’s reported quarterly production, including the timing of Thompson Creek’s concentrate shipments and the provisional and final settlement terms applicable to each shipment, neither of which are known to us prior to the shipment date. Royal Gold receives physical metal within two days after Thompson Creek records a sale, which in turn can take between five days and several weeks post-shipment. Royal Gold currently sells most of the delivered gold within three weeks of receipt. We recognize revenue on our streaming transactions when we sell the metal we receive.

6.3% Stream on Rubicon’s Phoenix Gold Project

On February 11, 2014, Royal Gold entered into a $75 million gold stream transaction with Rubicon to help finance a significant portion of the construction underway at the Phoenix Gold Project located in Ontario, Canada.

Royal Gold will make advance deposit payments in five installments totaling $75 million as prepayment of the purchase price for refined gold. The first installment of $10 million was made in conjunction with execution of definitive documents on February 11, 2014. The second installment of $20 million was paid on March 20, 2014, while the third, fourth and fifth installments of $15 million each are payable upon satisfaction of certain conditions.

Upon commencement of production at the Phoenix Gold Project, Royal Gold will purchase and Rubicon will sell 6.30% of any gold produced from the Phoenix Gold Project until 135,000 ounces have been delivered, and 3.15% of gold produced thereafter. For each delivery of gold, Royal Gold will pay a purchase price per ounce of 25% of the spot price of gold at the time of delivery, subject to certain conditions.

Goldrush Royalty Acquisition

On January 7, 2014, Royal Gold acquired a 1.0% net revenue royalty on the southern end of Barrick Gold Corporation’s (“Barrick”) Goldrush deposit in Nevada from a private landowner for total consideration of $8.0 million, of which $1.0 million was paid at closing and the remaining $7.0 million will be paid in seven annual installments.

NVR1 Royalty at Cortez

In January 2014, Royal Gold, through a wholly-owned subsidiary, purchased additional interests in the limited partnership that owns the NVR1 royalty covering certain portions of the Pipeline Complex at Barrick’s Cortez gold mine in Nevada. The NVR1 royalty rate attributable to our interest increased from 0.39% to 1.01% outside of the Crossroad Claims and from zero to 0.62% within the Crossroad Claims. Royal Gold also owns three other royalties within the Pipeline Complex: namely GSR1, GSR2 and GSR3.

Credit Facility

On January 29, 2014, Royal Gold expanded and extended its revolving credit facility from a $350 million facility maturing in May 2017 to a $450 million facility maturing in January 2019. In addition, the facility includes a $150 million accordion feature that allows the Company to increase availability at its option, subject to satisfaction of certain conditions, to a total of $600 million. The commitment fee is reduced to 0.25% from 0.375%, and the drawn interest rate is reduced to LIBOR +1.25% from LIBOR +1.75%.

PROPERTY HIGHLIGHTS

Highlights at certain of the Company’s principal producing and development properties during the quarter ended March 31, 2014, as compared to the prior year quarter, are listed below. Production, as used below, relates to the amount of metal sales subject to our royalty and stream interests, as reported to us by the operators of the mines.

In addition, we have received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2014. The estimates and production reports are prepared by the operators of the mining properties. We do not participate in the preparation or calculation of the operators’ estimates or production reports and have not independently assessed or verified the accuracy of such information.

Producing Properties

Andacollo – Production decreased 45% as Andacollo continues to progress through a lower gold grade phase of mining that began in the December 2013 quarter. The gold grade is forecast to improve slightly during the second half of calendar 2014 and Andacollo is expected to produce 38,500 ounces of payable gold subject to our interest during calendar year 2014.

Cortez – Production increased 157% as surface mining activity at Pipeline has recommenced. Additionally, after deferrals in the third and fourth calendar quarter of 2013, Barrick resumed shipments of roaster ore stockpiled at Cortez to Goldstrike for processing during the March quarter. For calendar 2014, Barrick’s forecast for production from our area of interest, including stockpiled ore, will total about 276,000 ounces from our GSR3 royalty interest, 125,000 ounces from our GSR1, 151,000 ounces from our GSR2, and 228,000 ounces associated with our NVR1 royalty.

Canadian Malartic – Osisko reported 25% higher production from our royalty area at the Canadian Malartic mine. The mine overcame an unscheduled four day shutdown of the mill to repair loose liners in the SAG mill with overall gold production setting a new record in the March quarter. Royal Gold’s 1.5% NSR on Malartic is unaffected by the recent merger and acquisition activity related to Osisko. Osisko’s overall guidance for the Canadian Malartic mine during calendar 2014 is 525,000 to 575,000 ounces with production from our area of interest expected to be 344,000 ounces.

Holt – Production increased 17% due to an increase in throughput, better hoisting capacity and increased reliability as a result of improvements established in the December 2013 quarter. For the calendar year 2014, the operator expects approximately 66,000 ounces of gold production at Holt.

Las Cruces – Production increased 7% due to higher expected recoveries related to improvements put in place in calendar 2013. First Quantum continues to debottleneck the plant for higher ore throughput rates and lower grades as it prepares to enter lower copper grade areas of the mine, which is expected in late calendar 2014. For the calendar year 2014, the operator expects 152 million to 159 million pounds of copper production at Las Cruces.

Mt. Milligan –Thompson Creek reported that the mine reached commercial production on February 18, 2014, defined as operating the mill at 60% of design capacity for 30 days. The operator expects mill throughput will achieve 75% to 85% of design capacity by the end of calendar year 2014. For calendar year 2014, Thompson Creek anticipates 165,000 to 175,000 ounces of payable gold production at Mt. Milligan.

Mulatos – Production decreased 42% due to lower than expected grades from the Escondida Deposit. Alamos commenced underground mining of the Escondida Deep deposit in this quarter, and expects to transition to production from the San Carlos deposit in the second half of 2014. Underground throughput rates at San Carlos are expected to gradually ramp up to an expanded mill capacity of 800 tonnes per day. The Mulatos royalty is capped at 2.0 million gold ounces of production. As of March 31, 2014, approximately 1.2 million cumulative ounces of gold have been produced. For the calendar year 2014, the operator expects 150,000 to 170,000 ounces of gold production at Mulatos.

Peñasquito – Gold and silver production increased 74% and 82%, respectively, while production of lead and zinc increased by 87% and 79%, respectively. Goldcorp reports that it is mining in the higher grade portion of the pit, which it expects will continue throughout calendar 2014 at a projected throughput of 110,000 tonnes per day. For the calendar year 2014, the operator expects 530,000 to 560,000 ounces of payable gold production, 22 million to 25 million ounces of silver production, 135 million to 145 million pounds of lead production and 315 million to 325 million pounds of zinc production at Peñasquito.

Robinson – Gold production was down 61% and copper production decreased 57% as the planned mine sequence continued in the Liberty pit, which has lower metal grades. It is expected that mining will return to the higher grade Ruth pit in the second half of calendar 2014. For the calendar year 2014, the operator has not disclosed production guidance at Robinson.

Voisey’s Bay – Nickel and copper production decreased 11% and 38%, respectively, due to lower copper grades. For the calendar year 2014 there is limited forward-looking information publicly provided by the operator, but we note that 2013 calendar year production at Voisey’s Bay totaled 138 million pounds of payable nickel and 88 million pounds of copper.

Production and revenue for the three and nine months ended March 31, 2014 for the Company’s principal royalty and stream interests are shown in Tables 1 and 2, and historical production data is shown in Table 3. For more detailed information about each of our principal royalty properties, please refer to the Company’s most recent Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available on the SEC’s website located at www.sec.gov, or our website located at www.royalgold.com.

CORPORATE PROFILE

Royal Gold is a precious metals royalty and stream company engaged in the acquisition and management of precious metal royalties, streams and similar production based interests. The Company owns interests on 201 properties on six continents, including interests on 37 producing mines and 22 development stage projects. Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol “RGLD,” and on the Toronto Stock Exchange under the symbol “RGL.” The Company’s website is located at www.royalgold.com.

Note: Management’s conference call reviewing its third quarter fiscal 2014 results will occur today at noon Eastern Time (10:00 a.m. Mountain Time). The call will be webcast and archived on the Company’s website for a limited time.

Fiscal 2014 Third Quarter Earnings Call Information:

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Cautionary “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking statements include statements about the contribution of Mt. Milligan to the Company’s revenue; Rubicon’s expectation for construction at the Phoenix project; changes in grade at Andacollo; the operators’ expectations regarding future production; life-of-mine plan at Peñasquito; as well as other anticipated developments at various mines. Factors that could cause actual results to differ materially from the projections include, among others, precious metals, copper and nickel prices; actual tax rates; performance of and production at the Company's royalty properties; decisions and activities of the operators of the Company’s royalty properties; delays in the operators’ securing or their inability to secure necessary governmental permits; changes in operators’ project parameters and timelines as plans continue to be refined; economic and market conditions; unanticipated grade, geological, metallurgical, processing, regulatory and legal or other problems the operators of the mining properties may encounter; completion of feasibility studies; the ability of the various operators to bring projects into production as expected; and other subsequent events, as well as other factors described in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made herein. Readers are cautioned not to put undue reliance on forward-looking statements.

FOOTNOTES

SCHEDULE A

Non-GAAP Financial Measures

The Company computes and discloses Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined by the Company as net income plus depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of mining assets, less non-controlling interests in operating income of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. Other companies may define and calculate this measure differently. Management believes that Adjusted EBITDA is a useful measure of the performance of our royalty portfolio. Adjusted EBITDA identifies the cash generated in a given period that will be available to fund the Company's future operations, growth opportunities, shareholder dividends and to service the Company's debt obligations. This information differs from measures of performance determined in accordance with U.S. generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. Below is a reconciliation of net income to Adjusted EBITDA.

Source: Royal Gold, Inc.