DENVER--(BUSINESS WIRE)-- Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we,” “us,” or “our”) reports fiscal year 2021 (“fiscal 2021”) net income of $302.5 million, or $4.61 per share, on revenue of $615.9 million and operating cash flow of $407.2 million. Adjusted net income1 was $236.5 million, or $3.59 per share.
Key Fiscal 2021 Highlights:
Record financial performance with revenue of$615.9 million, operating cash flow of $407.2 million and earnings of $302.5 million, increases of 23%, 19% and 52%, respectively, over the prior year
74% of revenue from gold and 10% from silver
Volume of 333,100 GEOs2
Ended the year debt free, with net cash3 of $222 million and available liquidity of $1.2 billion
Increased dividend for the 20th consecutive year to $1.20 per share, a 7% increase over the prior year
Continued Board renewal with election of Fabiana Chubbs
Key Fourth Quarter Highlights:
Record revenue of $168.0 million and operating cash flow of $120.9 million
Acquired royalty on the Côté Gold development project
Announced gold stream on the NX Gold Mine, including ESG funding commitment
Khoemacau stream rateincreased to 84% of payable silver, with first concentrate produced June 30
Post Quarter Events:
Acquired royalty on the world-class Red Chris Mine
Drew $100 million on revolving credit facility to fund acquisitions
“Not only did we produce record financial results, but we also achieved several significant strategic goals in fiscal 2021,” commented Bill Heissenbuttel, President and CEO of Royal Gold, “including the following highlights for the year:
We funded our base silver stream at Khoemacau and, with an incremental stream advance, are now positioned to purchase 84% of the payable silver from a project that has recently produced its first concentrate,
We sharpened our focus on our core royalty and streaming business with the sale of our Peak Gold joint venture interest, and with our three recent acquisitions we remain committed to both gold as our strategic metal of focus, and investing in properties with exploration and production upside,
We completed our acquisitions with existing sources of liquidity and without equity dilution to our shareholders, while also increasing our return of capital to our shareholders through the 20th consecutive increase in our annual dividend,
We extended our revolving credit to July 2026, securing a key source of liquidity to finance accretive growth for another five years,
We completed community support arrangements with two of our principal property operators and introduced an ongoing ESG support structure to our NX Gold stream, and
We will transition to a December 31 fiscal year end in order to align our reporting with our precious metal peers and facilitate comparative analysis for our analysts and shareholders.
We achieved all of these accomplishments only through the efforts of our dedicated employees, who continue to work with great professionalism and dedication while successfully working through the various challenges of the COVID-19 environment.”
Fiscal Fourth Quarter Results
For the fiscal fourth quarter ended June 30, 2021 (“fourth quarter”), net income of $81.7 million, or $1.24 per share, was reported on record revenue of $168.0 million and record operating cash flow of $120.9 million. Adjusted net income 1 was $68.7 million, or $1.04 per share.
1 Adjusted net income and adjusted net income per share are a non-GAAP financial measures. See Schedule A of this press release for additional information, including a detailed description of adjustments to net income.
2 See Schedule A of this press release for additional information about gold equivalent ounces, or GEOs.
3 Net debt (and net cash) is a non-GAAP financial measure. See Schedule A of this press release for additional information.
Recent Developments
First Concentrate Production and Shipment at the Khoemacau Project
According to Khoemacau Copper Mining (Pty.) Limited (“KCM”), a major milestone was achieved at the Khoemacau Project (“Khoemacau”) in Botswana on June 30, 2021, with the production of the first copper silver concentrate from the Boseto process plant. This milestone was achieved safely, within schedule and the overall project remains within 3% of the original budget. The project is currently undergoing commissioning activities and the first shipment of concentrate was made in mid-July 2021.
Since underground development of Zone 5 commenced in early calendar 2020, more than 350,000 tonnes of high-grade sulphide ore has been stockpiled on surface. While the state of emergency declared by the Government of Botswana to help prevent the spread of COVID-19 remains in place until at least September 30, 2021, mining remains designated as an “essential service” and KCM reports that activities at site are continuing. Absent any potential further unforeseen impacts caused by COVID-19 considerations, KCM expects to ramp up through the balance of calendar 2021 and reach full production in early 2022. At full production, Khoemacau has the capacity to produce 155,000 to 165,000 tonnes of high-grade copper and silver concentrate a year, containing approximately 60,000 to 65,000 tonnes of payable copper and 1.8 to 2.0 million ounces of payable silver.
Royal Gold holds the right to receive 84% of the payable silver produced from Khoemacau until the delivery of approximately 33.6 million silver ounces, and 42% thereafter. Royal Gold will pay a cash price equal to 20% of the spot silver price for each ounce delivered; however, if KCM achieves mill expansion throughput levels above 13,000 tonnes per day (30% above current mill design capacity), Royal Gold will pay a higher ongoing cash price for silver ounces delivered in excess of specific annual thresholds.
As of June 30, 2021, Royal Gold had remaining committed funding of $49.4 million to KCM in the form of $42.4 million of additional advance payments under the stream and $7.0 million remaining on a subordinated debt facility, both of which may be drawn at the election of KCM prior to the earlier of completion of development or 60 days after the start of commercial production. On July 7, 2021, KCM drew the remaining $7.0 million amount on the subordinated debt facility, reducing Royal Gold’s remaining committed funding to $42.4 million of additional advance payments. The subordinated debt facility has a term of seven years, carries interest at a rate of LIBOR +11% and requires mandatory repayment upon certain events. KCM has indicated that it does not expect to draw any material amounts from this remaining committed funding.
Acquisition of Royalty on the Red Chris Mine
On August 11, 2021, Royal Gold acquired a 1.0% net smelter return royalty on certain areas of the Red Chris Mine in British Columbia, Canada, from a subsidiary of Glencore International AG for $165 million in cash. The royalty covers an area of approximately 5,100 hectares which includes the currently known mineralization and prospective exploration targets.
The Red Chris Mine is an operating open pit mine producing gold, copper and silver, and is located on the northern edge of the Skeena Mountains. The mine is owned and operated by the Red Chris JV, which is owned 70% by Newcrest Mining Ltd. (“Newcrest”) and 30% by Imperial Metals Corporation, in which Newcrest is the operator.
Acquisition of Gold Stream on the NX Gold Mine
As previously announced, Royal Gold entered into a stream agreement on June 30, 2021, for gold produced from the NX Gold Mine in Brazil with Ero Gold Corp., a wholly owned subsidiary of Ero Copper Corp., and certain of its affiliates (together, “Ero”).
The transaction closed on August 6, 2021, and Royal Gold made an advance payment of $100 million upon closing. Royal Gold will make up to an additional $10 million of further payments from the beginning of calendar 2022 through the end of calendar 2024 based on Ero’s achievement of success-based targets related to regional exploration and resource additions. In return, Royal Gold will receive 25% of the gold produced from the NX Gold Mine until the delivery of 93,000 ounces, and 10% thereafter. Royal Gold will pay 20% of the spot gold price for each ounce delivered until the delivery of 49,000 ounces, and 40% of the spot gold price thereafter. Royal Gold will also contribute $5 per ounce of gold delivered under the stream agreement towards Ero’s environmental, social and governance (“ESG”) commitments within the area of influence of the NX Gold Mine.
A delivery of approximately 2,500 ounces of gold based on mine production through to closing is expected to be received from Ero within five business days of closing the transaction.
On July 7, 2021, Ero announced that nine drill rigs were operating on the property with a focus on extending the Santo Antonio Vein, identifying new veins within and adjacent to the mine’s infrastructure, and conducting the first regional exploration drill program on newly identified structures. Results reported included a 9 meter intercept grading 22.7 grams per tonne gold located approximately 10 meters beyond the limit of the 2020 inferred mineral resource shell at the Santo Antonio Vein, and the discovery of a new high-grade extension of the Matinha Vein. Regional drilling resulted in the discovery of two new mineralized gold systems located approximately 1.2 kilometers Northeast (Sovaco de Cobra) and 25 kilometers East-Northeast (Mata Verde) of the NX Gold Mine.
On August 4, 2021, Ero reaffirmed 2021 gold production guidance for the NX Gold Mine of 34,500 ounces to 37,500 ounces.
Acquisition of Royalty on the Côté Gold Project
On June 7, 2021, Royal Gold acquired a 1.0% net smelter return royalty on certain claims covering the Côté Gold Project in Northern Ontario, Canada, for $75 million in cash. The Côté Gold Project is owned 92.5% by the Côté Gold Joint Venture (a joint venture owned 70% by IAMGOLD Corporation (“Iamgold”) and 30% by Sumitomo Metal Mining Co., Ltd.), and 7.5% by a third party. The royalty covers the Chester 3 claims, which contain approximately 70% of the current reserves of the Côté Gold Project, as well as other areas outside the current project area.
The Côté Gold Project is currently under construction by the Côté Gold Joint Venture, with Iamgold as the operator. A positive investment decision was made on July 21, 2020, and Iamgold reported that approximately $276 million of the $1,605 to $1,680 million total estimated cost had been incurred as of June 30, 2021. According to Iamgold, the Côté Gold Project was approximately 27% complete as of June 30, 2021, and is currently on schedule and on track for commercial production in the second half of calendar 2023.
The Côté Gold Project has Proven and Probable Reserves of 7.3 million ounces of gold and is expected to operate for a mine life of at least 18 years. Iamgold expects the mine to produce an average of 367,000 ounces of gold per year with an average of 493,000 ounces per year in the first five years of production. Life of mine total cash costs are expected to be $600 per ounce with all-sustaining costs of $771 per ounce.
Mount Milligan Life of Mine Plan and Water Supply Update
Centerra Gold Inc. (“Centerra”) reported in May 2021 that given productivity improvements, cost controls and brownfield exploration success, it is updating the Mount Milligan life of mine plan. On August 10, 2021, Centerra reported that exploration activity is ongoing and results from drilling during the quarter ended June 30 indicate significant mineralization at targets below the ultimate open pit boundary and along the eastern and southeastern margins of the open pit.
With respect to water supply, Centerra reported that Mount Milligan accessed water from surface water sources and groundwater wells near the tailings storage facility in the quarter ended June 30, 2021, and with stored water inventory in excess of eight million cubic meters it estimated that Mount Milligan has sufficient water to enable continuous production for at least twelve months. Centerra also reported that it continues to pursue a longer-term solution to its water requirements at Mount Milligan and is in discussions with regulators, First Nations partners and other stakeholders. Centerra reported that in the first half of 2021 it obtained an environmental assessment certificate amendment and related permits to access surface water sources for Mount Milligan through November 2023.
On August 10, 2021, Centerra also reported that it is on track to achieve previously-provided 2021 production guidance of between 180,000 and 200,000 ounces of gold and between 70 million and 80 million pounds of copper at Mount Milligan. However, Centerra advised that forest fires in the Province of British Columbia have the potential to disrupt shipments to and from the mine and the operation itself.
Pueblo Viejo Expansion Continues and Silver Recoveries Improving
Barrick Gold Corporation (“Barrick”) reported continued progress at Pueblo Viejo during the June 2021 quarter to expand the process plant and tailings storage capacity. Barrick estimates that the expansion project could significantly increase throughput and allow the mine to maintain average annual gold production of approximately 800,000 ounces after calendar 2022 (on a 100% basis), and that the increase in tailings storage capacity has the potential to convert over 9 million ounces of mineralized material to reserves (on a 100% basis). Barrick reported that as of June 30, 2021, the engineering design of the process plant expansion is 87% complete, construction is 10% complete, and completion of the process plant expansion is expected by the end of calendar 2022. Barrick also reported an agreement with key stakeholders to allow independent government-led oversight of the strategic environmental and social impact assessment studies for the new tailings storage facility, which is an important first step in starting fieldwork and advancing the permitting process.
Silver stream deliveries were approximately 1.5 million ounces of silver during fiscal 2021, compared to approximately 1.7 million ounces of silver during fiscal 2020. The decrease in silver deliveries during the fiscal year ended June 30, 2021, is attributable to lower silver recoveries resulting from temporary operational issues with the silver circuit that caused recoveries to fall below the fixed 70% recovery rate specified in the stream agreement. The stream agreement includes a deferral mechanism for ounces that cannot be delivered at this fixed recovery rate, with the economic impact of any shortfall in deliveries to be made up in future periods. As of June 30, 2021, approximately 437,000 ounces of silver deliveries have been deferred. Barrick has advised that maintenance work on the silver recovery circuit is complete and silver recovery has steadily improved over the past quarter. Barrick also advised that modifications to further improve silver recovery are underway and are expected to be completed during the current quarter. With the recovery improvements, Royal Gold expects that delivery of the deferred ounces to begin next quarter.
Repayment and Amendment of Revolving Credit Facility
On April 1, 2021, Royal Gold repaid the then-remaining $150 million outstanding balance under the revolving credit facility, reducing the amount outstanding to $0 for the remainder of the fourth quarter.
On July 7, 2021, Royal Gold entered into a fourth amendment to the revolving credit facility dated as of June 2, 2017. The amendment extends the maturity date from June 3, 2024, to July 7, 2026, provides for the eventual replacement of LIBOR and makes certain changes to the lenders under the agreement.
In August 2021, the Company drew $100 million on the revolving credit facility for business development activities, leaving $900 million available under the credit facility.
Change to Fiscal Year End and Provision of Full Year Guidance
On August 9, 2021, the Royal Gold Board of Directors approved a change to Royal Gold’s fiscal year end from June 30 to December 31, effective as of December 31, 2021. To complete the change, Royal Gold will use a six-month transition period from July 1, 2021, to December 31, 2021. As part of this change, Royal Gold will hold its 2022 annual stockholders’ meeting on May 25, 2022.
Additionally, Royal Gold expects to issue one-year guidance for total GEO sales, depreciation, depletion and amortization expense, and effective tax rate during the second calendar quarter of 2022. With this change, Royal Gold will no longer provide guidance for stream sales on a quarterly basis.
These changes are intended to more closely align Royal Gold’s reporting and disclosure with that of the majority of its counterparties and the precious metals sector, which will allow market participants to more closely evaluate and compare Royal Gold’s performance.
Fiscal 2021 Overview
For fiscal 2021, the Company recorded net income of $302.5 million, or $4.61 per basic share and $4.60 per diluted share, as compared to net income of $199.3 million, or $3.04 per basic share and $3.03 per diluted share, for fiscal 2020. The increase in earnings was primarily attributable to (i) an increase in revenue, (ii) a one-time gain attributable to the sale of the Peak Gold JV interest during the September 2020 quarter and (iii) various discrete income tax benefits recognized during the September 2020 and June 2021 quarters. These increases were partially offset by increases in the cost of sales and depreciation, depletion and amortization expense, each discussed further below.
For fiscal 2021, the Company recognized total revenue of $615.9 million, which is comprised of stream revenue of $424.0 million and royalty revenue of $191.9 million, at an average gold price of $1,849 per ounce, an average silver price of $25.38 per ounce and an average copper price of $3.60 per pound, compared to total revenue of $498.8 million, which is comprised of stream revenue of $359.9 million and royalty revenue of $138.9 million, at an average gold price of $1,560 per ounce, an average silver price of $16.90 per ounce and an average copper price of $2.57 per pound, for fiscal 2020. The increase in total revenue for fiscal 2021 compared with fiscal 2020 resulted primarily from an increase in the average gold, silver and copper prices compared to the prior period and an increase in production within the royalty segment.
Cost of sales increased to $92.9 million for fiscal 2021 from $83.9 million for fiscal 2020. The increase was primarily due to an increase in the gold, silver and copper prices and an increase in copper sales at Mount Milligan when compared to the prior period. This increase was partially offset by a decrease in gold sales at Mount Milligan and Andacollo when compared to the prior period. Cost of sales, which excludes depreciation, depletion and amortization, is specific to the Company’s stream agreements and is the result of the purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for all other streams is a set contractual percentage of the gold, silver or copper spot price, as applicable, near the date of metal delivery.
General and administrative costs decreased to $28.4 million for fiscal 2021 from $30.2 million for fiscal 2020. The decrease was primarily due to additional non-cash stock compensation expense of approximately $3.3 million recognized in the prior year period due to the accelerated vesting of certain equity awards in connection with the retirement of the Company’s former President and Chief Executive Officer and former Vice President and General Counsel in January 2020.
Exploration costs decreased to $0.6 million for fiscal 2021 from $5.2 million for fiscal 2020. Exploration costs were specific to the exploration and advancement of the Peak Gold JV. On September 30, 2020, the Company sold the Peak Gold JV interest for cash consideration of $61.3 million and certain incremental net smelter return royalties.
Depreciation, depletion and amortization increased to $183.6 million for fiscal 2021 from $175.4 million for fiscal 2020. The increase was primarily due to higher copper sales at Mount Milligan and an increase in depletion rates at Mount Milligan through the six months ended December 31, 2020, as previously discussed in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020. The increase in depreciation, depletion and amortization was offset by a decrease in gold sales at Mount Milligan and Andacollo.
The Company recognized a gain in fair value changes in equity securities of $6.0 million for fiscal 2021, compared to a gain in fair value changes in equity securities of $1.4 million for fiscal 2020.
Interest and other expense decreased to $6.4 million for fiscal 2021, from $9.8 million for fiscal 2020. The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding during the current period when compared to the prior period.
During fiscal 2021 the Company recognized income tax expense totaling $36.9 million compared with an income tax benefit of $3.7 million during fiscal 2020. This resulted in an effective tax rate of 10.9% during the current period, compared with (1.9%) in the prior period. The effective tax rate for fiscal 2021 was primarily impacted by the release of uncertain tax liabilities resulting from settlement agreements with foreign tax authorities in various jurisdictions. The effective tax rate for fiscal 2020 was primarily impacted by a net step-up of tax assets due to the enactment of the Federal Act on Tax Reform and AHV Financing in Switzerland (Swiss Tax Reform) and the release of an uncertain tax liability resulting from a settlement agreement with a foreign tax authority. Absent these discrete income tax items, the Company’s effective tax rate would have been approximately 21% for fiscal 2021.
Net cash provided by operating activities totaled $407.2 million for fiscal 2021 compared to $340.8 million for fiscal 2020. The change was primarily due to an increase in proceeds received from the Company’s stream and royalty interests, net of cost of sales and production taxes, of approximately $86.1 million over fiscal 2020. This increase was offset by $27.4 million of higher cash taxes paid, net of refunds over the fiscal and lower income taxes paid over fiscal 2020.
At June 30, 2021, the Company had current assets of $297.1 million compared to current liabilities of $52.1 million resulting in working capital of $245.0 million. This compares to current assets of $362.2 million and current liabilities of $43.6 million at June 30, 2020, resulting in working capital of $318.6 million. The decrease in working capital was primarily attributable to the repayment of outstanding debt.
During fiscal 2021, liquidity needs were met from $407.2 million in net cash provided by operating activities and available cash resources. As of June 30, 2021, the Company had $1 billion available and no amounts outstanding under the revolving credit facility. Working capital, combined with available capacity under the revolving credit facility, resulted in approximately $1.2 billion of total liquidity at June 30, 2021. In August 2021, the Company borrowed $100 million under the revolving credit facility for business development activities.
Fourth Quarter 2021 Overview
Fourth quarter revenue was $168.0 million compared to $120.0 million in the prior year quarter, with stream revenue totaling $114.4 million and royalty revenue totaling $53.6 million. The increase in total revenue for the fourth quarter compared to the prior year quarter was due to higher average gold, silver and copper prices, higher gold stream sales from Andacollo, higher copper stream sales from Mount Milligan and higher royalty revenue primarily from Peñasquito, Cortez and Voisey’s Bay. These increases were partially offset by lower gold sales from Mount Milligan and lower silver sales from Pueblo Viejo.
Cost of sales, which excludes depreciation, depletion and amortization, increased to $24.7 million for the fourth quarter from $20.7 million for the prior year quarter. The increase was primarily due to higher gold, silver and copper prices, higher gold sales from Andacollo and higher copper sales from Mount Milligan, partially offset by lower gold sales from Mount Milligan and lower silver sales from Pueblo Viejo. Cost of sales is specific to the Company’s stream agreements and is the result of the purchase of gold, silver and copper for a cash payment.
Depreciation, depletion and amortization increased to $48.0 million for the fourth quarter from $45.4 million for the prior year quarter. The increase was primarily due to higher GEO volumes.
During the fourth quarter, the Company recognized a gain of $2.0 million on changes in fair value of equity securities related to warrants to purchase common shares of TriStar Gold Inc., compared to a gain of $6.4 million in the prior year period. Holdings in the prior period also included shares in Contango ORE, Inc., which were sold in September 2020, and shares in Battle North Gold Corporation, which were sold in May 2021.
Interest and other expense decreased to $1.1 million for the fourth quarter, from $2.7 million for the prior year period. The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding when compared to the prior year quarter.
During the fourth quarter, the Company recognized an income tax expense of $5.5 million, compared with an income tax expense of $0.045 million during the prior year period. The current period tax expense was primarily impacted by the release of an uncertain tax liability resulting from a settlement agreement with a foreign tax authority related to withholding tax. Absent the discrete income tax benefit, the Company’s effective tax rate would have been approximately 20% for the fourth quarter.
Outlook
For the quarter ended September 30, 2021, Royal Gold expects stream segment sales to range between 62,000 and 67,000 GEOs with quarter-end inventory ranging between 22,000 and 27,000 GEOs.
For the 6-month stub period ended December 31, 2021, Royal Gold expects total stream segment and royalty sales volume to range between 175,000 and 185,000 GEOs4. For the same period, depreciation, depletion and amortization expense is expected to range between $520 and $570 per GEO.
Other than potential remaining conditional funding at the Khoemacau Project and potential exploration and resource payments under the NX Gold Mine stream, both as described above, Royal Gold has no other project capital commitments or financing obligations.
4 Commodity price assumptions for GEO projections include: $1,750 per ounce of gold, $25.50 per ounce of silver, $4.15 per pound of copper, $8.00 per pound of nickel, $0.95 per pound of lead, and $1.25 per pound of zinc
Property Highlights
A breakdown of revenue for the stream and royalty portfolio can be found on Table 1. Historical production reported by operators of the Company’s principal stream and royalty properties can be found on Table 2. Calendar year 2021 operator production estimates for the Company’s principal stream and royalty properties compared to actual production at these properties through June 30, 2021 can be found on Table 3. Results of the streaming business for the fiscal 2021 and the fourth quarter, compared to fiscal 2020 and prior year quarter, respectively, can be found on Table 4. Highlights at certain of the Company’s principal producing and development properties during the fourth quarter, compared to the prior year quarter, are detailed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
CORPORATE PROFILE
Royal Gold is a precious metals stream and royalty company engaged in the acquisition and management of precious metal streams, royalties and similar production-based interests. As of June 30, 2021, the Company owned interests on 187 properties on five continents, including interests on 41 producing mines and 17 development stage projects. Royal Gold is publicly traded on the Nasdaq Global Select Market under the symbol “RGLD.” The Company’s website is located at www.royalgold.com.
Fourth Quarter and Fiscal Year 2021 Call Information:
Dial-In 855-209-8260 (U.S.); toll free
Numbers: 855-669-9657 (Canada); toll free
412-542-4106 (International)
Conference Title:
Royal Gold see more on
https://www.royalgold.com/investors/press-releases/press-release-details/?id=dc7be195-2b30-4f35-9d47-ecbdb8d202dd |
