Royal Gold basks in record royalty revenues

Vancouver — Robust gold prices and an expanded royalty portfolio allowed Denver, Colo.-based Royal Gold (RGL-T) to post record revenue of US$25.3 million for fiscal 2005, an 18% increase over the US$21.4 million reported in fiscal 2004.

Net income reached US$11.4 million, or US55, for the fiscal year ended June 30. This compares with net income of US$8.9 million in fiscal 2004, and net income of $6.75 million in fiscal 2003.

Royal Gold is a precious metals royalty company that holds two sliding-scale gross smelter return (GSR) royalties and two fixed-rate royalties at the Pipeline mine complex operated by Placer Dome (PDG-T) in Lander Cty., Nev.

The company also holds a 1.8% carried working interest — calculated as a net smelter return (NSR) royalty — at a portion of the Leeville project operated by Newmont Mining (NEM-N) in Nevada’s Eureka Cty.

Royal Gold’s other assets include: an 0.9% NSR royalty covering a small portion of the Goldstrike property operated by Barrick Gold (ABX-T); a 7% GSR royalty at the Troy mine operated by a unit of Revett Minerals (RVM-T) in Montana; a NSR sliding-scale royalty ranging from 1.75-3.5% covering a portion of the Bald Mountain mine operated by Placer Dome in Nevada; and a 2% NSR on the Martha silver mine operated by Coeur d’Alene Mines (CDM-T) in Santa Cruz province, Argentina.

The Pipeline complex is the largest contributor to Royal Gold’s bottom line. The operation produced 973,602 oz. gold and provided US$21.4 million of revenue from the combined royalties in fiscal 2005. This compares with revenue of US$18.7 million a year earlier.

The Leeville South mine provided US$763,000 of royalty revenue, based on the production of 93,180 oz. gold from claims subject to the company’s royalty interest. The Leeville royalty will provide additional benefits once Newmont begins production at the Leeville North underground mine later this year.

Royal Gold’s royalty covering the SJ claims at Goldstrike provided revenue of US$2 million in fiscal 2005, compared with US$1.4 million a year earlier. Gold production (subject to royalty) from the claims was 531,342 oz., up from 401,913 oz. in fiscal 2004.

The Troy mine began production early this year, and provided US$749,000 of royalty revenue from the production of 522,145 oz. silver and 4.6 million lbs. copper for fiscal 2005.

Bald Mountain contributed about US$208,000 in royalty revenue in fiscal 2005, compared with US$231,000 a year earlier. The Martha mine in Argentina contributed US$163,000 in fiscal 2005, down from US$256,000 a year earlier.

Royal Gold has 21 million shares outstanding and working capital (current assets minus liabilities) of US$53.3 million.

“We have high expectations about growing the company in the years ahead,” says Chairman Stanley Dempsey. “As a royalty company, we’re fortunate not to be affected by rising cost pressures, such as labour and energy.”

In addition to its production royalties, the company has royalties on exploration properties, notably in Nevada and the western U.S. The company also holds a 1% NSR royalty in a Russian exploration project managed by a unit of Phelps Dodge (PD-N).