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Royal Gold Inc. Reports Operating Results (10-Q)

February 05, 2010 | About:
10qk

10qk

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Royal Gold Inc. (RGLD) filed Quarterly Report for the period ended 2009-12-31.

Royal Gold Inc. has a market cap of $1.72 billion; its shares were traded at around $41.87 with a P/E ratio of 80.5 and P/S ratio of 23.3. The dividend yield of Royal Gold Inc. stocks is 0.8%. Royal Gold Inc. had an annual average earning growth of 21.2% over the past 5 years.RGLD is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, NWQ Managers of NWQ Investment Management Co, Murray Stahl of Horizon Asset Management, Chuck Royce of ROYCE & ASSOCIATES.

Highlight of Business Operations:

Our financial results are primarily tied to the prices of gold, silver, copper and other metals, as well as production from our producing stage royalty interests. Royalty revenue for the quarter ended December 31, 2009 was $34.7 million (which includes $0.6 million of non-controlling interest), compared to $14.6 million (which includes $0.3 million of non-controlling interest) for the quarter ended December 31, 2008. For the quarters ended December 31, 2009 and 2008, the price of gold averaged $1,100 and $795 per ounce, respectively, the price of silver averaged $17.57 and $10.21 per ounce, respectively, and the price of copper averaged $3.01 and $1.79 per pound, respectively. For the three months ended December 31, 2009, Royal Gold derived 84% of its total royalty revenue from gold royalties, 2% of its total royalty revenue from silver royalties, 9% of its total royalty revenue from copper royalties and 5% of its total royalty revenue from other metal royalties, compared to 95% of its total royalty revenue from gold royalties, 4% of its total royalty revenue from silver royalties, 0% of its total royalty revenue from copper royalties, and 1% of its total royalty revenue from other metal royalties for the three months ended December 31, 2008.

At the election of each IRC shareholder, each common share of IRC will be exchanged for either C$7.45 in cash (based on Royal Golds share price and the currency exchange rate on December 14, 2009) or 0.1385 common shares of Royal Gold or a combination thereof, subject to a maximum of $350 million in cash and a maximum of 7.75 million common shares of Royal Gold to be issued to IRC shareholders. If IRC shareholders elect to receive more than approximately $314 million in cash, the number of Royal Gold common shares issued will be reduced on a pro-rated basis until such cash election reaches a maximum of $350 million. Assuming the maximum share election, this offer consists of 0.0771 shares of Royal Gold plus $3.12 in cash for each fully diluted share of IRC, implying 56% stock consideration. Assuming the maximum cash election, this offer consists of 0.0700 shares of Royal Gold plus $3.48 in cash for each fully diluted share of IRC, implying 51% stock consideration.

The closing of the IRC Transaction is not subject to due diligence, Royal Gold shareholder approval or financing contingencies. The cash required for the acquisition will be sourced from available and unrestricted cash, together with committed credit facilities totaling $225 million, including the HSBC Term Loan as discussed below within this MD&A under Liquidity and Capital Resources. The closing of the IRC Transaction is subject to, among other things, receipt of court approval and the affirmative vote of at least 66 2/3 percent of the votes cast by IRC shareholders and option holders at a special meeting of the IRC shareholders. In December 2009, Franco-Nevada Corporation, of Toronto, Canada (Franco-Nevada), made an unsolicited offer of C$6.75 per share in cash for any and all of IRCs outstanding common shares. Franco-Nevada amended its offer on January 19, 2010, by extending the expiration date of the offer to February 19, 2010. In light of this outstanding offer, and depending upon satisfaction of the closing conditions for the IRC Transaction, we can provide no assurance that the IRC Transaction will close.

Pursuant to the terms of the Agreement, IRC is subject to customary non-solicitation covenants. In the event a superior proposal is made, Royal Gold has the right to match such proposal, and in the event IRCs board of directors changes its recommendation or terminates the Agreement in certain circumstances, IRC has agreed to pay Royal Gold a termination fee of $32 million. In certain other circumstances where the IRC Transaction is not completed, IRC is obligated to reimburse Royal Golds expenses up to a maximum of $5 million.

Proven and probable reserves, as estimated by the operator as of December 31, 2008, for the sulfide portion are 393.5 million tonnes (433.7 million tons) with a grade of 0.39% copper and 0.13 g/t (0.004 ozs/ton) gold. This equates to 1.6 million contained ounces of gold. Reserves were estimated using a copper price of $1.50 per pound and a gold price of $480 per ounce. Gold will be produced as a by-product of copper production, with a gold recovery rate estimated by the operator to be approximately 61%.

In addition, Royal Gold obtained as collateral a pledge of shares of certain equity investments in public companies held by High River. The market value of the pledged shares is approximately $59.5 million as of December 31, 2009. The Companys carrying value of its royalty interests at Taparko was approximately $15.3 million as of December 31, 2009. The pledge of High Rivers equity investments will remain in effect until the satisfaction of certain requirements as provided in the construction contract between Somita and its construction contractor, so long as there are no outstanding claims by the Company against the pledged securities.

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