The Gold Report - Thu, Nov 7, 2017

Precious Metals Company Shows 'A Good Start' to New Fiscal Year

BMO Capital Markets reported the Q1/18 financial results of this streaming and royalty corporation.

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A Nov. 1 BMO Capital Markets research report indicated that in Q1 FY18, Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) announced "headline earnings per share (EPS) of $0.44 on gold equivalent deliveries of 88 thousand ounces," wrote analyst Andrew Kaip. "After adjusting for stock-based compensation, adjusted EPS of $0.48 came in above our estimate for $0.37 and consensus of $0.38."

Kaip explained the reason for Royal Gold surpassing expectations: "The beat is related to lower depreciation, taxes, and general and administrative expenses offset by lower revenue on royalty sales."

Total revenue in Q1 FY18 was $112.5 million, $78.8 million from streams and $33.7 million from royalties. Operating and free cash flow was "in line with our estimate," noted Kaip. It was $71.6 million whereas BMO's estimate was $72 million.

Costs of exploration at the company's Peak Gold joint venture in Alaska were "slightly below our estimate" at $3.2 million versus $3.5 million, Kaip wrote.

Royal Gold had $88.4 million in cash and equivalents at the end of the quarter, indicated Kaip. It had "$800M available on its $1B revolving credit facility after repaying $50M during the quarter."

In the report, following review of the company's performance during the quarter, Kaip provided a brief update. Royal Gold recently added a stream to its portfolio, this one from New Gold's Rainy River, which declared commercial production in October. Royal Gold's interest from gold from the project is 6.5%, dropping to 3.25% after 230 Koz are achieved. For silver, it's 60%, decreasing to 30% after 3.1 Moz are reached.

BMO Capital has an Outperform rating and $105 per share target price on Royal Gold, whose stock is currently trading at around $88.62 per share.

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