Royal Gold (RGLD) 2 Nov 172018 Q1 Earnings call transcript

Good day, and welcome to Royal Gold's Fiscal 2018 First Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Karli Anderson, Vice President in Investor Relations. ahead. go Please,

overview able Good Royal operator. This welcome our website. will to is this replay Thank on call risks first morning quarter presented the discussion a discussion line is of our This with be you and the their filings Securities Private Gold's detail webcast results. access fiscal for After statement discussion the in a with opening Reform being of brief of uncertainties you, live and to Counsel year financial completes the event Harbor Participating slide Vice of current President, and Heissenbuttel, Secretary. and session. in Q&A SEC. Corporate Vice and Stefan on falls of Development; are is President, Operations; Litigation Stefan CFO with release Wenger, Mark company's under the President call presentation Jensen, today Vice quarter, and and followed President, Kirchhoff, Bruce and and management Safe the A General and a the the Isto, greater today's open will the cautionary by Tony in CEO; included Treasurer; Tony our remarks, Act. on XXXX Bill press Safe open we'll provision update. Harbor

to will I call over turn Tony. Now, the

was strong Rainy year-ago X ounces gold a Good and growth morning with reduction summary the with of of cash River. consistent Slide performance. call. quarter. the with fiscal flow Volume XX,XXX the delivered on XXXX solid Karli. Thanks, We debt begin and thank joining Royal you at the equivalent I'll generation, quarter. began Gold for steady

quarter. lower We X% year to highest earnings quarterly estimates, reflected in per of that of and gold revenue due operations, top-most the was $X.XX cash which ago. down $XXX second from about $XX price in expenses principally flow history; our during from cash Our company share, million was million a generated analyst reported

Our Board during and And priority We sheet. sustainable for our a $XX growing be quarter, strengthen continue we million XX% balance yield. to the the to team. a management out and equivalent dividend to continues paid cash-flow

$XXX Over down dedicated and debt. We strong cash dividends paid debt New future which about our we of congratulate million prepare pursue October on summary declared already River of it's final three the have to Rainy XX. to we deals capital acquisition and new $XXX of balance all is opportunities. we commitments. Gold, to In have commercial at Currently, getting reduction. Today, liquidity flow no But we my last for have sheet. remark, even stronger quarters, a million production

finalizing management start were and the we Board things chance they construction travelled the and to operations property, to tour operations. with just August, in as and site meet the team and a had team to Our all

calendar the SAG as on Slide updated We all the end class. in successful mill revenue some for Mount such compared Milligan, of so Few pebble unchanged. companies guidance and during unique quartile are reiterated producing We to Centerra a to-date. I'd efforts, with properties precious X, at low-end we XXX,XXX industry. of projections. have XX%. And Viejo, diversification. their and full-year quarter. their production River Centerra crusher expected December in ounces reduced the Pueblo current of And prior downtime will and ounces. the I'd experienced and full to At gold is XXth quarters that to on-plant of Wassa make and to Star continues of minerals. in rich in are increase properties The range guidance is the that be you quarter X.XX% as precious difficult both principal the copper with all throughput metal are XXX,XXX make That that with and of our XXXX, stream they January to the Mount copper XX ounces. up, startup XX.X% of well remind one Milligan you opportunities guidance just remind benchmark property. metal elements On their we Centerra cash ourselves expect gold Rainy is strong its diversification investment their near of like production as is from their operators Royal XXX,XXX calendar of producing Prestea, worldwide of sources all have midpoint increased both - generator our our year by finally, XXX,XXX XXXX. guidance end pleased Gold. important the X, lowest just our classes, the will We progress for gold is And pre-commissioning beyond Barrick to the which firmly of remains At Royal not year. to calendar of for certainly to the Golden cost an gold flow Gold has produced And a to aided want full-year investment strong year for

and our Slide to volume additions diversification new Turning intact. remain other our sequential of sources on X, of growth

metal. pleased and for $XXX X.X% to at progress in at see startup Rainy for front-end of additions On the circuit a further at These our require XXXX, part. the of made year. in purchase return do and the investment of We're next very million Rainy we the capital gold volume of the not of three quarter. any up, Cortez invested the the expect in Pyrite River silver Crossroads that price of ramp XX% spot ore Peñasquito heels River the We production during Leach each was XX%

so mine River equates million life. be from our mine XX in silver and first will the The December X gold gold of we reserves, delivering We current to of in quarter. a ounces contributions million nearly Rainy silver expect ounces which monthly, and XX-year has

have XXXX. its over equates smelter X addition of have of we value X-year been X.X% return with most details next life Pyrite It's mined of in is deposit silver million the leaching. in dedicated We where about lumpy, XX% XXXX, last the to before of in continue the of months. the and mine. royalty. XXXX. gold project And heap XX months to forward begin several According We at for the more gold of they net And Pyrite Leach moved go forward be the million ounces but will Goldcorp, Crossroads a a straight gross production now reserves stable startup been to recovered to to project. of second a XX% Gold anticipate year, the now was XX in finally, operation, be in production Leach the originally to will royalty, has to to is It Crossroads fourth total Goldcorp in the of accelerated be production to look circuit. half scheduled Barrick volume the deposit period. ore but from X% a encountering Once reporting ore. the are million forward this calendar and ounces of stripping Crossroads Cortez expected silver has current new production ore quarter to more X.X ounces over

about details to some Turning additional have we River's Rainy Slide X, progress.

X October or To commercial XX, processing production achieved of Gold to day this very XX, rate declared per New on averaging nameplate has processing a date, Gold ore started and the XX. on From tonnes capacity. XX,XXX a successful been September New XX% October startup.

will construction return the facility. longer-term tailing startup to milestone of way completion de-risks we Schedule obtained the finalize and Amendment, was potential the evaluating few New the startup to clears than was expected. Rainy River's mine X the further project complete, life. main first Another months for the the beyond years is which of its that storage earlier Gold XX Once expect a This of

talk a New I'd of activity. about on the Gold one kilometer for land square XXX most to jurisdictions favorable like our portfolio for world's X, has moment. And Slide package, mining just

our objective is mentioned, as our property. corporate I And diversification. Rainy of Royal XXth to further is One operating Gold's River portfolio

portfolio. it's the step to a time look back take a at and good So whole

of largest in While we of market three terms are companies, market that's the and of - in the royalty capitalization. streaming terms and smallest

our never for portfolio, diversity of of terms transform was as new can and discovery as better appreciate projects Our larger Goldstrike. a in you a just Cortez than two or case the when good We mine, large because know a number is competitors.

portfolio new metals. the Our of our of is stream copper effect XXX% the precious minerals gold. Mount principally Even with at XX% revenue was Milligan, and QX

during minerals. revenue the other silver, was our gold, Specifically, up XX% and XX% and of copper, XX% metals quarter X% made

of from traditions. comes States, Australia United jurisdictions. properties came countries from traditionally was balance from The Dominican Mexico derived revenue and XX% and with our QX the also Republic. mining in favorable Ghana, Chile, Canada, Our strong revenue

to Now Stefan I'll financial the details. over call for turn the

our At as mentioned and just net a and are sheet interest is our last there compared X.X%, dividends, fees efforts EBITDA for currently the net debt We'll debt X, X.XX% Thanks, have was plus drawn paying. X.X to undrawn the XX basis call, reduction margin to Tony we XX quarters. the When Tony. points are of On strengthening the XX, the times, times in or three LIBOR X.X that Slide debt future at decrease below opportunities. points balance on reduction of debt we're of focusing snapshot outset over September at above our to EBITDA. basis business and a we to lower

DD&A I'd liquidity. and XX, tax, Moving to Slide summarized our

rate Our XX% QX. effective was tax in

original expect an to tax about in to low of rate. XX% effective year with was at GEO, DD&A the fiscal XX% of XXXX the our our we rate For continue per fiscal in actual XXXX, range line end guidance. $XXX

XXXX, months had $XXX and of We liquidity, million evaluate always, revolver opportunities. most million a continually facility XX, paid continue to to ratio. an $XXX working million cost increase to I'll maintaining opportunities. during advantageous And for This down $XXX our credit fiscal to while in million At paid plus the over it fiscal dividends last September to we of capital $XXX expanded turn be cash to quarter. under $XXX GEO in last We nine resulting QX, from down million quarter. flow our Tony, $XX $XXX capital We've payout to we acquisition first the million structure on revolver. that of debt In between per XX% expect in expect million DD&A continue XXXX. fund increased determine $XX future $XXX capital during aggressively, includes with total you. pay the we our for back as available

Well, Stefan. XX. let me Slide conclude Thanks, on

Royal our true price model. of lower XXX. years the of and risk share Over the gold Gold last sustainable and We've for the S&P is through there shareholders by staying value years gotten streaming outpacing of to and delivered appreciation, dividend, price XX growing and significant royalty XX the

possible. as during to our times much portfolio properties diversified pursue company out and Today, producing cash our have transactions. will of the strategy. royalty stewarding extending a growing we XX decades generation Royal Gold on stream the flow the and by experience In Focusing opportunistic continue portfolio developing, shares and of future as

to focus We to on to be will shareholders per due share opportunities. continue capital diligently returns and prepared for future return

you'll is are million, opportunity our missed. and filing, today. the the XXXX, and and maturity. well Haase, and independent his joined grew stand when truly has Craig Finally, our royalty at Craig's Director, decided Craig in proxy programs board business. the read if with detail as guidance, he ushered annual market governance reelection to will know always upcoming as recent you've a an of our billion unwavering for in company era that for company dearly that and joined, our a deep that in meeting. passion $X.X attention to to ensured had aligned his he our as not thinking we mining $XXX governance Craig support expert from our an for be capitalization new expertise mining has the in to law He back

our some. decade I'll the of to company. call In you, short, lines We are turn for the we open if to for his can there back grateful service over and are up perhaps, questions, dedicated

you. Thank Okay.

Instructions] now first Chiu Our [Operator from begin question-and-answer will comes Please Cosmos go CIBC. ahead. the with question session. We

And team. quarter. and on Hi, very good Tony. Stefan, a congrats Hi,

certainly today. price my You in share and being the beat estimates reflected it's

Cosmos. you, Thank

you, Thank Cosmos.

A here, few as you've me you balance questions a have very talked from Tony, strong about, sheet.

opportunities this metals, Could credit. know have comment time? other Would of precious comment? again, there? comment be - a on a on maybe but general then touched out it, base quickly maybe at on I stuff, opportunity in better You untapped What's your quickly room in metals, it point on line you just you and

Cosmos, Thanks, do to happy so.

think I time And history. very We unique it to quieter was in continue back that And a very, ago, was activity. see as XX certainly, normal. we're than company our business months but to

base metal, across things seeing streaming When we're precious understand about So in assets. on say metal opportunities I'm and base I talking both please principally that the base metal. metal board,

areas. question, seeing So million was in the to ago. size when $XXX some that But, still I is range. range, $X million months get we're business million $XXX around of of kind somewhere those probably I opportunities XX both guide the asked billion to the that not It the $XXX

We just whether And some our we we'll point still active. We the to successful at covered things. still we're price So we'll see some like can for have - be right shareholders. things.

your completed comment for in time sort X on X, of sure this XXXX you sort your current now would on nine GSR XXXX? then, Could be such are this and here, and say calendar a point Mount Milligan, say, you would portfolio with Sounds calendar ones terms maybe at QX as at that, better going But time? touched good. in Maybe X, looking you're production and at I few Or moving not guidance a X, NVR. much other Cortez, point you back behind that to in the looking are of whatnot. table months in about, that updates is to of Cortez

Cortez see as some put further pass just Isto, you our Operations, Vice swing Hills term. then a of there, focus me if it if we know, Let Mark areas, Cortez of don't to opening interest. other a the to royalty and principally remarks me use But President add. anything has producer we're he where I'll their to at bit in a at property you that allow And have is there

So that we you annual confidence there. come see know in spurts bits we tremendous amount the tonnage they'll don't if and meet And of will. have that guidance I the

large production when all wouldn't suggest sustained most have a mentioned quarter. put of going model that the to the open year major the of as you your over our equipment a I site, second I half we pipeline much of interests. in see will back be So We're pit in more next on where royalty

my would to there. you general Mark comments more have be Isto, So add any remarks do there?

No.

it in us mentioned. lot years. the production the over described has give seen variability last we've that you mean, correctly. think occurred the a reasons our And Tony of forecast several for I for variability same I exactly they that

of not So overly I to coming an quarters expect would have couple different up.

to year, past say - have a this what this would Yeah, the kind time. pinpoint than to particular slower you any in point was kind in too I sort it's was seen than in that it point guess, by it's expected had time. in of or it be year hard not you a of hard better at But of underperformance, but if followed at expected

them. to a your specific good Yeah, with available generic grade let more answer highest all answer of to are me miners going question and the mine

additional in the today site. tonnes lower in grade Pipeline and the And so where of particularly producer, that's a mean the come kind area will GAP that's South fill pipeline the areas I at off the to swing what mill by from

I got you.

So say the they'll priority reserves - pit, in is - to the come complex. it's a the out only the thing there ground eventually. can And, the thing and the the open that pipeline then as there swing higher in grade the diminishes not I

have you and metal within talked we cobalt legal asset as in kind good issues right a guess, we that, today would and cobalt terms Tony, a and any Voisey's time asset, metals One or it's to portfolio about mines base Clearly, it's well. imagine, happening of metal didn't Bay, dispute? I there, had royalty. about And, talked a of base talk is update earlier pretty okay. now, I about Yeah, on legal base the your nickel what's

litigation Yeah, we're very, the very at present. active in

a time. specific have And guided all are for court a that doing we're hearing, that's the I'll trial for we calendar going that second and have We expect little today to to next things half be the September. set present we at prepared absolutely more for - be that a year be court about date of

on preparation lot point. our is at but of So it that's very the activity phase, The advanced a this much will attorneys there a in discovery going and there. call thinking

you. have. all again. thank Great, That's I Congrats

comes RBC Walker go Stephen Thanks, question next Markets. ahead. Cosmos. with The Please from Capital

Thank you, operator. Tony, two questions.

speaking, that's broadly up get background struggling XX,XXX your rated you one, with capacity. lines and you technical a at first given the scale to experience The when Mount plants, plant through Milligan, the day a tonne large to read got

issues your got just you at with I thoughts? being your mine resolved? you put previously. high when say, can put this from look Bearing you, on, you kind about manager's bit it? for you see but see SAG mind obviously what up happening pebble crusher, the You this your and engineering level in the you when background, but Does mill you're red talk of how little not the very any and quarter cap are As flags it what there a operator, a not

just other a tonnes this necessarily the performing yet, - it's want nameplate not groundwork bit sustaining And all-in very that but a capacity, to costs for thanks I that $XXX doing. in hat a it asset. Stephen, it's my I mean, and lowest into understand the It's don't it's the there, a things that put they the I highlighting deposit the of quarter. entering take remarks mine that a there, can't with comments grade are was control things I so during there nature just kind the the But we that please we conversation. issue project actually it's the an XX,XXX just hardness not that back I of and performing at of get day is how and good volume that say we worldwide can of were Centerra quarter. plant. before during issue chance up it's in the day. successful all the question my is well-built lay any we it's the quartile better. availability to to problem are it's is don't of first, And in not expect think we those Well, any have would has run The per has We appropriately. not well. an We out fabulous prepared to plan things. put ounce a the there the cash plant, but wanted manager's of And number mine. on, good the production. in we stigma typically of the maintenance, not part to agree now, Look, - operators, site, very, a is And know an particular and look the if plant do the we'd truly material. that a regarding see

can we throughput And are on. recovery maximizing the manmade that so basis. I really I the much as NPV And focus these work very an the issues as on much on don't on do

going way difference the is can a it think, is a up to whole do rate, better get a be where all not to don't will of today. throughput there than at I I know. at But reasonable it lot XX.X%, know, lot I

- per a another day lot availability five basis. can points you If that's get tonnage tonnage of on throughput

we made on So Centerra management along will call of have that bit yesterday it's forward. put had they projects had calibrate operators they've really there, entire And in but for those since going they'll models us the some sure, the the a calendar to I'm matured a before optimistic better production see come to they've tool made both only to purposes that, significantly them, their if and changes which guidance Centerra for year. and some now, it their changes. call their be you happened And some time that has going look continue things on to in, geo-metallurgical estimating the - for the they to they of out budgeting highlighted it things and come system

in been I'd think, setting for Milligan. tick-ups some but Mount expectation as over. copper all of be ticked discussed is very recovery recovery on much, up, huge certainly has since the So I improvements in recovery And is right the the really to finally, things say, some seen much We've direction. we've going the us not taken that nice in one and gold hasn't proper of

of news mine fruits I'd So tickled harvested. a operator. there There's to of this low And be as be good around still positive I a hanging think, lot is a manager, the lot can deposit. that

Great. second may, I Thank you. question. just, if And the

beginning the here. talked of You've contribution ore mentioned several back more of XXXX then Crossroads, the year. it from larger the months sounds That's about early the half and in put to waste patch you stripping of with of

model As the building of I up first I it, and to half solutions yourselves, as would understand it through looked the for pregnant be year.

think your until day to production see and it, call on of kick-in to on do of that Crossroads through some line? really expect then, from contribution revenue quarter to so you early, your you will the one increasing back a to through from leach flow doesn't point third credit from half us give ramp the calendar, the the And Can that production how up XXXX year. sense QX you

very the part be ore material. reach for of then, residency year. the it to in be the - going year, leach have in good it everything encounter concerned of understanding early to then the but pits back time understanding, in in will the the won't a pad all start with. be end go And have of - weighted to And it of second top deposit sure. it. won't my your else you of the and bigger half coming be It's course, volumes will They're of - that You leach

you want - apologize, in he very he Mark, but with to to not of same has us back office anything if just XXXX. that, me would add let base today, touch the is in I And much half just that. I then, as I has later make So guide to the Mark. sure

no. No,

definitely it's That's half back - correct. weighted. is explanation Your

to enough, So does on? Stephen you go give that

higher just plant and either Mark recollection, And to to do your there or you from grade, homogenous fairly go goes that within your that Tony, is helpful. if the it's zones is very everything the know pads? could perch leach and That's understanding

no. will some goes be pad. the There to No, that tonnage

metal would stronger the produced If it mill, than on leach is a pad, what between split the understand heap the be what's ore you I'm volume, volume, you percentage what's in look and it to produced on in trying say. the if

I of mill. of So don't breakdown expect exactly the you volume will the what but that is, million know ounces X.X should some the be going into

Into Thank the mill, perfect. Thank That's okay. you. you. very That's helpful.

Stephen. Thanks,

ahead. Okay. Andrew next from comes go question Kaip with The Please BMO.

Hi, gentlemen.

Hey, Andrew.

just That Hi. long Crossroads? Stephen's on production ounces, long we question. Look, I a follow-up How million mine expect from that should plan? X.X is how

nine a it's think plan, some down leach takes into mine but time I as well. that Well, year

years be to mine plan. of heavy ore the will end prior two the So the

they the some through have volume up much mill, the since put And by and the going again, can restricted ramp you the confined So in as ramp as a not to leach encounter down. they - pad. mine principally volume on is need by heap

significant X.X a could really the ounces be variance get will I the to into what And a give folks better the stress be believe try want million a it rest now, we're lumpy could the that could on So that giving Andrew little used and of I - word I because guidance, bit. from year-over-year. as swing the truly to quite call and

And recently. per the new another certainly, you than of that somewhat question. the and are out with probably weaker to they just being in X,XXX above Prestea What wondering, outlook Wassa your reviewed I'm views strong then, tonnes and expected production on had And offset just particular, able operational Wassa it And very due have? Wassa? a project day, to Wassa quarter, Okay. to Prestea. Thank. dilution. get

has months very, been closely. more Mark probably boots Yeah, on a watching very ground certainly or nine this himself, than every year. not had the project He's

possible And this one. close so he as to is as

Let me pass Mark. question you, that to

we are The trends. Yeah. infrastructure achieving this if Well, in, steady positive X,XXX tonnes And the a achievable. X,XXX day reported that They've progress about is their that they're for tonnes declines, last talking that production, they've their good quarter. think, a on tonnes that very will they're day X,XXX twin they at think put day. a for very had still you I

forecasts think, for sure, very good. achieve think, it's bodes them beyond, possibly I I well their getting and of X,XXX So to all for to it's

And that, you running exactly place? then, a they dilution was into conversation about had them with what that just issues a taking were

which Well, think mining implies trends the into got part stoping, more we're of which ore issue. stopes, longitudinal I they're still the haven't the expansive is They zones. bigger,

I But might coming the as But be quarter of that So the significant pushing have about talked the make And potential drilling their - stopes, they've helps. my first year, I that have, going that on and issue that. I of like dilution. opinion, I well. mean, more be a front I improvement think, we're having as they hope amount to longitudinal are in that they to significant mistaken think switch them, to in definition they're management. happen. certainly not getting some in the I transfer in stopes, will the will think, of to improve know, I dilution which

Yeah, helps. much. very it Thanks

Andrew. Thanks,

FBR. ahead. next [Operator go with Lucas comes Please Riley Pipes Instructions] from question B. The

Hey, good morning, everybody.

Good morning, Lucas.

as to they that the Thank point more of and a color give part project. what what return to a bit on operations that led to in XXXX. wanted little cease I you. follow if open saw wondered, that the bit there you I we may So the could little at to announcement Wassa pit. January up they position Obviously, And yesterday will us

you specific me that we focused back increase of the can I is underground. margins. make And - because, those comments guide to comments successful earlier, let miner best there, - Lucas, - me most tell Golden margins we're let some throughput. good obviously, is operator, to and startup. And just general Star. been as a I to very But they've we're the the able through on they underground highest and had be the They've said have not going

talk current the You XX,XXX. and day, underground somewhere I think where the tonnage per heard around about plan, Mark

see even to they they're that, go So and well, scope well higher. above

pit. So underground the rather open ounces margin than are high

So I'm at ounces a against - to took we most that deliver to ever have came very sure we just looked and board were since and decision. up the capital what been required project. the management margin the those something at best that look team weighed close them ounces and the with this It's available,

And much this we higher to grade, the margin, volume, very lower higher so anticipating. but is were move what

it. Got

I correct? about impact, the should so, for thing an that of And as of you, volumes progression have kind

as many is we I there as at ounces one the to going they're in be be higher grades really are going time. going cut at a a mill Wassa well. be Well, mill is, time may - to over half, little not that But think, to are utilizing the and be ball only because produced,

let as acquisition just don't those are year. what how next We see about surprise the projections their for doesn't But we've been a us about in thinking have philosophy, our again our yet. So us. budgeted come project, this in thoughts to

delays, still there's side coming growth at little Wassa. from Mount And together. Cortez, Milligan cetera. question And the bit open then of River, and a course, helpful. That's that, pit other at ceasing to on of then, put the maybe et the of have it issues some all we Obviously, to forward try Rainy of a the operations been

try little kind bit to appreciate would up pieces? you equivalent about it versus moving ounces, together, given those if volumes, year-over-year So all XXXX? to think guidance what does more be gold that a - going XXXX put I all I when of

calendar we period out of in don't what with Lucas, growth our in said the specific expect any the to or - is get June the in But forward-looking guidance the on declines probably, had. - we we marketplace so we'll guidance time. timeframe. well, And would have in in XXXX, that specific Yeah, May regard we probably even company come with we've offset that We'll… that continued particular

of End March…

now good End new benefit Q&A to the The Pyrite us. accelerated That's that's big proves that bit that piece into Rainy on spoken River January is XXXX, a be got we've being tonnage. haven't of bits really look certainly end effect what to all. make the we've up lot a the the And But be an we a about in show effect little going to like if be big that we XXXX little of still, starting Wassa, be of we the of case, of all March another But positive got difference a streaming will calendar to that's quarter. lot pieces to of faster, at also you Prestea starting a see, year. rate good able business, incremental in a for those uptick that numbers X, of our us. we'll Leach at

don't we you guide have but just generalities. to - time, specifics So this for any at no

a range, provide of And terms that terms - in - then in be that? maybe should able to of growth, if would be

think very We've how conservative that. we in No. done not We've been about that.

we're at able speculate sorry, to this to So not time. be going

very all appreciate I the Well, Thank Okay. much luck. color. you and good

concludes to over remarks. for question-and-answer I'd This closing our Jensen like Tony the to session. turn any back conference

on Well, thank you great Q&A for your and the interest, all session. the questions

the in steady And a in continuing forward and quarters months and joining near Thanks very you look for to forward speaking performance to look with the future. solid us. we Now ahead.

you for today's now attending concluded. Thank conference presentation. The has

now disconnect. may You