Royal Gold (RGLD) 10 Aug 182018 Q4 Earnings call transcript

Good day, everyone, and welcome to the Royal Gold 2018 Full-Year and Fourth Quarter Earnings 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]. And please note that today’s event is being recorded. to of conference Investor like Anderson, to now President Vice Relations. would turn over the Karli I Please go ahead.

year with Private event Thanks, of release and press Liam. you of Gold’s fiscal of is this Royal an our will cautionary the discussion results. give Good morning session. risks a access and Litigation fourth welcome be included the able by quarter a live filings being will then update, company’s webcast followed quarter is uncertainties to in today’s to of in for our XXXX and and Securities discussion This overview the discussion slide replay Reform Act. call and with open Jensen, President Bill This Tony CEO; and Vice Harbor under you President Strategy; the Bill President, website. financial Mark Q&A falls we’ll Heissenbuttel, statement on Vice the call the presentation, and Harbor A in Participating SEC. our in Safe and and on today Tony detail lines Isto, and of provision Safe are the the CFO our presented Operations. current is and greater

to Tony. I will turn the call Now over

begin Record of Good flow $XXX was reflecting versus another the Slide is line comments report call, XX I’ll the for while call. gold some continued in X. XX% portfolio thank today in global the to performance for $XXX cash of last properties. with of year, was from Today, results million pleased year. fiscal strong year will price revenue Since higher morning, X% on and operating our up year, Royal joining last versus And the Record nature. of my million, prior you we’re this was fiscal year-end record be Gold. more operating

strong acquire was $X.X guiding over Peak out We we a a ounces, through industry paid revolving relatively now cash advantage billion venture of planned, is in new ORE. we results this are In slightly volume for emphasis business. – have Gold with We’ve analysis as position XXXX, our a million you We been the slightly allocating GEO that dividends, ongoing sharing growth economic credit Contango took look joint and the debt of fiscal $XX.X opportunities. that our last reduction preliminary from which June the And year. Gold record was new to waivered. forward fall. which later We flow of facility just year total enhance XXX,XXX in liquidity and quiet of XX.X% our to Our equity our to an venture we joint of to agreement our we up in paid dividends. is for now off Peak

Rosa the also in our Mara the existing is in which We of royalty, increased through X% Brazil property addition our on interest we in the royalty X.XX% property. hold acquisition interest a to

flow Despite operational ores. over loan On been the invested point flow producer five of XXXX. making cash This price, cash hitting at Our our I essentially a like note and ores Star’s an in function flow growth all our and highlight operating not complex growth identified to rate watch Golden gold yet operating in pit highly of that organic potential flat our high-quality business Gold miner delivered share cost-attractive financial portfolio Golden Mount improved was balance Rainy Royal and And properties. falt $XX in since an we charted of history. of in with of Star’s accretive. X, this oxide impressive inflection of repayment from underground XX at last ahead open we’ve period, our River. years. growth cylinders during Slide sheet schedule. a operating Star’s Golden success Milligan And and It’s is compounded impressive numbers high-cost are Royal our XX% a been annual count cash transformation to I’d to Gold has a this development’s million further refractory that

days of Slide announced New gold We those At On assets to its quarter expect quarter, turning ahead. production X, better third ounces some only properties. Rainy June recent of full of the River, for developments at of in both Gold and our operations. XX,XXX

reduced operating full-year to start-up XXX,XXX at some guidance resolving River ounces is Gold issues, XXX,XXX for has to Rainy its New XXXX. As it calendar

both by mine the tonnes which improve throughput, continue ability quarter demonstrated fourth which to quarter has the to the XX%. be points We to in increased expected and X the calendar by encouraged is to increase XX,XXX June to that day per recovery,

grams year grade pit. production in grams XX% grade open tonne study. than increase the Star Gold’s reserve year. Underground, gold and Golden that generally years more current XXXX grades quarter offset new guidance Star plan XXX,XXX the rate production gold reported per the contained from than results favorably of gold for XXX,XXX in early gold compares mine Golden years. for and due starting study, River the continued me, Wassa reflect Wassa XX,XXX by reiterated production much average its was approximately New silver tonne production still ounces gold ounces At and for to which quarter performance the Prestea, grams to excuse and Rainy is stilt At – prior was Slightly production higher Golden design to which production where fewer the a of ounces by Prestea, from less X.X Golden XX.X tonne, Star’s feasibility our feasibility same X in strong from higher Star in of point improved reiterated was over later profile tonnage. per higher Overall, ago increased in per investment. The average the offset a from the – execution. than fiscal were the a is of to the

if reported further the in a reserves XX,XXX throughout capacity Wassa to the and position, – throughput to resources $XXX believe of tonnes opinion, Holding’s our rich Mount within shareholders. Wassa which Mancha to the throughput the holdings company approved by the expand learn Star balance pleased Prestea meet with Ghana. land per surface million is mine La to potential Milligan, identify explore of Golden day their supplement mill Ashanti consecutive sheet the such period. topping the Underground in underground the which position the is further feed, one financing, opportunities, as to We also future, and XX-day will At efficient over Centerra Golden Star’s solidify for We’re to strong belt largest

availability. water they impacted is continue are remains Mount adequate, the in – experience allow in early for will XXXX, cautioned future permitting However, nearby focus process that supplies to in lower water key to normal calendar if light receiving Centerra that in it permits supply ensure them but water could experienced draw the than fourth production from delays be of Milligan temporary water quarter continue to the shutdown sources. from resulting

heap represents top annually XXXX. Goldcorp of initial later commissioning that This and to calendar that ore quarter. Leach with building accelerated are first of Royal XXX,XXX at XXX,XXX expects construction We continue ore project production Penasquito, anticipates Turning was to for mention this deposit, add circuit gold pad. circuit the our that the Crossroads. X to the steady catalysts current leach of that over the Gold. to in million At from focus X these incremental understand growth of additional life. completed examples X. will I to I’ll Pyrite has expect year Slide we some to reported placed its near-term the organic And silver the on start Cortez ounces ounces an state leach exciting on with mine gold Goldcorp should been all no growth and this and more of million

the mine on the which have pad and would advance flotation concentrator. results. Finally, on project to I’ll begun basis, pilot X the production to pilot Barrick over convert works heap at planned allow the includes into leach XXX,XXX to consolidated This decade. well flotation million on a and to the ounces our expansion reserves, Viejo, that states to concentrate. substantially. increase Bill Barrick an Pueblo reports of annual call On production roughly has pre-oxidation the resources Barrick from prefeasibility study that the continues potential next a strategy turn now pad that civil the construction leach complete been financial maintain the gold ounces has for to

Tony. Thanks,

quarter, results offset Turning Volume Mount as to revenue of compared the our and Slide price lower Andacollo the X%, was during Star. up sufficient Milligan X%. the from year gold quarter prior million while Viejo Golden $XXX.X Pueblo were and increases up fourth quarter at was to to contributions on X,

share, and tax million, adjusted rate. $XX.X Absent a up prior quarter. Reported the of was or GEO XX% non-cash expense year’s per other some up included quarter, effective higher the was items. small stock and $X.XX U.S. tax share, net higher non-cash of Our for legislation impacts the by was which items, income employee the share impacted per per $X.XX X% volume earnings $X.XX from reform compensation up these

and Our cash sheet from operations changes. volume, other price due positive working balance and to was capital up XX%

attention the debt liquidity. leverage have X.X X, increased June capital, we dividends At now strong, November million of of our to to EBITDA is quarter, dividend cash outstanding to paid per And by flow. in our our paid we as to on And full-year, draw billion In $X is XX% together in a liquidity. the X% like for $X.X represented Not I’d net only $XX a Our bottom in your final of common with the our the result conservative liquidity dividends our Slide paid share XXXX. operating times. increase expressed working as the revolver. total

quarter XXX,XXX Fourth which was silver prior X. ounces, Slide and comprised the a to inventory ounces from XX,XXX decrease quarter. Turning gold was ending of

We delivered. this Mount number effects suspension to the the ounces operations Milligan of of in the of year have started see earlier

streaming expect a quarter any equivalent As quarter XXXX having our range first our sales fourth such, fiscal the than inventory related agreements basis of to be to in on impact lower without on the gold notable XX% we levels.

timing on ultimate from quarter. we the the of the sources depend deliveries will see this in all Although

million Our is convertible the $XXX bonds, only June which of remaining indebtedness in XXXX. mature

balance As proceeds sheet we our current did on long-term from of with the outstanding as the ability bonds our have XXXX XX, credit, revolving balance not the at reclassify bonds XXXX. repay June the principal we to

tax some new turn for us Tony. will effect provide to elements to this over of to U.S. call fiscal expect some the rates quarter. of first I’ll now beginning for guidance back consider fiscal year. key depreciation took properly and at the on XXXX We after the that This us reform allow tax

XX. on Bill. Slide Thanks, conclude I’ll

S&P the Looking gold its return of to steady beat hand. to price. during provide total We delivered the We XXX, fiscal objectives business equity fiscal gold price optionality steady back indices. over a true the shareholder and with XXXX, gold and core with to Gold navigated leverage year the the solid, Royal stayed performance that our

Our or fiscal metal revenue from stated gold, XX% in was terms. XXXX XX% precious

Our us cash new revolver grow our as will quickly now that well opportunities. we for paid, positioning flow

capital precious been issue at We and when the see time, and Investing same certainly we for market flow regarding discounts. recapitalization not the miners the in being haven’t a during market something often few our cost are markets and Operators organic quiet share allocation. is the for strategy are of very before today this market, times since balance last issued abundant going Gold which This be climbing. At has effective sector. I rebuilding can This relevant. debt patient troughs private sheet. because cycle patient own equity have be to and the of disciplined in to not opportunities growth in large deployment utilizing value metal is have while and the equity access limited equity surprised that over finance a you seen Royal We’d wish XXXX. interesting we to cash

we have main As are many equity and said debt our times, competitors.

efforts their we’ll there intensify properties be develop and their recapitalize miners when to ready. or companies, in So purchase additional

$XXX gold the a dividends dividend. Royal Gold and traded in growing at ounce. over paying million per since still XXXX, We’re paid price when sustainable $XXX

end a capital Our growing the Royal has to share been share in Gold unwavering at benefit dividends. a beginning XX of of fiscal XXXX of valuable most return decades. commitment in of strive in have of over to years the of through would our company two increase We of not fiscal purchase business. XXXX, a the yielded be including thirtyfold nearly prices the A

we to will managing prepared concludes best-in forward, pursue questions. continue remarks. we’d to open the shareholder -class be total Looking Operator, our our for And return. happy company lines that

today questioner question-and-answer the begin now our be CIBC. will Please And will Instructions] ahead. we session. And you. [Operator go Cosmos Thank first with Chiu

Maybe here. thanks Hi. call. few Thanks, Tony and from Bill, questions the me a and for

First off, New concern. Gold’s are potentially caused Rainy each separately about I update on of tackle you’ve know, and for you a of go-forward the New we But position week, a a Gold? them improve all concerned Mount Milligan on about River, Centerra’s to Rainy the at can talked last investor liquidity River Maybe of update bit first. But Tony basis. production

we look, monitoring that managing actively. until bonds the due, is, Well, Bill, think, XXXX. I’m issue obviously But correct me if are first and their wrong, don’t I come

Yes.

them And plenty and – there’s so get think get up this time running. we operation of to

So little concerned. I too a it’s early think be to

we at levels. on see can’t very assets successful the Our reason perform is and focus asset no the why

security of Yes. you on And remind on stream? you have that kind what that front, Tony, could us

could Bill, on to you that? Bill that. is our speak expert

Hi, Bill.

Yes, Sure. Cosmos.

to is Gold, company. New the the unsecured relative assets obligation stream Gold. of So New parent The of an the stream is

the have make agreements, So We where a into into of our collection the document. It under account the actually is we proceeds deliveries. of that’s of it. assets share one we the and which have all underlying test leverage – – used put is to stream a paid do

so but have the leverage a similar that’s banks, we test agreement. independent bank very the of And to it’s

we So that’s where stand. on some background

in Bill, kind you does so of happen where like would it’s happen. Gold, saying have, where do something you to to rank? the going And protection But not New what case

bank bonds both facility rank the We The with the bond. unsecured. in are

chain right the at We’re now. food very of the top pursue

Gotcha.

again River terms maybe paid us has you much here. how been so for how that far? cash in then remind stream you on much And Okay. Rainy and Could returned of flow

the a flow so return. We’re that cash you very in might little I figure call. little early stall later or days the can now in either probably with come bit, up

Okay.

purchased million, for that Cosmos. $XXX We

Okay.

to million? book value today the pretty close So is $XXX still

the of at I June, payment advance believe Yes. the – gotten back. X% about we’ve end of that

Gold. question on here is, And year? the much update need you given New given the Okay. maybe impairment early test for week news still you is Again, happened any that did like the last last then that item Rainy to but there from with River it what last days, potential coming Pascua

Cosmos, about we – are what entire actually taken look there back gold plan a that XX% worked higher we few new years a throughout the at have that ago. came – of technical contained out. life report actually being look mine on than at And the we

then you portfolio. at the the at see this asset on our production a point. So, production cost the the do in on little less all bit higher on in we’re not first few But concerned years and carrying later

for down, trigger test? Okay. impairment is rules, Is and And or if a potential it – leading needing that – is accounting the as come trigger resources well? what’s to an or what’s other some reserve under there or points

tests of are for a impairment. number there Well,

that your from just do and you the don’t asset, you with what did a I cash flow that undiscounted of key below the or quarters think ago. carrying to you that really to have expect value, is analysis at one if of a we discounted look drivers the couple revenue that’s as Pascua get

Okay.

than different IFRS. It’s

to We cumulative the look cash then then versus rate. our a below are the able at the take look carrying if flow discounted we that’s cost. carrying at cost, And

Okay.

technical River out report days that from the two ago. perspective that guess, you’ve at Rainy I looked So came

terms you’re looked value you of in with our place? flow have at cash point book in in this You’ve comfortable your very projections time, that at

We are.

six or you site thought of was could Bill, to I situation how the perspective this? Milligan. The that that happen. to here your bit Okay. But ago, a to have issue little are myself Maybe been here, was what’s there on water Tony here? you have five, close sort switching Have never going years recently? gears Mount on And

Isto knows Mark him, over Ops, and because just this. close he is And think, very he on to Well, our I VP question is there. I’ll going very, to that turn what’s of

Mark. Thanks. Hi

It’s general regular in about as operation about But – far happening a been we been specifically what’s to the and update a we’ve year water yes, situation. site. probably the It’s as with since get hi.

feel got situation and the the out, I understand yes, details sources message say near-term in to track put using would the understand comfortable we they’ve, are fact, is the it. that, fully key permitting have We that comfortable. So last we’ve enough feel that Centerra the winter. also And in issue water on has that used or

near-term straightforward in a steady with it’s very to we a the they continue have state So think that operation. to plan

stream? of Milligan And us of security, remind you Mount could again, the security on you kind the on have what question

We are secured.

in can’t us. just sits We And I are the remember that of subordinated. basket front

I us. you, get that something or that We million for can Cosmos. $XXX of like front think, sits it’s in sure

Okay.

Tony, on So you’re – on you’re secured asset? the Milligan, Mount

We are.

Okay.

situation not similar to Rainy a it’s River? So

No.

Okay, I got it.

That’s correct.

terms in you you paid how much for of could you’ve here book then value how And far? for Yes. much Mount Milligan, so received and remind us

the investment Well, was $XXX.X total million.

Yes.

trying return to asset. the the of on just think I’m

I want think to I XX. over XX%. But confirm that it’s

Yes.

for But I that want to you. confirm number

Okay.

able be right? financials, you’d in that But our to see

You’d see value. book the net

see necessarily returns. wouldn’t the You

book Net that returns. value

again, no about concerns impairment at And Mount Okay. Milligan?

No.

Maybe how does previously Royal from Board Tony, they’ve is on for Deeps, injection on Gold? call potential so you anymore. to that Star Wassa, they benefit Golden do a like, that’s Mancha. at Golden it positive? say much going Wassa received would on the not large of half-year you’re they sounds But note what – a that fairly of Star, And look expansion to Certainly, Directors, if cash close La the a

Absolutely.

view this suite behalf assets. speak But and Royal encourage directly as their Star talk Golden a to Gold’s just on specifically to me of good I let very you So we here comments. for

this belt. just associated to amazing the with it in endowment the pleased be and area Ashanti of it’s very We’re

continues other plunge it B grades some to ramp continues And shaft about intersect in ramp to have to some place. throughput other Shoot what or with there. perhaps plunged throughput, And and a to – probably I but the underground access than the class be so enough a would their deep what pretty think their now. It’s and Mark, I exciting about you’ll get think help [ph] me is, excited out right is that

a doing day. X,XXX tonnes They’re

X,XXX. X,XXX. The for mill has capacity

And large production learning still in ores they’re there said is exciting mill how I as to But either production, with see be it’s very [indiscernible] plenty don’t to there’s any do the and be high-grade remarks, a ramping another isn’t shaft could the successful be And ramp already even some of additional that that very, could that a to but my that supplement could prepared increase Alimak very the extent could is raises. surface with it way very, the operation. So asset. there And to up you or things larger. they it producer, find going still but for underground, available. that capacity supplement reason we why at Prestea

speaking there’s resources throughout be been other continues So – assets. the targets all I beyond to property mean, that’s has of just and their kinds there and that But about two then all thee package.

Yes.

I other and they’ve deposits. think, Brown the of about satellites like Father talked some

pit answer property position. other now. And have that’s Brown by just our successful Right. question, the But Royal assets interest those their for so to they’re a to years with underground and good be an entire do open for a was few operation way, we your scenario, of Father on them liquidity Gold. to really back the at all looking combined able things, very, and very

my and Bill for Gotcha. Great. Tony and team, and answering Karli Thanks, questions. thanks

appreciate the I questions. Thanks, Cosmos.

will Pipes Instructions] ahead. FBR. B. questioner Lucas our today [Operator Riley go be with Please And next

everybody. morning, afternoon, Good

Lucas. Hi,

fundamentals that? even you that? some private. some to I in in that? in would Tony Royal how looking some impacted play Could are on play financing? elaborate of Gold go comments companies mentioned Can market a Gold And I and are a intrigued was prepared the Royal about have role way you your think, miners at that team, by looking remarks your role

high-quality say be look companies awful Yes, is, there and looking some are see and would and I But of through speak are portfolio you when basket. capture and trading your What not surprised at said own for times this companies might I that don’t tempting ones good if, that. internally. want asset it’s can are at I to value there that very at is companies level. be to X.X that you’re And that kind which in there some NAV, when trading

to is that I capital were to companies wouldn’t happen. extent grow. access kinds So continue surprised if And the those to be of to want limited. Their to other

unique so really scenarios very this malleable. want kind of into have We this we’ve of what scenario, we’ve is that, and we is balance to very relevant. and we’re period kind product where we market can where that I our scenarios And lot moved here restructuring – be sheets can financing of a into of fit think emphasize out different time, – another moved of unique I potentially

are those nature the So of remarks. my prepared

Got seeing couple over you the change past market increased it. given the Are the of inbounds in months?

inbounds to then we strategies. look, wait don’t things on and for Well, the really here. very would consider actually strategies creatively We about execute happen. We think

So, investment some amount acting traditional inbounds. the yes, of banker like of we’ve creative things, a seen reasonable more an we’re more But

Interesting.

Okay. GAAP? under that? we us from how participant. that can IFRS? And why kind under U.S. prior remind part of so got be Maybe on many of from reporting questions reporting impairments quite would of just How Maybe you’re number that’s on companies and how you then a questions the different –

or want me me want you Okay. to it? to you Bill, that, take take Do

we impairment So, cumulative cash what determine it have assets theory look, discounted is Under then the you flow discounted cash be. GAAP, at cash to than the when carrying And look cumulative use cash there – and cost. compare flow to might if we carrying flow think, the I the those comparing carrying is IFRS, look your at to the to the have cost, flow of then less if cost. to

then ability that, road you under I further And write can up that would with be guess, asset write understand difference. GAAP. under and we just to – other nature don’t write other going a the have I the down on that’s down IFRS, later it that the the an then, up of later difference So up. write back And bit the back

so that by of think, you’re since given And Rainy to increased you this even gold, discounting a rate amount coming cash no asset higher unchanged just of of cumulative those cumulative changed? not if flows the apply example, stream is flow hence any this even River, cash impairment And before, that I we amount than if have mentioned timing even for from or XX%.

I’m marks-to-market looking their We collaboration. our New a to interest to this believe and mentioned, $XXX million. I us they Karli for how But basis, that at as Gold quarterly paid for think, on their I accounting. they million liability mark-to-market about it’s asset, treat I $XXX

I’m as about we Rainy said I on earlier, have cost our no So carrying this at concerns – River. time,

it. Got

I Okay, of and that’s appreciate helpful. very that luck. best

Thank Lucas. you,

for conclude remarks. any And over and like back this CEO our to will question-and-answer Jensen, session. to closing Tony would the I President conference turn

And fiscal forward at Thank Peak we join interesting to updating to and operator. those Gold first all available. today Well, quarter support forward really appreciate talk Royal thank the and news become a look events of And have others, and your of some we to we’ll for continued you. you very as look hopefully about appreciate we and taking And us time exciting you, things very to you Gold. Royal Gold. interest

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

your disconnect lines. now may You