Royal Gold flush with cash from royalties

Vancouver – Thanks to a sliding scale royalty tied to a rising gold price, Royal Gold nearly doubled first quarter earnings for its fiscal year 2005 from the same period a year ago. The company, which focuses on Nevadan gold project royalties, now has working capital of some US$51.8 million, and is expanding its royalty portfolio, having recently financed Revett Silver Company’s Troy mine in Montana for a royalty interest.

The Denver-based precious metals royalties company reported net income of US$2.5 million or 12 a share compared with US$1.3 million or 6 a share for the same period last year. Revenues of US$5.9 million for the quarter were up 40% over the same period in 2004 when revenues were US$4.2 million.

The 43% rise in revenues was largely due to higher gold prices after which the company’s sliding-scale royalty rate rose to 4%, from 3.4% at the Pipeline mining complex as the price of gold averaged US$401 an oz. compared with US$364 an oz. a year ago.

Royal Gold owns two sliding-scale gross smelter returns at Pipeline in Lander County, Nevada, owned by the Cortez JV between Placer Dome (PDG-T)and Rio Tinto (RTP-N), as well as a fixed rate gross smelter return royalty and a net value return royalty.

During the company’s first quarter, the Pipeline mining complex produced 249,469 oz. gold in royalty revenue of US$5 million, compared with 219,901 oz. and US$3.5 million for the same quarter last year.

The company holds a 1.8% net smelter return at the Leeville underground mine project, in Eureka County, currently being developed by Newmont Mining (NEM-P) for start-up by late 2005. The Carlin East deposit on the Leeville property is currently generating revenues for Royal Gold. A 38% increase in revenue came with production of 33,406 oz. for US$315,296 compared with 27,275 oz. and revenue of US$171,846 for the same quarter last year.

Royal Gold reported a 15% increase in royalty revenues due to higher gold prices from Barrick Gold’s SJ claims at the Goldstrike mine in Eureka County.

The company also holds NSR royalties at Placer Dome’s Bald Mountain mine in White Pine County and at Coeur d’Alene Mines’ (CDE-N) Martha silver mine in Argentina.

Royal Gold recently struck a deal for a 7% GSR royalty that covers the Troy underground silver mine in Montana which is operated by Revett Silver. Revett is aiming to begin production there late this year and estimates some 3 million oz. of silver and 25 million lbs. copper of production in 2005.