Royal Gold flush with cash

Vancouver — Thanks to sliding-scale royalties tied to the price of bullion, Royal Gold (RGL-T) nearly doubled earnings in the first quarter of its fiscal year 2005, compared with the first quarter of 2004.

The royalty company, which focuses on gold projects in Nevada, has working capital of US$51.8 million and is expanding its royalty portfolio. Recently the company financed Revett Silver Co.‘s Troy mine in Montana for a royalty interest.

Royal Gold earned US$2.5 million (or 12 per share) in the recent 3-month period, compared with US$1.3 million (6 per share) a year earlier. Revenue increased to US$5.9 million from US$4.2 million.

The 43% rise in revenue reflects higher gold prices. The company’s sliding-scale royalty rate rose to 4%, from 3.4%, at the Pipeline mining complex in Nevada, as the price of gold averaged US$401 per oz., compared with US$364 a year earlier.

Royal Gold owns two sliding-scale gross smelter return royalties at the Pipeline complex, which is jointly owned by Placer Dome (PDG-T) and Rio Tinto (RTP-N), as well as a fixed-rate gross smelter return royalty (GSR) and a net value return royalty.

In the first quarter, Pipeline produced 249,469 oz. gold and royalty revenue of US$5 million, compared with 219,901 oz. and US$3.5 million for the corresponding quarter last year.

The company holds a 1.8% net smelter return (NSR) at the Leeville underground mine project, in Eureka Cty., currently being developed by Newmont Mining (NEM-N) for startup by late 2005.

The Carlin East deposit on the Leeville property is also 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 first quarter of fiscal 2004.

Royal Gold reported a 15% increase in royalty revenues as a result of higher gold prices from Barrick Gold‘s (ABX-T) SJ claims at the Goldstrike mine, also in Eureka Cty.

The company also holds NSR royalties at Placer Dome’s Bald Mountain mine in White Pine Cty. 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. Troy is operated by Revett Silver, whish plans to start production there late this year and estimates 3 million oz. silver and 25 million lbs. copper will be produced in 2005.