Royal Gold sees higher earnings

Thanks to higher gold prices and greater production from the Pipeline complex in central Nevada, Royal Gold (RGLD-Q) is enjoying higher earnings.

The company returned to profitability in July, after converting its 20% net profits interest (NPI) at the South Pipeline deposit into a sliding-scale gross smelter royalty.

The Pipeline complex is operated by the Cortez joint venture, consisting of Placer Dome (PDG-N), which holds a 60% interest, and Rio Tinto (RTP-N), through its Kennecott subsidiary, with 40%.

In the first quarter of fiscal 2000 (ended Sept. 30), Pipeline produced 606,580 oz. gold, yielding royalty income of US$1.6 million. Combined with other royalty revenue, including US$130,000 from Placer’s Bald Mountain mine in Nevada, total revenue for the quarter topped US$2 million, compared with US$386,106 a year ago.

Earnings for the recent quarter amounted to US$855,296 (or 5 cents per share), compared with a year-ago loss of US$1.3 million (7 cents per share).

Income in the second quarter is expected to reach US$2.2 million, assuming a steady gold price of US$300 per oz.

In 2000, Cortez expects to produce 1.3 million oz. at a cash operating cost of US$50 per oz.

The company plans to spend US$1.9 million on exploration in fiscal 2000, compared with US$3.2 million last year. Most of these dollars are earmarked for the Milos project in Greece, which has a resource of 20.1 million tonnes grading 1.4 grams gold per tonne, or nearly 1 million oz.

Meanwhile, Royal has sold to Anglogold (AU-N) its interest in the Buckhorn South project in central Nevada. In return, Royal will receive a 14% net profits interest. It will also receive a 15% net profits interest on 24 claims and a 2% net smelter royalty on 381 claims at the Carico Lake property.