Royal Gold sets revenue record

Vancouver — After raking in royalty revenue of US$7.6 million in the latest fiscal quarter, Royal Gold (RGL-T, RGLD-Q) reported its best quarterly performance to date, while boosting its year-end working capital surplus to a healthy US$85.3 million.

The Denver, Colo.-based company posted net income of US$2.9 million, or US12 per share, for the fiscal second quarter of 2006, ended Dec. 31. This represents a modest improvement from the comparable period a year earlier, when net income of US$2.6 million on revenue of US$6 million was reported.

The company’s core assets are two sliding-scale gross smelter return royalties and a fixed-rate gross smelter return royalty on the Pipeline mining complex in Nevada’s Lander Cty. The complex, operated by Placer Dome (PDG-T, PDG-N), produced 196,616 oz. gold in the latest quarter, which generated royalty revenue of US$5.5 million to Royal Gold’s coffers.

More gold (218,682 oz.) was produced in the fiscal second quarter of 2005, but royalty revenue was lower, at US$5.5 million. The 8% increase in revenue was attributed to higher gold prices, which triggered an increase to 5% from 4.5% in the royalty rate during the latest quarter.

Contributions from the company’s remaining royalties are modest, with the exception of a 0.9% net-smelter royalty (NSR) over the SJ claims, part of the Goldstrike mine complex operated by Barrick Gold (ABX-T, ABX-N) in Nevada. The SJ claims produced 272,138 oz. gold in the latest fiscal quarter, which provided royalty revenue of US$1.2 million to Royal Gold, compared with US$617,605 on production of 158,741 oz. gold a year earlier.

Royal Gold is continuing to expand its royalty portfolio, which is no easy task as good royalties are even more difficult to find than good gold deposits. The company has an agreement to acquire two initial and two subsequent royalties at the Taparko-Bouroum project, an open-pit gold mine under construction in West Africa. Operator High River Gold Mines (HRG-T, HRIVF-O) hopes to begin production by year-end.

Royal Gold also has a strategic alliance with Taranis Resources (TRO-V, TNREF), which is exploring a number of advanced projects in Finland. The company may earn direct interests in the gold projects by contributing to exploration spending.