Market Overview

Royal Gold Reports Second Quarter 2019 Results

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Royal Gold, Inc. (NASDAQ:RGLD) (together with its subsidiaries,
"Royal Gold" or the "Company," "we" or "our") reports net income of
$23.6 million, or $0.36 per share, on revenue of $97.6 million in its
fiscal second quarter ended December 31, 2018 ("second quarter"). Second
quarter reported earnings included an income tax benefit resulting from
the Company's updated analysis of the tax impacts attributable to H.R.
1, originally known as the Tax Cuts and Jobs Act (the "Act"), which was
partially offset by a decrease in the fair value of equity securities.

Second Quarter Key Metrics Compared to Prior Year Quarter:

  • Revenue of $97.6 million, a decrease of 14.6%
  • Operating cash flow of $58.8 million, a decrease of 22.2%
  • Volume of 79,600 GEOs,1 a decrease of 11.3%
  • Dividends paid of $16.4 million, an increase of 4.3%
  • Average price of $1,226 per gold ounce, a decrease of 3.8%

______________________

1   Gold Equivalent Ounces ("GEOs") are calculated as revenue divided by
the average gold price for the same period. GEOs net of stream
payments were 64,800 in the second quarter, compared to 74,100 in
the prior second quarter.
 

"Our second quarter consolidated operating performance was consistent
with our guidance," commented Tony Jensen, President and CEO. "We were
pleased to see several positive developments in our portfolio during the
quarter, including good operating performance at Mount Milligan despite
water supply challenges, continued improvement in production levels at
Rainy River, and the start of commercial production at the Pyrite Leach
Project at Peñasquito. As we look forward in calendar 2019, we expect to
see continued improvement at Rainy River and further positive news with
respect to resolving water supply issues at Mount Milligan."

"We also took our first step toward realizing value for our equity
interest in the Peak Gold Project ("Peak Gold") near Tok, Alaska," Mr.
Jensen continued. "We believe that Peak Gold is a very attractive
opportunity for an operating company that can bring additional talent to
advance the project towards production. Royal Gold will remain committed
to the project over the long term through our existing royalty
interests, and our considerations for any potential transfer of
ownership will include a commitment to advance the project as a priority
while respecting best practices for responsible development."

Recent Developments

Mount Milligan

At the Mount Milligan mine, Centerra Gold Inc. ("Centerra") reported
that there were sufficient water resources in the fourth calendar
quarter of 2018 to enable the mill facility to run at a higher than
anticipated throughput rate, allowing the operation to achieve the upper
end of gold and copper production guidance for the 2018 calendar year.
Calendar year 2018 gold production was 194,993 ounces compared to the
guidance range of 175,000 to 195,000 ounces, and copper production was
47.1 million pounds compared to the guidance range of 40 million to 47
million pounds. During the fourth quarter of calendar 2018, production
from Mount Milligan was 60,271 ounces of gold and 11.8 million pounds of
copper.

For calendar year 2019, Centerra expects mill throughput at Mount
Milligan to be reduced during the remainder of the winter season to
properly manage the water balance until the water flow increases in the
spring. Once the spring melt has commenced, typically in April, Centerra
expects mill throughput levels to return to full capacity. In the second
half of calendar 2019, Centerra expects to achieve an average throughput
of approximately 55,000 tonnes per calendar day. For the full calendar
year, Centerra expects Mount Milligan's payable gold production to be in
the range of 155,000 to 175,000 ounces, and payable copper production to
be in the range of 65 to 75 million pounds.

With respect to water sourcing and permitting activities at Mount
Milligan, Centerra reports that permit applications are in process to
allow the mine to draw additional flow during the spring melt period for
the next three years from each of Philip Lake, Rainbow Creek and Meadows
Creek. This additional water would be stored in the tailings storage
facility for use during the remainder of the year, which Centerra
expects to be sufficient to allow operations to continue at a rate of
55,000 tonnes per calendar day. Centerra also reports that it is
completing an inventory of regional water sources to identify other
potential long-term water sources that could provide additional water
through to the end of the mine life.

Rainy River

Improved operating performance at the Rainy River mine, owned and
operated by New Gold Inc. ("New Gold"), continued during the fourth
calendar quarter of 2018. Quarterly gold production was 77,202 ounces, a
39% increase over the prior quarter due mainly to higher grade, recovery
and throughput rate. Mill processing reached a run rate of 25,835 tonnes
per operating day, the first full quarter in which the mill averaged a
daily run rate above the target 24,000 tonnes per day, and the average
throughput was 20,558 tonnes per calendar day at an 80% availability.
New Gold expects to replace the ball mill trunnion during the first
calendar quarter of 2019 and that recoveries will continue to improve
throughout the calendar year.

New Gold also announced that the underground development plan at Rainy
River was deferred to 2020, and that it will review alternative
underground mining scenarios during calendar 2019 with the overall
objective of reducing capital requirements and improving the return on
investment for the underground portion of the mine.

Adviser Retained to Assist with Peak Gold Project

Royal Gold retained Scotia Capital Inc. ("Scotia") to assist in
identifying parties interested in advancing Peak Gold. We own a 40%
indirect equity interest in Peak Gold, held through our wholly owned
subsidiary Royal Alaska, LLC, and 809,744 common shares (or
approximately 12.7%) of Contango ORE, Inc. ("CORE"), our joint venture
partner. In addition to the ownership interests in Peak Gold and CORE
equity, the Company also has the right to sell up to 20% of CORE's
aggregate membership interest in the joint venture (for a total sale of
up to 60% of the joint venture membership interest) and holds two net
smelter return royalties on the Peak Gold land package.

Second Quarter 2019 Overview

Second quarter revenue was $97.6 million compared to $114.3 million in
the prior year quarter, with stream revenue totaling $67.7 million and
royalty revenue totaling $29.9 million. The decrease in total revenue
for the second quarter compared to the prior year quarter was due to
lower average gold, silver and copper prices, as well as lower overall
sales and production. Lower gold stream sales from Andacollo and Pueblo
Viejo were partially offset by higher gold and copper sales from Mount
Milligan and initial contributions from Rainy River, while a decrease in
royalty revenue was due to lower production at Peñasquito and Cortez.

Second quarter cost of sales was approximately $18.2 million, compared
to $19.9 million in the prior year quarter. The decrease was primarily
due to lower gold sales from Andacollo. Cost of sales is specific to the
Company's stream agreements and is the result of the purchase of gold,
silver and copper for a cash payment.

General and administrative expenses decreased to $7.4 million in the
second quarter from $9.6 million during the prior year quarter. The
decrease during the current period was primarily due to a decrease in
legal costs related to the settlement of the Voisey's Bay royalty
calculation dispute during the first quarter of fiscal 2019.

Depreciation, depletion and amortization expense decreased to $38.8
million in the second quarter from $42.0 million in the prior year
quarter. The decrease was primarily attributable to a decrease in gold
sales at Andacollo and Pueblo Viejo, partially offset by an increase in
metal sales at Mount Milligan and Rainy River.

On July 1, 2018, the Company adopted new Accounting Standards Update
guidance which impacts how changes in fair value of equity securities
are recognized at each reporting period. As a result, for the three
months ended December 31, 2018, the Company recognized a loss of $3.6
million on changes in fair value of equity securities related to the
holdings in CORE and Rubicon Minerals Corporation. The new guidance
could increase earnings volatility in the future.

The Company recognized a second quarter income tax benefit of
$2.1 million, compared to an expense of $48.4 million during the prior
year quarter. The effective tax rate for the second quarter was (10.3)%
compared to 148.5% for the prior year quarter. The lower than expected
effective tax rate is due to approximately $6.0 million of discrete tax
items recorded in the quarter attributable to true-ups made after
completing the Company's analysis of the Act and consideration of
recently-issued U.S. Treasury and IRS guidance. The Company does not
anticipate future material changes due to evolving guidance; however,
many aspects of the law remain unclear and further regulatory guidance
could impact the Company's effective tax rate.

At December 31, 2018, the Company had current assets of $203.7 million
compared to current liabilities of $37.2 million, resulting in working
capital of $166.5 million. This compares to current assets of
$125.8 million and current liabilities of $51.4 million at June
30, 2018, resulting in working capital of $74.4 million.

During the second quarter, liquidity needs were met from $79.4 million
in net revenue and available cash resources. As of December 31, 2018,
the Company had no amounts outstanding and the full $1 billion available
under its revolving credit facility. Working capital, combined with the
Company's undrawn revolving credit facility, resulted in approximately
$1.2 billion of total liquidity at December 31, 2018.

Property Highlights

A summary of second quarter and historical production reported by
operators of the Company's stream and royalty properties can be found on
Tables 1 and 2. Calendar year 2018 operator production estimates for
certain properties in which the Company has interests compared to actual
production at those properties through December 31, 2018 can be found on
Table 3. Results of the streaming business for the second quarter,
compared to the prior year quarter, can be found on Table 4. Highlights
at certain of the Company's principal producing and development
properties during the second quarter, compared to the prior year
quarter, are detailed in the Quarterly Report on Form 10-Q.

CORPORATE PROFILE

Royal Gold is a precious metals stream and royalty company engaged in
the acquisition and management of precious metal streams, royalties and
similar production-based interests. As of December 31, 2018, the Company
owns interests on 191 properties on five continents, including interests
on 41 producing mines and 17 development stage projects. Royal Gold is
publicly traded on the Nasdaq Global Select Market under the symbol
"RGLD." The Company's website is located at www.royalgold.com.

Note: Management's conference call reviewing the second quarter
results will be held on Thursday, February 7, 2019, at noon Eastern Time
(10:00 a.m. Mountain Time). The call will be webcast and archived on the
Company's website for a limited time.

Second Quarter Earnings Call Information:

 
Dial-In Numbers:     855-209-8260 (U.S.); toll free
855-669-9657 (Canada); toll free
412-542-4106 (International)
Conference Title: Royal Gold
Webcast URL:

www.royalgold.com
under Investors, Events & Presentations

 

Cautionary "Safe Harbor" Statement Under the Private Securities
Litigation Reform Act of 1995:
With the exception of historical
matters, the matters discussed in this press release are forward-looking
statements that involve risks and uncertainties that could cause actual
results to differ materially from projections or estimates contained
herein. Such forward-looking statements include statements about solid
quarterly results; future production contributions from Peñasquito,
Mount Milligan and Rainy River; expectations for continued improvement
at Rainy River and positive water supply developments at Mount Milligan;
the value to be realized from the Company's interests in Peak Gold and
CORE common shares following a strategic review process; the belief that
Peak Gold is an attractive opportunity for an operating company;
calendar year 2019 mill throughput, water availability and total payable
gold and copper production from Mount Milligan; the impact, if any, on
Mount Milligan of Centerra's water permit applications, whether or not
granted, and its regional water source inventory; New Gold's
expectations for improved mill recoveries and the impact of its review
of underground mining scenarios; changes in taxes and tax rates
resulting from future tax legislation and regulatory guidance; and
operators' estimated and actual production for calendar year 2018, 2019
and future years, and their estimates of reserves and mineralized
material. Net gold and metal reserves attributable to Royal Gold's
stream, royalty and other interests are subject to certain assumptions
and, like reserves, do not reflect actual ounces that will be produced.
Like any stream, royalty or similar interest on a non-producing or
not-yet-in-development project, our interests on development projects
are subject to certain risks, such as the ability of the operators to
bring the projects into production and operate in accordance with their
feasibility studies and mine plans, and the ability of Royal Gold to
make accurate assumptions regarding valuation and timing and amount of
payments. In addition, many of our interests are subject to risks
associated with conducting business in a foreign country, including
application of foreign laws to contract and other disputes, foreign
environmental laws and enforcement and uncertain political and economic
environments. Factors that could cause actual results to differ
materially from projections include, among others, precious metals,
copper and nickel prices; performance of and production at the Company's
stream and royalty properties; the ability of operators to finance
project construction to completion and bring projects into production as
expected, including development stage mining properties, mine and mill
expansion projects and other development and construction projects;
operators' delays in securing or inability to secure or maintain
necessary governmental permits; decisions and activities of the
operators of the Company's stream and royalty properties; unanticipated
grade, environmental, geological, seismic, metallurgical, processing,
liquidity or other problems the operators of the Company's stream and
royalty properties may encounter; operators' inability to access
sufficient raw materials, water or power; changes in operators' project
parameters as plans continue to be refined; changes in estimates of
reserves and mineralization by the operators of the Company's stream and
royalty properties; contests to the Company's stream and royalty
interests and title and other defects in the properties where the
Company holds stream and royalty interests; errors or disputes in
calculating stream deliveries and royalty payments, or deliveries or
payments not made in accordance with stream and royalty agreements;
economic and market conditions; changes in laws governing the Company
and its stream and royalty interests or the operators of the properties
subject to such interests, and other subsequent events; as well as other
factors described in the Company's Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, and other filings with the Securities and Exchange
Commission. Most of these factors are beyond the Company's ability to
predict or control. The Company disclaims any obligation to update any
forward-looking statement made herein. Readers are cautioned not to put
undue reliance on forward-looking statements.

Statement Regarding Third-Party Information: Certain information
provided in this press release, including production estimates for
calendar 2019, has been provided to us by the operators of the relevant
properties or is publicly available information filed by these operators
with applicable securities regulatory bodies, including the Securities
and Exchange Commission. Royal Gold has not verified, and is not in a
position to verify, and expressly disclaims any responsibility for the
accuracy, completeness or fairness of such third-party information and
refers the reader to the public reports filed by the operators for
information regarding those properties.

           

TABLE 1

Second Quarter Fiscal 2019

Revenue and Operators' Reported Production for Principal Stream
and Royalty Interests

(In thousands, except reported production in oz. and lbs.)

 
Three Months Ended Three Months Ended
December 31, 2018     December 31, 2017
    Reported     Reported
Stream/Royalty    
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