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Royal Gold's (RGLD) Reserves Decline Amid Mining Depletion

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Royal Gold, Inc. (RGLD - Free Report) has updated estimates for ore reserves attributable to the company’s royalty, stream and similar interests as of Dec 31, 2018. Gold reserves of 3.8 million attributable ounces were 8.9% lesser than the prior calendar year primarily due to mining depletion at Carmen de Andacollo, Pueblo Viejo and Mount Milligan mines. Meanwhile, silver reserves of 50 million attributable ounces were higher by 22.2% owing to the acquisition of the Khoemacau silver stream interest during the current fiscal year.

On an attributable gold equivalent basis, gold contributes 66% of reserves, while silver makes up around 10%.  On a gold equivalent basis, Royal Gold’s attributable reserves were 5.8 million ounces compared to 6.4 million ounces recorded at the end of calendar-year 2017. The reduction was owing to lower metal prices for the non-gold metals as well as mining depletion.

As of Mar 31, 2019, Royal Gold, a precious metals stream and royalty company, owns interests on 191 properties on five continents, including interests on 43 producing mines and 17 development stage projects.
 
Coming to the share price performance, over the past year, Royal Gold’s stock has declined around 2.9%, as against the industry’s gain of 4%.



In February 2019, Royal Gold entered into a silver mine life-purchase agreement with Khoemacau Copper Mining Limited (“KCM’’). The agreement highlights the purchase and sale of silver, produced from the Khoemacau Copper Project in Botswana. Royal Gold will make an advance payment of $212 million to Cupric for the silver stream in exchange of 80% of the silver production from the Khoemacau project.  Royal Gold expects silver deliveries of 1.5 million ounces per annum at 80% stream rate, with initial deliveries probably starting in the first half of 2021. The transaction will be funded in cash and $1 billion available under a revolving credit facility.

Royal Gold’s revenues during third-quarter fiscal 2019 (ended Mar 31, 2019), declined due to lower average gold, silver and copper prices as well as softer stream revenues, mainly resulting from reduced gold and copper sales at Mount Milligan. However, lower sales at Mount Milligan were partly offset by higher gold and silver sales in Pueblo Viejo as well as solid gold sales in Andacollo mines.

For fiscal 2019, Royal Gold expects improved results, backed by several positive catalysts, including the beginning of production at Cortez Crossroads, early deployment of the Peñasquito Pyrite Leach Project and production improvements at Rainy River. It will also be aided by preliminary economic assessment at the Peak Gold joint venture.

Royal Gold's fiscal third-quarter sales performance was adversely impacted by reduced gold and copper sales at Mount Milligan. The mill processing facility faced a temporary shutdown in early calendar-year 2018 due to lack of sufficient water sources. On Feb 27, 2019, Centerra Gold Inc. received an amendment to the Mount Milligan environmental assessment certificate that permits access to additional sources of surface water and groundwater sources until November 2021.

Royal Gold, Inc. Price and Consensus

Zacks Rank & Key Picks

Royal Gold currently carries a Zacks Rank #3 (Hold).
 
A few better-ranked stocks in the Basic Materials space are Materion Corporation (MTRN - Free Report) , Fortescue Metals Group Ltd. (FSUGY - Free Report) and AngloGold Ashanti Limited (AU - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 27.1% for 2019. The company’s shares have gained 17.4% in the past year.

Fortescue Metals has an estimated earnings growth rate of 99.3% for the current year. The stock has appreciated 82.9% in a year’s time.

AngloGold has a projected earnings growth rate of 85.9% for 2019. Its shares have rallied 34.1% over the past year.

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