Royal Gold, Inc. Q2 FY2025 earnings call

Key Points

• Second quarter was excellent with new records for revenue, earnings, and cash flow. Earnings were $132 million or $2.01 per share, adjusted for discrete tax items to $119 million or $1.81 per share.
• Gold was 78% of total revenue; adjusted EBITDA margin was 84%. Debt-free at quarter end, paid $0.45 per share dividend.
• Achieved full offset of Pueblo Viejo advanced stream deposit. Strategic acquisitions of Sandstorm Gold and Horizon Copper to add scale, growth, diversification. Added assets like Kansanshi mine, Warintza project, Lawyers-Ranch royalty.

Portfolio Developments

• Mount Milligan: Centerra had lower gold grades, started infill/grade control, reduced 2025 gold production guidance. Pre-feasibility study for Mine Life Extension Project on track.
• Andacollo: SAG mill restarted, copper production guidance unchanged. Labor contracts ratified. Gold deliveries in Q4 expected lower due to shutdown.
• Pueblo Viejo: Achieved full offset of stream advance payment. Look forward to further contributions through mid-2040s.
• Smaller assets: Back River first gold pour, Côté processing plant at nameplate capacity, Mara Rosa processing plant suspended temporarily, Rainy River record monthly production, Xavantina revised gold production guidance, Cactus royalty buyback.

Gold was the largest contributor to revenue for the quarter, accounting for about 78% of total. Royalty revenue was $77 million, up by about 50% from the prior year quarter. Revenue from the stream segment was $133 million, up by about 8% from last year, with increased sales from Mount Milligan, Pueblo Viejo and Khoemacau, partially offset by lower sales from Xavantina, Wassa and Rainy River.

• Maintaining 2025 guidance ranges for metal sales, DD&A, and tax rate.
• Expect to close Sandstorm and Horizon transactions in Q4.
• Anticipate receiving first delivery of deferred gold consideration from Mount Milligan cost support agreement in latter part of Q3 or early Q4.

• Political volatility in African jurisdictions where some assets are located.
• Accounting complexities related to deferred gold ounces from Mount Milligan, including mark-to-market differences upon receipt and sale.
• Regulatory approvals for Sandstorm and Horizon transactions still underway, including reviews under Investment Canada Act and South Africa Competition Act.

Q: Could you talk through the deleveraging goal pro forma after the Sandstorm and Horizon transactions?

A: If you followed our history, we've taken advances under the revolving credit and then paid that off over time. The plan is to take excess cash flow each quarter and pay down the debt from these transactions, with debt repayment a key focus before considering buybacks.

Q: About Mount Milligan and other underperforming assets, how are you comfortable with 2025 guidance range?

A: We don't disclose guidance based on individual operations. We carry out a rigorous risk-adjusted budgeting and guidance preparation process, receiving monthly budget data, forecasting based on historical performance and specific knowledge, building in timing adjustments. We're comfortable maintaining 2025 guidance range despite some underperformance.

Q: On the Sandstorm transaction, timing of circular filing and 43-101 disclosures?

A: We expect to file the preliminary proxy with the SEC shortly. We're not planning on filing 43-101 documents for the properties at the moment. Regarding Mount Milligan deferred ounces, the deferred support liability will increase by the fair market value of the gold on the date received, and we'll sell the ounces within a few days, with mark-to-market difference going through earnings.