Royal Gold(US:RGLD)2022-08-04 19:25Financial Data and Key Metrics Changes - The company reported revenue of $146 million for Q2 2022, a decrease of 13% compared to the prior quarter, primarily due to lower volume [38] - Operating cash flow was strong at $120 million, consistent with the prior year [44] - Earnings for the quarter were $71.1 million or $1.08 per share, with adjusted earnings at $0.81 per share after accounting for a discrete tax benefit [43] - The adjusted EBITDA margin remained healthy at 78%, in line with the same quarter a year ago [9] Business Line Data and Key Metrics Changes - The royalty segment contributed $42 million in revenue, a decrease of 22% year-over-year, attributed to lower contributions from Cortez, Peñasquito, and Voisey's Bay [31] - The streaming segment generated revenue of $105 million, down about 8% from the prior year quarter, with lower contributions from Pueblo Viejo and Andacollo [32] Market Data and Key Metrics Changes - Gold prices increased by approximately 3%, while silver and copper prices rose by 15% and 2%, respectively [38] - Gold accounted for 71% of total revenue, followed by copper at 14% and silver at 11% [38] Company Strategy and Development Direction - The company aims to strengthen and diversify its portfolio of precious metals, royalties, and streams by acquiring high-quality assets [50] - Recent transactions, including the Great Bear and Cortez Royalty acquisitions, align with the company's strategy of focusing on people, place, and project [12][18] - The company has committed over $1 billion towards a mix of assets expected to provide meaningful gold revenue and exploration potential [51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the recently acquired royalties, emphasizing their strategic fit and low-risk jurisdictions [12][18] - The company remains on track to achieve its production guidance of 315,000 to 340,000 gold equivalent ounces for the full year 2022 [44] Other Important Information - The company ended the quarter with a cash balance of $281 million and remained debt-free [10] - A commitment to dividends was reaffirmed, with a payment of $0.35 per share during the quarter [11] - The company is focused on ESG initiatives, hiring a VP of Investment Stewardship to enhance its efforts in sustainability [11] Q&A Session Summary Question: Impact of provisional pricing on revenue - Management noted limited exposure to provisional pricing adjustments, with the largest exposure being the 3% NSR royalty at Robinson, which contributes only 1.5% to 2% of total revenue [56][59] Question: Differences in depreciation rates for accounting versus tax purposes - Management confirmed that the new Cortez Royalty would be subject to a 21% corporate tax rate, with the Nevada net proceeds tax also applicable [60][62] Question: Silver recovery issues at Pueblo Viejo - Management explained that ongoing bottlenecks in the silver recovery process are expected to continue until the expansion project is completed [63][65] Question: Future growth and liquidity for acquisitions - Management indicated that the company has sufficient liquidity for future growth opportunities, with a $1 billion credit facility available [80][81] Question: Potential for increasing exposure at Red Chris and Cortez - Management stated that they are open to discussions regarding increasing exposure but emphasized the importance of evaluating the people, place, and project criteria [89] Question: Interaction of the new Cortez royalty with existing royalties - Management clarified that the new royalty would be calculated based on total production and existing royalty deductions, with expectations for resource growth driving the investment thesis [96][98]