Royal Gold (RGLD) Gains on New Broadcasts and Royalty Captures

Royal Gold Limited Liability Company RGLD benefits from higher metal prices, primarily from the demand for safe markets resulting from ongoing geopolitical tensions. Khoemacau’s focus on developing new projects, acquiring new royalties and streams, and adding high-quality, sustainable development projects is driving growth.

Better-than-expected first-quarter earnings

Last month, Royal Gold reported adjusted earnings per share of 99 cents for the first quarter of 2022, beating the Zacks Consensus Estimate of 83 cents. The financial result also improved by 18% year-on-year.

Higher metal prices will increase revenues

The company will benefit from higher metal prices this year. Silver and copper prices are rising on safe-haven demand amid ongoing geopolitical tensions and concerns about slowing global growth. Demand for copper is growing as demand for electric vehicles, wind farms, solar panels and power grids increases. Gold remains Royal Gold’s most important revenue driver. In the quarter ended at the end of March, the company generated 71% of its revenues from gold, 10% from silver and 14% from copper. Gold prices are currently trading at around $1,854 per ounce due to the increased risk of a global recession. Royal Gold expects total gold equivalent ounce (GEO) sales volume to be between 315,000 and 340,000 GEO for the current year.

Growth factors related to operators’ mines

Royal Gold’s revenues are derived entirely from streams and royalty shares on properties owned and operated by third parties. Barrick Gold GOLD, operator of the Pueblo Viejo mine, continues to make progress on expanding its processing facility and proposing a tailings storage facility to extend the life of the mine. It estimates that the project is likely to significantly increase throughput and enable the mine to maintain average annual gold production of approximately 800,000 ounces beyond 2022. Barrick expects its Pueblo Viejo mine to produce gold of between 400,000 and 440,000 ounces in 2022 .

Centerra, the operator of the Mount Milligan mine, obtained an amendment to its environmental impact assessment certificate in January 2022 that will enable long-term access to surface water sources throughout the life of the project. Water storage at the tailings storage facility as of March 31, 2022 is expected to ensure continued operations for a year or more. Centerra continues to expect the Mount Milligan mine to produce 190,000 to 210,000 ounces of gold and copper production of 70 to 80 million pounds.

In 2019, Royal Gold entered into a lifetime silver mine purchase agreement with Khoemacau Copper Mining Limited (“KCM”) to purchase and sell silver from the Khoemacau long-life high-grade copper mining project in Botswana. KCM expects production rates to continue to steadily increase from current levels and achieve fully sustainable production by the fourth quarter of 2022. KCM estimates that Khoemacau will produce between 155,000 and 165,000 tonnes of high-grade copper-silver concentrates annually over the 20-year life of the mine. Royal Gold’s interest in Khoemacau payable silver increased from 90% to 100% after KCM collected the remaining $26.5 million streaming advance. Following the final draw on March 14, 2022, Royal Gold retains the right to receive 100% of the payable silver produced in Khoemacau until delivery of 40.0 million ounces of silver and 50% thereafter.

Royal Gold has acquired a 1.0% net smelter royalty in certain areas of the Red Chris Mine. This royalty acquisition adds another high-quality and durable asset to the company’s portfolio. The Red Chris Mine is a world-class copper and gold project in a mining-friendly jurisdiction. This royalty could provide Royal Gold with significant revenue for decades. In addition, RGLD acquired a gold stream from Ero Copper CorpERO NX gold mine in Brazil. Ero expects gold production from the mine to be between 39,000 and 42,000 ounces this year. The NX 60 project is likely to add a new vein to the mine plan in 2024 and is expected to maintain long-term gold production of approximately 60,000 ounces per year.

Price performance

Over the past six months, Royal Gold has gained 14.3% compared to the industry’s growth of 3.4%.

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Zacks Rank and Stocks to Consider

Royal Gold is currently sporting a Zacks Rank #3 (Hold).

The better-rated range in the area of basic materials is Allegheny Technologies Inc. ATi. Allegheny’s projected earnings growth rate for the current year is 869.2%. The Zacks Consensus Estimate for ATI’s current-year earnings has been revised upwards by 27.3% over the past 60 days.

Allegheny’s earnings have topped the Zacks Consensus Estimate in each of the last four quarters. Earnings surprises for the last four quarters average around 128.9%. ATI has gained approximately 15.2% over the year and currently sits at a Zacks Rank of #1 (Strong Buy). You can see complete list of today’s Zacks #1 ranked stocks here.

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