A Nov. 1 BMO Capital Markets research report indicated that in Q1 FY18, Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) announced "headline earnings per share (EPS) of $0.44 on gold equivalent deliveries of 88 thousand ounces," wrote analyst Andrew Kaip. "After adjusting for stock-based compensation, adjusted EPS of $0.48 came in above our estimate for $0.37 and consensus of $0.38."
Kaip explained the reason for Royal Gold surpassing expectations: "The beat is related to lower depreciation, taxes, and general and administrative expenses offset by lower revenue on royalty sales."
Total revenue in Q1 FY18 was $112.5 million, $78.8 million from streams and $33.7 million from royalties. Operating and free cash flow was "in line with our estimate," noted Kaip. It was $71.6 million whereas BMO's estimate was $72 million.
Costs of exploration at the company's Peak Gold joint venture in Alaska were "slightly below our estimate" at $3.2 million versus $3.5 million, Kaip wrote.
Royal Gold had $88.4 million in cash and equivalents at the end of the quarter, indicated Kaip. It had "$800M available on its $1B revolving credit facility after repaying $50M during the quarter."
In the report, following review of the company's performance during the quarter, Kaip provided a brief update. Royal Gold recently added a stream to its portfolio, this one from New Gold's Rainy River, which declared commercial production in October. Royal Gold's interest from gold from the project is 6.5%, dropping to 3.25% after 230 Koz are achieved. For silver, it's 60%, decreasing to 30% after 3.1 Moz are reached.
BMO Capital has an Outperform rating and $105 per share target price on Royal Gold, whose stock is currently trading at around $88.62 per share.
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Disclosures from BMO Capital Markets, Royal Gold, Nov. 1, 2017
Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures:
Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to New Gold within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to New Gold within the past 12 months.
Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to New Gold within the past 12 months. Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from New Gold within the past 12 months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from New Gold.
Disclosure 6A: New Gold is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
Disclosure 6C: New Gold is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 9: BMO Capital Markets makes a market in New Gold.
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of New Gold.
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