In an April 20 research note, BMO Capital Markets analyst Jackie Przybylowski reported the takeaways from Royal Gold Inc.'s (RGLD:NASDAQ; RGL:TSX) recent Investor Day.
During the event, Przybylowski noted, the royalty and streaming company explained its strategy for building its asset portfolio. Royal Gold reiterated it is primarily focused on maintaining gold as the predominant commodity. As shown in the company's fiscal year 2020 revenues, 79% came from gold. Management said it is open to acquiring non-gold royalties and streams if the opportunity is compelling and will not exceed its overall gold holdings.
Though high, volatile gold prices are currently making it harder to close gold-related acquisitions, Przybylowski relayed, Royal Gold indicated it remains optimistic it can continue to effect such transactions, For one, the company, during COVID-19, continued researching and doing due diligence related to potential deals, through remote and virtual means.
Management cited the company's Khoemacau stream acquisition as a recent example of one transaction that fits Royal Gold's criteria. The deal consists of a stream, structured in such a way that it benefits both parties, Royal Gold and the operator. The acquisition boosts Royal Gold's gold exposure and offers it significant upside from the existing reserve and the mine plan. Further, Khoemacau is near production, with commissioning expected to commence later in Q2/21.
Regarding Khoemacau, Przybylowski added, "the target is to complete an advanced prefeasibility study by end of 2021, feasibility study in 2022, advanced engineering and funding (which could potentially include further streams on properties not included in the current Royal Gold agreement) and a two-year build process."
The final key point about Royal Gold, Przybylowski wrote, is that it has multiple assets offering organic growth at no or low cost to the company. They include Pueblo Viejo, Wassa, Peñasquito and LaRonde Zone 5.
BMO has a Market Perform rating and a $140 per share target price on Royal Gold, the stock of which is trading now at about $118.20 per share.[NLINSERT]
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Disclosures from BMO Capital Markets, Royal Gold, April 20, 2021
I, Jackie Przybylowski, 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 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Royal Gold.
Disclosure 6C: Royal 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.