Royal Gold : Reports First Quarter 2018 Results

Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports net income of $28.6 million, or $0.44 per share, on revenue of $112.5 million in its fiscal first quarter ended September 30, 2017. Subsequent to our first quarter-end, New Gold declared commercial production at Rainy River.

Fiscal First Quarter Highlights Compared to Prior Year Quarter:

• Revenue of $112 million, a decrease of 5%
• Operating cash flow of $72 million, an increase of 30%
• Volume of 88,000 GEOs,¹ in line with the prior year quarter
• Dividends paid of $16 million, an increase of 4%
• Repaid $50 million on revolving credit facility
• Average gold price of $1,278, down 4%

“The first fiscal quarter reflected steady results, strong cash flow generation, debt reduction, and growth that is already bought and paid for,” commented Tony Jensen, President and CEO. “Our gold and silver stream at Rainy River will further complement Royal Gold’s results in the December quarter. We congratulate New Gold on achieving commercial production at Rainy River ahead of schedule, and we are very pleased to add another Canadian property to our portfolio of 40 worldwide producing interests.”

Recent Developments

New Gold’s Rainy River

On October 19, 2017, New Gold announced that its Rainy River mine, located near Fort Frances, Ontario, achieved commercial production approximately two weeks ahead of schedule. In its first 30 days of operation, New Gold reported that Rainy River successfully processed approximately 457,000 tonnes of ore and that both grade and recoveries have been consistent with its commissioning plan. For the period October 1 to October 24, Rainy River processed an average of 18,500 tonnes per day, which is approximately 88% of nameplate capacity.

On September 28, New Gold announced the approval of its Schedule 2 Amendment that was required to complete construction of the main tailing storage facility.

Royal Gold has a streaming interest on 6.5% of the gold (3.25% after delivery of 230,000 ounces) and 60% of the silver (30% after delivery of 3,100,000 ounces) produced at Rainy River. At calendar year-end 2016, New Gold reported reserves of approximately 3.9 million ounces of gold reserves and 10 million ounces of silver reserves at Rainy River.²

First Fiscal Quarter 2018 Overview

First quarter revenue was $112.5 million compared to $118.0 million in the prior year quarter.Stream and royalty revenue totaled $78.8 million and $33.7 million, respectively, for the quarter. Revenue decreased due to a lower gold price and lower gold sales at Mount Milligan and Andacollo, partially offset by higher sales at Wassa and Prestea and new copper sales from Mount Millligan. Copper deliveries from Mount Milligan began in the June 2017 quarter.

First quarter cost of sales of $20.4 million was below the $22.7 million recorded in the prior year quarter, driven by lower gold sales from Andacollo and Mount Milligan.

General and administrative expenses decreased to $6.9 million in the first quarter, compared to $10.5 million in the prior year quarter. The decrease was primarily related to $1.8 million in lower non-cash stock-based compensation charges and a decrease in legal costs of approximately $1.1 million.

Exploration costs, which are related to our Peak Gold Joint Venture, were $3.2 million in the first quarter, which was in line with the prior year quarter.

Interest and other expense of $8.6 million was in line with the prior year quarter of $8.3 million.

We recognized first quarter income tax expense of $7.5 million, compared to $7.2 million during the prior year quarter. This resulted in an effective tax rate of 22.1% compared to 21.1% in the prior year quarter. The increase was primarily related to a re-measurement of Canadian dollar deferred tax liabilities due to foreign exchange rate changes.

At September 30, 2017, we had current assets of $155.8 million compared to current liabilities of $39.7 million, resulting in working capital of $116.1 million. This compares to current assets of $143.6 million and current liabilities of $34.3 million at June 30, 2017, resulting in working capital of $109.3 million.

During the first quarter, liquidity needs were met from our available cash resources and $84.6 million in revenue net of our streaming payments. The Company repaid $50 million of the outstanding revolving credit facility during the quarter resulting in $800 million available and $200 million outstanding under its revolving credit facility as of September 30, 2017. Working capital, combined with the Company’s undrawn revolving credit facility, totals $916 million of liquidity at September 30, 2017.

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¹ Gold Equivalent Ounces, (“GEOs”) are calculated as revenue divided by the average gold price for the same period. GEOs net of stream payments were 72,000 in the first quarter, compared to 71,300 in the prior year quarter.

² Cautionary Note to U.S. Investors Concerning Estimates of Proven and Probable Mineral Reserves and Measured and Indicated Mineral Resources: The mineral reserve estimates reported by New Gold were prepared in accordance with Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves. Royal Gold has not reconciled the reserve estimates provided by New Gold with definitions of reserves used by the U.S. Securities and Exchange Commission.

PROPERTY HIGHLIGHTS

A summary of first quarter and historical production reported can be found on Tables 1 and 2. Calendar year 2017 operator production estimates of certain properties in which we have interests compared to actual production through September 30, 2017 can be found on Table 3. Results of our streaming business for the first quarter, compared to the prior year quarter, can be found on Table 4. Highlights at certain of the Company’s principal producing and development properties during the first quarter, compared to the prior year quarter, are detailed in our Annual Report on Form 10-K.

CORPORATE PROFILE

Royal Gold is a precious metals stream and royalty company engaged in the acquisition and management of precious metal streams, royalties and similar production based interests. The Company owns interests on 197 properties on six continents, including interests on 40 producing mines and 23 development stage projects. Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol “RGLD.” The Company’s website is located at www.royalgold.com.

Note: Management’s conference call reviewing the first quarter results will be held on Thursday, November 2, 2017, at noon Eastern Time (10:00 a.m. Mountain Time). The call will be webcast and archived on the Company’s website for a limited time.

First Quarter Earnings Call Information:

Cautionary “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking statements include statements about cash flow growth, debt reduction and growth already bought and paid for; Rainy River as a new source of revenue providing further growth and revenue diversification; and operators’ production estimates for calendar year 2017. Net gold and metal reserves attributable to Royal Gold’s stream, royalty and other interests are subject to certain assumptions and, like reserves, do not reflect actual ounces that will be produced. Like any stream, royalty or similar interest on a non-producing or not-yet-in-development project, our interests on development projects are subject to certain risks, such as the ability of the operators to bring the projects into production and operate in accordance with their feasibility studies and mine plans, and the ability of Royal Gold to make accurate assumptions regarding valuation and timing and amount of payments. In addition, many of our interests are subject to risks associated with conducting business in a foreign country, including application of foreign laws to contract and other disputes, foreign environmental laws and enforcement and uncertain political and economic environments. Factors that could cause actual results to differ materially from the projections include, among others, precious metals, copper and nickel prices; performance of and production at the Company's stream and royalty properties, including gold and copper production at Mount Milligan and gold and silver production at Pueblo Viejo; the ability of operators of development properties to finance project construction to completion and bring projects into production as expected; operators’ delays in securing or inability to secure or maintain necessary governmental permits; decisions and activities of the operators of the Company's stream and royalty properties; unanticipated grade, environmental, geological, seismic, metallurgical, processing, liquidity or other problems the operators of the Company’s stream and royalty properties may encounter; changes in operators’ project parameters as plans continue to be refined; changes in estimates of reserves and mineralization by the operators of the Company’s stream and royalty properties; contests to the Company’s stream and royalty interests and title and other defects to the Company’s stream and royalty properties; errors or disputes in calculating stream deliveries and royalty payments, or deliveries or payments not made in accordance with stream and royalty agreements; economic and market conditions; changes in laws governing the Company and its stream and royalty interests or the operators of the properties subject to such interests, and other subsequent events; as well as other factors described in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made herein. Readers are cautioned not to put undue reliance on forward-looking statements.

Statement Regarding Third-Party Information: Certain information provided in this press release, including production estimates for calendar 2017, has been provided to us by the operators of the relevant properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission. Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for, the accuracy, completeness or fairness of such third-party information and refers the reader to the public reports filed by the operators for information regarding those properties.

SCHEDULE A

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (“GAAP”). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; in communications with the board of directors, stockholders, analysts and investors concerning our financial performance; as useful comparisons to the performance of our competitors; and as metrics of certain management incentive compensation calculations. We believe that these measures are used by and are useful to investors and other users of our financial statements in evaluating our operating performance because they provide an additional tool to evaluate our performance without regard to special and non-core items, which can vary substantially from company to company depending upon accounting methods, book value of assets and capital structure. We have provided reconciliations of all non-GAAP measures to their nearest U.S. GAAP measures and have consistently applied the adjustments within our reconciliations in arriving at each non-GAAP measure. We consider these items to be necessary adjustments for purposes of evaluating our ongoing business performance and are often considered non-recurring. Such adjustments are subjective and involve significant management judgment.

Adjusted EBITDA Reconciliation

Adjusted EBITDA is defined by the Company as net income (loss) plus depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of mining assets, less non-controlling interests in operating loss (income) of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. Other companies may define and calculate this measure differently. Adjusted EBITDA identifies the cash generated in a given period that will be available to fund the Company's future operations, growth opportunities, shareholder dividends and to service the Company's debt obligations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. See the table below for a reconciliation of net income to Adjusted EBITDA.

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