Royal Gold USA : Reports Record Operating Cash Flow in its Third Quarter 2017

Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports net income attributable to stockholders (“net income”) of $23.7 million, or $0.36 per share, on revenue of $107.0 million in its fiscal third quarter ended March 31, 2017 (“third quarter”). Earnings increased significantly compared to the prior year quarter net loss attributable to stockholders of $67.7 million, or ($1.04) per share, on revenue of $93.5 million.

Third Quarter Highlights as Compared to the Prior Year Quarter:

• Record operating cash flow of $76.1 million, an increase of 15%
• Revenue of $107.0 million, an increase of 14%
• Volume of 87,700 Gold Equivalent Ounces (“GEOs”¹), an increase of 11%
• Dividends paid of $15.7 million, an increase of 4%
• Average gold price of $1,219, an increase of 3%

“We generated our second straight quarter of record operating cash flow, and paid down $45 million of debt,” commented Tony Jensen, President and CEO. “With no additional funding requirements, cash flow from our diverse stream and royalty portfolio on 38 operating properties will continue to strengthen our balance sheet. At the same time, we look forward to three new or expanding sources of revenue currently in development, including New Gold’s Rainy River mine, Barrick’s Cortez Crossroads mine, and Goldcorp’s Pyrite Leach Project at the Peñasquito mine. We expect these new projects to be commissioned in calendar 2017, 2018 and 2019, respectively, providing further growth and revenue diversification.”

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Third Quarter Overview

Third quarter revenue of $107.0 million included stream revenue of $76.6 million and royalty revenue of $30.4 million. Stream segment gold purchases were approximately 50,000 ounces, while sales totaled approximately 58,000 ounces. Stream segment silver purchases were approximately 374,000 ounces and silver sales were approximately 322,000 ounces. The Company had approximately 15,000 gold ounces and 375,000 silver ounces in inventory at March 31, 2017, as previously announced, compared to approximately 24,000 gold ounces and 323,000 silver ounces in inventory at December 31, 2016.

Total revenue increased 14% from the prior year quarter. Higher sales from our Mount Milligan and Pueblo Viejo streams relative to the prior year quarter more than offset lower sales from our Andacollo stream, which was due to timing of concentrate shipments.

Third quarter cost of sales was $22.4 million, compared to $17.9 million in the prior year quarter. The increase was primarily due to higher gold sales from Mount Milligan and increased gold and silver sales from Pueblo Viejo. Cost of sales is specific to our stream agreements that call for Royal Gold’s purchase of gold and silver for a cash payment per ounce.

General and administrative expenses decreased to $5.4 million in the third quarter, compared to $7.7 million in the prior year quarter. The decrease was primarily related to lower non-cash stock-based compensation charges.

Exploration costs, which are related to our Peak Gold joint venture (“Peak Gold”) in Alaska, totaled $2.6 million in the third quarter, compared to $1.9 million in the prior year quarter. As of March 31, 2017, Royal Gold had earned a 24.9% interest in the joint venture. Peak Gold is currently preparing a resource estimate which is expected to be complete by the end of the June 2017 quarter.

Interest and other income decreased during the third quarter to $1.3 million from $3.1 million in the prior year quarter. The decrease was primarily due to a realized gain on the sale of marketable securities during the prior year quarter and a decrease in the fair value of certain warrants we own.

We recognized a third quarter income tax expense of $6.5 million, compared with an income tax benefit of $8.3 million during the prior year quarter. This resulted in an effective tax rate of 23.2% in the current period. The prior year effective tax rate of 10.6% reflected impairment charges recorded a year ago.

At March 31, 2017, we had current assets of $134.2 million compared to current liabilities of $24.8 million, resulting in working capital of $109.4 million. This compares to current assets of $164.8 million and current liabilities of $22.7 million at June 30, 2016, resulting in working capital of $142.1 million. As of March 31, 2017, the Company had $350 million available and $300 million outstanding under its revolving credit facility. In the third quarter, the Company repaid $45.0 million of the outstanding borrowings under the revolving credit facility. Working capital, combined with the Company’s undrawn revolving credit facility, resulted in approximately $459.4 million of total available liquidity at March 31, 2017.

Recent Developments

Mount Milligan Stream Amendment

We began receiving gold and copper deliveries reflecting the amended Mount Milligan stream agreement in April 2017. Under the terms of the amendment, our 52.25% gold stream has been amended to a 35.0% gold stream and an 18.75% copper stream. We will continue to pay $435 per ounce of gold delivered and will pay 15.0% of the spot price per metric tonne of copper delivered. Under the terms of both the original and amended agreements, there is a maximum of five months between concentrate shipment and final settlement.

Royal Gold expects that, on the basis of its current stream and royalty portfolio, approximately 85% of the next several fiscal years’ revenue will come from precious metals.

Wassa and Prestea Gold Stream Acquisition

On January 3, 2017, the Company made the final scheduled payment of $10.0 million under the Wassa and Prestea streaming agreement. The Company has no further upfront payment obligations associated with the Wassa and Prestea gold stream. Commercial production was achieved at Wassa Underground on January 1, 2017. Commercial production at Prestea Underground is currently expected to be achieved in the third calendar quarter of 2017. Upon the earlier of either commercial production from Prestea Underground or January 1, 2018, our streaming interest associated with Golden Star’s Ghanaian assets will increase from 9.25% to 10.5%.

Attributable Reserves

Royal Gold announces updated estimates of ore reserves and mineralized material¹ attributable to the Company’s stream, royalty and similar interests as of December 31, 2016. These figures are provided by the operators of properties on which the Company holds these interests, or are obtained by Royal Gold through publicly available information.

On a gold equivalent basis², using a silver to gold ratio of approximately 70:1 and a copper to gold ratio of 450:1, metals reserves attributable to Royal Gold were 6.7 million ounces, on a net reserve basis, compared with 6.8 million ounces for the same period ended 2015. The complete Royalty/Metal Stream Portfolio, which includes the ore reserves and mineralized material¹ subject to the Company's interests on producing and development properties, can be found on our website.

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PROPERTY HIGHLIGHTS

A summary of third quarter and historical production can be found on Tables 1 and 2. Calendar year 2017 production estimates of the operators of certain properties in which we have interests versus actual production at those properties can be found on Table 3. Results of our streaming business for the third 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 third quarter, compared to the prior year quarter, are detailed in our Form 10-Q.

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 193 properties on six continents, including interests on 38 producing mines and 22 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 third quarter results will be held on Thursday, May 11, 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.

Third 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 from operating properties strengthening our balance sheet; Rainy River, Cortez Crossroads and the Peñasquito Pyrite Leach Project as new or expanding sources of revenue providing further growth and revenue diversification, and the expected timing of commissioning of these projects; operators’ expectations regarding future production and returns from our stream and royalty properties; timing for receipt of gold and copper deliveries from Mount Milligan under the amended Mount Milligan stream agreement; estimated percentages of future net revenue from precious metals expected from the Company’s stream and royalty portfolio in the aggregate; operators’ production estimates for calendar year 2017; reserves and additional mineralization estimates provided by the operators or obtained by Royal Gold through publicly available information; the sliding-scale features of our royalty structure at certain of our properties; and estimates of commencement of production at projects in development. 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 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 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 mining 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; risks associated with conducting business in foreign countries; changes in laws governing the Company and its stream and royalty properties or the operators of such properties, 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.

FOOTNOTES
Tables 1 and 2

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 and Adjusted Net Income as measures 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 and 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.

Adjusted Net Income (Loss) Reconciliation

Management of the Company uses adjusted net income (loss) to evaluate the Company’s operating performance, and for planning and forecasting future business operations. The Company believes the use of adjusted net income (loss) allows investors and analysts to understand the results relating to receipt of revenue from its royalty interests and purchase and sale of gold from its streaming interests by excluding certain items that have a disproportionate impact on our results for a particular period. The net income (loss) adjustments are presented net of tax generally at the Company’s statutory effective tax rate. Management’s determination of the components of adjusted net income (loss) are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts. Net income (loss) attributable to Royal Gold stockholders is reconciled to adjusted net income (loss) as follows:

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