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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 0-5664
ROYAL GOLD, INC.
----------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-0835164
------------------------------ ---------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
SUITE 1000
1660 WYNKOOP STREET
DENVER, COLORADO 80202-1132
-------------------------------------- --------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(303) 573-1660
--------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Not Applicable
--------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90
days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK MAY 6, 1996
--------------------- -----------------
$.01 PAR VALUE 15,461,476 SHARES
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ROYAL GOLD, INC.
INDEX
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets ................... 3-4
Consolidated Statements of Operations ......... 5-6
Consolidated Statements of Cash Flows ......... 7-8
Notes to Consolidated Financial
Statements .................................. 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................... 17
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .............. 22
SIGNATURES ................................................ 23
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ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, June 30,
1996 1995
---------- ----------
Current Assets
Cash and equivalents $ 3,803,709 $ 3,424,094
Marketable securities 5,057,042 5,011,570
Receivables
Trade and other 210,974 171,994
Related party 0 35,690
Gold inventory 1,294,876 183,073
Prepaid expenses and other 134,553 89,907
Deferred income tax benefit 25,000 25,000
---------- ----------
Total current assets 10,526,154 8,941,328
Property and equipment, at cost
Mineral properties 1,654,281 554,588
Furniture, equipment and improvements 745,332 732,666
---------- ----------
2,399,613 1,287,254
Less accumulated depreciation,
depletion and amortization (845,236) (703,061)
---------- ----------
Net property and equipment 1,554,377 584,193
Other Assets
Restricted investments and other 22,767 22,767
Deferred income tax benefit 725,000 725,000
---------- ----------
Total other assets 747,767 747,767
--------- ----------
Total Assets $ 12,828,298 $10,273,288
========== ==========
The accompanying notes are an integral part of
these consolidated financial statements.
3
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ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1996 1995
---------- ----------
Current Liabilities
Accounts payable $ 151,050 $ 145,050
Current portion on notes payable 0 27,866
Accrued liabilities
Post retirement benefits 26,400 26,400
Other 14,131 19,161
---------- ----------
Total current liabilities 191,581 218,477
Post retirement benefit liabilities 112,149 116,949
Commitments and contingencies
(Note 4)
Stockholders' equity
Common stock, $.01 par value,
authorized 40,000,000 and 30,000,000
shares, respectively;
issued 15,477,462 and 14,492,962
shares, respectively 154,775 144,930
Additional paid-in capital 47,200,642 44,314,602
Accumulated deficit (34,750,876) (34,441,697)
---------- ----------
12,604,541 10,017,835
Less treasury stock, at cost
(15,986 shares) (79,973) (79,973)
---------- ----------
Total stockholders' equity 12,524,568 9,937,862
Total liabilities and stockholders' ---------- ----------
equity $12,828,298 $ 10,273,288
========== ==========
The accompanying notes are an integral part of
these consolidated financial statements.
4
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ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
March 31,
------------------------
1996 1995
---------- ----------
Royalty income $ 807,300 $ 171,047
Consulting revenues 3,000 80,650
Costs and expenses
Costs of operations 57,902 55,552
General and administrative 306,361 259,408
Direct costs of consulting revenues 0 28,688
Exploration, net 286,162 225,425
Lease maintenance and holding costs 114,548 51,151
Depreciation and depletion 53,107 25,562
---------- ----------
Total costs and expenses 818,080 645,786
---------- ----------
Operating loss (7,780) (394,089)
---------- ----------
Interest and other income 136,999 105,901
Gain (loss) on marketable securities 31 34,908
---------- ----------
Net gain (loss) $ 129,250 $ (253,280)
========== ==========
Net gain (loss) per share $ 0.01 $ (0.02)
Weighted average shares
outstanding 14,745,831 14,378,895
The accompanying notes are an integral part of
these consolidated financial statements.
5
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ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the nine months ended
March 31,
-------------------------
1996 1995
---------- ----------
Royalty income $ 2,022,923 $ 382,492
Consulting revenues 28,544 159,681
Costs and expenses
Costs of operations 172,452 179,442
General and administrative 913,432 755,186
Direct costs of consulting revenues 13,115 101,058
Exploration, net 1,185,412 1,226,226
Lease maintenance and holding costs 273,287 179,939
Depreciation and depletion 142,175 55,498
---------- ----------
Total costs and expenses 2,699,873 2,497,349
---------- ----------
Operating loss (648,406) (1,955,176)
---------- ----------
Interest and other income 352,682 275,001
Gain (loss) on marketable securities (13,476) 35,309
Interest expense 0 (1,359)
---------- ----------
Net loss $ (309,200) $ (1,646,225)
Net loss per share $ (0.02) $ (0.12)
Weighted average shares outstanding 14,671,572 14,199,334
The accompanying notes are an integral part of
these consolidated financial statements.
6
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ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
March 31,
-------------------------
1996 1995
---------- ----------
Cash flows from operating activities
Net income (loss) $ (309,200)$(1,646,225)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and depletion 142,175 55,498
(Gain) loss on marketable securities 13,476 (35,309)
Non cash exploration expense 0 8,875
(Increase) decrease in:
Marketable securities (58,948) (33,535)
Trade and other receivables (3,290) 24,417
Inventory (1,111,803) (154,238)
Prepaid expenses and other (44,646) (45,454)
Increase (decrease) in:
Accounts payable and accrued liabilities (26,875) 42,043
Post retirement liabilities (4,800) (17,667)
---------- ----------
Total Adjustments (1,094,711) (155,370)
Net cash provided by (used in) operating ---------- ----------
activities (1,403,911) (1,801,595)
---------- ----------
Cash flows from investing activities
Capital expenditures for
property and equipment (1,112,359) (357,243)
(increase) decrease in other assets 0 (10,000)
Net cash provided by (used in) investing ---------- ----------
activities (1,112,359) (367,243)
---------- ----------
(Continued)
The accompanying notes are an integral part of
these consolidated financial statements.
7
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ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the nine months ended
March 31,
--------------------------
1996 1995
---------- ----------
Cash flows from financing activities
Proceeds from issuance of common stock $ 2,895,885 $ 4,139,780
Net cash provided by (used in) financing ---------- ----------
activities 2,895,885 4,139,780
---------- ----------
Net increase (decrease) in cash and
equivalents 379,615 1,970,942
Cash and equivalents at beginning
of period 3,424,094 1,942,912
---------- ----------
Cash and equivalents at end of period $ 3,803,709 $ 3,913,854
========== ==========
Supplemental disclosure of non-cash activities:
During the period ended March 31, 1995, 1,000 shares of treasury stock
were issued as a lease payment on an exploration property.
The accompanying notes are an integral part of
these consolidated financial statements
8
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ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For a more complete understanding of the business and operations of Royal
Gold, Inc.("Royal Gold" or "the Company"), please refer to the Report on
Form 10-K of Royal Gold, Inc. for the annual period ended June 30, 1995.
1. PROPERTY AND EQUIPMENT
Property and equipment consists of the following components at
March 31, 1996, and June 30, 1995:
March 31, June 30,
1996 1995
---------- ----------
Mineral Properties:
South Pipeline-
Net Profits Interest $ - $ -
South Pipeline-
Capped Royalty 80,395 193,350
Long Valley 1,259,171 159,478
Camp Bird 120,110 120,110
---------- ----------
1,459,676 472,938
Office furniture, equipment
and improvements 94,701 111,255
---------- ----------
Net property and equipment $1,554,377 $ 584,193
========== ==========
As discussed in the following paragraphs, the Company is conducting
activity on substantially all of its mineral properties. The
results of these activities to date have not resulted in any
conclusions that the carrying value of these properties will or
will not be recoverable by charges against income from future
mining operations or a subsequent sale of the properties.
Realization of these costs is dependent upon the success of
exploration programs resulting in the discovery of economically
mineable deposits and the subsequent development or sale of those
deposits or properties, or the production of gold from existing
resources. The outcome of these matters is contingent upon future
events which cannot be determined at this time.
Presented below is a discussion of the status of each of the
Company's significant mineral properties.
A. SOUTH PIPELINE (CRESCENT VALLEY)
The South Pipeline property is a claim block containing
sediment-hosted gold deposits located in Lander County,
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Nevada. Pursuant to an agreement dated September 18,
1992, the Company holds a 20% net profits interest in
this project. Production has commenced at the Crescent
Pit portion of the project, whereas the remainder of the
project is in the exploration and development stage.
Cortez Gold Mines ("Cortez") is the project operator.
Cortez began mining at the Crescent Pit, which is located
on a small portion of the South Pipeline property, in
June 1994. At June 30, 1994, the Company estimated that
the Crescent Pit contained proven reserves of 1,967,000
tons of mill-grade ore, with an average grade of 0.125
oz./ton of gold, resulting in 245,875 contained ounces of
gold. In September 1994, sufficient quantities of this
mill-grade oxide ore had been accumulated to start
processing and gold production from mill-grade ore.
Initially, oxide ore from the Crescent Pit was commingled
with roasted ore from Cortez's Gold Acres Mine, and both
were being processed at the Cortez Mill; Royal Gold has
no interest in the Gold Acres Mine.
Production began from the Crescent Pit heap leach
operations in August 1995. The heap leach material in
the Crescent Pit includes an estimated 2.2 million tons
of ore with an average grade of 0.029 oz./ton yielding
64,000 ounces of gold, of which an estimated 29,000
ounces of gold are recoverable over 4 to 5 years.
On February 12, 1996, Cortez advised the Company that it
had determined to increase production from the Crescent
Pit, and temporarily suspend the operation of the Cortez
roaster, effective March 1, 1996. Cortez advised the
Company, on February 12, 1996, that its budgeted
production forecast for the Crescent Pit, for the twelve
months ending December 31, 1996, is 126,300 ounces,
including both mill-grade and heap leach material. This
change doubles the expected production attributable to
the Company from the prior twelve months' actual
production. The Company notes that this forecast of
future production levels is inherently uncertain, because
of all of the risks of any gold mining operation,
including maintenance of production levels, variable
metallurgy, maintenance of grade control, and stability
of gold prices.
Cortez is currently conducting a feasibility study for
the South Pipeline deposit, which occurs on a larger
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portion of the South Pipeline Project ground. Cortez has
also advised the Company that it plans to spend in excess
of $1.7 million to conduct further exploration of South
Pipeline in 1996.
In addition, Royal Gold has completed its own
prefeasibility studies of the potential of mining some of
the higher grade material in a deep zone of the South
Pipeline deposit by underground methods. The study
suggests that further investigation of this potential is
warranted. Cortez is currently undertaking such an
investigation.
On the basis of the Company's latest estimate of the
deposit, the entire South Pipeline project contains
approximately 91.8 million tons of ore at an average
grade of 0.048 oz./ton. On February 13, 1996, Cortez
reported to the Company that, as of December 31, 1995,
52.53 million tons of such deposit, with an average grade
of 0.053 ounces per ton, have been shown to be economic
under a wide range of mining and milling scenarios, and
therefore may be classified as proven and probable
reserves. The Company understands that the reserves so
classified by Cortez include 306,000 ounces from the
Crescent Pit and 2.49 million additional ounces from the
South Pipeline deposit.
During the quarter ended March 31, 1996, Cortez milled
106,309 tons of oxide material from the Crescent Pit.
This period included one month of the mill processing
Crescent Pit ore exclusively. This material had an
average grade of 0.218 ounces of gold per ton and yielded
19,813 ounces of gold. During the quarter, Cortez sold
15,744 ounces of gold from the Crescent Pit mill-grade
ore and 4,126 ounces of gold from the heap leach
operation.
B. SOUTH PIPELINE - CAPPED ROYALTY
In October 1994, the Company purchased an additional
royalty interest on the South Pipeline project from
Western Mining Corporation for $275,000. The royalty
interest is equivalent to a 0.75 percent net smelter
return production royalty, capped at $375,000. To date,
the Company has received payments totalling $265,370.
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C. LONG VALLEY
The Long Valley property, in Mono County, California, is
subject to an agreement between the Company and Standard
Industrial Minerals, Inc. Pursuant to the agreement, the
Company is entitled, through December 31, 1997, to
acquire Standard Industrial Minerals' interest in the
property upon payment of $1,000,000. The Option
Agreement, which is terminable by the Company at any
time, involves annual option consideration payments which
would total $125,000, if all four such payments were
made. Up to $100,000 of the payments (namely, the
payment that was made in 1995 and the payment that would
be made in November 1996) may be credited against the
option exercise amount.
During the summer and fall of 1994, the Company drilled
a total of 18 vertical and angled holes, by reverse
circulation drilling, of up to 900 feet in length. Based
on these results and Royal Gold's assessment of data
previously generated by the Company and its predecessors
in interest, Royal Gold estimated that Long Valley hosts
a mineralized deposit of 49,640,000 tons, with an average
grade of 0.018 ounces of gold per ton, using a cutoff
grade of 0.01 ounces per ton. Applying a cutoff grade of
0.02 ounces of gold per ton, Royal Gold estimated that
the deposit at Long Valley is 11,825,000 tons, with an
average grade of 0.036 ounces of gold per ton.
During 1995 the Company drilled 141 holes, with an
aggregated length of 53,210 feet. This drilling was
intended to define the extent of gold mineralization in
the Hilton Creek and Southeast Zones (the object of the
prior estimation of resources), and to extend exploration
away from those areas. The 1995 program confirmed the
existence of continuous mineralization between the Hilton
Creek and Southeast Zones, and discovered additional
mineralization to the north of the Hilton Creek Zone.
Each of the Hilton Creek and Southeast Zones also remain
"open" in all directions.
Royal Gold now estimates that the mineralized material at
Long Valley (comprising the Hilton Creek and Southeast
Zones) includes 53,687,000 tons with an average grade of
0.019 opt gold (at a cutoff grade of 0.01 opt).
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Effective July 1, 1995, costs related to Long Valley have
been capitalized pursuant to the determination that the
project is in the development stage. During the quarter
ended March 31, 1996, Royal Gold spent $37,703 related to
Long Valley. Royal Gold is also conducting metallurgical
and hydrogeological analyses that will be incorporated in
the detailed economic analysis that is required before
the mineral deposit at Long Valley can be shown to be
commercially viable and to constitute reserves.
D. CAMP BIRD
At March 31, 1996, capitalized costs of $120,000
represent the Company's ownership of patented mining
claims. Management believes that these claims have
value for their mineral potential as well as for the
value of the real estate.
E. NEVADA EXPLORATION
BUCKHORN SOUTH
Buckhorn South is a block of 265 contiguous claims in
Eureka County, Nevada. The Company leases 131 of the
claims, which are subject to a 4% NSR royalty burden and
fixed minimum royalty obligations of $360,000. The
remaining claims are subject to a 1% NSR royalty.
During the summer and fall of 1994, the Company drilled
nine reverse circulation holes at the Buckhorn South
property, in Eureka County, Nevada. The first five holes
of this program focused on five distinct anomalies that
had been identified by geophysical survey. Anomalous
levels of gold were encountered in each hole, and the
Company conducted further drilling on this property in
December 1994.
In September 1995, the Company drilled 24 reverse
circulation holes, totalling 13,825 feet, in the south-
central portion of the claim block. Gold mineralization
was discovered in Tertiary basalt and in the underlying
fanglomerate. Several of the holes contained significant
intervals measuring greater that 0.01 opt gold.
Additional drilling is planned for the upcoming field
season.
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BOB CREEK
Effective December 1, 1994, the Company entered into an
agreement with Santa Fe Pacific Gold Corporation on its
Bob Creek project. The Bob Creek project consists of 103
unpatented mining claims that comprise approximately
three square miles in Eureka County, Nevada. Santa Fe
controls other mineral interests adjacent to the
property.
Under the terms of the agreement, Santa Fe will (1)
assume all of Royal Gold's obligations under two
underlying mining leases; (2) spend a minimum of $150,000
in exploration during the first year, this amount being
guaranteed; and (3) spend progressively greater amounts
on exploration over the succeeding three years. Royal
Gold has reserved a 2% net smelter return production
royalty.
During July and August of 1995, Santa Fe drilled 14
reverse circulation holes to depths ranging from 365 to
960 feet. Santa Fe has advised the Company that a number
of the holes merited further exploration. During March
1996, Santa Fe competed a second round of drilling,
involving three reverse circulation holes, but it has not
yet disclosed the results of that drilling to the
Company.
F. UNION PACIFIC
Under the Company's exploration agreement with Union
Pacific Minerals, the Company may explore Union Pacific
lands in Wyoming, Colorado, and Utah and the State Line
district in Wyoming and Colorado. In December 1995, the
Company and Union Pacific Resources Group, Inc. agreed to
extend the agreement. The term of the agreement has been
extended to December 31, 1999. The Company has committed
to spend a total of $75,000 by August 19, 1996, by which
time it must either elect to continue through the end of
calendar year 1996 or terminate the agreement. If the
Company elects to continue its exploration program, it
would then commit to spending an additional $50,000 for
the remainder of calendar 1996.
Since the inception of the agreement, Royal Gold has
spent a total of $581,116 on the project as of March 31,
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1996 and has met its expenditure obligation through
December 31, 1995. For the full term of the agreement,
as amended, Royal Gold's commitment for exploration and
development expense would be $2.2 million. These
commitments are cancelable in stages. If the Company
proceeds past December 31, 1996, $600,000 in additional
work expenditures would be required by December 31, 1998,
and if work continues past December 31, 1998, an
additional $1,000,000 must be spent by December 31, 1999.
2. INCOME TAXES
At June 30, 1995, the Company had an estimated net operating
loss carryforward for federal income tax purposes of
approximately $22.9 million. If not used, the net operating
loss carryforwards will expire by the year 2010.
Based upon the determination of proven gold reserves at the
Crescent Pit of the South Pipeline Project, management has
estimated that is more likely than not that the Company will
have some net future taxable income within the net operating
loss carryforward period and has established a $750,000
deferred tax asset.
3. INVENTORY
Inventory as of March 31, 1996 relates to in-kind gold
payments received resulting from the Company's Net Profits
Interest at South Pipeline. This inventory is comprised of
3,292.51 ounces of gold, carried at a value of $393.28 per
ounce, for a total of $1,294,876.
4. CONTINGENCIES
The operations and activities conducted on the properties in
which the Company holds various interests are subject to
various federal, state, and local laws, and regulations
governing protection of the environment. These laws are
continually changing and are generally becoming more
restrictive. Management believes that the Company is in
material compliance with all applicable laws and regulations.
The U.S. Forest Service has now substantially completed
reclamation of the Goldstripe project site, but it is
15
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possible, depending on the results of post-reclamation
groundwater monitoring, that additional reclamation work may
be required. The Company may be called upon to dedicate
additional capital resources to this activity.
5. GENERAL
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
Therefore, it is suggested that these financial statements be
read in connection with the financial statements and the notes
included in the Company's audited consolidated financial
statements as of June 30, 1995.
The information in this report reflects all adjustments which,
in the opinion of management, are necessary to express a fair
statement of results for the periods presented. All such
adjustments are of a normal recurring nature. The results of
operations for the period ended March 31, 1996 are not
necessarily indicative of the results to be expected for the
full fiscal year.
Certain accounts in the prior period financial statements have
been reclassified for comparative purposes to conform with the
presentation in the current period financial statements.
16
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ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Royal Gold is engaged in the acquisition, exploration, development,
and sale of gold properties and in the acquisition of gold royalty
interests.
The Company's primary business strategy is to create and acquire
royalty and other carried ownership interests in gold mining
properties through exploration and development activity (and
subsequent transfer of the operating interest in the subject
properties to other firms), and through the direct acquisition of
such interests. Substantially all the Company's revenues are and
can be expected to be derived from royalty interests, rather than
from mining operations conducted by the Company.
At March 31, 1996, the Company had a working capital surplus of
$10,334,573. Current assets were $10,526,154, compared to current
liabilities of $191,581, for a current ratio of 55 to 1. This
compares to current assets of $8,941,328, and current liabilities
of $218,477, at June 30, 1995, resulting in a current ratio of 41
to 1. The Company is now receiving its full 20% net profits
royalty interest from the Crescent Pit mill-grade ore, and 4% of
net profits on the Crescent Pit heap leach material, where the
Company is receiving its pre-payback interest. During the first
nine months of fiscal 1996, the Company continued to incur losses
from operations.
The Company's liquidity needs are generally being met from its
available cash resources, royalty income, interest income, cash
payments from companies seeking to explore the Company's
properties, earnings from consulting services, and the issuance of
common stock. During the third quarter of fiscal 1996, the Company
earned $807,300 in royalties from South Pipeline. This $807,300 is
primarily comprised of $741,542 related to the Company's Net
Profits Interest and $59,169 in payment of its capped royalty. The
Company earned $136,999 in interest income on its cash and
marketable securities portfolio. This marketable securities
portfolio is primarily invested in U.S. treasury notes with
maturities of up to fifteen months, has a cost basis of $5,042,073,
and a market value of $5,057,042. During the quarter, the Company
also received $2,895,885 from the exercise of options and warrants.
On February 12, 1996, Cortez advised the Company that it would,
effective March 1, 1996, temporarily suspend operation of its
roaster, with the consequence that Cortez will also suspend the
commingling of Gold Acres ore with Crescent Pit ore, and will
devote the entire capacity of the Cortez Mill to the processing of
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mill-grade oxide ore from the Crescent Pit. Cortez advised the
Company, on February 12, 1996, that its budgeted production
forecast for the Crescent Pit, for the twelve months ending
December 31, 1996, has been increased to 126,300 ounces, including
both mill-grade and heap leach material. This change from
commingling doubles the production attributable to the Company.
The Company notes that this forecast of future production levels is
inherently uncertain, because of all of the risks of any gold
mining operation, including maintenance of gold levels, variable
metallurgy, maintenance of grade control, and stability of gold
prices. The Cortez Mill has a capacity of 2,000 tons per day.
During calendar 1995, the Cortez Mill, on average, processed 1,000
tons per day of Crescent Pit mill-grade oxide ore, while
commingling such material with Gold Acres ore.
Management believes the Company's cash resources will be adequate
to fund planned operations for the foreseeable future. The Company
has continued to actively explore its properties and anticipates
continued exploration activities for the remainder of the year.
The Company's long-term viability is dependent upon the continued
successful development and operation of the Company's mineral
interests. It can be anticipated, because of the nature of the
business, that exploration on many of these properties will prove
unsuccessful and that the Company will terminate its interest in
such properties. As significant results are generated at any such
property, the Company will re-evaluate the property, and may
substantially increase or decrease the level of expenditures on the
particular property.
The Company anticipates total expenditures for fiscal 1996 for
general and administrative expenses to be approximately $1,200,000
(increased from $1,000,000), of which $913,432 has been spent to
date. The Company also anticipates expenditures for exploration
and holding costs to be approximately $1,700,000 (increased from
$950,000 and including amounts spent under the Union Pacific
Agreement), of which $1,458,699 has been spent. Because of the
seasonal nature of the Company's activities, exploration and
holding costs are disproportionately incurred during the year.
Capital expenditures are estimated at $1,250,000 (increased from
$705,000), of which $1,112,359 has been spent. See discussion of
operations for the nine months ended March 31, 1996 for explanation
of the increases in general and administrative expense, exploration
expense and capital expenditures. On a prospective basis these
amounts could increase or decrease significantly, based on
exploration results and decisions about releasing or acquiring
additional properties, among other factors.
On May 14, 1996, the Company filed with the Securities and Exchange
Commission ("SEC") a form of shelf registration statement relating
to 2,000,000 shares of the Company's common stock. As and when
such registration statement is declared effective by the SEC, the
Company could employ the shares of common stock to acquire other
18
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gold royalty interests or exploration properties, or other assets.
At present the Company has no agreement or pending arrangement that
could or might require issuance of any of the shares that are the
subject of such registration statement.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1996, COMPARED TO THE QUARTER ENDED
MARCH 31, 1995
For the quarter ended March 31, 1996, the Company reported a net
gain of $129,250, or $.01 per share, as compared to a net loss of
$253,280, or $.02 per share, for the quarter ended March 31, 1995.
Royalty income for the current quarter of $807,300, compared to
$171,047 for the prior year, relates to Royal Gold's interest in
the South Pipeline property, from which the Company was receiving
its full 20% net profits interest on mill-grade ore and its pre-
payback interest on heap leach ore in the third quarter of the
current fiscal year. For the quarter ended March 31, 1995,
royalties were principally attributable to pre-payback interest on
mill-grade production.
The decrease in consulting revenue is primarily attributable to one
consulting arrangement for which the Company received $75,000
during the prior period.
General and administrative costs of $306,361 for the current
quarter have increased from $259,408 for the quarter ended March
31, 1995, primarily because of increased office expenses, investor
relations expenditures, and employee compensation and benefits.
Exploration expenditures of $286,162 for the quarter ended March
31, 1996, increased from $225,425 for the quarter ended March 31,
1995, primarily due to expenditures related to the review and
analysis of the possible acquisition of royalty interests on two
producing base metals mines.
Lease maintenance and holding costs increased from $51,151 for the
quarter ended March 31, 1995, to $114,548 for the quarter ended
March 31, 1996, primarily due to the increase in a property payment
on Buckhorn South.
Depreciation, depletion and amortization increased from $25,562 for
the quarter ended March 31, 1995, to $53,107 for the quarter ended
19
<PAGE>
March 31, 1996, primarily due to depletion expense related to the
South Pipeline Project capped royalty.
Interest and other income increased from $105,901 for the quarter
ended March 31, 1995, to $136,999 for the quarter ended March 31,
1996, primarily due to higher interest rates received on funds
available for investment.
FOR THE NINE MONTHS ENDED March 31, 1996, COMPARED TO THE NINE
MONTHS ENDED March 31, 1995
For the nine months ended March 31, 1996, the Company reported a
net loss of $309,200, or $.02 per share, as compared to a net loss
of $1,646,225, or $.12 per share, for the nine months ended March
31, 1995.
Year-to-date royalty income of $2,022,923, compared to $382,492 for
the prior year, relates to Royal Gold's interest in the South
Pipeline property, from which the Company was receiving its full
20% net profits interest on mill-grade ore and its pre-payback net
profits interest on heap leach ore during the nine months ended
March 31, 1996. For the nine months ended March 31, 1995,
royalties were principally attributable to mill-grade production at
the pre-payback interest level, and advance minimum royalties.
The decrease in consulting revenue is primarily attributable to one
consulting arrangement for which the Company received $150,000
during the prior period.
General and administrative costs of $913,432 for the nine months
ended March 31, 1996 have increased from $755,186 for the nine
months ended March 31, 1995, primarily because of increased third
party expenses related to congressional and industry-sponsored
initiatives to revise the mining law, higher public reporting
compliance costs, investor relations expenditures, and other office
and employee expenses.
Exploration expenditures of $1,185,412 for the nine months ended
March 31, 1996, decreased from $1,226,226 for the nine months
ended March 31, 1995, primarily due to the capitalization of Long
Valley expenditures versus $195,774 of expensed costs in the prior
period. This was offset by increased drilling and geophysical
activity in Nevada and the review and analysis of the possible
acquisition of royalty interests on two base metals mines during
the nine months ended March 31, 1996.
20
<PAGE>
Lease maintenance and holding costs increased from $179,939 for the
nine months ended March 31, 1995, to $273,287 for the nine months
ended March 31, 1996, due to the acquisition of nine new
exploration properties and increased holding costs at Buckhorn
South.
Depreciation, depletion and amortization increased from $55,498 for
the nine months ended March 31, 1995, to $142,175 for the nine
months ended March 31, 1996, primarily due to depletion expense
related to the South Pipeline Project capped royalty.
Interest and other income increased from $275,001 for the nine
months ended March 31, 1995, to $352,682 for the nine months ended
March 31, 1996, primarily due to higher interest rates received on
funds available for investment.
21
<PAGE>
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ROYAL GOLD, INC.
(Registrant)
Date: May 15, 1996 By: /s/ Stanley Dempsey
-------------------
Stanley Dempsey
Chairman of the Board and
Chief Executive Officer
Date: May 15, 1996 By: /s/ Thomas A. Loucks
--------------------
Thomas A. Loucks
Treasurer
(chief financial officer)
23
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-END> MAR-31-1996 MAR-31-1996
<CASH> 3,807,709 3,807,709
<SECURITIES> 5,057,042 5,057,042
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<INVENTORY> 1,294,876 1,294,876
<CURRENT-ASSETS> 10,526,154 10,526,154
<PP&E> 2,399,613 2,399,613
<DEPRECIATION> 845,236 845,236
<TOTAL-ASSETS> 12,828,298 12,828,298
<CURRENT-LIABILITIES> 191,581 191,581
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0 0
0 0
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<INCOME-PRETAX> 129,250 (309,200)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 129,250 (309,200)
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<NET-INCOME> 129,250 (309,200)
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