UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the
Quarterly Period Ended March 31, 2001
-----------------------------------
Commission File No. 0-5664
ROYAL GOLD, INC.
----------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
--------
(State or Other Jurisdiction of Incorporation or Organization)
84-0835164
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(Employer Identification Number)
1660 WYNKOOP STREET, SUITE 1000, DENVER, COLORADO
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(Address of Principal Executive Offices)
80202-1132
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(Zip Code)
(303) 573-1660
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(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.
Class of Common Stock Outstanding At May 2, 2001
--------------------- --------------------------
$.01 PAR VALUE 17,751,596 SHARES
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . .3
Consolidated Statements of Operations. . . . . . . .5
Consolidated Statements of Cash Flows. . . . . . . .7
Notes to Consolidated Financial Statements . . . . .9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . .15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . .18
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Cautionary "Safe Harbor" Statement Under the Private Securities Litigation
Reform Act of 1995. With the exception of historical matters, the matters
discussed in this report 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 regarding projected revenues, reserves, planned levels of
expenditures, and that the Company envisions that further growth will more
likely occur as a result of acquisitions, rather than because of exploration.
Factors that could cause actual results to differ materially from the
projections incorporated herein include, among others, changes in gold
prices, unanticipated grade, geological, metallurgical, processing or other
problems, changes in project parameters as plans continue to be refined, and
the availability of acquisitions, as well as other factors described elsewhere
in this report. 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. Readers should also refer to the
"risks" section of the Company's Annual Report on Form 10-K, for the year ended
June 30, 2000, as filed with the Securities and Exchange Commission.
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
-------------------------
March 31, June 30,
2001 2000
-------------------------
Current assets
Cash and equivalents $ 5,781,735 $ 4,647,160
Royalty receivables 1,139,799 1,761,266
Prepaid expenses and other 236,843 235,990
Available for sale securities 861,633 920,273
----------- -----------
Total current assets 8,020,010 7,564,689
----------- -----------
Property and equipment, at cost, net 8,039,526 9,337,746
Other assets 491,086 595,147
----------- -----------
Total assets $ 16,550,622 $ 17,497,582
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements
3
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------
March 31, June 30,
2001 2000
-------------------------
Current liabilities
Accounts payable $ 330,059 $ 713,580
Dividend payable 0 885,004
Accrued compensation 75,000 212,370
Other 41,282 61,292
----------- -----------
Total current liabilities 446,341 1,872,246
Other liabilities 126,296 124,697
Commitments and contingencies (note 5)
Stockholders' equity
Common stock, $.01 par value, authorized
40,000,000 shares; and issued 17,980,822
and 17,910,822 shares, respectively 179,808 179,108
Additional paid-in capital 55,854,330 55,846,280
Accumulated other comprehensive income (708,855) (400,215)
Accumulated deficit (38,250,426) (39,080,904)
----------- -----------
17,074,857 16,544,269
Less treasury stock, at cost
(229,226 and 210,726 shares, respectively) (1,096,872) (1,043,630)
----------- -----------
Total stockholders' equity 15,977,985 15,500,639
----------- -----------
Total liabilities and stockholders' equity $ 16,550,622 $ 17,497,582
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements
4
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
March 31,
-------------------------
2001 2000
-------------------------
Royalty revenues $ 1,446,010 $ 2,391,903
Interest and other income 74,595 67,453
----------- -----------
Total revenues 1,520,605 2,459,356
----------- -----------
Costs and expenses
Costs of operations 147,591 150,575
General and administrative 457,175 368,913
Exploration costs 207,140 426,664
Depreciation and depletion 330,456 307,488
----------- -----------
Total costs and expenses 1,142,362 1,253,640
----------- -----------
Operating income 378,243 1,205,716
Interest and other expense 11,920 40,101
----------- -----------
Income before income taxes 366,323 1,165,615
Income tax expense 7,326 23,312
----------- -----------
Net earnings $ 358,997 $ 1,142,303
=========== ===========
Adjustments to comprehensive income 144,709 (165,493)
----------- -----------
Comprehensive income $ 503,706 $ 976,810
=========== ===========
Basic earnings per share 0.02 0.06
Basic weighted average shares outstanding 17,751,596 17,641,327
Diluted earnings per share 0.02 0.06
Diluted weighted average shares outstanding 17,866,905 17,873,527
The accompanying notes are an integral part
of these consolidated financial statements
5
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
For the nine months ended
March 31,
-------------------------
2001 2000
-------------------------
Royalty revenues $ 4,389,061 $ 7,422,531
Interest and other income 216,191 218,295
----------- -----------
Total revenues 4,605,252 7,640,826
----------- -----------
Costs and expenses
Costs of operations 482,655 523,457
General and administrative 1,315,848 1,392,860
Exploration costs 590,240 1,643,112
Depreciation and depletion 866,947 922,974
Impairment of royalty interest 490,215 0
----------- -----------
Total costs and expenses 3,745,905 4,482,403
----------- -----------
Operating income 859,347 3,158,423
Interest and other expense 11,920 101,795
----------- -----------
Income before income taxes 847,427 3,056,628
Income tax expense 16,949 61,132
----------- -----------
Net earnings $ 830,478 $ 2,995,496
=========== ===========
Adjustments to comprehensive income (308,640) (165,493)
----------- -----------
Comprehensive income $ 521,838 $ 2,830,003
=========== ===========
Basic earnings per share 0.05 0.17
Basic weighted average shares outstanding 17,749,870 17,480,431
Diluted earnings per share 0.05 0.17
Diluted weighted average shares outstanding 17,655,551 17,712,631
The accompanying notes are an integral part
of these consolidated financial statements
6
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
March 31,
-------------------------
2001 2000
-------------------------
Cash flows from operating activities
Net earnings $ 830,478 $ 2,995,496
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and depletion 866,947 922,974
Impairment of royalty interest 490,215 0
Other 104,061 73,267
(Increase) decrease in:
Royalty receivables 621,467 (1,794,410)
Prepaid expense and other (853) 251,772
Increase (decrease) in:
Accounts payable and accrued liabilities (540,901) 85,885
Other liabilities 1,599 (19,801)
----------- -----------
Total adjustments 1,542,535 (480,313)
----------- -----------
Net cash provided by operating activities 2,373,013 2,515,183
Cash flows from investing activities
Capital expenditures for property and equipment (58,942) (8,288,384)
Purchase of available for sale securities (250,000) (1,320,488)
Maturity of held-to-maturity securities 0 3,000,000
Increase in other assets 0 22,000
----------- -----------
Net cash used in investing activities $ (308,942) $ (6,586,872)
----------- -----------
The accompanying notes are an integral part
of these consolidated financial statements
7
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
For the nine months ended
March 31,
-------------------------
2001 2000
-------------------------
Cash flows from financing activities
Purchase of common stock $ (53,242) $ 0
Proceeds from issuance of common stock 8,750 1,820,876
Dividend payment (885,004) 0
Proceeds from issuance of debt 0 1,000,000
----------- -----------
Net cash provided by (used in) financing activities (929,496) 2,820,876
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,134,575 (1,250,813)
----------- -----------
Cash and cash equivalents at beginning of period 4,647,160 4,670,476
----------- -----------
Cash and cash equivalents at end of period $ 5,781,735 $ 3,419,663
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements
8
ROYAL GOLD, INC.
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
(Unaudited)
For a more complete understanding of the business and operations of Royal Gold,
Inc., please refer to the Report on Form 10-K of Royal Gold, Inc. for the
annual period ended June 30, 2000.
1. PROPERTY AND EQUIPMENT
The carrying value of the Company's property and equipment consists of the
following components at March 31, 2001:
Accumulated
Depreciation
Cost & Depletion Net
------------ ------------ -----------
Royalties
GSR1 $ - $ - $ -
GSR2 - - -
GSR3 8,105,020 1,497,914 6,607,106
Bald Mountain 1,978,547 1,012,749 965,798
Mule Canyon 180,714 - 180,714
Yamana Resources, Inc. 172,809 - 172,809
------------ ------------ -----------
Total Royalties 10,437,090 2,510,663 7,926,427
Office furniture, equipment
and improvements 832,848 719,749 113,099
------------ ------------ -----------
$ 11,269,938 $ 3,2030,412 $ 8,039,526
Presented below is a discussion of the status of the Company's current
precious metals royalties.
A. Pipeline Mining Complex
The Company holds two sliding scale gross smelter returns royalties
(GSR1 and GSR2) and a fixed-rate gross royalty (GSR3) over the
Pipeline Mining Complex, which includes the Pipeline and South
Pipeline gold deposits in Lander County, Nevada. In April 2001, the
Company purchased an additional royalty on the Pipeline Mining
Complex. See Footnote 7, Subsequent Events.
The Pipeline Mining Complex is owned by The Cortez Joint Venture, a
joint venture between Placer Cortez, Inc., a subsidiary of Placer
Dome Inc. (60%), and Kennecott Explorations (Australia) Ltd., a
subsidiary of Rio Tinto (40%).
9
ROYAL GOLD, INC.
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
(Unaudited)
B. Bald Mountain
Effective January 1, 1998, the Company purchased a 50% undivided
interest in a 3.50% net smelter returns royalty that burdens a
portion of the Bald Mountain mine, in White Pine County, Nevada.
Bald Mountain is an open pit, heap leach mine operated by Placer Dome
U.S. Inc. The Company recorded an impairment of $490,215 in the
quarter ended December 31, 2000, because the carrying amount exceeded
the fair market value, due to decreased reserves at Bald Mountain at
December 31, 2001.
C. Mule Canyon
In fiscal 1999, the Company purchased a 5% net smelter returns
("NSR") royalty on a portion of the Mule Canyon mine, operated by
Newmont Gold Company and located in Lander County, Nevada.
D. Yamana Resources, Inc.
In fiscal 2000, the Company purchased a 2% net smelter returns
royalty on Yamana Resources' properties in Argentina.
2. AVAILABLE FOR SALE SECURITIES
During fiscal 2000, the Company acquired three million units of the
securities of Yamana Resources, Inc. for $1,293,480. Each unit consists of
one share and one-half warrant to purchase an additional share for Cdn $0.50
per share, until February 2003. During fiscal 2001, the Company acquired
2,000,000 additional shares and 2,000,000 additional warrants with a strike
price of Cdn $0.15, for $250,000. These new warrants expire February 2004.
Additionally the existing warrants were repriced to Cdn $0.30 per share.
The Company had an unrealized loss of $708,855 on available for sale
securities at March 31, 2001. The unrealized loss for the nine months ended
March 31, 2001 was $308,640.
10
ROYAL GOLD, INC.
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
(Unaudited)
3. EARNINGS PER SHARE COMPUTATION
For the nine months ended March 31, 2001
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
BASIC EPS
Earnings to common stockholders $ 830,478 17,749,870 $ 0.05
Effect of dilutive securities
Options - 115,681 -
--------- ----------- ---------
DILUTED EPS $ 830,478 17,865,551 $ 0.05
========= =========== =========
For the three months ended March 31, 2001
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
BASIC EPS
Earnings to common stockholders $ 358,997 17,751,596 $ 0.02
Effect of dilutive securities
Options - 115,309 -
--------- ----------- ---------
DILUTED EPS $ 358,997 17,866,905 $ 0.02
========= =========== =========
At March 31, 2001, options to purchase 1,052,079 shares of common stock
were outstanding, at an average price of $5.01 per share, but were not
included in the computation of diluted EPS because the exercise price of
these options was greater than the average market price of the common
shares.
For the nine months ended March 31, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
BASIC EPS
Earnings to common stockholders $2,995,496 17,480,431 $ 0.17
Effect of dilutive securities
Options - 232,200 -
--------- ----------- ---------
DILUTED EPS $2,995,496 17,712,631 $ 0.17
========= =========== =========
11
ROYAL GOLD, INC.
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
(Unaudited)
For the three months ended March 31, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
BASIC EPS
Earnings to common stockholders $1,142,303 17,641,327 $ 0.06
Effect of dilutive securities
Options - 232,200 -
--------- ----------- ---------
DILUTED EPS $1,142,303 17,873,527 $ 0.06
========= =========== =========
At March 31, 2000, options to purchase 1,005,532 shares of common stock were
outstanding, at an average price of $5.66 per share, but were not included
in the computation of diluted EPS because the exercise price of these
options was greater than the market price of the common shares at March 31,
2000.
4. FINANCIAL ACCOUNTING STANDARDS NO. 133
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivatives and Hedging Activities ("SFAS 133"). SFAS 133, as amended by
SFAS 137 and SFAS 138, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000 (the fiscal year commencing July 1,
2000, for the Company), and establishes accounting and reporting standards
for derivative instruments and hedging activities. The Company has been
engaged in limited trading activities utilizing puts. In the near term, the
Company will continue to mark its open positions to market and record the
difference in the carrying value to current earnings. During the first nine
months of fiscal 2001, the Company recorded mark to market losses of $68,035
in operations related to previously-purchased puts.
12
ROYAL GOLD, INC.
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
(Unaudited)
5. COMMITMENTS AND CONTINGENCIES
Casmalia
--------
The Company received notice, on March 24, 2000, that the U.S. Environmental
Protection Agency ("EPA") has identified Royal Resources, Inc. (Royal
Gold's corporate predecessor) as one of 22,000 potentially responsible
parties ("PRPs"), along with many oil companies, for clean-up of a fully-
permitted hazardous waste landfill at Casmalia, Santa Barbara, California,
under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("Superfund"). The Company's alleged PRP status
stems from oil and gas exploration activities undertaken by Royal Resources
in California during 1983-84.
By letter dated June 14, 2000, the Company has provided the EPA certain
exculpatory information. The EPA has not yet responded.
6. LINE OF CREDIT
The Company has entered into a line of credit agreement with HSBC Bank USA
for the purpose of purchasing cash-flowing royalty assets. This facility
has an initial borrowing capacity of up to $10 million. Repayment of any
loan under the line of credit will be collateralized by a mortgage on the
Company's GSR3 royalty at the Pipeline Mining Complex, and by a security
interest in the proceeds from any of the Company's royalties at the Pipeline
Mining Complex. Any assets purchased with the line of credit will also
serve as collateral. The term of the facility will mature in June 2005, but
the line of credit can be extended under two one-year options. There are
no amounts outstanding at March 31, 2001.
7. SUBSEQUENT EVENT
In April 2001, Royal Gold reached agreement with a group on individuals,
including several officers and directors of the Company, to acquire a
portion of the group's 1.25% net value royalty ("NVR") over production from
the GAS Claims located at the Pipeline Mining Complex, in Lander County,
Nevada. Royal Gold acquired a 0.37% NVR for approximately $2.1 million.
Of this amount, approximately 45% or $967,500, was distributed to those
officers and directors of the Company who participated. (The participating
officers and directors received the same proportionate consideration as the
other members of the selling group.) This NVR is calculated by deducting
processing-related costs, but the royalty is not burdened by mining costs.
The valuation transaction was determined by a comparable purchase in August
1999 of a similar royalty at the Pipeline Mining Complex when the gold price
was at or about the same level.
13
ROYAL GOLD, INC.
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
(Unaudited)
The GAS Claims comprise an area of interest of approximately 4,000 acres.
This area of interest covers the South Pipeline deposit and Crossroads
area, but does not include the Pipeline pit. Total proven and probable
reserves attributable to this NVR interest are approximately 122 million
tons at an average grade of 0.041 opt, containing approximately 5 million
ounces of gold.
In addition to the proven and probable reserves, there are about 49 million
tons, grading 0.048 opt of the total mineralized material attributable to
this royalty.
8. GENERAL
The unaudited financial statements as of March 31, 2001 and for the three
months and the nine months ended March 31, 2001 and 2000, reflect all
adjustments, consisting solely of normal recurring items, which are
necessary for the fair presentation of financial position, results of
operations, and cash flows on a basis consistent with that of the prior
audited consolidated financial statements.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principals have been condensed or omitted. Therefore, it is suggested that
these financial statements be read in connection with the audited financial
statements and the notes included in the Company's Annual Report on Form 10-
K as of June 30, 2000.
14
ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Royal Gold is engaged in the acquisition and management of precious metals
royalties. The Company seeks to acquire existing royalties or to finance
projects that are in production or near production in exchange for royalty
interests. The Company also explores and develops properties thought to contain
precious metals and seeks thereby to create or obtain royalties and other
carried ownership interests. Substantially all of the Company's revenues are
and can be expected to be derived from royalty interests, rather than from
mining operations conducted by the Company.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company had a working capital surplus of $7,573,669.
Current assets were $8,020,010, compared to current liabilities of $446,341, for
a current ratio of 18 to 1. This compares to current assets of $7,564,889, and
current liabilities of $1,872,246, at June 30, 2000, resulting in a current
ratio of 4 to 1.
The Company's liquidity needs are generally being met from its available cash
resources, royalty revenues and interest income. During the first nine months
of fiscal 2001, the Company received $4,152,577 from its royalty interests at
the Pipeline Mining Complex, and $235,277 from its royalty interest at Bald
Mountain.
The Company also earned $216,191 in interest income on its cash and marketable
securities portfolio during the nine month period. The Company has secured a
$10 million facility that is available for the purchase of cash-flowing royalty
assets. Management believes its cash resources will be adequate to fund planned
operations for the foreseeable future.
For fiscal 2001, the Company anticipates royalty revenues of $6.0 million. This
is based on a $265 gold price for the last quarter of the fiscal year, and
production estimates by Cortez of over 1,100,000 ounces of gold at the Pipeline
Mining Complex during calendar year 2001. Revenue is projected at $6.8 million
if the gold price is at or about $275 for the last quarter of the fiscal year.
The Company previously projected revenues of $8.4 million based on a $275 gold
price for fiscal 2001. During the second and third quarters of the fiscal year,
the gold price averaged less than $270 per ounce. (At a gold price of $270.00
to $309.99, the Company's GSR1 royalty rate is 2.25%. At a gold price of
$250.00 to $269.99, the Company's GSR1 royalty rate is 1.3%.) As previously
disclosed, the Company estimates for fiscal 2001, depletion and depreciation to
be $1.7 million; general and administrative expenses of approximately $1.7
million, cost of operations of approximately $0.6 million and exploration and
property holding costs of approximately $0.8 million. The Company estimates
interest income of $0.4 million and income taxes of $0.1 million. These amounts
could increase or decrease significantly, at any time during the fiscal year,
based on actual production levels achieved by Cortez, changes in the gold price,
and the Company's decisions about releasing or acquiring additional properties,
among other factors.
The Company continuously evaluates acquisition opportunities and may use cash or
stock for these acquisitions.
15
ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Acquisitions have become a more important part of
the Company's growth strategy and could be substantial, while exploration is
becoming less important.
RESULTS OF OPERATIONS
For the quarter ended March 31, 2001, compared to the quarter ended March 31,
- -----------------------------------------------------------------------------
2000
- ----
For the quarter ended March 31, 2001, the Company reported net earnings of
$358,997 or $0.02 per basic share, as compared to net earnings of $1,142,303, or
$0.06 per basic share, for the quarter ended March 31, 2000.
Royalty revenues for the current quarter decreased to $1,446,010, compared to
$2,391,903 for the quarter ended March 31, 2000. The decrease in royalty
revenues is attributable to lower gold prices for the quarter which resulted in
a lower royalty rate on our GSR1 sliding scale royalty.
Costs of operations of $147,591 for the quarter ended March 31, 2001, were
comparable to $150,575 for the quarter ended March 31, 2000, primarily because
of the decrease in expenditures related to Nevada net proceeds tax owing on the
lower royalty revenues, offset by mark to market costs of our hedging program.
General and administrative costs of $457,175 for the current quarter increased
compared to $368,913 for the quarter ended March 31, 2000, primarily because
last year's results reflect non-recurring adjustments, and with decreased
exploration in the current quarter, a lesser percentage of employee costs are
charged to exploration expense.
Exploration expenditures of $207,140 for the quarter ended March 31, 2001,
decreased from $426,664 for the quarter ended March 31, 2000, primarily because
of decreased activity at the Milos Gold project.
Depreciation, depletion, and amortization costs increased from $307,488 to
$330,460 for the quarter ended March 31, 2001, primarily relating to higher DD&A
on GSR3 because of the step-up in its royalty rate.
Interest income of $74,595 for the quarter ended March 31, 2001 increased
compared to $67,453 for the quarter ended March 31, 2000, primarily because of a
higher level of funds available for investment.
16
ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the nine months ended March 31, 2001, compared to the nine months ended
- ---------------------------------------------------------------------------
March 31, 2000.
- --------------
For the nine months ended March 31, 2001, the Company reported net earnings of
$830,478, or $0.05 per basic share, as compared to net earnings of $2,995,496,
or $0.17 per basic share, for the nine months ended March 31, 2000.
Royalty revenues for the current nine month period decreased to $4,389,061,
compared to $7,422,531 for the nine months ended March 31, 2000. The decrease
in royalty revenues is primarily attributable to lower gold prices, which
resulted in a lower royalty rate on our GSR1 sliding scale royalty. Also, no
royalties were received from the Company's 10% GSR royalty on Crescent Pit
stockpiled material, which has been exhausted. (The 10% GSR provided
approximately $1,100,000 in royalty revenues in the nine months ended March 31,
2000.)
Cost of operations decreased to $482,655 for the nine months ended March 31,
2001, compared to $523,457 for the nine months ended March 31, 2000, primarily
because of the decrease in Nevada net proceeds tax owing on the lower royalty
revenues, offset by the effect of marking to market puts purchased in the
current year.
General and administrative costs of $1,315,848 for the nine months ended March
31, 2001 decreased from $1,392,860 for the nine months ended March 31, 2000,
primarily because of non-recurring stock grants to non-employee directors in the
quarter ended March 31, 2000.
Exploration expenditures of $590,240 for the nine months ended March 31, 2001
decreased from $1,643,112 for the nine months ended March 31, 2000, primarily
because of decreased activity at the Milos Gold project.
In the current nine month period, the Company recorded an impairment related to
its royalty interest at Bald Mountain by $490,215, because of the operator's
revised reserve estimates due to lower long-term gold price assumptions.
Depreciation, depletion, and amortization costs decreased from $922,974 to
$866,947 for the nine months ended March 31, 2001, primarily relating to a lower
depletion rate on GSR3, offset by higher DD&A on GSR3 because of the step-up in
the royalty rate.
Interest income of $216,191 for the nine months ended March 31, 2000 was
comparable to $218,295 for the nine months ended March 31, 2001.
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
None
18
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 10, 2001 By: /s/ Stanley Dempsey
-------------------------
Stanley Dempsey
Chairman of the Board and
Chief Executive Officer
Date: May 10, 2001 By: /s/ John Skadow
-------------------------
John Skadow
Controller and Treasurer
19