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 DECEMBER 31, 1995
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 FEBRUARY 6, 1996
$.01 PAR VALUE 14,850,976 SHARES
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
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
December 31, June 30,
1995 1995
-----------------------
Current Assets
Cash and equivalents $ 2,780,226 $ 3,424,094
Marketable securities 5,057,011 5,011,570
Receivables
Trade and other 170,371 171,994
Related party 0 35,690
Gold inventory 759,925 183,073
Prepaid expenses and other 82,583 89,907
Deferred income tax benefit 25,000 25,000
----------- ---------
Total current assets 8,875,116 8,941,328
Property and equipment, at cost
Mineral properties 1,616,578 554,588
Furniture, equipment and improvements 741,992 732,666
--------- ---------
2,358,570 1,287,254
Less accumulated depreciation,
depletion and amortization (792,129) (703,061)
Net property and equipment 1,566,441 584,193
--------- ---------
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
---------- ---------
$11,189,324 $10,273,288
========== ==========
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
December 31, June 30,
1995 1995
-------------------------
Current Liabilities
Accounts payable $ 359,465 $ 145,050
Current portion on notes payable 0 27,866
Accrued liabilities
Post retirement benefits 26,400 26,400
Other 15,108 19,161
----------- ----------
Total current liabilities 400,973 218,477
----------- ----------
Post retirement benefit liabilities 113,749 116,949
Commitments and contingencies
(Note 4)
Stockholders' equity
Common stock, $.01 par value,
authorized 40,000,000 and 30,000,000
shares, respectively;
issued 14,711,962 and 14,492,962
shares, respectively 147,120 144,930
Additional paid-in capital 45,487,582 44,314,602
Accumulated deficit (34,880,127) (34,441,697)
------------ -----------
10,754,575 10,017,835
Less treasury stock, at cost
(15,986 and 15,986 shares,
respectively) (79,973) (79,973)
------------ -----------
Total stockholders' equity 10,674,602 9,937,862
------------ -----------
Total liabilities and stockholder's
equity $ 11,189,324 $ 10,273,288
============ ===========
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
December 31,
1995 1994
--------------------------
Royalty income $ 504,809 $ 56,445
Consulting revenues 24,544 76,000
Costs and expenses
Costs of operations 65,966 69,448
General and administrative 327,747 297,300
Direct costs of consulting revenues 12,173 71,361
Exploration, net 434,710 580,410
Lease maintenance and holding costs 15,571 35,441
Depreciation and depletion 42,437 23,240
---------- ----------
Total costs and expenses 898,604 1,077,200
---------- ----------
Operating loss (369,251) (944,755)
Interest and other income 111,810 104,052
Gain (loss) on marketable securities (11,206) (8,375)
---------- ----------
Net loss $ (268,647) $ (849,078)
=========== ===========
Net loss per share $ (0.02) $ (0.06)
=========== ===========
Weighted average shares
outstanding 14,687,226 14,349,484
============ ===========
The accompanying notes are an integral part of
these consolidated financial statements.
5
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the six months ended
December 31,
1995 1994
--------------------------
Royalty income $ 1,215,623 $ 211,445
Consulting revenues 25,544 79,031
Costs and expenses
Costs of operations 114,550 106,751
General and administrative 607,071 511,192
Direct costs of consulting revenues 13,115 74,095
Exploration, net 899,250 1,000,801
Lease maintenance and holding costs 158,739 128,788
Depreciation and depletion 89,068 29,936
----------- -----------
Total costs and expenses 1,881,793 1,851,563
----------- -----------
Operating loss (640,626) (1,561,087)
Interest and other income 215,683 169,100
Gain (loss) on marketable securities (13,507) 401
Interest expense (1,359) (1,359)
Net loss $ (439,809) $ (1,392,945)
============ ===========
Net loss per share $ (0.03) $ (0.10)
============ ===========
Weighted average shares
outstanding 14,584,992 14,092,518
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 six months ended
December 31,
1995 1994
------------------------
Cash flows from operating activities
Net income (loss) $ (439,809) $(1,392,945)
----------- ----------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and depletion 89,068 29,936
(Gain) loss on marketable securities 13,507 (400)
Non cash exploration expense 0 8,875
(Increase) decrease in:
Marketable securities (58,948) (37,129)
Trade and other receivables 37,313 42,033
Inventory (576,852) (33,073)
Prepaid expenses and other 7,324 8,172
Increase (decrease) in:
Accounts payable and accrued liabilities 183,875 252,309
Post retirement liabilities (3,200) (21,067)
---------- ----------
Total Adjustments (307,913) 249,656
---------- ----------
Net cash provided by (used in) operating
activities (747,722) (1,143,289)
---------- ----------
Cash flows from investing activities
Capital expenditures for
property and equipment (1,071,316) (311,861)
(increase) decrease in other assets 0 (10,000)
---------- ----------
Net cash provided by (used in) investing
activities (1,071,316) (321,861)
---------- ----------
(Continued)
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 six months ended
December 31,
1995 1994
-------------------------
Cash flows from financing activities
Proceeds from issuance of common stock $ 1,175,170 $ 3,848,561
---------- ----------
Net cash provided by (used in) financing
activities 1,175,170 3,848,561
---------- ----------
Net increase (decrease) in cash and
equivalents (643,868) 2,383,411
---------- ----------
Cash and equivalents at beginning
of period 3,424,094 1,942,912
---------- ----------
Cash and equivalents at end of period $ 2,780,226 $ 4,326,323
========== ==========
Supplemental disclosure of non-cash activities:
During the period ended December 31, 1994, 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
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
December 31, 1995, and June 30, 1995:
December 31, June 30,
1995 1995
------------ --------
Mineral Properties:
South Pipeline-
Net Profits Interest $ - $ -
South Pipeline-
Capped Royalty 123,786 193,350
Long Valley 1,221,468 159,478
Camp Bird 120,110 120,110
--------- ----------
1,465,364 472,938
Office furniture, equipment
and improvements 101,077 111,255
---------- ----------
Net property and equipment $ 1,566,441 $ 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.
9
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
___________________________
A. SOUTH PIPELINE (CRESCENT VALLEY)
The South Pipeline property is a claim block containing
sediment-hosted gold deposits located in Lander County,
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, while 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. Currently, oxide ore
from the Crescent Pit is commingled with roasted ore
from Cortez's Gold Acres Mine, and both are 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, has been
increased to 126,300 ounces, including both mill-grade
and heap leach material. 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.
10
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
____________________
Cortez is currently conducting a feasibility study for
the South Pipeline deposit, which occurs on a larger
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.
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 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.
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
$206,201.
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
11
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
____________________
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 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 Royal Gold and its
predecessors in interest, Royal Gold now estimates 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 estimates that the deposit at Long Valley is
11,825,000 tons, with an average grade of 0.036 ounces
of gold per ton.
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 December 31, 1995, Royal Gold
expended $621,281, primarily on drilling and the
payment of a $50,000 advance minimum royalty payment.
Results of drilling during the calendar 1995 field
season are currently being evaluated and therefore are
not included in the estimate of mineralization above.
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 December 31, 1995, capitalized costs of $120,000
represent the Company's ownership of patented mining
claims. Management believes that these claims have
12
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
____________________
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 $460,000. 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, a third round of drilling focused on
the new areas of mineralization as well as geophysical
anomalies previously identified by Royal Gold. The
Company is evaluating results from these holes.
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.
13
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
____________________
During July and August of 1995, Santa Fe drilled 14
reverse circulation holes at depths ranging from 365 to
960 feet. Santa Fe has advised the Company that a
number of the holes merit further exploration.
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 $554,057 on the project as of December
31, 1995 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.
During the current quarter, the Company sustained a loss
from operations which added to its net operating loss
carryforward position.
14
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
____________________
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 December 31, 1995 relates to in-kind gold
payments received resulting from the Company's Net Profits
Interest at South Pipeline. This inventory is comprised of
1,974.266 ounces of gold, carried at a value of $384.92 per
ounce, for a total of $759,925.
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
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.
15
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
____________________
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
December 31, 1995 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
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 December 31, 1995, the Company had a working capital surplus
of $8,474,143. Current assets were $8,875,116, compared to
current liabilities of $400,973, for a current ratio of 22 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 six 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 second quarter of fiscal 1996, the
Company earned $500,638 in royalties on South Pipeline. This
$500,638 is comprised of $506,103 related to the Company's Net
Profits Interest, $44,535 in payment on its capped royalty, less
$50,000 in recoupment of remaining outstanding advance royalties.
The Company earned $111,810 in interest income on its cash and
marketable securities portfolio. This marketable securities
portfolio is 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 $5,057,010. During the quarter, the Company also
received $31,950 from the exercise of warrants.
On February 12, 1996, Cortez advised the Company that it will,
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
17
ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
_____________________
devote the entire capacity of the Cortez Mill to the processing
of 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. 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 its cash resources will be adequate to fund
planned operations for the foreseeable future. The Company has
continued to aggressively explore its properties and anticipates
continued exploration activities for the remainder of the year.
The Company's long-term viability is ultimately dependent upon
the 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 reevaluate 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
$1,000,000, of which $607,000 has been spent to date. The
Company also anticipates expenditures for exploration and holding
costs to be approximately $1,500,000 (increased from $950,000 and
including amounts spent under the Union Pacific Agreement), of
which $1,057,989 has been spent. Because of the seasonal nature
of the Company's activities, exploration and holding costs are
disproportionately incurred during the six months ended December
31. Capital expenditures are estimated at $1,250,000 (increased
from $705,000), of which $1,071,000 has been spent. 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.
18
ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
____________________
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1995, COMPARED TO THE QUARTER
ENDED DECEMBER 31, 1994
For the quarter ended December 31, 1995, the Company reported a
net loss of $268,647, or $.02 per share, as compared to a net
loss of $849,078, or $.06 per share, for the quarter ended
December 31, 1994.
Royalty income for the current quarter of $504,809, compared to
$56,445 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 second quarter of the
current fiscal year. For the quarter ended December 31, 1994,
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 $327,747 for the current
quarter have increased from $297,300 for the quarter ended
December 31, 1994, primarily because of increased office expenses
and employee compensation and benefits.
Exploration expenditures of $434,710 for the quarter ended
December 31, 1995, decreased from $580,410 for the quarter ended
December 31, 1994, primarily due to the capitalization of
$621,281 of Long Valley expenditures versus $105,897 of expensed
costs in the prior year quarter. This was somewhat offset by
increased drilling and geophysical activity in Nevada in the
current quarter.
Lease maintenance and holding costs decreased from $35,441 for
the quarter ended December 31, 1994, to $15,571 for the quarter
ended December 31, 1995, due to the acquisition of new
exploration properties in the prior period.
19
ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
____________________
Depreciation, depletion and amortization increased from $23,240
for the quarter ended December 31, 1994, to $42,437 for the
quarter ended December 31, 1995, primarily due to depletion
expense related to the South Pipeline Project capped royalty.
Interest and other income increased from $104,052 for the quarter
ended December 31, 1994, to $111,810 for the quarter ended
December 31, 1995, primarily due to higher interest rates
received on funds available for investment.
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995, COMPARED TO THE SIX
MONTHS ENDED DECEMBER 31, 1994
For the six months ended December 31, 1995, the Company reported
a net loss of $439,809, or $.03 per share, as compared to a net
loss of $1,392,945, or $.10 per share, for the six months ended
December 31, 1994.
Year to date royalty income of $1,215,623, compared to $211,445
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 six months
ended December 31, 1995. For the six months ended December 31,
1994, 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 $75,000
during the prior period.
General and administrative costs of $607,071 for the six months
ended December 31, 1995 have increased from $511,192 for the six
months ended December 31, 1994, primarily because of increased
third party expenses related to congressional and industry-
sponsored initiatives to revise the mining law, higher public
reporting compliance costs, and other office and employee
expenses.
Exploration expenditures of $899,250 for the six months ended
December 31, 1995, decreased from $1,000,801 for the six months
ended December 31, 1994, primarily due to the capitalization of
$1,621,281 of Long Valley expenditures versus $176,897 of
expensed costs in the prior period. This was offset by increased
drilling and geophysical activity in Nevada in the six months
ended December 31, 1995.
20
ROYAL GOLD, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
____________________
Lease maintenance and holding costs increased from $128,788 for
the six months ended December 31, 1994, to $158,739 for the
quarter ended December 31, 1995, due to the acquisition of six
new exploration properties.
Depreciation, depletion and amortization increased from $29,936
for the six months ended December 31, 1994, to $89,068 for the
six months ended December 31, 1995, primarily due to depletion
expense related to the South Pipeline Project capped royalty.
Interest and other income increased from $169,100 for the six
months ended December 31, 1994, to $215,683 for the six months
ended December 31, 1995, primarily due to higher interest rates
received on funds available for investment.
21
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
On December 13, 1995, a Form 8-K related to a Change in
Registrant's Certifying Accountant was filed during the
three-month period ended December 31, 1995.
22
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: February 14, 1996 By: /s/ Stanley Dempsey
Stanley Dempsey
Chairman of the Board and
Chief Executive Officer
Date: February 14, 1996 By: /s/ Thomas A. Loucks
Thomas A. Loucks
Treasurer
(chief financial officer)
23