Royal Gold (RGLD) had a very strong quarter with volume, revenue and cash flow records; the first silver was received from the Khoemacau mine in Botswana, where Royal also just increased its stream to 90% of the silver produced at this copper mine, notes Adrian Day, editor of Global Analyst.

The initial delivery to Royal was somewhat higher than expected, though the steady-stage production date has been pushed back into Q3 2022. But the ramp-up in coming quarters will see increased revenue, and the mine is expected to be a strong contributor to revenues for a couple of decades.

The quarter was also helped by some catch-up of deferred silver from Pueblo Viejo in the Dominican Republic, though gold production at the mine was down. There have been positive developments at several of the non-producing assets in their portfolio, including a new feasibility study at Red Chris which Newcrest recently acquired.

Another paydown on the revolving credit facility left Royal with $60 million of cash, and $50 million outstanding debt, as well as available credit of $950 million. The new global minimum tax will have less impact on Royal than its Canadian peers since Royal, a U.S. company, was already paying U.S. tax on its offshore streaming income, currently at a little over 13%.

CEO William Heissenbuttel said Royal would stay focused on precious metals, though he noted that, given the precious metals revenue percentage –– 73% gold and 10% from silver –– there would be room for other metals, if the company found something “very attractive”. But they are unlikely to move into battery metals or other industries “we may not understand as much.”

He also noted that the current gold percentage is lower than he would like, but the figure for the latest quarter is partly because of price movement differentials between gold and copper, and partly because of higher production at Mt Milligan which delivers both gold and copper.

Royal is trading at multiples lower than the other large royalty companies and with a better near-term growth profile as Khoemacau ramps up, and further out from IAMGOLD’s new Cȏté project in Ontario. If you do not own it, you can buy at this level.

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