Royal Gold Inc 2026 Q2 Earnings Call

Good morning, welcome to our discussion of Royal Gold's second quarter 2026 results. This event is being webcast live, a replay of this call will be available on our website. Speaking on the call today are William Heissenbuttel, President and CEO, Paul Libner, Senior Vice President and CFO, and Martin Raffield, Senior Vice President, Operations. Other members of the management team are also available for questions. During today's call, we will make forward-looking statements, including statements about our projections and expectations for the future. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties are discussed in yesterday's press release and our filings with the SEC. We will also refer to certain non-GAAP financial measures, including adjusted net income, adjusted net income per share, adjusted EBITDA, and cash G&A.

Reconciliations of these measures to the most directly comparable GAAP measures are available in yesterday's press release, which can be found on our website. Bill will start with an overview of the second quarter, Martin will provide portfolio commentary, Paul will give a financial update. After the formal remarks, we'll open the lines for a Q&A session. I'll now turn the call over to Bill.

Good morning, thank you for joining the call. I'll begin on slide four. This is our second complete quarter of consolidated financial results after significantly growing our business in 2025. Our strong first half of 2026 clearly demonstrates the material change in the scale of our portfolio. Revenue for the quarter was $451 million, operating cash flow was a record $335 million, and earnings were $236 million. These were increases of 115%, 119%, and 79%, respectively, over the same period last year. Our diversified portfolio produced revenue from a variety of properties, with no one asset contributing more than 13% of revenue, and only two assets generating more than 10% of revenue. Reducing asset concentration risk was a key driver for our acquisitions in 2025, and we are pleased to see this reflected in our portfolio, which is now one of the most diversified in the sector.

After adjustments, net income was $218 million, or $2.56 per share, a 41% increase over last year. We remain a gold-focused business, gold contributed 76% of total revenue for the quarter. Our adjusted EBITDA margin remained high at 83% for the quarter, reflecting our low and stable cash G&A. We paid dividends of $40 million to shareholders in the quarter at our annual rate of $1.90 per share, 6% higher than last year. We repaid $200 million on the revolver during the quarter, we ended the quarter with total available liquidity of $1.2 billion. We are active on our share buyback program, repurchased and canceled 147,000 shares for a total cost of $30 million. As we discussed on our last quarterly call, we put the share buyback program in place as an additional capital allocation tool to be used with discretion.

We have multiple priorities for capital deployment, our decision-making considers the business development pipeline, the balance sheet, our regular dividend, and our equity valuation. During the quarter, we balanced the agreed further investment at Aurizona, paid $40 million in dividends, bought back shares, and made a meaningful reduction in debt, the latter of which preserves liquidity. Changes in market conditions and our outlook mean we must be flexible as we balance all opportunities for the accretive deployment of capital over the long term. In the second quarter, we thought the market did not reflect what we see as the value of our company, we are active on the share buyback alongside our other priorities. Any further activity will be based on the short and long-term priorities of the company and not just valuation. During the quarter, we also made further progress on simplifying the Sandstorm portfolio.

We announced a restructuring of our ownership in the Hod Maden joint venture, after quarter end, we reduced our equity interest from 30% to 15% in return for additional royalty interests. Hod Maden is a high-grade and high-margin project, we are pleased to preserve the value of our position while bringing our overall interest more in line with our core royalty and streaming business. While the residual equity interest is not the ideal investment structure for our portfolio, the smaller interest materially reduces our exposure to operating and capital cost risks, and we may still look for opportunities to reduce this interest in the future. We also worked with Americas Gold and Silver to settle fixed delivery obligations related to the Relief Canyon Mine.

This was a complicated arrangement that was cumbersome to manage, it eliminates a distraction for both sides without impacting our royalty or stream interests at Relief Canyon. With these transactions, we have significantly simplified aspects of the Sandstorm portfolio that were difficult for investors to understand. Over the past few months, we have streamlined the Horizon structure, divested non-core equity positions, restructured the Bear Creek investments, settled the Relief Canyon obligations, and made progress on restructuring the direct equity interest in Hod Maden. These steps were a strategic priority for us when we announced the Sandstorm and Horizon transaction, I am pleased with how quickly we have been able to show progress. I'll now turn the call over to Martin to discuss portfolio performance in the quarter.

Thanks, Bill. Turning to slide 5, we had another quarter of solid portfolio performance. Volume was 100,000 GEOs with revenue of $451 million. Royalty revenue was up by 83% from the prior year quarter to $140 million. We saw large revenue increases over the prior year from the Cortez legacy zone and Voisey's Bay, as well as strong contributions from our new Antamina, Caserones, Houndé, and Fruta del Norte interests. Stream revenue was also up strongly from the prior year to $311 million, an increase of 133%. We saw materially higher revenue year-over-year from Andacollo, Pueblo Viejo, Rainy River, Khoemacau, Wassa, and Sevinchenah, slightly offset by lower revenue from Mount Milligan. We also saw a strong contribution from Kansanshi, as well as our new Greenstone, Bonikro, Cerro Moro, and Chapada streams.

With respect to 2026 metal sales guidance, gold and silver are tracking well to the guidance ranges, and copper and other metals are trending to be around or above the top end of the ranges. We've seen strong copper-related revenue, largely due to lower than expected deductions on the Antamina NPI royalty and strong performance at other assets. Other metal sales have benefited from strong zinc production at Antamina and nickel production at Voisey's Bay. I'll now turn to slide 6 and give some high-level commentary on notable developments within the portfolio. At Mount Milligan, Centerra reported that gold and copper production is on track to meet full-year guidance.

At Rainy River, Coeur announced its plans after acquiring New Gold late in the first quarter, including a more aggressive exploration program with a focus on near mine drill testing and exploration of the large land package in the Rainy River District, which extends over 50 sq km. At Greenstone, Equinox reported that operations are continuing to ramp up, and 69% of the days in the second quarter exceeded the mill nameplate capacity of 27,000 tons per day. Equinox expects this trend to continue, resulting in higher quarter-over-quarter production for the balance of the year. At Red Chris, the government of Canada announced a CAD 500 million investment in the Block Cave project. Newmont has received key regulatory approvals for the project from the province of British Columbia and is advancing towards board approval near the end of the year.

At Caserones, work is underway by Lundin Mining to increase utilization of the cathode plant and grow copper production. 39,000 meters of drilling is planned this year on more than 10 exploration targets in the district. An initial resource at Angelica and the deep sulfide targets adjacent to the Caserones pit is expected in the first quarter of 2027. At Fruta del Norte, Lundin Gold reported the discovery of 2 additional copper gold porphyries, increasing the district total to 7, with a maiden resource for the Sandia porphyry expected in early 2027. At Kansanshi, First Quantum confirmed 2026 production guidance and reported that the S3 plant throughput was sustained above design capacity in the second quarter, driven by higher operating time, strong utilization, and improved milling rates. At Bonikro, Allied Gold expects to extend the mine life from 2029 to 2036, with average annual gold production of 120,000 ounces per year.

Allied is also studying an increase in plant capacity to bring forward the processing of low-grade stockpiles beginning in late 2026 to early 2027. At Platreef, Ivanhoe is now expecting commercial production from phase I in the fourth quarter of 2026. Shaft 3 commissioning was completed in June, Ivanhoe expects this will support the phase I ramp up and the phase II expansion. Construction of the phase II concentrator is on schedule for completion in the fourth quarter of 2027. We received the first delivery under our gold stream last week, we are looking forward to increased deliveries as the mine ramps up towards commercial production. At Mara, Glencore reported yesterday that mining restarted ahead of schedule at Alumbrera and that Agua Rica feasibility engineering is underway with the environmental permitting submission expected in the coming weeks, RIGI approval expected shortly thereafter.

At Hod Maden, the transition of operatorship to Lidya is complete, construction is continuing while Lidya undertakes a review of the project schedule and execution plan. Based on the work so far, project expenditures and commitments remain within the scope reflected in the technical report summary published by SSR Mining in January 2026. As of June 30th, overall project progress was approximately 25% when considering engineering at 74%, contracts and procurement at 44%, construction at 8%. Cumulative expenditures were approximately $175 million. Lidya continues to target initial concentrate production in 2028, subject to completion of the schedule and execution plan review, timely execution of the remaining major construction and procurement packages. Finally, I'll note that recent severe winter weather in central and northern Chile has caused temporary operational issues at both Andacollo and Caserones.