"On April 6, Royal Gold announced that it signed a definitive agreement with a subsidiary [Compañia Minera Carmen de Andacollo (CDA)] of Teck Cominco Limited to acquire an interest in the gold production at the Andacollo mine located in Chile for $300 million in cash and Royal Gold shares. We consider the Andacollo purchase to be a transformational deal for Royal Gold as it is expected to increase its annual revenue by over 40% from fiscal 2011 onward, is accretive to longer term CFPS, has a favorable impact on NAV, and adds another long-life royalty asset operated by a world-class mining company."
    -MICHAEL JALONEN,   MERRILL LYNCH (05/15/09)

"The company has been successful in growing its portfolio of producing royalties and is enjoying the benefits of a broad and diversified source of revenues, with expected future growth from the ramp up of new operations.

Andacollo Transaction – On April 6, Royal Gold announced an agreement for the purchase of an interest in the production of Teck Cominco’s Andacollo mine in Chile for US$265 million, consisting of US$218 million (which it raised in equity) and 1.2 million RGLD shares. The agreement is for a 75% royalty on the first 910,000 ounces of production, and a 50% royalty on production thereafter. We believe Royal Gold has negotiated a positive transaction, adding a significant source of revenues and reserves to its growing portfolio. The transaction is in line with the company’s strategy to remain a primarily gold royalty company, and demonstrates that it is well positioned to gain access to attractive deals in the sector.

Royal Gold is currently our top pick in the gold sector, rated Outperform. Royal Gold shares are trading at a 1.2x multiple to our valuation, versus an average 1.5x multiple for its peers. Our US$54/share target price implies a potential 36% return. We believe this is a good opportunity for investors to take a position in the stock, which offers a lower risk profile relative to other gold sector equities; participation in rising gold prices with negligible exposure to operating costs while retaining leverage to exploration success; an experienced management team; and a good track record of growth."
    -PATRICK CHIDLEY,   BARNARD JACOBS MELLET - USA (05/11/09)

"Royal Gold has returned to the royalty financing market with the announcement that it is acquiring the rights to 75% of the payable gold production from the Andacollo copper-gold mine in Chile, which is being developed by Teck Cominco. The USD300m purchase, to be paid with a combination of cash (minimum of USD100m) and shares (ranging from 0.7-4.5m), would give Royal Gold a direct interest in c0.7moz of gold production over the 20-year life of the Andacollo mine. Royal Gold is not purchasing any of the mine's copper output, although it would be exposed to the copper market, should prices decline below USD1.15/lb, we estimate.

This transaction, in our view, reduces the company's exposure to some of its more mature royalties, such as Cortez, although it shifts the risk profile toward development-stage and preproduction assets. With the commissioning of Peñasquito in the second half of calendar 2009 and the start-up of Andacollo in the first half of calendar 2010, Royal Gold could see a significant boost to revenues in fiscal 2011, assuming that both projects achieve rated capacity without major issues. Based on our assumptions regarding production from the Andacollo mine, we estimate that this transaction would increase our SVM real options valuation of Royal Gold by c11% and our standard NPV valuation by more than 20%."
    -VICTOR FLORES,   HSBC SECURITIES (04/08/09)

"Royal Gold has been GSA Top 10 for 18 months now. We put it on in part because of the Penasquito deposit that I mentioned earlier. Royal has a 2% royalty on that, and 2% of a billion dollars is $20 million a year. Royal is unique in that they haven't prostituted themselves by selling shares on a continuous basis. They only have 34 million shares outstanding and they will have royalty income this year of about $100 million. Penasquito is just coming on line, so its $20 million per year won’t be fully seen until late 2010.

Plus Royal pays a dividend. I think it could pay $1.00/share ($0.32 now). Dividend-paying gold stocks typically trade at a 1% yield. A $1.00/share dividend would make Royal a potential $100 stock. That's my crystal ball down-the-road target.

Royal is a great play on gold price because they don't have the aggravation of mining. They have a portfolio of mine royalties, plus a small corporate office. Royal employs 16 people, has $150 million in the bank and over $100 million a year income, which is about $3.00 per share pre-tax. Their biggest cost is taxes."
    -   The Gold Report Interview with John Doody (01/20/09)

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