Royal Gold, Inc. (NASDAQ:RGLD) Faces Uncertainty Over its Royalty Revenue Stream


Dallas, Texas 11/01/2013 (Financialstrend) – Since the last week of October Royal Gold, Inc. (NASDAQ:RGLD) stock is bleeding red. It had lost close to 5.3% of its market value on October 25 trading session and that has continued to this week with the stock shedding another 7% during trading on October 31. As of close of business yesterday, the stock was pegged at $48.04 per share. In the past month of trading the stock is down 2% and by a staggering 44% during trading over the past 12 months.

The lack of protracted investor confidence in the stock is being ascribed to the uncertainty prevailing around the completion of mining infrastructure in the Pascua lama mining project. The construction activity was being front ended by Barrick Gold which held a controlling stake in the project. The $3.11 billion market capped Royal has a “sliding scale” royalty mechanism with the operator. Royal has been very clear from  the beginning that this project constitutes a royalty revenue stream with no obligation on its part with respect to funnelling in additional investment into the stock.

In spite of the weakness in the stock valuation, the gold producer has managed to payout dividend of $0.8 per share translating to a 1.67% dividend payout to its share holders. Its annual sales has been in the region of $289 million with net income from operations for the quarter coming in at $69.2 million.

The firm is expected to announce its third quarter results in the second week of November. In its previous quarter, the sales had dipped into the negative territory with a huge 52% drop in its earnings per share. This lack of support to the stock from company operations had resulted in the sustained sell of  by investors leading to the stock currently trading at 46% lower than its 52 week high valuations.