Royal Gold (RGLD) Q2 FY26 earnings call: guidance and Q&A

Royal Gold reported a robust second quarter with revenue of $451 million, a 115% increase year-over-year, and record operating cash flow of $335 million, up 119%. The company's portfolio demonstrated significant diversification, with no single asset contributing more than 13% of revenue and only two assets exceeding 10%, a key objective of the 2025 acquisitions. Adjusted net income per share rose 41% to $2.56, and the adjusted EBITDA margin remained high at 83%.

The company actively managed its capital, repaying $200 million on its revolver during the quarter and ending with $1.2 billion in available liquidity. Dividends of $40 million were paid, representing an annual rate of $1.90 per share, a 6% increase. Royal Gold also repurchased and canceled 147,000 shares for $30 million, utilizing its buyback program as a flexible capital allocation tool, balancing it against business development, balance sheet strength, and equity valuation.

Significant progress was made in simplifying the Sandstorm portfolio. This included restructuring the Hot Maden joint venture, reducing Royal Gold's equity interest from 30% to 15% in exchange for additional royalty interests, thereby reducing exposure to operating and capital cost risks. The company also settled fixed delivery obligations related to the Relief Canyon Mine, eliminating a complex arrangement without impacting its royalty or stream interest. These actions were strategic priorities following the Sandstorm and Horizon transactions.

Several key projects saw advancements. Greenstone operations are ramping up, exceeding mill nameplate capacity 69% of the time in Q2. At Red Chris, the Canadian government announced a CAD 500 million investment, and Newmont is advancing towards Board approval for the block cave project. Platreef Phase 1 commercial production is expected in Q4 2026, with the first gold stream delivery already received. Mara's Agua Rica project is progressing with environmental permitting submission expected soon, and mining restarted at Alumbrera.

The transition of operatorship at Hod Maden from SSR Mining to Lidya is complete, with construction continuing. Overall project progress was approximately 25% as of June 30, with cumulative expenditures of $175 million. Lidya targets initial concentrate production in 2028, subject to schedule review. Royal Gold's remaining commitment for its 15% share of project costs is approximately $65 million, expected to be funded over mid-2027 to mid-2028, after Lidya funds the next $397 million.

Gold and silver sales are tracking well to guidance, while copper and other metals are trending at or above the top end of their ranges, largely due to lower-than-expected deductions on the Antamina NPI royalty and strong performance from other assets like Voisey's Bay (nickel) and Antamina (zinc). Gold remains the dominant revenue driver at 76%, with silver at 12% and copper at 8%. Management remains precious metal focused but is open to opportunities in other metals.