Royal Gold Stumbles Even as Gold Prices Soar (RGLD, NEM, ABX, SLW, GLD, GDX)

Investors looking to making a killing on gold this past year would have done well to invest in silver. Gold prices have risen to more than $1,300/ounce, about a 20% jump in the past 12 months. Silver has jumped from around $10/ounce to a shade over $25/ounce.
Looking at the earnings report from Royal Gold, Inc. (NASDAQ:RGLD) puts gold and the gold miners in the same box as the big oil companies. Royal Gold reported its 2011 first quarter diluted EPS of $0.21 on royalty revenue of $45.3 million. Analysts were expecting EPS of $0.25 on revenue of $47.61. Unlike miners Newmont Mining Corp. (NYSE:NEM) and Barrick Gold Corp. (NYSE:ABX), Royal does not mine anything, it simply buys royalty rights in production.

Royalty revenues jumped from $26.1 million in the same period a year ago, and operating income nearly doubled. Net income was nearly 50% higher. The missed estimate on revenue looks to be due to a drop of $3.3 million in payments from Barrick’s Cortez mine, where Royal’s share of production fell by two-thirds.

The company doesn’t explain the drop in its earnings release, but something’s a little strange because Barrick’s earnings release noted that Cortez produced about 370,000 ounces of gold in the quarter, more than a third of Barrick’s North American production.
Newmont reported earnings last week , and the company beat both EPS and revenue estimates. But the company cooled off investor interest by lowering its overall production forecast and raising its cost/ounce forecast.

Barrick, which also reported earnings last week, kept its forecast for costs and production in-line with its earlier guidance. The company noted total cash costs in North America were $454/ounce. At the Cortez mine, total cash costs were just $277/ounce due primarily to richer ore.

Royal’s shares are up about 3.5% in early trading this morning. The SPDR Gold Shares ETF (NYSE:GLD) is up about 2.5% and the Market Vectors Gold Miners ETF (NYSE:GDX) is up about 3.5%. Silver buyer Silver Wheaton Corp. (NYSE:SLW) is up about 6.5%. Gold is up more than 3%, at $1,378/ounce. That probably explains why no one is paying much attention to Royal’s earnings.

Paul Ausick