Gold prices steady, holding sharp gains in wake of soft U.S. jobs data
On Thursday, BMO Capital Markets updated its financial outlook for Royal Gold (NASDAQ:RGLD), slightly increasing the price target on the company’s shares to $197 from the previous $196. The firm has chosen to keep a Market Perform rating on the stock. The adjustment follows a recent deal involving Royal Gold, which is expected to contribute positively to the company’s financial prospects. The stock, currently trading at $179.7, has demonstrated strong momentum with a 37% year-to-date return and is trading near its 52-week high of $191.78. According to InvestingPro analysis, Royal Gold appears slightly undervalued based on its Fair Value assessment.
Analysts at BMO Capital Markets have expressed a favorable view of Royal Gold’s involvement with the Warintza project. The company, which maintains impressive gross profit margins of 86.75% and has consistently paid dividends for 26 consecutive years, has committed to a $200 million stream and royalty agreement that is designed to support the project through to a final investment decision, anticipated by late 2026. The deal is considered beneficial for Royal Gold, with a projected internal rate of return (IRR) of approximately 7% based on BMO’s gold price estimates and potentially reaching around 10% at current spot prices.
The Warintza project is still in its early stages, yet the terms of Royal Gold’s royalty agreement include provisions that accommodate potential timeline delays. The stream agreement includes mutual termination options with provisions for full repayment if necessary, while the net smelter return (NSR) royalty is set to be a permanent fixture. These terms are designed to protect Royal Gold’s investment and provide financial flexibility.
In light of the new agreement, BMO Capital Markets has incorporated the stream into its financial model for Royal Gold, leading to a $1 increase in the target price for Royal Gold’s shares. The revised target reflects the anticipated positive impact of the Warintza project on Royal Gold’s financial performance.
The Warintza project is situated in a region known for its mineral wealth, and Royal Gold’s investment is expected to play a significant role in bringing the project to fruition. The royalty company’s financial commitment to Warintza is indicative of its strategic approach to investment in mining projects with potential for long-term returns. With a market capitalization of $11.83 billion and an "GREAT" financial health score according to InvestingPro, which offers comprehensive analysis and additional insights through its Pro Research Report covering 1,400+ US equities.
In other recent news, Royal Gold Inc. reported impressive financial results for the first quarter of 2025, significantly exceeding analyst expectations. The company announced earnings per share of $1.72, surpassing the forecasted $1.38 by 24.6%. Revenue also exceeded projections, reaching $193.4 million against the anticipated $146.31 million, marking a 32.2% beat. Additionally, Royal Gold declared a third-quarter dividend of $0.45 per share, reflecting a 12.5% increase over the previous year. The company maintained a debt-free status with $1.25 billion in liquidity, positioning it well within the royalty and streaming sector. Despite these strong financial outcomes, Royal Gold’s stock experienced a decline, which may be attributed to broader market conditions. The company also announced its ongoing commitment to exploring transaction opportunities in the base metal sector. Analysts from firms like CIBC (TSX:CM) and Scotiabank (TSX:BNS) have shown interest in Royal Gold’s asset handbook and corporate development activities, indicating a positive outlook for future growth.
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