Royal Gold Reports Third Quarter 2019 Results
DENVER–(BUSINESS WIRE)–Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries,
“Royal Gold” or the “Company,” “we” or “our”) reports net income of
$28.8 million, or $0.44 per share, on revenue of $109.8 million in its
fiscal third quarter ended March 31, 2019 (“third quarter”).
Third Quarter Key Metrics Compared to Prior Year Quarter:
- Revenue of $109.8 million, a decrease of 5.3%
- Operating cash flow of $77.4 million, a decrease of 25.9%1
- Volume of 84,200 GEOs2, a decrease of 3.6%
- Dividends paid of $17.4 million, an increase of 6.1%
- Average price of $1,304 per gold ounce, a decrease of 1.9%
“We delivered another solid quarter with several positive developments
in our portfolio,” commented Tony Jensen, President and CEO. “Most
notably, we were pleased that amendments were granted to the Mount
Milligan environmental assessment certificate that should relieve water
supply constraints on mill operations, which Centerra expects to return
to full capacity starting mid-May. We were also pleased to see that
improvements at Rainy River continued, with mill availability increasing
to 89% and gold recovery at 90% for the quarter.
“In February, we announced an agreement to acquire a silver stream on
the Khoemacau Copper Project in Botswana. This is a high-quality and
long-life development project that will fit nicely into our portfolio
and add another component of growth to our portfolio over the next
several years. We expect to fund this acquisition from cash flow or the
currently undrawn $1 billion revolving credit facility, which will leave
us well positioned with a strong balance sheet as we evaluate more
opportunities in what is currently an active business development
environment.”
__________________
1 Operating cash flow for the fiscal third quarter ended
March 31, 2018 included a one-time cash refund of a $20.8 million tax
receivable from the Servicio de Impuestos Internos, the Chilean tax
authority.
2 Gold Equivalent Ounces (“GEOs”) are calculated as revenue
divided by the average gold price for the same period. GEOs, net of
stream payments, were 69,600 in the third quarter, compared to 71,200 in
the prior year third quarter.
Recent Developments
Agreement to Acquire Silver Stream on Khoemacau Copper Project
On February 25, 2019, Royal Gold, through its wholly owned subsidiary
RGLD Gold AG, announced the acquisition of a silver stream on the
Khoemacau Copper Project (“Khoemacau”) in Botswana with Khoemacau Copper
Mining (Pty.) Limited (“KCM”), a wholly owned subsidiary of Cupric
Canyon Capital LP (together with all its subsidiaries including KCM,
“Cupric”), a private company owned by management and funds advised by
Global Natural Resource Investments (“GNRI”).
Khoemacau is an advanced stage copper-silver project. Cupric has
assembled an experienced board, executive team and project team to
develop Khoemacau, and has obtained all permits and approvals required
for construction to proceed. Cupric envisions a 21 year mine life,
averaging payable production of approximately 62,000 tonnes of copper
and 1.9 million ounces of silver per year. Silver represents
approximately 7% of the mine’s anticipated revenues at current metal
prices.
Royal Gold will make an advance payment of $212 million for 80% of the
silver produced from Khoemacau until certain delivery thresholds are met
(the “Silver Stream”), and at Cupric’s option, up to an additional $53
million for up to the remaining 20% of the silver produced (the “Option
Stream”). Royal Gold will pay 20% of the spot silver price for each
ounce delivered. Royal Gold will also make available up to $25 million
of subordinated debt towards the end of project development to fund
potential cost overruns, subject to various conditions (the “Overrun
Facility”). Cupric’s development plans indicate that Royal Gold could
expect average annual silver deliveries of 1.5 million ounces at a
stream rate of 80%, or 1.9 million ounces based on a stream rate of 100%
if Cupric exercises the entire Option Stream. Initial deliveries are
expected to start in the first half of 2021.
Before accounting for the Silver Stream and Option Stream, Cupric
forecasts life of mine by-product C1 plus sustaining capital costs of
approximately $1.71 per pound of copper on a by-product basis at a
silver price of $16.00 per ounce, placing the operation at approximately
the 50th percentile on the global copper cost curve.
Mount Milligan
On February 27, 2019, Centerra Gold Inc. (“Centerra”) announced that it
received an amendment to the Mount Milligan environmental assessment
certificate that permits access to additional sources of surface water
and groundwater. According to Centerra, Mount Milligan will be permitted
to use water at set rates from Philip Lake 1, Rainbow Creek and Meadows
Creek until November 30, 2021, as well as water from groundwater sources
within a six kilometer radius of the mine for the life of mine. Mount
Milligan reported that it has upgraded its water pumping infrastructure
and commenced accessing water from the newly permitted sources at the
beginning of April, 2019. Mill throughput was limited to 32,000 tonnes
per operating day in the first calendar quarter of 2019, and has
increased slowly as water levels increased in the tailings facility.
Centerra expects mill throughput to be at full capacity of 55,000 tonnes
per day starting mid-May as additional water is captured during the
pending spring melt, and to remain at that level throughout the
remainder of 2019.
With respect to the long-term water supply plan, Centerra continues to
work with relevant stakeholders to identify and evaluate water sources
for the remainder of the mine life. Centerra expects formal applications
and government review to commence later this calendar year. Centerra
also expects that the long-term source, or sources, should be available
after November 2021, for the entire mine life.
For the full calendar year, Centerra continues to expect Mount
Milligan’s payable gold production to range from 155,000 to 175,000
ounces, and payable copper production to range from 65 to 75 million
pounds.
Rainy River
Improved operating performance at the Rainy River mine, owned and
operated by New Gold Inc. (“New Gold”), continued during the quarter.
Quarterly gold production was approximately 62,000 ounces, with full
calendar year production guidance of 245,000 to 270,000 ounces. Although
ice buildup in the crushed ore stockpile caused mill throughput to track
below the annual target of 22,000 to 24,000 tonnes per day, New Gold
reported average mill throughput returned to target levels at the end of
the quarter. Mill availability has been improving and reached a record
89% for the quarter, with 95% achieved in March, despite planned
downtime to complete repairs. Gold recovery also improved, with an
average 90% for the quarter. New Gold expects recovery to continue to
improve, and average 90 to 92% for the calendar year.
New Gold is undertaking an optimization study for Rainy River during
calendar 2019 with the objective of increasing cash flow generation by
focusing on medium and high grade ore. Potential scenarios for
underground development are also being evaluated. This work is to be
completed with an updated mine plan in the fourth quarter of this
calendar year.
Subsequent to the end of the quarter, on May 1, 2019, New Gold announced
that a buildup of excess water in the tailings facility from snowmelt
caused a temporary suspension of milling operations at Rainy River on
April 24. Mining and crushing operations are continuing and ore is being
stockpiled during the suspension. New Gold is managing the excess water
and expects full mill operations to resume within five days of the
announcement of the suspension depending on precipitation levels over
the same period.
Peñasquito
Subsequent to the end of the quarter, on April 29, 2019, Newmont
Goldcorp reported a temporary suspension of operations at Peñasquito due
to a blockade by a trucking contractor and certain community leaders.
Newmont Goldcorp reported that it is pursuing legal avenues and is
working with government authorities to resolve the situation, but did
not indicate what effect this suspension is expected to have on calendar
2019 production.
Third Quarter 2019 Overview
Third quarter revenue was $109.8 million compared to $116.0 million in
the prior year quarter, with stream revenue totaling $77.8 million and
royalty revenue totaling $32.0 million. The decrease in total revenue
for the third quarter compared to the prior year quarter was due to
lower average gold, silver and copper prices, as well as lower stream
revenue primarily attributable to a decrease in gold and copper sales at
Mount Milligan. The lower stream sales at Mount Milligan were partially
offset by higher gold and silver sales at Pueblo Viejo and higher gold
sales at Andacollo due to timing of deliveries.
Third quarter cost of sales was approximately $19.1 million, compared to
$21.3 million in the prior year quarter. The decrease was primarily due
to decreased gold and copper sales from Mount Milligan. Cost of sales is
specific to the Company’s stream agreements and is the result of the
purchase of gold, silver and copper for a cash payment.
General and administrative expenses decreased to $6.8 million in the
third quarter from $8.1 million during the prior year quarter. The
decrease during the current period was primarily due to lower legal
costs resulting from settlement of the Voisey’s Bay royalty calculation
dispute.
On July 1, 2018, the Company adopted new Accounting Standards Update
guidance which impacts how changes in fair value of equity securities
are recognized at each reporting period. As a result, for the three
months ended March 31, 2019, the Company recognized a gain of $1.8
million on changes in fair value of equity securities related to the
holdings in Contango ORE, Inc. and Rubicon Minerals Corporation. The new
guidance will increase earnings volatility at each reporting period.
The Company recognized a third quarter income tax expense of
$9.4 million, compared to a benefit of $45.9 million during the prior
year quarter, which resulted in an effective tax rate for the third
quarter of 24.7% compared to 22.9% for the prior year quarter. The
increase in the effective tax rate was primarily related to lower
discrete benefits recorded in the current quarter as compared to the
prior year quarter, which included a tax benefit related to impairment
charges.
As of March 31, 2019, the Company had current assets of $265.4 million
compared to current liabilities of $49.3 million, resulting in working
capital of $216.1 million. This compares to current assets of
$125.8 million and current liabilities of $51.4 million at June
30, 2018, resulting in working capital of $74.4 million.
During the third quarter, liquidity needs were met from $90.7 million in
net revenue and available cash resources. As of March 31, 2019, the
Company had no amounts outstanding and the full $1 billion available
under its revolving credit facility. Working capital, combined with the
Company’s undrawn revolving credit facility, resulted in approximately
$1.2 billion of total liquidity as of March 31, 2019.
In June 2012, the Company completed an offering of $370 million
aggregate principal amount of 2.875% convertible senior notes due 2019
(“2019 Notes”). The 2019 Notes mature on June 15, 2019, and the Company
will settle the principal amount of each 2019 Note in cash and settle
any excess conversion value in shares, plus cash in lieu of fractional
shares.
Third quarter cash flow from operations was $77.4 million, compared to
$104.6 million in the prior year quarter. The decrease over the prior
year quarter was primarily due to lower proceeds received in the current
quarter of $7.0 million from stream and royalty interests, net of
production taxes and cost of sales, and the receipt of an income tax
receivable from a foreign taxing authority of $20.8 million in the prior
year quarter.
Property Highlights
A summary of third quarter and historical production reported by
operators of the Company’s principal stream and royalty properties can
be found on Tables 1 and 2. Calendar year 2019 operator production
estimates for these properties compared to actual production at those
properties through March 31, 2019 can be found on Table 3. Results of
the streaming business for the third quarter, compared to the prior year
quarter, can be found on Table 4. Highlights at certain of the Company’s
principal producing and development properties during the third quarter,
compared to the prior year quarter, are detailed in the Quarterly Report
on Form 10-Q.
CORPORATE PROFILE
Royal Gold is a precious metals stream and royalty company engaged in
the acquisition and management of precious metal streams, royalties and
similar production-based interests. As of March 31, 2019, the Company
owns interests on 191 properties on five continents, including interests
on 43 producing mines and 17 development stage projects. Royal Gold is
publicly traded on the Nasdaq Global Select Market under the symbol
“RGLD.” The Company’s website is located at www.royalgold.com.
Note: Management’s conference call reviewing the third quarter
results will be held on Thursday, May 2, 2019, at noon Eastern Time
(10:00 a.m. Mountain Time). The call will be webcast and archived on the
Company’s website for a limited time.
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Third Quarter Earnings Call Information: |
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| Dial-In Numbers: | 855-209-8260 (U.S.); toll free | ||||||
| 855-669-9657 (Canada); toll free | |||||||
| 412-542-4106 (International) | |||||||
| Conference Title: | Royal Gold | ||||||
| Webcast URL: |
www.royalgold.com |
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Cautionary “Safe Harbor” Statement Under the Private Securities
Litigation Reform Act of 1995: With the exception of historical
matters, the matters discussed in this press release are forward-looking
statements that involve risks and uncertainties that could cause actual
results to differ materially from projections or estimates contained
herein. Such forward-looking statements include statements about solid
quarterly results and positive portfolio developments; the Khoemacau
Copper Project, including the new silver stream fitting into the
Company’s portfolio and adding growth, funding for advance payments,
being well-positioned to evaluate opportunities in an active business
development environment, mine life, average annual payable copper and
silver production, silver contribution to mine revenue, expected initial
and annual silver deliveries and life of mine cash and capital costs;
Mount Milligan, including permit amendments allowing near- and long-term
access to additional surface and groundwater, expectations for mill
operations returning to full capacity and average mill throughput
through 2019, work to secure water sources for the life of the mine and
expected gold and copper production through 2019; Rainy River, including
continued operating improvements, expectations for improved recoveries
at expected rates, and results of studies to increase cash flow
generation, evaluations of underground development, completing an
updated mine plan and expectations to resume full mill operations after
suspension; effect of production suspension at Peñasquito; the Peak Gold
Project, including efforts to identify options with respect to the
Company’s interests; potential future earnings volatility caused by
accounting guidance on recognition of changes in equity securities fair
value; changes in taxes and tax rates; expectations to settle the
Company’s 2019 Notes primarily in cash from the revolving credit
facility; and operators’ estimated and actual production for calendar
year 2019 and future years, and their estimates of reserves and
mineralized material. Net gold and metal reserves attributable to Royal
Gold’s stream, royalty and other interests are subject to certain
assumptions and, like reserves, do not reflect actual ounces that will
be produced. Like any stream, royalty or similar interest on a
non-producing or not-yet-in-development project, our interests on
development projects are subject to certain risks, such as the ability
of the operators to bring the projects into production and operate in
accordance with their feasibility studies or other technical studies and
mine plans, and the ability of Royal Gold to make accurate assumptions
regarding valuation and timing and amount of payments. In addition, many
of our interests are subject to risks associated with conducting
business in a foreign country, including application of foreign laws to
contract and other disputes, foreign environmental laws and enforcement
and uncertain political and economic environments. Factors that could
cause actual results to differ materially from projections include,
among others: precious metals, copper and nickel prices; performance of
and production at the Company’s stream and royalty properties; the
ability of operators to finance project construction to completion and
bring projects into production as expected, including development stage
mining properties, mine and mill expansion projects and other
development and construction projects; operators’ delays in securing or
inability to secure or maintain necessary governmental permits;
decisions and activities of the operators of the Company’s stream and
royalty properties; unanticipated grade, environmental, geological,
seismic, metallurgical, processing, liquidity or other problems the
operators of the Company’s stream and royalty properties may encounter;
operators’ inability to access sufficient raw materials, water or power;
changes in operators’ project parameters as plans continue to be
refined; changes in estimates of reserves and mineralization by the
operators of the Company’s stream and royalty properties; contests to
the Company’s stream and royalty interests and title and other defects
in the properties where the Company holds stream and royalty interests;
errors or disputes in calculating stream deliveries and royalty
payments, or deliveries or payments not made in accordance with stream
and royalty agreements; economic and market conditions; changes in laws
governing the Company and its stream and royalty interests or the
operators of the properties subject to such interests, and other
subsequent events; as well as other factors described in the Company’s
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other
filings with the Securities and Exchange Commission. Most of these
factors are beyond the Company’s ability to predict or control. The
Company disclaims any obligation to update any forward-looking statement
made herein. Readers are cautioned not to put undue reliance on
forward-looking statements.
Statement Regarding Third-Party Information: Certain information
provided in this press release, including production estimates for
calendar 2019, has been provided to us by the operators of the relevant
properties or is publicly available information filed by these operators
with applicable securities regulatory bodies, including the Securities
and Exchange Commission. Royal Gold has not verified, and is not in a
position to verify, and expressly disclaims any responsibility for the
accuracy, completeness or fairness of any such third-party information
and refers the reader to the public reports filed by the operators for
information regarding those properties.
Information in this press release concerning the Khoemacau Copper
Project mine life, average annual payable copper and silver production,
silver contribution to mine revenue, cost information and initial
deliveries of silver under the streaming agreement was provided to the
Company by Cupric Canyon Capital L.P., the privately-held owner and
developer of Khoemacau. Such information may not have been prepared in
accordance with applicable laws, stock exchange rules or international
standards governing preparation and public disclosure of technical data
and information relating to mineral properties. Royal Gold has not
verified, and is not in a position to verify, and expressly disclaims
any responsibility for the accuracy, completeness or fairness of this
third-party information, and investors are cautioned not to rely upon
this information.
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TABLE 1 Third Quarter Fiscal 2019
Revenue and Operators’ Reported Production for Principal Stream (In thousands, except reported production in oz. and lbs.) |
||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||
| March 31, 2019 | March 31, 2018 | |||||||||||||||
| Reported | Reported | |||||||||||||||
| Stream/Royalty | Metal(s) | Revenue | Production(1) | Revenue | Production(1) | |||||||||||
| Stream: | ||||||||||||||||
| Mount Milligan | $ | 26,938 | $ | 47,807 | ||||||||||||
| Gold | 15,200 | oz. | 25,800 | oz. | ||||||||||||
| Copper | 2.6 | Mlbs. | 4.3 | Mlbs. | ||||||||||||
| Pueblo Viejo | $ | 20,787 | $ | 15,734 | ||||||||||||
| Gold | 10,400 | oz. | 8,500 | oz. | ||||||||||||
| Silver | 469,000 | oz. | 260,800 | oz. | ||||||||||||
| Andacollo | Gold | $ | 15,638 | 12,000 | oz. | $ | 7,186 | 5,400 | oz. | |||||||
| Wassa and Prestea | Gold | $ | 7,328 | 5,600 | oz. | $ | 8,350 | 6,300 | oz. | |||||||
| Other(2) | $ | 7,074 | $ | 3,902 | ||||||||||||
| Gold | 5,000 | oz. | 2,800 | oz. | ||||||||||||
| Silver | 40,800 | oz. | 11,100 | oz. | ||||||||||||
| Total stream revenue | $ | 77,765 | $ | 82,979 | ||||||||||||
| Royalty: | ||||||||||||||||
| Peñasquito | $ | 4,465 | $ | 6,452 | ||||||||||||
| Gold | 37,300 | oz. | 91,200 | oz. | ||||||||||||
| Silver | 4.9 | Moz. | 5.0 | Moz. | ||||||||||||
| Lead | 34.5 | Mlbs. | 26.0 | Mlbs. | ||||||||||||
| Zinc | 72.8 | Mlbs. | 88.0 | Mlbs. | ||||||||||||
| Cortez | Gold | $ | 4,127 | 32,700 | oz. | $ | 1,901 | 18,900 | oz. | |||||||
| Other(2) | Various | $ | 23,421 | N/A | $ | 24,651 | N/A | |||||||||
| Total royalty revenue | $ | 32,013 | $ | 33,004 | ||||||||||||
| Total Revenue | $ | 109,778 | $ | 115,983 | ||||||||||||
| Nine Months Ended | Nine Months Ended | ||||||||||||||||||||
| March 31, 2019 | March 31, 2018 | ||||||||||||||||||||
| Reported | Reported | ||||||||||||||||||||
| Stream/Royalty | Metal(s) | Revenue | Production(1) | Revenue | Production(1) | ||||||||||||||||
| Stream: | |||||||||||||||||||||
| Mount Milligan | $ | 63,954 | $ | 101,390 | |||||||||||||||||
| Gold | 38,500 | oz. | 57,100 | oz. | |||||||||||||||||
| Copper | 5.8 | Mlbs. | 8.7 | Mlbs. | |||||||||||||||||
| Pueblo Viejo | $ | 58,504 | $ | 67,492 | |||||||||||||||||
| Gold | 28,500 | oz. | 35,900 | oz. | |||||||||||||||||
| Silver | 1.5 | Moz. | 1.3 | Moz. | |||||||||||||||||
| Andacollo | Gold | $ | 51,016 | 40,900 | oz. | $ | 41,124 | 32,100 | oz. | ||||||||||||
| Wassa and Prestea | Gold | $ | 24,939 | 20,000 | oz. | $ | 26,049 | 20,200 | oz. | ||||||||||||
| Other(2) | $ | 17,067 | $ | 4,973 | |||||||||||||||||
| Gold | 12,300 | oz. | 3,600 | oz. | |||||||||||||||||
| Silver | 108,300 | oz. | 11,100 | oz. | |||||||||||||||||
| Total stream revenue | $ | 215,480 | $ | 241,028 | |||||||||||||||||
| Royalty: | |||||||||||||||||||||
| Peñasquito | $ | 12,763 | $ | 20,439 | |||||||||||||||||
| Gold | 141,000 | oz. | 296,200 | oz. | |||||||||||||||||
| Silver | 14.1 | Moz. | 15.9 | Moz. | |||||||||||||||||
| Lead | 100.4 | Mlbs. | 95.5 | Mlbs. | |||||||||||||||||
| Zinc | 220.1 | Mlbs. | 274.8 | Mlbs. | |||||||||||||||||
| Cortez | Gold | $ | 7,066 | 59,700 | oz. | $ | 7,823 | 73,800 | oz. | ||||||||||||
| Other(2) | Various | $ | 72,053 | N/A | $ | 73,517 | N/A | ||||||||||||||
| Total royalty revenue | $ | 91,882 | $ | 101,779 | |||||||||||||||||
| Total revenue | $ | 307,362 | $ | 342,807 | |||||||||||||||||
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TABLE 2 Operators’ Historical Production |
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| Reported Production For The Quarter Ended1 | ||||||||||||||||||||||||||
| Property | Operator | Stream/Royalty | Metal(s) | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | ||||||||||||||||||
| Stream: | ||||||||||||||||||||||||||
| Mount Milligan | Centerra | 35% of payable gold | Gold | 15,200 | oz. | 17,700 | oz. | 5,500 | oz. | 20,700 | oz. | 25,800 | oz. | |||||||||||||
| 18.75% of payable copper | Copper | 2.6 | Mlbs. | 2.4 | Mlbs. | .8 | Mlbs. | 1.6 | Mlbs. | 4.3 | Mlbs. | |||||||||||||||
| Pueblo Viejo | Barrick (60%) | 7.5% of gold produced up to 990,000 ounces; 3.75% thereafter | Gold | 10,400 | oz. | 8,900 | oz. | 9,200 | oz. | 13,200 | oz. | 8,500 | oz. | |||||||||||||
| 75% of payable silver up to 50 million ounces; 37.5% thereafter | Silver | 469,000 | oz. | 509,500 | oz. | 540,200 | oz. | 616,300 | oz. | 260,800 | oz. | |||||||||||||||
| Andacollo | Teck | 100% of gold produced | Gold | 12,000 | oz. | 6,200 | oz. | 22,700 | oz. | 12,400 | oz. | 5,400 | oz. | |||||||||||||
| Wassa and Prestea | Golden Star | 10.5% of gold produced up to 240,000 ounces; 5.5% thereafter | Gold | 5,600 | oz. | 7,800 | oz. | 6,500 | oz. | 2,800 | oz. | 6,300 | oz. | |||||||||||||
| Royalty: | ||||||||||||||||||||||||||
| Peñasquito | Newmont Goldcorp | 2.0% NSR | ||||||||||||||||||||||||
| Gold | 37,300 | oz. | 53,400 | oz. | 50,300 | oz. | 79,600 | oz. | 91,200 | oz. | ||||||||||||||||
| Silver | 4.9 | Moz. | 5.0 | Moz. | 4.2 | Moz. | 5.0 | Moz. | 5.0 | Moz. | ||||||||||||||||
| Lead | 34.5 | Mlbs. | 36.1 | Mlbs. | 29.9 | Mlbs. | 26.6 | Mlbs. | 26.0 | Mlbs. | ||||||||||||||||
| Zinc | 72.8 | Mlbs. | 83.1 | Mlbs. | 64.2 | Mlbs. | 73.7 | Mlbs. | 88.0 | Mlbs. | ||||||||||||||||
| Cortez | Barrick | GSR1, GSR2, GSR3, NVR1 | Gold | 32,700 | oz. | 19,900 | oz. | 7,000 | oz. | 3,900 | oz. | 18,900 | oz. | |||||||||||||
Contacts
Alistair Baker
Director, Business Development
(720) 554-6995
