UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10‑K10-K
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(Mark One) | |
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Fiscal Year Ended June 30, | |
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or | |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Transition Period From to |
Commission File Number 001‑13357001-13357
Royal Gold, Inc.Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware |
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Denver, Colorado | 80202 |
(303) 573‑1660
Registrant’s telephone number, including area code:code (303) 573-1660
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of | ||
Common | | RGLD | | Nasdaq Global Select Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well‑knownwell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑TS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ | Accelerated filer ☐ |
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Emerging growth company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Exchange Act). Yes ☐ No ☒
Aggregate market value of the voting common stock held by non‑affiliatesnon-affiliates of the registrant, based upon the closing sale price of Royal Gold common stock on December 31, 2017,2019, as reported on the NASDAQNasdaq Global Select Market was $5,335,748,560.$8.0 billion. There were 65,505,11065,591,043 shares of the Company’sRoyal Gold common stock, par value $0.01 per share, outstanding as of August 1, 2018.July 30, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 20182020 Annual Meeting of Stockholders scheduled to be held on November 14, 2018,18, 2020, and to be filed within 120 days after June 30, 2018,2020, are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10‑K10-K.
INDEX
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2 | ||||
| | 7 | ||
| | 15 | ||
| | 15 | ||
| | 28 | ||
| | 28 | ||
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| | 28 | ||
| | 28 | ||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 29 | |
| | 39 | ||
| | 40 | ||
| Changes | |||
72 | ||||
| | 72 | ||
| | 73 | ||
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| | 74 | ||
| | 74 | ||
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | 74 | |
| Certain Relationships and Related Transactions, and Director Independence | | 74 | |
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74 | ||||
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| | 80 | ||
| 81 | |||
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ii
1
This document (including information incorporated hereinreport contains and incorporates by reference) contains “forward‑lookingreference “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933U.S. federal securities laws. Forward-looking statements are made based on management’s current expectations and Section 21E of the Securities Exchange Act of 1934, which involve a degree of risk and uncertaintybeliefs concerning future developments. Actual results may differ, possibly materially, from forward-looking statements due to various factors affecting Royal Gold, Inc. and its subsidiaries.factors. For a discussion of some of these factors, see the discussion in Item 1A, Risk Factors, of this report. In addition, please see our note about forward‑looking statements included inand Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), of this report.
Royal Gold does not own, develop, or mine the properties on which it holds stream or royalty interests, except for our interest in the Peak Gold, LLC joint venture (“Peak Gold JV”) as described further in this report.. Certain information provided in this Annual Report on Form 10‑K,10-K about operating properties in which we hold interests, including without limitation, allinformation about reserves, historical production, and production estimates, property descriptions, of properties and property developments, at properties included herein, has beenwas provided to us by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission (the “SEC”). 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, such third‑partythird-party information and refers the reader to the public reports filed by the operators for information regarding those properties.
Unless the context otherwise requires, references to “Royal Gold,” the “Company,” “we,” “us,” and “our” refer to Royal Gold, Inc. and its consolidated subsidiaries
PART I
Overview
Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiringWe acquire and managingmanage precious metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests. Please refer to Item 2, Properties, for a discussion of the development at our principal properties.
We manage our business under two segments:
Acquisition and Management of Stream Interests—A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. As of June 30, 2018,2020, we owned seven stream interests, which are on fivesix producing properties and onetwo development stage property.properties. Our stream interests accounted for approximately 71%72% of our total revenue for each of the fiscal years ended June 30, 20182020 and 2017.2019. We expect stream interests to continue representing a significant proportionportion of our total revenue.
Acquisition and Management of Royalty Interests—Royalties are non‑operatingnon-operating interests in mining projects that provide the right to a percentage of revenue or metals produced from the project after deducting specified costs, if any. As of June 30, 2018,2020, we owned royalty interests on 3435 producing properties, 2114 development stage properties and 130 exploration stage properties, of which we consider 5349 to be evaluation stage projects. We use “evaluation stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. Royalties accounted for approximately 29%28% of our total revenue for each of the fiscal years ended June 30, 20182020 and 2017.2019.
We do not conduct mining operations on the properties in which we hold stream and royalty interests, and exceptinterests. Except for our interest in the Peak Gold LLC joint venture (“Peak Gold JV”),JV, we are not required to contribute to capital costs, exploration costs, environmental costs, or other operating costs on those properties.
In the ordinary course of business, we engage in a continual review of opportunities to acquire existing stream and royalty interests, to establish new streams on operating mines, to create new stream and royalty interests through the financing of mine development or exploration, or to acquire companies that hold stream and royalty interests. We currently, and generally at any time, have acquisition opportunities in various stages of active review, including, for example, our
2
engagement of consultants and advisors to analyze particular opportunities, our analysis of technical, financial, legal and other
1
confidential information,particular opportunities, submission of indications of interest and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes.
As discussed in further detail throughout this report, some significant developments tohighlights of our business during fiscal year 20182020 were as follows:
| Our revenue increased |
| We |
| We increased our calendar year dividend to |
Certain Definitions
Dollar or “$”: Unless we have indicated otherwise, or the context otherwise requires, references in this Annual Report on Form 10‑K Refers to “$” or “dollar” are to the currency of the United States.U.S. dollars. We refer to Canadian dollars as C$.
Gold equivalent ounces (GEOs): GEOs are calculated as Royal Gold’s revenue divided by the average gold price for the period.
Gross smelter return (GSR) royalty: A defined percentage of the gross revenue from a resource extraction operation, less, if applicable, certain contract‑definedcontract-defined costs paid by or charged to the operator.
Metal stream: A purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement.
Mineralized material: That part of a mineral system that has potential economic significance, but is not included in the proven and probable reserve estimates until further drilling and metallurgical work is completed, and until other economic and technical feasibility factors based on such work have been resolved.
Net revenue: Net revenue is calculated as Royal Gold’s Revenue minus Cost of sales.
Net smelter return (NSR) royalty: A defined percentage of the gross revenue from a resource extraction operation less a proportionate share of incidental transportation, insurance, refining and smelting costs.
Net value royalty (NVR): A defined percentage of the gross revenue from a resource extraction operation less certain contract‑definedcontract-defined costs.
Probable reserves: Ore reserves Reserves for which the quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, of probable reserves, although lower than that for proven reserves, is high enough to assume geological continuity between points of observation.
Proven reserves: Ore reserves Reserves for which (a) the quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and the grade isand/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that the size, shape, depth and mineral content of reserves are well established.
Payable metal: Ounces or pounds of metal in concentrate after deduction of a percentage of metal in concentrate by a third‑partythird-party smelter pursuant to smelting contracts.
2
3
Reserve: That part of a mineral deposit whichthat could be economically and legally extracted or produced at the time of the reserve determination.
Royalty: The right to receive a percentage or other denomination of mineral production from a mining operation.
Ton: A unit of weight equal to 2,000 pounds or 907.2 kilograms.
Tonne: A unit of weight equal to 2,204.6 pounds or 1,000 kilograms.
Fiscal 20182020 Business Developments
Please refer to Item 7, MD&A, for discussion on recent liquidity and capital resource developments.
U.S. Tax LegislationAlturas royalty acquisition
On December 22, 2017, H.R. 1, originally knownJanuary 29, 2020, we entered into an agreement with various private individuals for the acquisition of an NSR royalty of up to 1.06% (gold) and up to 1.59% (copper) on mining concessions included as the Tax Cuts and Jobs Act (the “Act”), was enacted and is effective for tax years including January 1, 2018. The effectspart of the Act were recognized inAlturas project, which is located within the periodCoquimbo Region of enactment, orChile and held by Compañia Minera Salitrales Limitada, a subsidiary of Barrick Gold Corporation (“Barrick”). Total consideration for the period ending December 31, 2017. Certain other aspectsroyalty is up to $41 million, of which $11 million was paid on January 29, 2020. A future payment of up to $20 million is conditioned based on a project construction decision by Barrick and the size of the Act are not effectiveminable mineralized material on the date of the construction decision. A further future payment of up to $10 million will be made upon first production from the mining concessions.
Castelo de Sonhos royalty acquisition
In August 2019, we entered into an agreement with TriStar Gold Inc. and its subsidiaries (together “TriStar”) to acquire (i) up to a 1.5% NSR royalty on the Castelo de Sonhos gold project (“CDS”), located in Brazil, and (ii) warrants to purchase up to 19,640,000 common shares of TriStar. Total consideration was $7.5 million, of which $4.5 million was paid in August 2019, $1.5 million was paid in November 2019, and $1.5 million was paid in March 2020.
Aggregate funds we invested with TriStar will be used primarily to advance CDS to the feasibility stage, including advancing permitting activities. A preliminary economic assessment for fiscal June 30 companies until July 1, 2018.
The Act, among other things, reduced the U.S. corporate income tax rate to 21% starting January 1, 2018. AsCDS was prepared by TriStar in calendar 2018 and was based on a United States domiciled company, we expect that the Act will have a positive long-term impact on Royal Gold’s future financial results through the reduction in the U.S. corporate tax rate from 35% to 21% and by allowing us to efficiently repatriate future earnings from our foreign subsidiaries. As the Company is a fiscal year taxpayer, we applied a blended U.S. federal income tax ratetotal of 2.0 million ounces of mineralized material at an average gold grade of approximately 28.1% for1.0 gram per tonne. Since August 2019, TriStar has completed reverse circulation drilling, which will support the fiscal year ending June 30, 2018. The blended percentage was calculated onpreparation of a pro-rata percentage of the number of days before and after January 1, 2018. The Company’s U.S. statutory federal corporate income tax rate will be 21% for the fiscal year commencing on July 1, 2018 and all future years.
preliminary feasibility study. Refer to Note 103 of our notes to consolidated financial statements for further discussiondiscussion.
Covid-19 and current economic environment
Several of our operating counterparties previously announced temporary operational curtailments or the withdrawal or review of previously disclosed guidance due to the ongoing COVID-19 pandemic. The economic and societal impacts associated with COVID-19 are fluid and changing rapidly, and we are currently unable to predict the nature or extent of any impacts on our results of operations and financial condition. We will continue to monitor any further developments that the income tax accounting considerations for the Act.COVID-19 pandemic may have on stream or royalty interests as part of our regular asset impairment analysis.
Recent TransactionsLeadership changes
On June 28, 2018, Royal Gold acquired 682,556 sharesWe made several key leadership changes as a result of common stockour ongoing management succession planning. After a thorough search process, our Board of Contango ORE, Inc. (“CORE”) for consideration of $26 per share from certain individual stockholders of CORE.
On June 29, 2018, Royal Gold, throughDirectors appointed William Heissenbuttel as our President and Chief Executive Officer and a wholly-owned subsidiary, acquired an additional 1.75% NSR royalty interest on Amarillo Gold’s Mara Rosa gold project in Goias State, Brazil for $10.8 million.
On June 29, 2018, a subsidiary of Golden Star repaid its $20 million term loan facility, plus accrued interest, to Royal Gold.
See Note 3member of the notes to consolidated financial statements for more information regarding these transactionsBoard of Directors, effective January 2, 2020. Mr. Heissenbuttel most recently served as our Chief Financial Officer and Vice President Strategy. In addition, the Board of Directors promoted the following executives effective January 2, 2020: Mark Isto, Executive Vice President and Chief Operating Officer; Paul Libner, Chief Financial Officer and Treasurer; and Randy Shefman, Vice President and General Counsel.
3
4
Our Operational Information
Reportable Segments Geographical and Financial Information
The Company manages itsWe manage our business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long‑livedlong-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table:table (amounts are in thousands):
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| As of June 30, 2018 |
| As of June 30, 2017 | ||||||||||||||||||||||||||||||||||||||
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| Total stream |
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| Total stream | ||||||||||||||||||||
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| Stream |
| Royalty |
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| and royalty |
| Stream |
| Royalty |
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| and royalty | ||||||||||||||||||||||||
|
| interest |
| interest |
| Impairments |
| interests, net |
| interest |
| interest |
| Impairments |
| interests, net | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | As of June 30, 2020 | | As of June 30, 2019 | ||||||||||||||||||||||||||||||||||||||
| | | | | | | | Total stream | | | | | | | | Total stream | ||||||||||||||||||||||||||
| | Stream | | Royalty | | and royalty | | Stream | | Royalty | | and royalty | ||||||||||||||||||||||||||||||
|
| interest |
| interest |
| interests, net |
| interest |
| interest |
| interests, net | ||||||||||||||||||||||||||||||
Canada |
| $ | 809,500 |
| $ | 214,562 |
| $ | (284) |
| $ | 1,023,778 |
| $ | 852,035 |
| $ | 221,618 |
| $ | — |
| $ | 1,073,653 | | $ | 702,732 | | $ | 189,855 | | $ | 892,587 | | $ | 767,749 | | $ | 200,251 | | $ | 968,000 |
Dominican Republic |
|
| 495,460 |
|
| — |
|
| — |
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| 495,460 |
|
| 543,256 |
|
| — |
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| — |
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| 543,256 | | | 406,469 | | | — | | | 406,469 | | | 451,585 | | | — | | | 451,585 |
Chile |
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| 328,331 |
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| 453,306 |
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| (239,080) |
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| 542,557 |
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| 348,778 |
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| 453,369 |
|
| — |
|
| 802,147 | | | 277,661 | | | 223,922 | | | 501,583 | | | 301,507 | | | 214,226 | | | 515,733 |
Africa |
|
| 104,874 |
|
| 502 |
|
| — |
|
| 105,376 |
|
| 123,760 |
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| 572 |
|
| — |
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| 124,332 | | | 215,463 | | | 321 | | | 215,784 | | | 89,556 | | | 321 | | | 89,877 |
Mexico |
|
| — |
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| 93,277 |
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| — |
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| 93,277 |
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| — |
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| 105,889 |
|
| — |
|
| 105,889 | | | — | | | 75,951 | | | 75,951 | | | — | | | 83,748 | | | 83,748 |
United States |
|
| — |
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| 165,543 |
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| — |
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| 165,543 |
|
| — |
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| 168,378 |
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| — |
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| 168,378 | | | — | | | 159,445 | | | 159,445 | | | — | | | 163,398 | | | 163,398 |
Australia |
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| — |
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| 34,254 |
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| — |
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| 34,254 |
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| — |
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| 37,409 |
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| — |
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| 37,409 | | | — | | | 30,006 | | | 30,006 | | | — | | | 31,944 | | | 31,944 |
Other |
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| 12,039 |
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| 28,833 |
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| — |
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| 40,872 |
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| 12,030 |
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| 25,162 |
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| — |
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| 37,192 | ||||||||||||||||||
Rest of world | | | 12,038 | | | 25,050 | | | 37,088 | | | 12,038 | | | 22,993 | | | 35,031 | ||||||||||||||||||||||||
Total |
| $ | 1,750,204 |
| $ | 990,277 |
| $ | (239,364) |
| $ | 2,501,117 |
| $ | 1,879,859 |
| $ | 1,012,397 |
| $ | — |
| $ | 2,892,256 | | $ | 1,614,363 | | $ | 704,550 | | $ | 2,318,913 | | $ | 1,622,435 | | $ | 716,881 | | $ | 2,339,316 |
The Company’s revenue, costsOur reportable segments for purposes of sales and net revenue by reportable segmentassessing performance for our fiscal years ended June 30, 2018, 20172020, and 20162019 are geographically distributed as shown below (amounts are in the following table:thousands):
| | | | | | | | | | | | | | | |
| | Year Ended June 30, 2020 | |||||||||||||
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| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit(3) | |||||
Stream interests | | $ | 359,868 | | $ | 83,890 | | $ | — | | $ | 144,678 | | $ | 131,300 |
Royalty interests | | | 138,951 | | | — | | | 3,824 | | | 30,369 | | | 104,758 |
Total | | $ | 498,819 | | $ | 83,890 | | $ | 3,824 | | $ | 175,047 | | $ | 236,058 |
| | | | | | | | | | | | | | | |
| | Year Ended June 30, 2019 | |||||||||||||
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| Revenue |
| Cost of sales |
| Production taxes |
| Depletion |
| Segment gross profit | |||||
Stream interests | | $ | 305,824 | | $ | 77,535 | | $ | — | | $ | 127,770 | | $ | 100,519 |
Canada | | $ | 81,021 | | $ | 23,393 | | $ | — | | $ | — | | $ | 57,628 |
Dominican Republic | | | 37,717 | | | 17,675 | | | — | | | — | | | 20,042 |
Chile | | | 35,378 | | | 7,684 | | | — | | | — | | | 27,694 |
Africa | | | 17,611 | | | 5,012 | | | — | | | — | | | 12,599 |
Total stream interests | | | 171,727 | | | 53,764 | | | — | | | - | | | 117,963 |
| | | | | | | | | | | | | | | |
Royalty interests | | | 117,232 | | | — | | | 4,112 | | | 35,086 | | | 78,034 |
Canada | | $ | 17,717 | | $ | — | | $ | — | | $ | $- | | $ | 17,717 |
United States | | | 14,340 | | | — | | | — | | | — | | | 14,340 |
Mexico | | | 15,833 | | | — | | | — | | | — | | | 15,833 |
Australia | | | 6,217 | | | — | | | — | | | — | | | 6,217 |
Africa | | | 1,024 | | | — | | | — | | | — | | | 1,024 |
Chile | | | $- | | | — | | | — | | | — | | | - |
Rest of world | | | 4,738 | | | — | | | — | | | — | | | 4,738 |
Total royalty interests | | | 59,869 | | | — | | | - | | | - | | | 59,869 |
Total | | $ | 423,056 | | $ | 77,535 | | $ | 4,112 | | $ | 162,856 | | $ | 178,553 |
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| Year Ended June 30, 2018 |
| Year Ended June 30, 2017 | ||||||||||||||
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| Revenue |
| Cost of sales |
| Net revenue |
| Revenue |
| Cost of sales |
| Net revenue | ||||||
Streams: |
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Canada |
| $ | 142,244 |
| $ | 40,766 |
| $ | 101,478 |
| $ | 136,736 |
| $ | 45,954 |
| $ | 90,782 |
Dominican Republic |
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| 95,055 |
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| 28,496 |
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| 66,559 |
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| 91,589 |
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| 27,191 |
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| 64,398 |
Chile |
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| 57,413 |
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| 8,614 |
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| 48,799 |
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| 60,251 |
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| 9,037 |
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| 51,214 |
Africa |
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| 29,804 |
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| 5,963 |
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| 23,841 |
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| 25,435 |
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| 5,083 |
|
| 20,352 |
Total streams |
| $ | 324,516 |
| $ | 83,839 |
| $ | 240,677 |
| $ | 314,011 |
| $ | 87,265 |
| $ | 226,746 |
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Royalties: |
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Mexico |
| $ | 42,959 |
| $ | — |
| $ | 42,959 |
| $ | 41,945 |
| $ | — |
| $ | 41,945 |
United States |
|
| 39,496 |
|
| — |
|
| 39,496 |
|
| 35,282 |
|
| — |
|
| 35,282 |
Canada |
|
| 24,254 |
|
| — |
|
| 24,254 |
|
| 23,208 |
|
| — |
|
| 23,208 |
Australia |
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| 13,710 |
|
| — |
|
| 13,710 |
|
| 12,943 |
|
| — |
|
| 12,943 |
Africa |
|
| 2,098 |
|
| — |
|
| 2,098 |
|
| 3,131 |
|
| — |
|
| 3,131 |
Chile |
|
| 473 |
|
| — |
|
| 473 |
|
| 1,648 |
|
| — |
|
| 1,648 |
Other |
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| 11,536 |
|
| — |
|
| 11,536 |
|
| 8,646 |
|
| — |
|
| 8,646 |
Total royalties |
| $ | 134,526 |
| $ | — |
| $ | 134,526 |
| $ | 126,803 |
| $ | — |
| $ | 126,803 |
Total streams and royalties |
| $ | 459,042 |
| $ | 83,839 |
| $ | 375,203 |
| $ | 440,814 |
| $ | 87,265 |
| $ | 353,549 |
(1) | Excludes depreciation, depletion and amortization. |
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(2) | Depletion amounts are included within Depreciation, depletion and amortization on our consolidated statements of operations and comprehensive income (loss). |
(3) | Refer to Note 14 to consolidated financial statements for a reconciliation of total segment gross profit to consolidated income (loss) before income taxes. |
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| Fiscal Year Ended June 30, 2017 |
| Fiscal Year Ended June 30, 2016 | ||||||||||||||
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| Revenue |
| Cost of sales |
| Net revenue |
| Revenue |
| Cost of sales |
| Net revenue | ||||||
Streams: |
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Canada |
| $ | 136,736 |
| $ | 45,954 |
| $ | 90,782 |
| $ | 125,755 |
| $ | 47,417 |
| $ | 78,338 |
Dominican Republic |
|
| 91,589 |
|
| 27,191 |
|
| 64,398 |
|
| 39,684 |
|
| 11,625 |
|
| 28,059 |
Chile |
|
| 60,251 |
|
| 9,037 |
|
| 51,214 |
|
| 49,243 |
|
| 7,280 |
|
| 41,963 |
Africa |
|
| 25,435 |
|
| 5,083 |
|
| 20,352 |
|
| 23,346 |
|
| 4,657 |
|
| 18,689 |
Total streams |
| $ | 314,011 |
| $ | 87,265 |
| $ | 226,746 |
| $ | 238,028 |
| $ | 70,979 |
| $ | 167,049 |
Royalties: |
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Mexico |
| $ | 41,945 |
| $ | — |
| $ | 41,945 |
| $ | 35,267 |
| $ | — |
| $ | 35,267 |
United States |
|
| 35,282 |
|
| — |
|
| 35,282 |
|
| 35,483 |
|
| — |
|
| 35,483 |
Canada |
|
| 23,208 |
|
| — |
|
| 23,208 |
|
| 30,676 |
|
| — |
|
| 30,676 |
Australia |
|
| 12,943 |
|
| — |
|
| 12,943 |
|
| 10,462 |
|
| — |
|
| 10,462 |
Africa |
|
| 3,131 |
|
| — |
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| 3,131 |
|
| 1,868 |
|
| — |
|
| 1,868 |
Chile |
|
| 1,648 |
|
| — |
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| 1,648 |
|
| 84 |
|
| — |
|
| 84 |
Other |
|
| 8,646 |
|
| — |
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| 8,646 |
|
| 7,922 |
|
| — |
|
| 7,922 |
Total royalties |
| $ | 126,803 |
| $ | — |
| $ | 126,803 |
| $ | 121,762 |
| $ | — |
| $ | 121,762 |
Total streams and royalties |
| $ | 440,814 |
| $ | 87,265 |
| $ | 353,549 |
| $ | 359,790 |
| $ | 70,979 |
| $ | 288,811 |
Please see “Operations in foreign countries or other sovereign jurisdictions are subject to many risks, which could decrease our revenues,” under Part I, Item 1A, Risk Factors, of this report for a description of the risks attendant to foreign operations.
Our financial results are primarily tied to the price of gold and, to a lesser extent, the priceprices of silver and copper, together with the amounts of production from our producing stageproducing-stage stream and royalty interests. During the fiscal year ended June 30, 2018, Royal Gold2020, we derived approximately 86%88% of itsour revenue from precious metals (including 77%79% from gold and 9% from silver), 11%9% from copper, and 3% from other minerals. The priceprices of gold, silver, copper, and other metals have fluctuated widely in recent years. The marketability and the price of metals are influenced by numerous factors beyond the control of the Company and significantour control. Significant declines in the priceprices of gold, silver, or copper could have a material and adverse effect on the Company’sour results of operations and financial condition.
Competition
The mining industry in general, and streaming and royalty segments in particular, are very competitive. We compete with other streaming and royalty companies, mine operators, and financial buyers in efforts to acquire existing streaming and royalty interests, andinterests. We also compete with the lenders, investors, and streaming and royalty companies providing financing to operators of mineral properties in our efforts to create new streaming and royalty interests. Our competitors may be larger than we are and may have greater resources and access to capital than we have. Key competitive factors in the stream and royalty acquisition and financing business include the ability to identify and evaluate potential opportunities, transaction structure and consideration, and access to capital.
Regulation
Operators of the mines that are subject to our stream and royalty interests must comply with numerous environmental, mine safety, land use, waste disposal, remediation and public health laws and regulations promulgated by federal, state, provincial and local governments in the United States, Canada, Chile, Ghana, Mexico, the Dominican Republic, Ghana, Mexico, Botswana, Australia and other countries where we hold interests. Although we, are not responsible as a stream or royalty interest owner, are not responsible for ensuring compliance with these laws and regulations, failure by the operators of the mines on which we have stream and royalty interests to comply with applicable laws, regulations and permits can result in injunctive action, orders to suspend or cease operations, damages, and civil and criminal penalties on the operators.
5
operations and financial condition.
Corporate Information
We were incorporated under the laws of the State of Delaware on January 5, 1981. Our executive offices are located at 1660 Wynkoop1144 15th Street, Suite 1000,2500, Denver, Colorado 80202. Our telephone number is (303) 573‑1660.573-1660.
Available InformationSEC Filings
Royal Gold maintains a website at www.royalgold.com. Royal Gold makesWe file periodic and current reports, proxy statements, and other information with the SEC. This includes our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those forms. These reports are available free of charge through the Investor Relations section of itson our website its Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act,at www.royalgold.com as soon as reasonably practicable after such material isthey are electronically filed with or furnished to the SEC. Our SEC filings are available fromThese reports also can be obtained on the SEC’s website at www.sec.gov which contains reports, proxy and information statements and other information regarding issuers that file electronically. These reports, proxy statements and other information may also be inspected and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1‑800‑SEC‑0330 for further information on the operation of the Public Reference Room. The charters of Royal Gold’s key committees of the Board of Directors and Royal Gold’s Code of Business Conduct and Ethics are also available on the Company’s website. Any of the foregoing information is available in print to any stockholder who requests it by contacting our Investor Relations Department at (303) 573‑1660.www.sec.gov. The information on the Company’sour website is not and shall not be deemed to be, a part hereof or incorporated intoof this or any of our other filingsreport filed with or furnished to the SEC.
Company PersonnelEmployees
We currently have 2327 employees, 17 located18 of which work out of our office in Denver, Colorado and theColorado. The remainder locatedwork out of our offices in our Zug,Lucerne, Switzerland, Vancouver, Canada, and Toronto, Canada offices.Canada. Our employees are not subject to a labor contract or a collective bargaining agreement. We consider our overall employee relations to be good.
We also retain independent contractors6
Our global offices are adhering by the guidelines provided to provide consulting services, relating primarilythe local health authorities during the COVID-19 pandemic. The adoption of a remote work environment has not caused any material interruptions to geologic and geophysical interpretations and also relating to such metallurgical, engineering, environmental, and other technical matters as may be deemed useful in the operationday-to-day activities of our business.the Company.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below before making an investment decision.in this section. Our future performance is subject to risks and uncertainties that could have a material adverse effect on our business, financial condition, results of operations, and cash flows could be materially adversely affected by any of these risks. The market orfinancial condition and the trading price of our securities could decline duecommon stock. We may be subject to any of these risks.other risks and uncertainties not presently known to us. In addition, please see our note about forward-looking statements included in Part II, Item 7, MD&A of this Annual Report on Form 10-K. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business, operations and stock price.
Risks RelatedRelating to our Business
Volatility
Our revenue is subject to volatility in metal prices, which could negatively affect our results of operations or cash flow.
Market prices for gold, silver, copper, nickel, and other metal prices may have an adverse impact on the value of our stream and royalty interests and may reduce our revenues. Certain contracts governing our stream and royalty interests have features that may amplify the negative effects of a drop in metals prices.
The profitability of our stream and royalty interests is directly related to the market price of gold, silver, copper, nickel and other metals. Our revenue is particularly sensitive to changes in the price of gold, as we derive a majority of our revenue from gold stream and royalty interests. Market prices may fluctuate widely over time and are affected by numerous factors beyond the control of Royal Gold or any mining company, includingour control. These factors include metal supply and demand, industrial and jewelry fabrication, investment demand, central banking economic policy,actions, inflation expectations, with respect to the rate of inflation, the relative strength of the dollar and other currencies,currency values, interest rates, gold purchases, sales and loans by central banks, forward sales by metal producers, global or regionaland political, trade, economic, or banking conditions, and a number of other factors.conditions.
6
Volatility in gold, silver, copper and nickel pricesOur revenue is demonstrated by the annual high and low prices for those metals over the past decade as reported by, in the case of gold and silver, the London Bullion Market Association, and in the case of copper and nickel, the London Metal Exchange:
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| Gold |
| Silver |
| Copper |
| Nickel | ||||||||||||||||
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| ($/ounce) |
| ($/ounce) |
| ($/pound) |
| ($/pound) | ||||||||||||||||
Calendar Year |
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| Low |
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| High |
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| Low |
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| High |
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| Low |
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| High |
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| Low |
2008 - 2009 |
| $ | 1,213 |
| $ | 713 |
| $ | 20.92 |
| $ | 8.88 |
| $ | 4.08 |
| $ | 1.26 |
| $ | 15.10 |
| $ | 4.00 |
2010 - 2011 |
| $ | 1,895 |
| $ | 1,058 |
| $ | 48.70 |
| $ | 15.14 |
| $ | 4.60 |
| $ | 2.76 |
| $ | 13.17 |
| $ | 7.68 |
2012 - 2013 |
| $ | 1,792 |
| $ | 1,192 |
| $ | 37.23 |
| $ | 18.61 |
| $ | 3.93 |
| $ | 3.01 |
| $ | 9.90 |
| $ | 5.97 |
2014 - 2015 |
| $ | 1,385 |
| $ | 1,049 |
| $ | 22.05 |
| $ | 13.71 |
| $ | 3.37 |
| $ | 2.05 |
| $ | 9.62 |
| $ | 3.70 |
2016 - 2017 |
| $ | 1,366 |
| $ | 1,077 |
| $ | 20.71 |
| $ | 13.58 |
| $ | 3.27 |
| $ | 1.96 |
| $ | 5.82 |
| $ | 3.50 |
2018 to-date (August 1, 2018) |
| $ | 1,355 |
| $ | 1,218 |
| $ | 17.52 |
| $ | 15.26 |
| $ | 3.29 |
| $ | 2.95 |
| $ | 7.14 |
| $ | 5.63 |
Declines in market prices could cause an operatordirectly tied to reduce, suspend or terminate production from an operating project or construction work at a development project, which may result in a temporary or permanent reduction or cessation of revenue from those projects, and may prevent us from being able to recover the initial investment inmetal prices. Under our stream and royalty interests. Our streaming agreements, provide us the right towe purchase metals eithermetal at a fixed price per ounce or a specifiedstated percentage of the spot price. Our margin betweenmarket price and then sell the price at which we can purchase metals pursuant to streaming agreements and the price at which we sell metalsmetal in the open market. If market will vary as metal prices vary; in the event of metal price declines, we would generate lowerdecline, our revenue and cash flow or earnings, or possibly losses. Further,from metal sales decline. A price decline can also impact our sliding‑scale royalties, suchrevenue under certain sliding-scale royalty agreements as Cortez, Holt, Mulatos and other properties, amplify the effect of declines in market prices for metals becausewe may receive a lower royalty rate when prices fall below price thresholds specified in a sliding‑scale royalty, a lower royalty rate will apply. A price decline may result in a material and adverse effect on our business, resultsthresholds. In addition, some of operations and financial condition.
Metal price fluctuations between the time that decisions about development and construction of a mine are made and the commencement of production can have a material adverse effect on the economics of a mine and can eliminate or have a material adverse impact on the value of stream and royalty interests on the property.
Where gold and silver are produced as co-products or by‑products at the properties where we hold stream and royalty interests, an operator’s production decisions and the economic cut‑off applied to its reporting of gold and silver reserves and resources may be influenced by changes in the commodity prices of the principal metals produced at the mines.
Moreover, certain agreements governing our royalty interests, such as those relating to our royalty interests in the Robinson and Peñasquito properties,agreements are based on the operator’s concentrate sales to smelters which includeand allow for price adjustments between the operator and the smelter based on metals prices aton a laterfuture date, typically three to five months after shipment of concentrate. These price adjustments can decrease our revenue in future periods if metal prices decline following shipment.
Price declines could cause an operator to reduce, suspend, or terminate production or development at a project, which would impact our future revenue from the project. These production or development decisions could prevent us from recovering our initial investment in the project or result in an impairment to the smelter. In such cases,value of our payments from the operator include a component of these later price adjustments, which can result in decreased revenue in later periods if metals prices have fallen.initial investment.
We own passive interests in mining properties and it is difficult or impossible for us tocannot ensure properties are developed or operated in our best interest.interests.
All of our current
Our revenue is derived entirely from stream and royalty interests onin properties owned and operated by third parties. The holder of a stream or royalty interest typically hasIn general, we have no decision-making authority regarding the development or operation of athe mineral property. Therefore, we typically are not in control of decisions regarding development or operation of any of the properties on which we hold a stream or royalty interest, and we have limited legal rights to influence those decisions.
Our strategy of acquiring and holdingunderlying our stream and royalty interests on properties operated by third parties puts us generally at risk to theinterests. Operators make all development and operating decisions, of others regarding all operating matters, including decisions about permitting, feasibility analysis, mine design and operation, processing, plant and equipment matters, and temporary or permanent suspension of operations. We generally are not entitled to compensation if operations among others. As a result, our revenue is dependent upon the activities of third parties, whichare shut down. This creates the risk thatfor us because operators may at any time those third parties may: (i)times have business interests that are inconsistent with ours, (ii) take actionour interests or may act contrary to our interests, policies or objectives, or (iii) be unable or unwilling to fulfill their obligations under their agreements with us. At any time, any of the operators of our mining properties may decide to suspend or discontinue operations. Except in limited circumstances,
7interests.
we will not be entitled to material compensation if operations are shut down, suspended or discontinued on a temporary or permanent basis. Although we attempt to secure contractual rights when we create new stream or royalty interests, such as audit or access rights, that will permit us to protect our interests to a degree, there can be no assurance that such rights will always be available or sufficient, or that our efforts will be successful in achieving timely or favorable results or in affecting the operation of the properties in which we have a stream or royalty interest in ways that would be beneficial to our stockholders.
Our revenues arerevenue is subject to operational and other risks faced by operators of our mining properties.the properties in which we hold stream or royalty interests.
Although we
We generally are not required to pay capital or operating costs on projects onin which we hold stream or royalty interests (except for transactions where we finance mine development or actively fund or participate in exploration),interests. However, our financial resultsrevenue and the value of our investments are indirectly subject to hazards and risks normally associated with developing and operating mining properties, where we hold stream and royalty interests. Some of these risks include:including the following:
•insufficient ore reserves;
•increases in capital or operating costs incurred by operators or third parties that may impact the amount of reserves available to be mined, cause an operator to delay or curtail mining development and operations, or render mining of ore uneconomical and cause an operator to suspend or close operations;
•declines in the price of gold, silver, copper, nickel and other metals;
•mine operating and ore processing facility problems;
•significant permitting, environmental and other regulatory requirements and restrictions and any changes in those regulations or their enforcement;
•challenges by non‑mining interests, including by local communities, indigenous populations and non‑governmental organizations, to existing permits and mining rights, and to applications for permits and mining rights;
•community or civil unrest;
•labor shortage of miners, geologists and mining experts, changes in labor laws, increased labor costs, and labor disputes, strikes or work stoppages at mines;
•unavailability of mining, drilling and related equipment;
•unanticipated geological conditions or metallurgical characteristics;
•unanticipated ground or water conditions, including lack of access to sufficient quantities of water for operations;
•pit wall or tailings dam failures or any underground stability issues;
•fires, explosions and other industrial accidents;
•environmental hazards and natural catastrophes such as droughts, floods,hurricanes or earthquakes;
•injury to persons, property or the environment;
•the ability of operators to maintain or increase production or to replace reserves as properties are mined;
•potential increased operating costs arising from climate change initiatives and their impact on energy and other costs in the U.S. and foreign jurisdictions;
•uncertain domestic and foreign political and economic environments;
•economic downturns and operators’ insufficient financing;
•default by an operator on its obligations to us or its other creditors;
•insolvency, bankruptcy or other financial difficulty of the operator; and
8
7
● | insufficient ore reserves |
● | increased capital or operating costs |
● | declines in the price of gold, silver, copper, nickel, or other metals |
● | construction or development delays |
● | operational disruptions, including those caused by pandemics or other global or local health crises |
● | inability to obtain or maintain necessary permits |
● | inability to replace or increase reserves as properties are mined |
● | inability to maintain, or challenges to, exploration or mining rights |
● | changes in mining taxes and royalties payable to governments |
● | significant changes to environmental, permitting, or other regulatory requirements |
● | challenges to operations, permits, or mining rights by local communities, indigenous populations, non-government organizations, or others |
● | litigation between operators and third parties relating to the properties |
● | community or civil unrest, including protests and blockades |
● | labor shortages, increased labor costs, labor disputes, strikes, or work stoppages |
● | unavailability of mining, drilling, or other equipment |
● | unanticipated geological conditions or metallurgical characteristics |
● | unanticipated ground or water conditions, including lack of access to sufficient water |
● | inadequate supplies of power or other raw materials |
�� | pit wall or tailings dam failures or underground stability issues |
● | fires, explosions, or other industrial accidents |
● | injuries to humans, property, or the environment |
● | natural catastrophes and environmental hazards such as earthquakes, droughts, floods, forest fires, hurricanes, weather, or climate events |
● | physical effects of climate change and regulatory changes designed to reduce the effects of climate change; |
● | uncertain political and economic environments |
● | economic downturns |
● | insufficient financing or inability to obtain financing |
● | default by an operator on its obligations to us or its other creditors |
● | insolvency, bankruptcy, or other financial difficulty of the operator |
● | changes in laws or regulations or the enforcement of laws or regulations |
•changes in laws or regulations, including changes implemented by new political administrations.
The occurrence of any of the above mentioned risks or hazards, among others,these events could result in an interruption, suspension or termination ofnegatively impact operations or development work at any of the properties in which we hold a stream or royalty interest and have a material adverse effect on our business, results of operations, cash flows and financial condition.
Many of our stream and royalty interests, are important to us and any adverse development related to these properties could adversely affect our revenues and financial condition.
Our investmentswhich in the Mount Milligan, Andacollo, Pueblo Viejo, Wassa and Prestea and Peñasquito properties generated approximately $341.7 million in revenue in fiscal year 2018, or 74% of our revenue for the period. We expect these properties and others to be important to us in fiscal year 2019 and beyond. Any adverse development affecting the operation of or production from any of these propertiesturn could have a material adverse effect on our business, results ofrevenue and cash flow.
The current COVID-19 pandemic has adversely affected, and may continue to adversely affect, operations cash flows and financial condition. Any adverse decision made by the operators, such as changes to mine plans, production schedules, metallurgical processesat some properties in which we have stream or royalty calculation methodologies, may materially and adversely impact the timing and amount of revenue that we receive.
Problems concerning the existence, validity, enforceability, terms or geographic extent of our stream and royalty interests, could adversely affect our business and revenues, and our interests may similarly be materially and adversely impacted by change of control, bankruptcy or the insolvency of operators.
Defects in or disputes relating to the stream and royalty interests we hold or acquire may prevent us from realizing the anticipated benefits from these interests, andwhich could have a material adverse effect on our business, results of operations cash flows and financial condition. Material changes
The world is currently experiencing a deadly outbreak of the coronavirus disease 2019, or COVID-19. Public health and government authorities have recommended and mandated precautions to mitigate the spread of COVID-19, including in some cases quarantines, shelter-in-place orders, and restrictions on mining-related activities. As a result, several of our operating counterparties, including at our principal properties, have had temporary operational curtailments. There may be additional curtailments. The COVID-19 pandemic could also occur thatdisrupt operators’ supply or distribution chains or access to workers, which in turn could adversely impact their production or sales. In addition, development and exploration activities at some properties may be delayed or suspended. Any of these events could have a material adverse impact on our results of operations and financial condition in future periods. We are unable to predict the nature or extent of any impact the COVID-19 pandemic may have on our future results of operations and financial condition.
The current COVID-19 pandemic has significantly impacted the global economy and markets over the past several months and may continue to do so, which could adversely affect management’s estimateour business or the trading price of our stock.
8
The global economy, metal prices, and financial markets have experienced significant volatility and uncertainty due to COVID-19. Our revenue is directly related to the market price of gold and other metals. Metal price volatility causes our revenue to fluctuate from period to period. This price volatility could also cause operators or developers to defer or forgo projects, which could adversely impact our future revenue. Moreover, in the ordinary course of business, we review opportunities to acquire new stream and royalty interests and currently have acquisition opportunities at various stages of review. Reduced economic and travel activities or illness among our management team as a result of COVID-19 could limit or delay acquisition opportunities or other business activities. In addition, economic volatility, disruptions in the financial markets, or severe price declines for gold or other metals could adversely affect our ability to obtain future debt or equity financing for acquisitions on acceptable terms. Government efforts to counter the economic effects of COVID-19 through liquidity and stimulus programs may be insufficient or ineffective in preventing or reducing the effects of a recession. It is difficult to determine the extent of the carrying valueeconomic and market impacts from COVID-19 and the many ways in which they may negatively affect our business and the trading price of our stock.
A significant portion of our revenue comes from a small number of operating properties, which means that adverse developments at these properties could have a more significant or lasting impact on our results of operations than if our revenue was less concentrated.
Approximately 75% of our revenue for fiscal year 2020 came from six properties: Mount Milligan, Andacollo, Pueblo Viejo, Wassa, Peñasquito, and Cortez. We expect these properties to continue to represent a significant portion of revenue going forward. This concentration of revenue could mean that adverse developments, including any adverse decisions made by the operators, at one or more of these properties could have a more significant or longer-term impact on our results of operations than if our revenue was less concentrated.
Operators may fail to comply with their contractual arrangements with us or may interpret their obligations in a manner adverse to us, which could decrease our revenue or increase our costs.
At times, operators may be unable or unwilling to fulfill their contractual obligations to us. In addition, we often rely on the operators for the calculation of our stream deliveries or royalty payments. When we enter into new stream or royalty interests, we attempt to secure contractual rights that allow us to monitor operators’ compliance with their obligations to us, such as audit or access rights. However, these rights may not be sufficient to ensure compliance. In addition, our stream and royalty agreements are often complex and may be subject to interpretation or uncertainties. Operators and other counterparties may interpret our interests in a manner adverse to us. For these or other reasons, we could be forced to expend resources or take legal action to enforce our contractual rights. We may not be successful in enforcing our contractual rights. As a result, our revenue relating to the disputed interests could be adversely affected. We may also need to expend significant monetary and human resources to defend our position, which could adversely affect our results of operations. In addition, we may be required to make retroactive revenue adjustments in future periods relating to past period revenue as a result of information that we learn through audit or access rights.
We often have limited access to data about operating properties, which may make it difficult for us to project or assess the performance of our stream and royalty interests and could result in impairment charges. While we seek to confirm the existence, validity, enforceability, terms and geographic extent of the stream and royalty interests we acquire, there can be no assurance that disputes or other problems concerning these and other matters or other problems will not arise. Confirming these matters is complex and is subject to the application of the laws of each jurisdiction to the particular circumstances of each parcel of mining property and to the documents reflecting the stream or royalty interest. Similarly, stream interests and, in many jurisdictions, royalty interests are contractual in nature, rather than interests in land, and therefore may be subject to change of control, bankruptcy or insolvency of operators, and our stream or royalty interests could be materially restricted or set aside through judicial or administrative proceedings. We often do not have the protection of security interests that could help us recover all or part of our investment in a stream or royalty interest.interests.
We have limited access to data and disclosure regarding the operation of the properties on which we have stream and royalty interests, which may limit our ability to assess the performance of a stream or royalty interest.
Although certain agreements governing our stream and royalty interests require the operators to provide us with production, operating and other information, weoften do not have the contractual right to receive such information for allproduction, operating, and other data from the operators of ourthe properties in which we hold stream and royalty interests. As a result, weit may have limited accessbe difficult for us to data about the operations and the properties themselves, which could affect our ability toproject or assess the performance of a stream or royalty interest. This could result in delays in, or reductions of, our cash flow from the amounts that we anticipate based on the stage of development of or production from the properties, which could have an adverse impact on our business, results of operations cash flows andor financial condition.
Acquired
Our stream and royalty interests particularly on development stage properties, are subject to the risk that they may not produceresult in the anticipated revenues.
The stream and royalty interests we acquirereturns or may not produce anticipated revenues. The success ofotherwise ultimately benefit our acquisitions of stream and royalty interests is based on our abilitybusiness.
We are continually reviewing opportunities to make accurate assumptions regarding the valuation, timing and amount of revenues to be derived from our stream and royalty interests, the geological, metallurgical and other technical aspects of the project, and, for development projects, the costs, timing and conduct of development. If an operator does not bring a property into production and operate in accordance with feasibility studies, technical or reserve reports or mine and other plans due to lack of capital, inexperience, unexpected problems, delays, or otherwise, then the acquired stream or royalty interest may not yield sufficient revenues to be profitable for us. Furthermore, operators of properties at all
9
stages must obtain and maintain all necessary environmental permits and access to adequate supplies of water, power and other raw materials, as well as financing, necessary to begin or sustain development or production, and there can be no assurance that operators will be able to do so.
The failure of any of our principal properties to produce anticipated revenues on schedule or at all would have a material adverse effect on our asset carrying values or the other benefits we expect to realize from the acquisition ofacquire new stream and royalty interests, and potentially our business, results of operations, cash flows and financial condition.
For example, we experienced an impairment charge of $239.1millionfor the Pascua-Lama mining project during our third quarter of fiscal 2018 after Barrick Gold Corporation (“Barrick”), the owner of the project, reclassified the proven and probable reserves for the Chilean portion of the project, to which our royalty interest relates, and, ultimately, suspended further development of the project, in response to sanctions by the Chilean government. See Note 4 of the notes to consolidated financial statements for more information. Further, as mines on which we have stream and royalty interests mature, we can expect overall declines in production unless operators are able to replace reserves that are mined through mine expansion or successful new exploration. There can be no assurance that the operators of properties where we hold stream and royalty interests will be able to maintain or increase production or replace reserves as they are mined.
Operators may interpret our stream and royalty interests in a manner adverse to us or otherwise may not abide by their contractual obligations, and we could be forced to take legal action to enforce our contractual rights.
Our stream and royalty interests generally are subject to uncertainties and complexities arising from the application of contract and property laws in the jurisdictions where the mining projects are located. Operators and other parties to the agreements governing our stream and royalty interests may interpret our interests in a manner adverse to us or otherwise may not abide by their contractual obligations, and we could be forced to take legal action to enforce our contractual rights. We may or may not be successful in enforcing our contractual rights, and our revenues relating to any challenged stream or royalty interests may be delayed, curtailed or eliminated during the pendency of any such dispute or in the event our position is not upheld, which could have a material adverse effect on our business, results of operations, cash flows and financial condition. Disputes could arise challenging, among other things, methods for calculating the stream or royalty interest, various rights of the operator or third parties in or to the stream or royalty interest or the underlying property, the obligations of a current or former operator to make payments on stream and royalty interests, and various defects or ambiguities in the agreement governing a stream or royalty interest.
For example, on October 6, 2017, the Labrador Nickel Royalty Limited Partnership (“LNRLP”), of which the Company is the indirect majority owner, filed amendments to its original October 2009 statement of claim against Vale and certain subsidiaries of Vale. LNRLP alleges that Vale has been calculating LNRLP’s 3% NSR royalty on nickel, copper and cobalt produced from the Voisey’s Bay mine incorrectly since production began in late 2005, and since Vale began processing Voisey’s Bay concentrates at its new Long Harbour Processing facility, and that Vale has breached its contractual duties of good faith. Royal Gold strongly disagrees with Vale’s position that full operating costs, depreciation and cost of capital are permissible net smelter return deductions pursuant to the royalty agreement and is aggressively pursuing its legal remedies.
Potential litigation affecting the properties that we have stream and royalty interests in could have a material adverse effect on us.
Potential litigation may arise between the operators of properties on which we have stream and royalty interests and third parties. For example, Barrick’s Pascua‑Lama mining project has been the subject of litigation by local farmers and indigenous communities alleging that the project’s water management system is not in compliance with environmental permits and that the project has damaged glaciers located in the Pascua‑Lama project area. As a holder of stream and royalty interests, we generally will not have any influence on litigation such as this and generally will not have access to non‑public information concerning such litigation. Any such litigation that results in the reduction, suspension or termination of a project or production from a property, whether temporary or permanent, could have a material adverse effect on our business, results of operations, cash flows and financial condition.
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We may enter into acquisitions or other material transactions at any time.
In the ordinary course of business, we engage in a continual review of opportunities to acquire existing stream and royalty interests, to establish new streams and royalties on operating mines, to create new stream and royalty interests through financing mine development or exploration, or to acquire companies that hold stream and royalty interests. We currently, and generally at any time, have acquisition opportunities inat various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular opportunities, analysis of technical, financial, legal and other confidential information, submission of indications of interest and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes. We also consider obtaining debt commitments for acquisition financing. In the event that we choose to raise debt capital to finance any acquisition, our leverage may be increased. We also could issue common stock to fund our acquisitions. Issuances of common stock could dilute existing stockholders and may reduce some or all of our per share financial measures.
review. Any such acquisition could be material to us. All transactions include risks associated with our ability to negotiate acceptable terms with counter-parties. In addition, any such acquisition or other transaction may have other transaction specific risks associated with it, including risks related to the completion of the transaction, the project, its operators, or the jurisdictions in which the project is located and other risks discussed in this Annual Report on Form 10-K. There can be no assurance that any acquisitions completed will ultimately benefit the Company.
In addition,At times, we mayalso consider opportunities to restructure our existing stream or royalty interests where we believe suchthe restructuring would provide a long‑termlong-term benefit to the Company,us, even though such restructuring mayit could reduce near‑termnear-term revenues or result in the incurrence of transaction‑relatedtransaction-related costs. The success
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of our stream and royalty interests is based in part on our ability to make accurate assumptions at the time of acquisition about the amount and timing of revenue to be derived from those interests. These assumptions are based on a variety of factors, including the geological, metallurgical, permitting, environmental, and other aspects of the project. For development projects, we also make assumptions about the cost, timing, and conduct of development. If an operator fails to bring a project into production as expected or if actual performance otherwise falls short of our assumptions, our revenue derived from the project may not be sufficient to yield an adequate, or any, return on our investment. In addition, we could be required to decrease the carrying value of our investment, which could have a material adverse effect on our results of operations or financial condition. We could enter into one or morecannot ensure that any acquisition or restructuring transactions at any time.other transaction will ultimately benefit Royal Gold.
We may not be unableable to successfully acquire additional stream or royalty interests at appropriate valuations.
Our future success depends largely depends uponon our ability to acquire additional stream and royalty interests at appropriate valuations, including through royalty, stream and corporate acquisitions and other financing transactions. There can be no assurance that we willvaluations. We may not be able to identify and complete the acquisitionacquisitions of such stream and royalty interests or businesses that own desirableadditional interests at reasonableappropriate prices or on favorable terms,terms. We may not have sufficient liquidity or if necessary, that we will have ormay not be able to obtain sufficient financing on reasonable terms to complete such acquisitions. Economic volatility, credit crises, or severe declines in market prices for gold, silver, copper, nickel and certain other metals, could adversely affect our ability to obtain debt or equity financing for acquisitions.to fund acquisitions due to economic volatility, credit crises, declines in metal prices, or other reasons. Certain of our competitors are larger and have greater financial resources than we do, and we may not be able to compete effectively against them. In addition, changes to tax rules, accounting policies, or the treatment of stream interests by ratings agencies could make royalties, streams or other investments by the Companyroyalties less attractive to counterparties. Such changesAny of these factors could adversely affect our ability to acquire new stream or royalty interests.
We also have competitors that are engaged in the acquisition of stream and royalty interests, and companies holding such interests, including competitors with greater financial resources, and we may not be able to compete successfully against these companies in new acquisitions. If we are unable to successfully acquire additional stream or royalty interests, the reserves subject towhich would adversely affect our stream and royalty interests may decline as the producing properties on which we have such stream and royalty interests are mined or payment or production caps on certain of our royalty interests are met. We also may experience negative reactions from the financial markets or operators of properties on which we seek stream and royalty interests if we are unable to successfully complete acquisitions of such interests or complete them at satisfactory rates of return. Each of these factors could have a material adverse effect on our business,future results of operations cash flows and financial condition.
We depend on our operators for the calculation of payments of our stream and royalty interests. We may not be able to detect errors and later payment calculations may call for retroactive adjustments.
The deliveries and payments under our stream and royalty interests are calculated by the operators of the properties on which we have stream and royalty interests based on their reported production. Each operator’s calculation of deliveries and payments is subject to and dependent upon the adequacy and accuracy of its production and accounting functions, and, given the complex nature of mining and ownership of mining interests, errors may occur from time to time in the allocation of production and the various other calculations made by an operator. Any of these errors may render such
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calculations inaccurate. Certain agreements governing our stream and royalty interests require the operators to provide us with production and operating information that may, depending on the completeness and accuracy of such information, enable us to detect errors in deliveries under metal streams and in the calculation of payments of royalties. We do not, however, have the contractual right to receive production information for all of our royalty interests. As a result, our ability to detect payment errors through our stream and royalty monitoring program and its associated internal controls and procedures is limited, and the possibility exists that we will need to make retroactive revenue adjustments. Some contracts governing our stream and royalty interests provide us the right to audit the operational calculations and production data for the associated stream deliveries and royalty payments; however, such audits may occur many months following our recognition of the revenue and we may be required to adjust our revenue in later periods, which could require us to restate our financial statements.
Development and operation of mines is very capital intensive and any inability of the operators of properties where we hold stream and royalty interests to meet liquidity needs, obtain financing or operate profitably could have material adverse effects on the value of and revenue from our stream and royalty interests.
If operators of properties where we hold stream and royalty interests do not have the financial strength or sufficient credit or other financing capability to cover the costs of developing or operating a mine, the operator may curtail, delay or cease development or operations at a mine site, or enter into bankruptcy proceedings. An operator’s ability to raise and service sufficient capital may be affected by, among other things, macroeconomic conditions, future commodity prices of metals to be mined, or further economic volatility in the U.S. and global financial markets. If certain of the operators of the properties on which we have stream and royalty interests suffer these material adverse effects, then our stream and royalty interests, including the value of and revenue from them, and the ability of operators to obtain debt or equity financing for the exploration, development and operation of their properties may be materially adversely affected.
Certain of the agreements governing our stream and royalty interests contain terms that reduce or cap the revenuesrevenue generated from thethose interests.
Revenue from some of our stream and royalty interests will stopdecreases or decreasestops after threshold production, delivery, or payment milestones are achieved. For example, our gold stream interests at Pueblo Viejo, decreases from 7.5% of Barrick’s interest in gold produced at Pueblo Viejo to 3.75% after 990,000 ounces of gold have been delivered. Similarly, our silver stream at Pueblo Viejo decreases from 75% of Barrick’s interest in silver produced at Pueblo Viejo to 37.50% after 50.00 million ounces of silver have been delivered. Our stream interests atAndacollo, Wassa, and Prestea, Andacollo, and Rainy RiverKhoemacau, and certain of our royalty interests at other properties, are subject to similar limitations, and therefore currentcontain these types of limitations. As a result, past production and revenue results from ourrelating to these interests may not be indicative of future results.
Estimates of reserves and other mineralized material by
If the operators of mines in which we have stream and royalty interests are subject to significant revision.
There are numerous uncertainties inherent in estimating proven and probable reserves and mineralized material, including many factors beyond our control and the control of the operators of properties in which we have stream and royalty interests. Reserve estimates for our stream and royalty interests are prepared by the operators of the mining properties. We do not participate in the preparation or verification of such reports and have not independently assessed or verified the accuracy of such information.
The estimation of reserves and of other mineralized material is a subjective process, and the accuracy of any such estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, metallurgical testing andassumptions underlying operators’ production, and the evaluation of mine plans subsequent to the date of any estimate, may cause a revision of such estimate. The volume and grade of reserves recovered and rates of production may be less than anticipated. Assumptions about gold and other precious metal prices are subject to great uncertainty, and such prices have fluctuated widely in the past. Declines in the market price of gold, silver, copper, nickel or other metals also may render reservesreserve, or mineralized material containing relatively lower ore grades uneconomical to exploit. Changes in operating costs and other factors including short‑term operating factors, the processing of new or different ore grades, geotechnical characteristics and metallurgical recovery, may materially and adversely affect reserves.
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Mineral resources as reported by some operators do not constitute mineral reserves and do not have demonstrated economic viability. Due to the uncertainty of mineral resources, there can be no assurance that such resources will be upgraded to proven and probable mineral reserves as a result of continued exploration. It should not be assumed that any part or all of mineral resources on properties where we hold stream and royalty interests constitute or will be converted into mineral reserves.
Estimates of production by the operators of mines in which we have stream and royalty interests are subject to change, and actual production may vary materially from such estimates.
Production estimates are prepared byinaccurate or if future events cause operators to negatively adjust their previous estimates, our future revenue or the operatorsvalue of mining properties. There are numerous uncertainties inherent in estimating anticipated production attributable to our stream and royalty interests, including many factors beyond our control and the control of theinvestments could be adversely affected.
The operators of the properties in which we have stream and royalty interests. We do not participate in the preparation or verification of production estimates and have not independently assessed or verified the accuracy of such information. The estimation of anticipated production is a subjective process and the accuracy of any such estimates is a function of the quality of available data, reliability of production history, variability in grade encountered, mechanical or other problems encountered, engineering and geological interpretation and operator judgment. Actual rates of production may be less than expected. Results of drilling, metallurgical testing and production, changes in commodity prices, and the evaluation of mine plans subsequent to the date of any estimate may cause actual production to vary materially from such estimates.
If title to mining claims, concessions, licenses or leases from governments on mine properties is not properly maintained by the operators, or is successfully challenged by third parties, ourhold stream and royalty interests generally prepare production and reserve estimates for the properties. We do not independently prepare or verify this information. There are numerous uncertainties inherent in these estimates, many of which are outside the operators’ control. As a result, production and reserve estimates are subjective and necessarily depend upon a number of assumptions, including, among others, reliability of historical data, geologic and mining conditions, metallurgical recovery, metal prices, operating costs, capital expenditures, development and reclamation costs, mining technology improvements, and the effects of government regulation. If any of the assumptions that operators make in connection with production or reserve estimates are incorrect, actual production could be foundsignificantly lower than the production or reserve estimates, which could adversely affect our future revenue and the value of our investments. In addition, if operators’ estimates with respect to be invalid.the timing of production are incorrect, we may experience variances in expected revenue from period to period.
Our business includes
Some operators also report publicly or to us estimates of mineralized material. The term “mineralized material” does not indicate proven or probable reserves as defined by the risk that operators of mining projects and holders of exploration or mining claims, tenements, concessions, licenses or other interests in land and minerals may lose their exploration or mining rights, or have their rightsSEC. Mineralized material is subject to explore and mine properties contested by private parties or the government. Internationally,future exploration and mining tenuresdevelopment and associated risks and may never convert to future reserves. In addition, estimates of mineralized material are subject to loss for many reasons, including expiration, failuresimilar uncertainties and assumptions as discussed above with respect to mineral reserves.
Our disclosures relating to operating properties will change as a result of the holdernew SEC disclosure rules, and we continue to meet specific legal qualifications, failure to pay maintenance fees or meet expenditure or work requirements, reduction in geographic extent upon passageface uncertainty around how some of time or upon conversion from an exploration tenurethese rules apply to a mining tenure, failure of title, expropriation and similar risks. If title to exploration or mining tenures subject to our streamstreaming and royalty interests have not been properly established or not properly maintained, or are successfully contested, our streamcompany.
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In 2018, the SEC adopted amendments to its disclosure requirements for mining companies, including streaming and royalty interests couldcompanies. We are required to comply with the new rules for our fiscal year beginning on July 1, 2021. Our disclosures about operating properties will change under the new rules, and, in some cases, we may be adversely affected.required to disclose in our SEC filings more or less information than we currently disclose about these properties. There continues to be uncertainty about how the rules will apply to a streaming and royalty company with significant investments in properties run by international operators that are not required to report under SEC rules.
Operations
Most of our revenue is derived from properties outside the United States, and risks associated with conducting business in foreign countries or other sovereign jurisdictions are subject to many risks, which could decreaseadversely affect our revenues.results of operations or financial condition.
We derived approximately 91%
Over 90% of our revenuesrevenue comes from non-U.S. sources during fiscal year 2018, compared to approximately 92% in fiscal year 2017 and approximately 90% in fiscal year 2016. Our principal producing stream and royalty interests on properties outside of the United States, and many of our operators are located in Canada, Chile,organized outside of the Dominican Republic, GhanaUnited States. Within the United States and Mexico. We currently have stream and royalty interests in mines and projects in other countries, including Argentina, Australia, Bolivia, Brazil, Burkina Faso, Guatemala, Honduras, Macedonia, Nicaragua, Peru, Russia, Spain and Tunisia. Various indigenous peoplespeople may be recognized as sovereign entities and may enforce their own laws and regulations within the United States, Canadaregulations. Our and other countries. In addition, future acquisitions may expose us to new jurisdictions. Ouroperators’ activities and those of the operators of properties on which we hold stream and royalty interests are subject to the risks normally associated with conducting business in foreign countries or within the jurisdiction of indigenous people that may be recognized asother sovereign entities in the United States and elsewhere. These risks may impact or our operators, depending on the jurisdiction, and include such things as:
•expropriation or nationalization of mining property;
•seizure of mineral production;
•exchange and currency controls and fluctuations;
•limitations on foreign exchange and repatriation of earnings;
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•restrictions on mineral production and price controls;
•import and export regulations, including restrictions on the export of gold, silver, copper, nickel or other metals;
•changes in legislation and government policies, including changes related to taxation, government royalties, imports, exports, duties, currency, foreign ownership, foreign trade, foreign investment and other forms of government take, including any such changes as may be made in response to U.S. laws or foreign policies;
•challenges to mining, processing and related permits and licenses, or to applications for permits and licenses, by or on behalf of regulatory authorities, indigenous populations, non‑governmental organizations or other third parties;
•changes in economic, trade, diplomatic and other relationships between countries, and the effect on global and economic conditions, the stability of global financial markets, and the ability of key market participants to operate in certain financial markets;
•high rates of inflation;
•labor practices and disputes;
•enforcement of unfamiliar or uncertain foreign real estate, mineral tenure, contract, water use, mine safety and environmental laws and policies;
•renegotiation, nullification or forced modification of existing contracts, licenses, permits, approvals, concessions or the like;
•war, crime, terrorism, sabotage, civil unrest and uncertain political and economic environments;
•corruption;
•exposure to liabilities under anti‑corruption and anti‑money laundering laws,jurisdictions, including the U.S. Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions to which we, but not necessarily our competitors, may be subject;following:
•suspension of the enforcement of creditors’ rights and stockholders’ rights; and
● | expropriation or nationalization of mining property or other government takings |
● | seizure of mineral production |
● | exchange and currency controls and fluctuations |
● | limitations on foreign exchange or repatriation of earnings |
● | restrictions on mineral production or price controls |
● | import or export regulations, including trade wars and sanctions and restrictions on metal exports |
● | changes in government taxation, royalties, tariffs, or duties |
● | changes in economic, trade, diplomatic, or other relationships between countries or the effects on global and economic conditions, the stability of global financial markets, or the ability of key market participants to operate in certain financial markets |
● | high rates of inflation |
● | unfamiliar or uncertain foreign real estate, mineral tenure, safety, or environmental rules |
● | war, crime, terrorism, sabotage, blockades, or other forms of civil unrest |
● | uncertain political or economic environments |
● | corruption |
● | exposure to liabilities under anti-corruption or anti-money laundering laws |
● | suspension of the enforcement of creditors’ or stockholders’ rights |
● | loss of access to government-controlled infrastructure, such as roads, bridges, rails, ports, power sources, and water supplies |
•loss of access to government controlled infrastructure, such as roads, bridges, rails, ports, power sources and water supply.
In addition, many of our operators are organized outside of the United States. Our stream and royalty interests may be subject to the application of foreign laws to our operators, and their stockholders, including laws relating to foreign ownership structures, corporate transactions, creditors’ rights, bankruptcy and liquidation. Foreign operations also could be adversely impacted by laws and policies of the United States affecting foreign trade, investment and taxation.
These risks may limit or disrupt operating minesthe development or projects onoperation of properties in which we hold stream and royalty interests restrict the movement of funds, or result in the deprivation of contractimpair our rights or the takinginterests in these properties, which could adversely affect our results of property by nationalizationoperations or expropriation without fair compensation,financial condition.
We and our operating properties may be subject to environmental risks, including risks associated with climate change, which could have a material adverse effect on our business, resultsfinancial condition or the value of operations, cash flows and financial condition.our investments.
Opposition from indigenous people may delay or suspend development or
Mining operations at the properties where we hold stream and royalty interests, which could decrease our revenues.
Various international and national, state and provincial laws, rules, regulations and other practices relate to the rights of indigenous peoples. Some of the properties where we hold stream and royalty interests are located in areas presently or previously inhabited or used by indigenous peoples. Many of these laws impose obligations on governments to respect the rights of indigenous people. Some mandate that governments consult with indigenous people regarding government actions which may affect indigenous people, including actions to approve or grant mining rights or permits. One or more groups of indigenous people may oppose continued operation, further development, or new development of the properties where we hold stream and royalty interests. Such opposition may be directed through legal or administrative proceedings or protests, roadblocks or other forms of public expression, and claims and protests of indigenous peoples may disrupt or
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delay activities of the operators of the properties. For example, the Pascua‑Lama project has been challenged by Chilean indigenous groups and other third parties. During the fourth calendar quarter of 2013, Barrick suspended construction activities at the Pascua‑Lama project, except for those activities required for environmental and regulatory compliance. Subsequently, in the first calendar quarter of 2018, Barrick reclassified the proven and probable reserves for the Chilean portion of the project, to which our royalty interest relates, and, ultimately, suspended further development of the project, in response to sanctions by the Chilean government.
Changes in mining taxes and royalties payable to governments could decrease our revenues.
Changes in mining and tax laws in any of the United States, Canada, Chile, the Dominican Republic, Ghana, Mexico or any other country in which we have stream and royalty interests in mines or projects could affect mine development and expansion, significantly increase regulatory obligations and compliance costs with respect to mine development and mine operations, increase the cost of holding mining tenures or impose additional taxes on mining operations, all of which could adversely affect our revenue from such properties. A number of properties where we hold royalty interests are located on U.S. public lands that are subject to federal mining and other public land laws. In recent years, the United States Congress has considered a number of proposed major revisions to the General Mining Law of 1872, and otherextensive laws which govern the creation, maintenance and possession of mining claims and related activities on public lands in the United States. Congress also has recently considered bills, which if enacted, would impose a royalty payable to the government on hardrock production, increase land holding fees, impose federal reclamation fees and financial assurances, impose additional environmental operating standards and afford greater public involvement and regulatory discretion in the mine permitting process. Such legislation, if enacted, or similar legislation in other countries, could adversely affect the development of new mines and the expansion of existing mines, as well as increase the cost of all mining operations, and could materially and adversely affect mine operators and our revenue.
The mining industry is subject to environmental risks in the U.S. and in the foreign jurisdictions where our interests are located, including risk associated with climate change.
Mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Laws and regulations in the United Statesgoverning land use and abroad intended to ensure the protection of the environment are constantly changing and evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased capital expenditures and operating costs. Furthermore, mining may be subject to significant environmental and other permitting requirements regarding the use of raw materials needed for operations, particularly water and power.environment. In addition, concerns with regardmany countries have implemented laws and regulations designed to address the effects of climate change, in the United States and abroad have resulted in international, national and local treaties, legislation and initiatives that affect mineral exploration and production, including those intendedrules to reduce industrial emissions and increase energy efficiency. Compliance with all suchThese laws and regulations treaties and initiatives (“Laws”) could increase permitting requirements,are constantly evolving in a manner generally expected to result in stricter standards, more liability, and enforcement,increased costs. Compliance with these laws and require significant increases in capital expendituresregulations can impose substantial costs and operating costs byburdens on operators of properties subject to our interests. Further, breach of a Law may result in the imposition of fines and penalties or other adverse impacts on operators and their properties, which may be material. IfIn addition, an operator is forced to incur significant costsoperator’s failure to comply with Lawsthese laws and regulations could result in injunctive action, orders to
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suspend or becomes subject to related restrictions that limit its ability to continuecease operations, damages, or expand operations,civil or if an operatorcriminal penalties on the operator. If any of these events were to lose its right to useoccur, our revenue or access power, water or other raw materials necessary to operate a mine, or if the costs to comply with Laws materially increased the capital or operating costs on the properties where we hold streams and royalties,value of our revenuesinvestment could be reduced, delayed or eliminated. These risks are also salient with regardadversely affected.
Further, due to our development stage properties where permitting may not be complete and/or where new legislation and regulation could lead to delays, interruptions and significant unexpected cost burdens for mine operators. For example, Argentina passed a federal glacier protection law in 2010 that could restrict mining activities in areas on or near the nation’s glaciers. We have royalties on the Chilean side of the Pascua‑Lama project, which straddles the border between Chile and Argentina and the glacier law could impact some aspects of the design, development and operation of the project. Further, to the extentexpansive environmental laws, it is possible that we could become subject to environmental liabilities for any historic periodperiods during which we owned or operated properties or relative to our current ownership interests in the lease and underlying unpatented mining claims acquired at Cortez or the lease, unpatented mining claims and exploration activities associated with the Peak Gold JV, the satisfaction of anyclaims. These liabilities would reduce funds otherwise available to us and could have a material adverse effect on our business, results of operations cash flows andor financial condition.
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TableUnknown defects in our stream or royalty interests or the bankruptcy or insolvency of Contentsan operator could have a material adverse effect on the value of our investments.
Despite our due diligence practices, it is possible that unknown defects or problems will exist relating to the existence, validity, enforceability, terms, or geographic extent of our stream and royalty interests. Similarly, stream interests and, in many jurisdictions, royalty interests are contractual in nature, rather than interests in land. As a result, these interests may not survive a bankruptcy or insolvency of an operator. We are dependent upon information technology systems, which are subject to cyber threats, disruption, damage and failure.
Information systems and other technologies, including those related to our financial and operational management, are an integraloften do not have the protection of security interests that could help us recover all or part of our business activities. Network and information systems‑related events, such as computer hackings, cyber‑attacks, ransomware, computer viruses, wormsinvestment in a stream or other destructive or disruptive software, process breakdowns, denial of service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing, or power outages, natural disasters, terrorist attacks or other similar events, could result in damage to our property, equipment and data, affect our ability to maintain ongoing operations, and result in significant expenditures to repair or replace the damaged property or information systems, reacquire access to networks and information systems, or to protect them from similar eventsroyalty interest in the future. In addition, any security breaches, such as misappropriation, misuse, leakage, falsificationevent of an operator’s bankruptcy or accidental releaseinsolvency. If our stream or loss of information maintained in our information technology systems (or thoseroyalty interests were set aside through judicial or administrative proceedings, the value of our third party service providers), including information about our company or our employees, third party information in our possession,investments could be adversely affected.
Anti-corruption laws and other data,regulations could damage our reputation, exposesubject us to legal liability and require us to expend significant capitalincur costs.
We are subject to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other resourceslaws that prohibit improper payments or offers of payments to remedy any such security breach. Despite security measuresthird parties, including foreign governments and their officials, for the purpose of obtaining or retaining business. In some cases, we invest in mining operations in jurisdictions that have implemented and other measures we may implementexperienced corruption in the future, and despitepast. Our international investment activities create the fact that, to date,risk of unauthorized payments or offers of payments in violation of the Company has not experienced any material losses relating to cyber-attacksFCPA or other information security breaches, there can be no assurance thatanti-corruption laws by one of our employees or agents in violation of our policies. In addition, the operators of the properties in which we own stream and royalty interests may fail to comply with anti-corruption laws and regulations. Although we are passive investors in these eventsproperties, enforcement authorities could deem us to have some culpability for the operators’ actions. Any violations of the FCPA or other anti-corruption laws could result in significant civil or criminal penalties to us and security breaches will not occur in the future or notcould have an adverse effect on our business. Furthermore, new and evolving requirements relating to cybersecurity are applicable or may in the future applyreputation.
A significant disruption to our information technology systems could adversely affect our business including requirements relatingand operating results.
We rely on a variety of information technology and automated operating systems to protection ofmanage and support our operations. For example, we depend on our information technology systems for financial reporting, operational and investment management, and email. These systems contain our proprietary business information and personally identifiable information. Compliance with such requirementsinformation of our employees. The proper functioning of these systems and the security of this data is critical to the efficient operation and management of our business. In addition, these systems could require modifications or upgrades as a result of technological changes or growth in our business. These changes could be costly and disruptive to our operations and could impose substantial demands on management time. Our systems, and those of third-party providers, could be vulnerable to damage or disruption caused by catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access, or cyber-attacks. Any security breach could compromise our networks, and the information stored on them could be improperly accessed, disclosed, lost, or stolen. The steps that we have taken to secure our systems and electronic information may not be adequate to prevent a disruption. Any unauthorized activities could disrupt our operations, damage our reputation, or result in additionallegal claims or increased compliance costs and exposure to legal liability.proceedings, any of which could adversely affect our business, reputation, or operating results.
We depend on the services of our President and Chief Executive Officerexecutives and other key employees.employees, and the loss of one or more members of our management team could harm our business.
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We believe that our success depends on the continued service of our key executive management personnel. Tony Jensen has served as our Presidentretaining qualified executives and Chief Executive Officer since July 2006. Mr. Jensen’s extensive commercial experience, mine operations background and industry contacts give us an important competitive advantage. The loss of the services of Mr. Jensen, other key members ofemployees. Our management team has significant industry and company-specific experience. If we are unsuccessful at retaining or other key employeesattracting qualified personnel, our business could jeopardizebe disrupted and our ability to maintain our competitive position in the industry. From time to time, we may also need to identify and retain additional skilled management and specialized technical personnel to efficiently operate our business. The number of persons skilled in the acquisition, exploration and development of stream and royalty interests is limited and there is competition for such persons. Recruiting and retaining qualified personnel is critical to our success and there can be no assurance of such success. If we are not successful in attracting and retaining qualified personnel, our ability to executeachieve our business modelobjectives and growth strategygrow effectively could be affected, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.jeopardized. We currently do not havecurrently maintain key person life insurance foron any of our officersdirectors or directors.employees.
Our disclosure controls
Current and internal control overfuture indebtedness could adversely affect our financial reporting are subject to inherent limitations.
Management has concluded that as of June 30, 2018, our disclosure controlscondition and procedures and our internal control over financial reporting were effective. Such controls and procedures, however, may not be adequate to prevent or identify existing or future internal control weaknesses due to inherent limitations therein, which may be beyond our control, including, but not limited to, our dependence on operators for the calculation of royalty payments and deliveries of metal streams that translate to our revenues as discussed above in “We depend on our operators for the calculation of payments of our stream and royalty interests. We may not be able to detect errors and later payment calculations may call for retroactive adjustments”. Given our dependence on third party calculations, there is a risk that material misstatements in results of operations and financial condition may not be prevented or detected on a timely basis by our internal controls over financial reporting and may require us to restate our financial statements.
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We have incurred indebtedness in connection with our business and may in the future incur additional indebtedness that could limit cash flow available for our operations, limitimpair our ability to borrow additional funds and, if we were unable to repayoperate our debt when due, would have a material adverse effect on our business, results of operations, cash flows and financial condition.business.
As of June 30, 2018,2020, we had $370$305 million aggregate principal amount of our 2.875% convertible senior notes due 2019 (the “2019 Notes”) outstanding which we incurred in June 2012. In addition, we may incur additional indebtedness in connection with financing acquisitions, strategic transactions or for other purposes. As of June 30, 2018, there was $1.0 billionand $695 million available and no amounts outstanding under our revolving credit facility. We are also subject tomay incur additional indebtedness in the risks normally associated with debt obligations,future. Current and future indebtedness could have important consequences, including the risk that our cash flows may be insufficient to meet required principal and interest payments and the risk that we will be unable to refinance our indebtedness when it becomes due, or that the terms of such refinancing will not be as favorable as the terms of our indebtedness. We may seek additional debt or equity financing in the future.following:
Indebtedness could have a material adverse effect on our business, results of operations, cash flows and financial condition. For example, it could:
● | require us to dedicate a substantial portion of our cash flow from operations to service indebtedness, thereby reducing the availability of cash flow to fund acquisitions, working capital, or dividends |
● | limit our flexibility in planning for, or reacting to, changes in our business |
● | restrict us from exploiting business opportunities |
● | make us more vulnerable to a downturn in our business or the economy |
● | place us at a competitive disadvantage compared to our competitors with less indebtedness |
● | require the consent of our existing lenders to incur additional indebtedness |
● | limit our ability to borrow additional funds for acquisitions, working capital, or debt-service requirements |
•require us to dedicate a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the availability of our cash flow to fund acquisitions of stream and royalty interests, working capital, pay dividends and other general corporate purposes;
•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•restrict us from exploiting business opportunities;
•place us at a competitive disadvantage compared to our competitors that have less indebtedness;
•dilute our existing stockholders if we elect to issue common stock instead of paying cash in the event the holders convert the 2019 Notes, or any other convertible securities issued in the future;
•require the consent of our existing lenders to borrow additional funds, as was required in connection with the issuance of the 2019 Notes; and
•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes.
In addition, the agreement governing our revolvingOur credit facility contains and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants. For example, the agreement includes financial covenants that willrequire us to maintain a maximum leverage ratio and a minimum interest coverage ratio (as these terms are defined under the agreement). These covenants could limit our ability to engage in activities that may beare in our long‑termlong-term best interests. Among other restrictions, the agreement governing our revolving credit facility contains covenants limiting our ability to make certain investments, consummate certain mergers, incur certain debt or liens and dispose of certain assets.
If we are unable to maintain cash reserves or generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we failOur failure to comply with the variousthese covenants and requirements of the 2019 Notes, our revolving credit facility or any indebtedness which we may incurwould result in the future, an event of default could occur that, if not cured or waived, could result in the acceleration of all outstanding indebtedness. Our credit facility expires in June 2024. In the future, we may be unable to obtain new financing or refinancing on acceptable terms.
The proposed phase out of the London Interbank Offered Rate ("LIBOR") could adversely affect our debt. Any defaultresults of operations or financial condition.
In 2017, the United Kingdom's Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to phase out LIBOR by the end of calendar 2021. The Federal Reserve Board has convened a group of private-market participants to identify a proposed alternative rate and address the transition from LIBOR to an alternative rate. In 2019, the FASB proposed guidance that would help facilitate the market transition from existing reference rates to alternative rates. Borrowings under the 2019 Notes, our revolving credit facility or any indebtedness whichbear interest at LIBOR plus an applicable margin. Under the agreement governing the facility, if LIBOR is phased out, we may incurare required to negotiate in good faith to establish an alternative rate under the facility. There is currently no definitive information regarding the future could haveuse of LIBOR or a material adverse effect onreplacement rate. We are unable to predict whether and to what extent a LIBOR change would impact our business,future results of operations cash flows and financial condition.
Risks Related to our Common Stock
Our stock price may continue to be volatile, and you could decline.lose all or part of your investment.
The market price of our common stock has fluctuated in the past and may declinecontinue to do so in the future. The high and low sale prices of our common stock on the Nasdaq Global Select Market were $72.04 and $24.68 for theFor example, during fiscal year ended June 30, 2016, $87.74 and $60.21 for the fiscal year ended June 30, 2017 and $94.39 and $76.15 for the fiscal year ended June 30, 2018. The
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fluctuation of2020, the market price of our common stock has been affected by many ranged from a low of $59.78 to a high of $139.63. Many
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factors that are beyond our control, including:
•market prices of gold, silver, copper, nickel and other metals;
•Central bank interest rates;
•expectations regarding inflation;
•ability of operatorsunrelated to service their financial obligations, advance development projects, produce precious metals and develop new reserves;
•currency values;
•credit market conditions;
•general stock market conditions; and
•global and regional political and economic conditions.
Additional issuances of equity securities by us could dilute our existing stockholders, reduce some or all of our per share financial measures, reduce the trading price of our common stock or impede our abilityoperating performance can contribute to raise future capital. Substantial sales of shares may negatively impactvolatility in the market price of our common stock, including the following:
● | economic, market, or political conditions, including the effects of COVID-19 |
● | market prices of gold, silver, copper, nickel, and other metals |
● | developments relating to operating properties |
● | interest rates and expectations about inflation |
● | currency values |
● | credit market conditions |
These market fluctuations, regardless of cause, may materially and adversely affect our stock price. As a result, you could lose all or part of your investment.
We may issue additional equity securities, which would dilute our existing stockholders and reduce our per-share financial measures and could reduce the market price of our common stock.
We may issue additional equity in the future in connection with acquisitions, strategic transactions, or for other purposes. To the extentIf we issue additional equity securities, our existing stockholders couldwould be diluted and some or all of our per shareper-share financial measures couldwould be reduced. In addition, the shares of common stock that we issue in connection with an acquisition may not be subject to resale restrictions. The market price of our common stock could decline if our stockholders sell substantial amounts of our common stock including shares issued upon the conversion of the outstanding 2019 Notes or are perceived by the market as intending to sell these shares other than in an orderly manner.
Conversion of the 2019 Notes may dilute the ownership interest of existing stockholders.
At our election, we may settle the 2019 Notes tendered for conversion entirely or partly in shares of our common stock. An aggregate of approximately 3.5 million shares of our common stock are issuable upon conversion of the outstanding 2019 Notes at the initial conversion rate of 9.4955 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $105.31 per share of common stock). In addition, the number of shares of common stock issuable upon conversion of the 2019 Notes, and therefore the dilution of existing common stockholders, could increase under certain circumstances described in the indenture under which the 2019 Notes are governed. We may issue all of these shares without any action or approval by our stockholders. As a result, the conversion of some or all of the 2019 Notes may dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
We may change our practice of paying dividends.dividends, which could reduce the value of your investment.
We have paid a cash dividend on our common stock for each fiscal year beginning in fiscalsince calendar year 2000. Our board of directors has discretion in determining whether to declare a dividend based on a number of factors, including prevailing gold and other metal prices, economic or market conditions, future earnings, cash flows,flow, financial condition, and funding requirements for future opportunities or operations. In addition, there may be corporate law limitations or future contractual restrictions oncould limit our ability to pay dividends.dividends in the future. If our board of directors declinesreduces or is unable to declareeliminates future dividends, in the future or reduces the current dividend level, our stock price could fall, and the success of anyour investment in our common stock would depend largely uponon any future stock price appreciation. We have increased our dividendsdividend in prior years. There can be no assurance, however, that we will continue to do so or that we will pay any dividends at all.dividends.
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TableProvisions of ContentsDelaware law and our organizational documents could delay or prevent a third party from acquiring us.
CertainThe anti-takeover provisions of Delaware law our organizational documents, andimpose barriers to the indenture governing the 2019 Notes could impede, delay or prevent an otherwise beneficial takeover or takeover attemptability of us.
Certain provisions of Delaware law, our organizational documents, and the indenture governing the 2019 Notes could make it more difficult or more expensive for a third party to acquire control of us, even if a change of control would be beneficial to our existing stockholders. By default, Delaware law prohibits, subject to certain exceptions, a Delaware corporation from engaging in any business combination with any “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock, for a period of three years following the date that the stockholder became an interested stockholder. Additionally,In addition, our certificate of incorporation and bylaws contain provisions that could similarly delay, defer or discourage a change in control of us or our management. These provisions could also discourage a proxy contest andmay make it more difficult for stockholdersa third party to elect directors and takeacquire control of us without the approval of our board of directors. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding common stock. Among other corporate actions. Suchthings, these provisions provide for the following, among other things: (i) the ability of our board of directors to issue shares of common stock and preferred stock without stockholder approval, (ii) the ability of our board of directors to establish the rights and preferences of authorized and unissued preferred stock, (iii) a board of directors divided into three classes of directors serving staggered three year terms, (iv) permitting only the chairman of the board of directors, chief executive officer, president or board of directors to call a stockholders’ meeting and (v) requiring advance notice of stockholder proposals and related information. In addition, if an acquisition event constitutes a fundamental change, holders of the 2019 Notes will have the right to require us to purchase their 2019 Notes in cash. If an acquisition event constitutes a make‑whole fundamental change, we may be required to increase the conversion rate for holders who convert their 2019 Notes in connection with such make‑whole fundamental change. following:
● | allow our board of directors to issue shares of common stock and preferred stock without stockholder approval, except as may be required by Nasdaq rules |
● | allow our board of directors to establish the rights and preferences of authorized and unissued preferred stock |
● | provide for a classified board, whereby our board of directors is divided into three classes of directors serving staggered three-year terms |
● | prohibit stockholders from calling special meetings of stockholders |
● | require advance notice of stockholder proposals and related information |
● | require vacancies and newly created directorships on the board of directors to be filled only by affirmative vote of a majority of the directors then serving on the board |
These provisions could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, which may causecould decrease the market pricevalue of our common stock to decline.your investment.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
We do not own or operate the properties inon which we havehold stream or royalty interests, except for our interest in the Peak Gold JV, and therefore much of the information disclosed in this Form 10‑K10-K regarding these properties is provided to us by the operators. For example, the operators of the variouscertain properties provide us information regarding metals production, estimates of mineral reserves and additional mineralized material and production estimates. A list of our producing and development stage streams and royalties, as well their respective reserves, are summarized below in Table 1 “Operators’ Estimated Proven and Probable Gold Reserves” below within this Item 2. More information is available to the public regarding certain properties in which we have stream or royalty interests, including reports filed with the SEC or with the Canadian securities regulatory agencies available at www.sec.gov or www.sedar.com, respectively.
The Company manages itsWe manage our business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. The description of our principal streams and royalties set forth below includes the location, operator, stream or royalty rate, access and any material current developments at the property. For any reported production amounts discussed below, the Company considerswe consider reported production to relate to the amount of metal sales subject to our stream and royalty interests. Please refer to Item 7, MD&A, for discussion on production estimates, historical production and revenue for our principal properties. The map below illustrates the location of our principal producing stage properties.
Principal Producing Properties
The Company considersWe consider both historical and future potential revenues in determiningto determine which stream and royalty interests in our portfolio are principal to our business. Estimated future potential revenues from producing properties are based on a number of factors, including reserves subject to our stream and royalty interests, production estimates, feasibility studies, technical reports, metal price assumptions, mine life, legal status and other factors and assumptions, any of which could change and could cause the Companyus to conclude that one or more of such stream and royalty interests are no longer principal to our business.
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Currently, the Company considerswe consider the properties discussed below (listed alphabetically by stream and royalty interest) to be principal to our business. Based on the factors discussed above, we no longer consider Rainy River to be a principal property.
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Stream Interests
Andacollo (Region IV, Chile)
The Company’s wholly owned subsidiary, RGLD Gold AG (“RGLD Gold”), a wholly-owned subsidiary of the Company, owns the right to purchase 100% of the gold produced from the Andacollo copper‑goldcopper-gold mine until 900,000 ounces of payable gold have been delivered, and 50% thereafter. The cash purchase price equals 15% of the monthly average gold price for the month preceding the delivery date for all gold purchased. As of June 30, 2018,2020, approximately 142,000237,100 ounces of payable gold have been delivered to RGLD Gold.
Andacollo is an open‑pitopen-pit mine and milling operation located in central Chile, Region IV in the Coquimbo Province and is operated by Compañía Minera Teck Carmen de Andacollo (“CMCA”), a 90% owned subsidiary of Teck Resources Limited (“Teck”). The Andacollo mine is located in the foothills of the Andes Mountains approximately 1.5 miles southwest of the town of Andacollo. The regional capital of La Serena and the coastal city of Coquimbo are approximately 34 miles northwest of the Andacollo mine by road, and Santiago is approximately 215 miles south by air. Access to the mine is provided by Route 43 (R‑43)(R-43) south from La Serena to El Peñon. From El Peñon, D‑51D-51 is followed east and eventually curves to the south to Andacollo. Both R‑43R-43 and D‑51D-51 are paved roads.
Stream deliveries from Andacollo were approximately 51,70043,900 ounces of gold during the fiscal year ended June 30, 2018,2020, compared to approximately 47,90051,900 ounces forof gold during the fiscal year ended June 30, 2017. 2019. Stream deliveries decreased as a result of the temporary suspension of operations during the quarter ended December 31, 2019, due to a workers’ strike from October 14, 2019 through December 5, 2019, which was resolved with the ratification of a new 36-month collective agreement.
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Teck indicated that they expect gradually decliningexpects grades to be offset largely by planned throughput improvementscontinue to decline towards reserve grades in the mill.calendar year 2020 and future years. The current life of mine
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for Andacollo is expected to continue until 2036.calendar year 2035. Additional permittingpermits or permit amendments to existing permits will be required to execute the life of mine plan.
Khoemacau Project (Botswana)
In February 2019, RGLD Gold entered into a silver stream with Khoemacau Copper Mining (Pty.) Limited (“KCM”) for the purchase of silver produced from the Khoemacau Project (“Khoemacau”). Under the purchase and sale agreement, subject to the satisfaction of certain conditions, RGLD Gold will make advance payments totaling $212 million toward the purchase of 80% of the silver produced from Khoemacau until certain delivery thresholds are met (the “Base Silver Stream”). At KCM’s option and subject to various conditions, RGLD Gold will make up to an additional $53 million in advance payments for up to the remaining 20% of the silver produced from Khoemacau (the “Option Silver Stream”). The stream rate will drop to 40% of silver produced from Khoemacau following delivery to RGLD Gold of 32 million silver ounces under the Base Silver Stream, or to 50% of the silver produced from Khoemacau following delivery of 40 million silver ounces to RGLD Gold should KCM exercise the entire Option Silver Stream. RGLD Gold will pay a cash price equal to 20% of the spot silver price for each ounce delivered under the Base Silver Stream and Option Silver Stream; however, if KCM achieves mill expansion throughput levels above 13,000 tonnes per day (30% above current mill design capacity), RGLD Gold will pay a higher ongoing cash price under the Base Silver Stream and Option Silver Stream for silver ounces delivered in excess of specific annual thresholds.
Khoemacau is a copper-silver development project located within the North West and Ghanzi Districts of Botswana owned by KCM. The license area is generally southwest of the town of Maun and northeast of the town of Ghanzi. Khoemacau is accessed from the city of Maun, approximately 40 miles southwest to the town of Toteng on a major travel route, Botswana’s A3 highway, a paved road and then approximately 16 miles on gravel road to reach the Boseto plant site. The Zone 5 mining area is connected to the Boseto plant by a 20-mile gravel road.
According to KCM, progress continued at Khoemacau during the June 2020 quarter and the project reached approximately 54% of construction completion as of June 30, 2020 with 81% of the capital committed. According to KCM, activities are focused on refurbishment of the Boseto mill, underground development, completion of accommodation, power and water infrastructure at Zone 5 and completing construction of the haul road between Zone 5 and the Boseto mill. Also, according to KCM, underground development has cumulatively advanced 2,360 meters in the five declines, which is in line with planned development rates.
On July 5, 2020, RGLD Gold made its fourth advance payment of $11.1 million, which brings the total contribution to $146.8 million. RGLD Gold expects to commit approximately $35 - $45 million during the remainder of calendar year 2020, and assuming the midpoint of this range, the total remaining commitment in calendar year 2021 is expected to range from approximately $25 million for the Base Silver Stream up to approximately $78 million should KCM elect to fully exercise the Option Silver Stream. Further payments are subject to certain conditions and are scheduled to be made on a quarterly basis using an agreed formula and certification process as project spending progresses.
According to KCM, although a six-month state of emergency has been declared by the Government of Botswana to help prevent the spread of COVID-19, mining has been designated an “essential service” and general development activity at Khoemacau is continuing. However, due to the impacts experienced from travel restrictions, some activities have been slowed or rescheduled. Barring any potential further impacts caused by COVID-19 considerations, we now expect the first shipment of concentrate to occur late in the third calendar quarter of 2021.
Mount Milligan (British Columbia, Canada)
RGLD Gold owns the right to purchase 35% of the payable gold and 18.75% of the payable copper produced from the Mount Milligan copper‑gold projectcopper-gold mine in British Columbia, Canada, which is operated by an indirect subsidiary of Centerra Gold Inc. (“Centerra”). The cash purchase price for gold is equal to the lesser of $435 per ounce, with no inflation adjustment, or the prevailing market price when purchased. The cash purchase price for copper is 15% of the spot price. As of June 30, 2020, approximately 516,500 ounces of payable gold and 34.71 million pounds of payable copper have been delivered to RGLD Gold.
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Mount Milligan project is an open‑pitopen-pit mine and is located within the Omenica Mining Division in North Central British Columbia, approximately 96 miles northwest of Prince George, 53 miles north of Fort St. James, and 59 miles west of Mackenzie. The Mount Milligan project is accessible by commercial air carrier to Prince George, British Columbia, then by vehicle from the east via Mackenzie on the Finlay Philip Forest Service Road and the North Philip Forest Service Road, and from the west via Fort St. James on the North Road and Rainbow Forest Service Road. Road travel to the Mount Milligan property site is 482 miles from Prince Rupert and 158 miles from Prince George.
Gold stream deliveries from Mount Milligan were approximately 78,00059,900 ounces of gold during the fiscal year ended June 30, 2018,2020, compared to approximately 96,00068,500 ounces of gold during the fiscal year ended June 30, 2017.2019. The decrease was primarily due to the changereflects differences in the timing of shipments and settlements during the periods, in addition to lower gold stream rate from 52.25% to 35%. RGLD Gold began receivinggrades processed and lower gold deliveries reflecting the lower stream percentage in April 2017. recovery, slightly offset by increased tonnage processed.
Copper stream deliveries from Mount Milligan were approximately 10.35 million pounds of copper during the fiscal year ended June 30, 2018, compared to approximately 2.5712.7 million pounds during the fiscal year ended June 30, 2017. Copper stream deliveries began during our June 2017 quarter. The decrease was also partially a result of the mill processing operations at the mine being temporarily suspended for 39 days beginning on December 27, 2017, due to insufficient water. For the June 2018 quarter, mill throughput 47,000 tonnes per calendar day,2020, compared to 52,000 tonnes per calendar dayapproximately 9.1 million pounds during the June 2017 quarter.
On December 27, 2017, Centerra temporarily suspended mill operations at Mount Milligan due to insufficient fresh water. Centerra provided a further update on May 1, 2018 that Mount Milligan was operating at an average throughput of approximately 40,000 tonnes per day, and that once the spring snow melt is underway, throughput is expected to increase to a targeted average of 55,000 tonnes per day for the second half of the calendar year. Our fourth quarter fiscal year 2018 results were not impacted by the temporary shutdown of the mill processing facility. Due toended June 30, 2019. Increased deliveries resulted from differences in the timing of shipments and deliveriessettlements during the periods, in addition to higher tonnage and higher copper grades processed, slightly offset by lower copper recovery.
On March 26, 2020, Centerra published an updated National Instrument 43-101 (“NI 43-101”) technical report for the Mount Milligan mine, which provided a detailed update to the life of mine plan contained in the previous NI 43-101 report for Mount Milligan published by Centerra in calendar 2017.
Centerra reported a reduction in proven and probable reserves due to increased costs, lower expected productivities, and lower process plant throughput compared to their calendar 2017 technical report, as well as an update to the resource model and re-estimation of metallurgical recoveries. Details for the reserves and updated mine plan, which does not contemplate any growth capital or inclusion of additional mineralized material, were reported by Centerra as follows:
● | Reserves as of December 31, 2019 containing 2.4 million ounces of gold and 959 million pounds of copper (comprised of 191.0 million tonnes grading 0.39 grams per tonne of gold and 0.23% of copper). Reserves were calculated using a gold price of $1,250 per ounce, a copper price of $3.00 per pound, and an exchange rate of US$ 1.00 to C$ 1.25; |
● | Production based on a 9-year reserve life through calendar 2028; |
● | Average life of mine recoveries of 61.8% for gold and 80.6% for copper; |
● | Life of mine payable gold production of 1.45 million ounces, or an average of 161,000 ounces per year; |
● | Life of mine payable copper production of 735.6 million pounds, or an average of 81.7 million pounds per year; and |
● | Average life of mine all-in sustaining cost of $704 per ounce of gold sold on a by-product basis, which includes sustaining capital and copper revenue credits (assuming a copper price of $3.00 per pound and an exchange rate of US$ 1.00 to C$ 1.25). |
Significant reductions in proven and probable reserves or mineralized material are indicators of potential impairment for our stream and royalty interests. As part of our regular asset impairment analysis during the quarter ended March 31, 2020, we determined that an impairment of our stream interest at Mount Milligan was not necessary as (i) the earlier financial impairment taken by Centerra does not impact the mine operating performance, and (ii) the reduction in reserves and mineralized material at Mount Milligan resulted in updated gold and copper depletion rates that remain well below current and long-term consensus gold and copper prices. Due to the reduction in gold and copper reserves, as reported by Centerra, the depletion rate of our investment at Mount Milligan increased from $402 to $764 per ounce of gold and copper, we expectfrom $0.81 to $1.48 per pound of copper.
On April 1, 2020, Centerra announced that reductions of manpower and throughput at Mount Milligan would occur as a result of actions implemented to combat the impactCOVID-19 pandemic. Centerra has since reported that workforce numbers returned to normal over the month of May resulting in mining and plant tonnages returning to planned levels. According to Centerra, process plant throughput averaged approximately 60% of target levels and mining operations experienced a four week partial shutdown during the reduction period, and during April, the process plant was shut down for eleven days to perform routine maintenance and reline the SAG mill.
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Centerra also reported that stored water inventory at Mount Milligan, which is critical to the ability to process ore through the mill on a sustainable basis, was in excess of six million cubic meters as at June 30, 2020. Centerra reported that spring water pumping started in April, and substantial snowpack and a wet spring led to volumes pumped as of the temporary shutdown to be reflected in Royal Gold’s first fiscal quarter 2019 results, as someend of June that exceeded those of the deliveries of gold and copper that were expected in the June through August 2018 period have been deferred to a later date.
On August 1, 2018,entire 2019 pumping season. In addition, Centerra reported that Mount Milligan continued to access ground water from the Lower Rainbow Valley wellfield and other groundwater wells near the tailings storage facility during the quarter ended June 30, 2020. Centerra also reported that it continued exploration activities focused on extending the groundwater capacity in the vicinity of the existing infrastructure, and these activities will continue for the remainder of 2020. Further, Centerra reported that it continues to face potential limitations duepursue a longer-term solution to its water supply, a situation exacerbated by minimal inflow from snow melt and less than expected precipitation experienced in calendar 2018.requirements at Mount Milligan.
On July 31, 2020, Centerra announced they filedconfirmed that there is no change to the previously issued production guidance for an amendment to their environmental assessment certificate to provide additional short-term water sources through 2020, and to initiate the development of a longer term water supply plan for subsequent years.
According to Centerra, if regulatory approvals to access water sources are not received, the Mount Milligan mill would needfor calendar year 2020 of 140,000 to operate only one ball mill to conserve water and throughput would be reduced to approximately 30,000 tonnes per day for the December 2018 quarter. In addition to these water matters, throughput in the September 2018 quarter will be reduced as a result of a recent (July 2018) 10-day unscheduled shutdown of the primary crusher for maintenance and a scheduled five-day maintenance shutdown in September 2018. Considering these factors, Centerra reduced their calendar 2018 production guidance at Mount Milligan to 175,000-195,000160,000 payable ounces of gold and 40-4780 to 90 million payable pounds of copper. If Centerra receives approval to access short-term water sources in the fourth quarter of calendar 2018, second half calendar 2018 throughput could be increased.
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Pueblo Viejo (Sanchez Ramirez, Dominican Republic)
RGLD Gold owns the right to purchase 7.5% of Barrick’s interest in the gold produced from the Pueblo Viejo mine until 990,000 ounces of gold have been delivered, and 3.75% thereafter. The cash purchase price for gold is 30% of the spot price of gold per ounce delivered until 550,000 ounces of gold have been delivered, and 60% of the spot price of gold per ounce delivered thereafter. RGLD Gold also owns the right to purchase 75% of Barrick’s interest in the silver produced from the Pueblo Viejo mine, subject to a minimum silver recovery of 70%, until 50 million ounces of silver have been delivered, and 37.5% thereafter. The cash purchase price for silver is 30% of the spot price of silver per ounce delivered until 23.1 million ounces of silver have been delivered, and 60% of the spot price of silver per ounce delivered thereafter. As of June 30, 2020, approximately 226,400 ounces of payable gold and 7.9 million ounces of payable silver have been delivered to RGLD Gold.
The Pueblo Viejo mine is located in the province of Sanchez Ramirez, Dominican Republic, approximately 60 miles northwest of Santo Domingo, and is owned by a joint venture in which Barrick holds a 60% interest and is responsible for operations, and in which GoldcorpNewmont Corporation holds a 40% interest. Pueblo Viejo is accessed from Santo Domingo by traveling northwest on Autopista Duarte, Highway #1, approximately 48 miles to Piedra Blanca and proceeding east for approximately 14 miles on Highway #17 to the gatehouse for Pueblo Viejo. Both Highway #1 and Highway #17 are paved.
Gold stream deliveries from Pueblo Viejo were approximately 45,40045,000 ounces of gold during the fiscal year ended June 30, 2018,2020, compared to approximately 52,60041,200 ounces of gold during the fiscal year ended June 30, 2017.
2019. Silver stream deliveries were approximately 1.891.7 million ounces of silver during the fiscal year ended June 30, 2018,2020, compared to approximately 1.782.0 million ounces of silver during the fiscal year ended June 30, 2017. 2019.
Barrick reportedreports that it continues to advance engineering and evaluation work towards a decrease in production at Pueblo Viejo during the June 2018 quarter due to lower head grade resulting from the expected decline in pit ore gradesfeasibility study for the periodprocess plant expansion and delays in transitioning to higher grade ore benches in Moore Pit Phases 5 and 6. Lower throughput duringproposed tailings storage facility that could extend the June 2018 quarter resulted from the first of two-annual planned autoclave and mill shutdowns. Barrick expects production to increase in the September 2018 quarter as Pueblo Viejo transitions to higher grades in Moore Pit Phases 5 and 6. Barrick expects September 2018 quarter throughput to remain in line with the June 2018 quarter as scheduled maintenance of the second autoclave will be completed. Barrick also anticipates higher gradesmine life at Pueblo Viejo to persist intobeyond calendar year 2040. Barrick estimates that the December 2018 quarter, with higher throughput.
Barrick is advancing prefeasibility level studies for aprocess plant and tailings expansion at Pueblo Viejo that wouldproject could significantly increase throughput by 50% to 12 million tonnes per year, allowingand allow the mine to maintain average annual gold production of approximately 800,000 ounces after calendar year 2022 (on a 100% basis). The project involves, and that the addition of a pre-oxidation heap leach pad with aincrease in tailings storage capacity of eight million tonnes per year, a new mill and flotation concentrator with a capacity of four million tonnes per year, and additional tailings capacity. The project has the potential to convert roughly sevenapproximately 11 million ounces of mineralized material to proven and probable reserves (on a 100% basis). In support
Barrick expects the proportion of lower grade stockpile ore in the feed blend to steadily increase until the mine expansion pits are fully developed as part of the prefeasibility study,decision on the proposed plant and tailings expansion project. Barrick completedalso reported lower gold production during the constructionJune 2020 quarter as a result of a pilot pre-oxidation heap leach padplanned maintenance shutdown. For calendar year 2020, Barrick indicated production attributable to test metallurgytheir interest at Pueblo Viejo is expected to be between 530,000 and recoveries, and is now irrigating ore. Civil works for the pilot flotation circuit have also commenced, and a tender process for structural, mechanical, and electrical contracts is now underway. 580,000 ounces of gold.
Wassa and Prestea (Western Region, Ghana)
RGLD Gold owns the right to purchase 10.50%10.5% of the gold produced from the Wassa, Prestea and Prestea projects,Bogoso mines, operated by Golden Star Resources Ltd. (“Golden Star”), until an aggregate 240,000 ounces have been delivered. Once the applicable delivery threshold is met, the stream percentage will decrease to 5.5%. The cash purchase price for the remaining term gold is 20%
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of the transaction.spot price per ounce delivered until 240,000 ounces of gold have been delivered, and 30% of the spot price per ounce delivered thereafter. As of June 30, 2020, approximately 110,500 ounces of payable gold have been delivered from Wassa, Prestea and Bogoso mines, of that 69,700 ounces of payable gold have been delivered from Wassa to RGLD Gold.
The Wassa underground mine and oxide ore mill are located near the village of Akyempim in the Wassa East District, in the Western Region of Ghana, approximately 50 miles north of Cape Coast and 93 miles west of the capital Accra. The main access to the site is from the east, via the Cape Coast to Twifo‑PrasoTwifo-Praso road, then over the combined road‑railroad-rail bridge on the Pra River. There is also an access road from Takoradi in the south via Mpohor. An airport at Takoradi is capable of handling jet aircraft and is serviced by several commercial flights each day.
Prestea currently produces from both open pits and an underground operation producing oxide ore located in the Ashanti gold district in the central eastern section of the Western Region of Ghana, approximately 6 miles south of the town of Bogoso. Access to the property is by commercial air carrier to Accra and then by vehicle on a paved and gravel road.
22
Stream deliveries from Wassa and Prestea were approximately 25,90016,500 ounces of gold during the fiscal year ended June 30, 2018,2020, compared to approximately 19,90016,600 ounces of gold during the fiscal year ended June 30, 2017.2019.
On March 27, 2020, Golden Star reported that deep drilling in calendar year 2019 successfully extended the increase in productionmineralization at Wassa by approximately 700 feet to the south where the deposit remains open to the south and down dip. Golden Star further reported that the exploration strategy during calendar year 2020 would transition away from growth of the currentoverall resource to infill drilling to help define the potential mine plans for the southern extension of the operation. According to Golden Star, as of December 31, 2019 the proven mineral reserve at Wassa increased 87% over the prior year period was primarily due to improved grade1.4 million ounces of gold, and tonnestotal underground mineralized material at the Wassa underground mine. Ascontained approximately 11.2 million ounces of February 1, 2018, Wassa became an underground-only mining operation, however, stock piled ore continued to be processed throughout the current period. At Prestea,gold.
On July 27, 2020, Golden Star announced that it had signed a binding agreement with Future Global Resources Limited (“FGR”) for the sale of the Prestea and Bogoso mines. This transaction will require the separation of the RGLD Gold stream agreement into separate stream agreements for each of Wassa and Prestea/Bogoso, which is conditional on, among other things, the approval of the board of directors of Royal Gold. Further, on July 28, 2020, Golden Star announced that, if approved, the separated Wassa stream agreement would require Golden Star to deliver 10.5% of the gold produced from Wassa in return for a cash purchase price for gold of 20% of the spot price per ounce delivered, until the delivery of 240,000 ounces, after which the obligation would decrease to 5.5% of the gold produced from Wassa in return for a cash purchase price for gold of 30% of the spot price per ounce delivered.
On July 28, 2020, Golden Star reported calendar year 2020 gold production decreased during the current period primarily dueguidance for Wassa of between 165,000 to the planned reduction170,000 ounces, up from the Prestea open-pits and the slower than expected ramp-up at the Prestea underground mine. previous guidance range of 155,000 to 165,000 ounces.
Golden Star indicated that they remain on track to achieve their consolidated calendar year 2018 production guidance, and that they expect production to be weighted to the second half of calendar 2018.
Royalty Interests
Cortez (Nevada, USA)
Cortez is a series of large open‑pitopen-pit and underground mines, utilizing mill and heap leach processing, which are operated by subsidiaries of Barrick.Nevada Gold Mines LLC (“NGM”), a joint venture between Barrick and Newmont Corporation (“Newmont”) with respect to their Nevada operations. The operation is located approximately 60 air miles southwest of Elko, Nevada, in Lander County. The site is reached by driving west from Elko on Interstate 80 approximately 46 miles and proceeding south on State Highway 306 approximately 23 miles. Our royalty interest at Cortez applies to the Pipeline and South Pipeline deposits, part of the Gap pit and the Crossroads deposit.
The royalty interests we hold at Cortez include:
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indexing for inflation or deflation. The GSR2 royalty rate is 5.0% at a gold price of $470 per ounce and higher. (c)Reserve and GAS Claims Fixed Royalty (“GSR3”). The GSR3 royalty is a fixed rate GSR royalty of 0.7125% and covers the same cumulative area as is covered by our two sliding-scale GSR royalties, GSR1 and GSR2, except mining claims that comprise the undeveloped Crossroads deposit. (d)Net Value Royalty (“NVR1”) and Net Value Royalty (Crossroads) (“NVR1C”). The NVR1 royalty is a fixed royalty of 4.91% NVR that covers the area of the GAS Claims, excluding the majority of the Crossroads deposit. The NVR1C royalty, which covers the majority of the Crossroads deposit, is a fixed royalty of 4.52% NVR. On average, above a gold price of $470 per ounce after the relevant deductions, the combined royalty interests of GSR1, GSR2, GSR3, NVR1 and NVR1C are equivalent to an approximate 8.2% gross smelter return royalty to Royal Gold. |
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We also own three other royalties in the Cortez area where there is currently no production and no reserves attributed to these royalty interests.
Production attributable to our royalty interest at Cortez increased approximately 21% when compared to 173,300 ounces of gold over the prior fiscal year ended June 30, 2017. Waste strippingof 96,700 ounces of gold, as a result of production ramping up at the Crossroads deposit, which is subject to our NVR1 (Crossroads) and GSR2 royalty interests is currently ongoing. Production from Crossroads, which contains 3.2and portions of the NVR1 and GSR3 royalty interests.
During the quarter ended March 31, 2020, Barrick provided us with an updated reserve statement and life of mine plan for Cortez. According to Barrick, as of December 31, 2019, total proven and probable reserves subject to our royalty interests contained 3.5 million ounces of gold (consisting of 87.0 million tonnes of ore at a grade of 1.26 grams per tonne). Reserves were calculated at a gold price of $1,200 per ounce.
Further according to Barrick, total gold production at Cortez from the regions subject to our interests is expected to beginbe approximately 175,000 ounces in late calendar 2018.year 2020, increasing to an approximate average of 425,000 ounces from calendar 2021 through calendar 2026. The expected production increase from calendar year 2020 to calendar year 2021 is primarily due to higher contribution from the Crossroads deposit, which is expected to ramp up through calendar year 2023 and offset declining production from the other royalty regions.
Peñasquito (Zacatecas, Mexico)
We own a production payment equivalent to a 2.0% NSR royalty on all metal production from the Peñasquito open‑pitopen-pit mine, located in the State of Zacatecas, Mexico, and operated by a subsidiary of Goldcorp Inc. (“Goldcorp”).Newmont. The
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Peñasquito projectmine is located approximately 17 miles west of the town of Concepción del Oro, Zacatecas, Mexico. The project,mine, composed of two main deposits called Peñasco and Chile Colorado, hosts large gold, silver, zinc and lead reserves. The deposits contain both oxide and sulfide material, resulting in heap leach and mill processing. There are two access routes to the site. The first is via a turnoff from Highway 54 onto the State La Pardita road, then onto the Mazapil to Cedros State road. The second access is via the Salaverna by‑passby-pass road from Highway 54 approximately 16 miles south of Concepción del Oro. There is a private airport on site and commercial airports in the cities of Saltillo, Zacatecas and Monterrey.
GoldFor fiscal 2020, gold production attributable to our royalty interest at Peñasquito decreased approximately 32% when comparedincreased to 312,200 ounces over the prior fiscal year ended June 30, 2017 , as a result of Goldcorp’s planned transition from158,800 ounces; silver production increased to 27.8 million ounces over the higher-grade area of the Peñasco pit to lower grade ore and stockpiled material during the current period. Zinc production attributable to our royalty interest increased approximately 10% when compared to theprior fiscal year ended June 30, 2017, while silver andof 16.4 million ounces; lead production were in line withincreased to 182.3 million pounds over the prior year.fiscal year of 117.4 million pounds; and zinc increased to 393.9 million pounds over the prior fiscal year of 216.2 million pounds.
Goldcorp indicated that goldThe increase in production during the current period was lower as a result of the planned transition from high-grade ore in Phase 5D at the bottom of the Peñasco pit, to lower grade ore from stockpiles and the remnants of Phase 5D. Production in Phase 5D was completed during the June 2018 quarter, and equipment was refocused on accelerating stripping activities in Phase 6D and in the Chile Colorado pit.
Goldcorp reported the Peñasquito Pyrite Leach project (“PLP”) completed construction with commissioning further accelerated to the September 2018 quarter, and that the first gold is expected in the December 2018 quarter, two quarters ahead of schedule. Goldcorp further reported at the end of the June 2018 quarter that pre-commissioning activities were 45% complete, and water testing was ongoing on an area and systems basis. During the June 2018 quarter, construction of the Carbon Pre-flotation component of the PLP was completed. This will allow Peñasquito to process ore previously considered uneconomic, including significant amounts already in stockpiles.
With the commissioning schedule of the PLP accelerated into the September 2018 quarter, Goldcorp modified the production plan for the September 2018 quarter with lower than planned mill throughput and low mill head grades, exclusively from the surface stockpile, to accommodate the commissioning of a new major circuit, which is the preferred material to be processing during the commissioning phase where lower recoveries are expected. A resequencingattributable to higher grades and mill tonnagerecoveries and tons processed compared to the prior fiscal year, as well as the suspension of operations during the June 2019 quarter, resulting in significantly lower sales from Peñasquito during the prior fiscal year.
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On April 22, 2020, Newmont announced Peñasquito reached a definitive agreement with the San Juan de Cedros community (one of 25 neighboring communities) in Zacatecas, Mexico on land use, water availability, infrastructure and social investments, which includes access to 10,000 hectares for exploration and operational purposes, and resolves all outstanding issues with the community.
On May 5, 2020, Newmont announced that operations at Peñasquito were placed on care and maintenance on April 12 due to a Mexican federal government decree to temporarily suspend all non-essential activities in Mexico as part of a nationwide effort to help slow the spread of COVID-19. According to Newmont, a phased ramp-up began in mid-May with milling and mining activities ramping up at the beginning of June, and production in the December 2018 quarter, subsequentplant was back to the commissioning, is expected to allow the mine to meet itspre-COVID levels by mid-June.
On July 30, Newmont provided full year 2020 production guidance for Peñasquito of 510,000 ounces of gold, production objectives. Mining activities will transition to the newly developed Chile Colorado pit in late calendar 201828 million ounces of silver, 360 million pounds of zinc, and into the higher-grade ore in Phase 6D in calendar 2019 in the Peñasco pit.190 million pounds of lead.
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Reserve Information
Table 1 below summarizes proven and probable reserves for gold, silver, copper, nickel, zinc, lead cobalt and molybdenumcobalt that are subject to our stream and royalty interests as of December 31, 2017,2019, as reported to us by the operators of the mines. Properties are currently in production unless noted as development (“DEV”) within the table. The exploration royalties we own do not contain proven and probable reserves as of December 31, 2017.2019. Please refer to pages 27-2922-26 for the footnotes to Table 1.
22
Operators’ Estimated Proven and Probable Gold Reserves
As of December 31, 20172019(1)
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Gold(2) | Gold(2) | Gold(2) | ||||||||||||||||||||||
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| PROBABLE |
| RESERVES(3)(4)(5) | ||||||||||||||
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| Gold | ||||||||||||
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| Tons of |
| Gold |
| Contained | ||||||||||||
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| Grade |
| Ozs(6) | ||||||||||||
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| | | | | | | | PROBABLE | | RESERVES(3)(4)(5) | ||||||||||||||
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| Average |
| Gold | ||||||||||||
| | | | | | | | Tons of | | Gold | | Contained | ||||||||||||
| | | | | �� | | | Ore | | Grade | | Ozs(6) | ||||||||||||
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| (opt) |
| (M) | | ROYALTY/METAL STREAM | | OPERATOR | | LOCATION | | (M) | | (opt) | | (M) |
Bald Mountain |
| 1.75% - 2.5% NSR(7) |
| Kinross |
| United States |
| 18.950 |
| 0.023 |
| 0.436 |
| 1.75% - 2.5% NSR(7) |
| Kinross |
| United States |
| 18.950 | | 0.023 | | 0.436 |
Cortez (Pipeline) GSR1 |
| 0.40 - 5.0% GSR(8) |
| Barrick |
| United States |
| 46.224 |
| 0.016 |
| 0.737 | ||||||||||||
Cortez (Pipeline) GSR2 |
| 0.40 - 5.0% GSR(8) |
| Barrick |
| United States |
| 107.757 |
| 0.032 |
| 3.444 | ||||||||||||
Cortez (Pipeline) GSR3 |
| 0.71% GSR |
| Barrick |
| United States |
| 64.480 |
| 0.016 |
| 1.008 | ||||||||||||
Cortez (Pipeline) NVR1 |
| 4.91% NVR |
| Barrick |
| United States |
| 50.256 |
| 0.015 |
| 0.733 | ||||||||||||
Cortez (Pipeline) NVR1C |
| 4.52% NVR |
| Barrick |
| United States |
| 89.441 |
| 0.035 |
| 3.173 | ||||||||||||
Cortez GSR1 |
| 0.40 - 5.0% GSR(8) |
| Nevada Gold Mines LLC |
| United States |
| 17.277 | | 0.020 | | 0.347 | ||||||||||||
Cortez GSR2 |
| 0.40 - 5.0% GSR(8) |
| Nevada Gold Mines LLC |
| United States |
| 78.662 | | 0.040 | | 3.168 | ||||||||||||
Cortez GSR3 |
| 0.71% GSR |
| Nevada Gold Mines LLC |
| United States |
| 26.714 | | 0.017 | | 0.466 | ||||||||||||
Cortez NVR1 |
| 4.91% NVR |
| Nevada Gold Mines LLC |
| United States |
| 16.065 | | 0.016 | | 0.262 | ||||||||||||
Cortez NVR1C |
| 4.52% NVR (9) |
| Nevada Gold Mines LLC |
| United States |
| 69.225 | | 0.044 | | 3.049 | ||||||||||||
Gold Hill |
| 1.0 - 2.0% NSR(10) |
| Kinross |
| United States |
| 4.897 |
| 0.016 |
| 0.080 |
| 1.0 - 2.0% NSR(10,11) |
| Kinross |
| United States |
| 4.897 | | 0.016 | | 0.080 |
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| 0.6 - 0.9% NSR(11) |
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| 0.6 - 0.9% NSR(12) |
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Goldstrike (SJ Claims) |
| 0.9% NSR |
| Barrick |
| United States |
| 32.600 |
| 0.087 |
| 2.828 |
| 0.9% NSR |
| Nevada Gold Mines LLC |
| United States |
| 27.254 | | 0.081 | | 2.218 |
Hasbrouck (DEV) |
| 1.5% NSR |
| West Kirkland/Clover Nevada |
| United States |
| 35.616 |
| 0.017 |
| 0.588 | ||||||||||||
Hasbrouck Mountain (DEV) |
| 1.5% NSR |
| West Vault Mining/Clover Nevada |
| United States |
| 35.616 | | 0.017 | | 0.588 | ||||||||||||
Leeville |
| 1.8% NSR |
| Newmont |
| United States |
| 3.193 |
| 0.253 |
| 0.809 |
| 1.8% NSR |
| Nevada Gold Mines LLC |
| United States |
| 4.729 | | 0.288 | | 1.364 |
Marigold |
| 2.0% NSR |
| SSR Mining |
| United States |
| 150.465 |
| 0.012 |
| 1.790 |
| 2.0% NSR |
| SSR Mining |
| United States |
| 173.425 | | 0.014 | | 2.356 |
Pinson (DEV) |
| 3.0% NSR(12) |
| Waterton Precious Metals Fund |
| United States |
| 7.557 |
| 0.064 |
| 0.483 |
| 3.0% NSR(13,14) |
| Waterton Precious Metals Fund |
| United States |
| 7.557 | | 0.064 | | 0.483 |
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| 2.94% NSR(13) |
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| 2.94% NSR(13,15) |
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Relief Canyon (DEV) |
| 3.0% NSR(16) |
| Americas Silver |
| United States |
| 20.665 | | 0.022 | | 0.451 | ||||||||||||
Robinson |
| 3.0% NSR |
| KGHM |
| United States |
| 84.310 |
| 0.005 |
| 0.413 |
| 3.0% NSR |
| KGHM |
| United States |
| 84.310 | | 0.005 | | 0.413 |
Ruby Hill |
| 3.0% NSR |
| Waterton Precious Metals Fund |
| United States |
| 1.726 |
| 0.014 |
| 0.024 |
| 3.0% NSR |
| Waterton Precious Metals Fund |
| United States |
| 1.726 | | 0.014 | | 0.024 |
Twin Creeks |
| 2.0% GPR |
| Newmont |
| United States |
| 0.991 |
| 0.053 |
| 0.052 |
| 2.0% GPR |
| Nevada Gold Mines LLC |
| United States |
| 0.768 | | 0.060 | | 0.046 |
Wharf |
| 0.0 - 2.0% GSR(14) |
| Coeur |
| United States |
| 33.298 |
| 0.025 |
| 0.842 |
| 0.0 - 2.0% GSR(17) |
| Coeur Mining |
| United States |
| 32.850 | | 0.026 | | 0.855 |
Back River - Goose Lake (DEV) |
| 1.95% GSR(15) |
| Sabina Gold & Silver |
| Canada |
| 13.623 |
| 0.184 |
| 2.503 |
| 1.95% GSR(18) |
| Sabina Gold & Silver |
| Canada |
| 13.623 | | 0.184 | | 2.503 |
Canadian Malartic |
| 1.0 - 1.5% NSR(16) |
| Agnico Eagle/Yamana |
| Canada |
| 73.208 |
| 0.030 |
| 2.191 |
| 1.0 - 1.5% NSR(19) |
| Agnico Eagle/Yamana |
| Canada |
| 43.531 | | 0.028 | | 1.239 |
Holt |
| 0.00013 × quarterly avg. gold price |
| Kirkland Lake |
| Canada |
| 4.354 |
| 0.131 |
| 0.570 |
| 0.00013 x quarterly avg. gold price |
| Kirkland Lake |
| Canada |
| 4.829 | | 0.116 | | 0.562 |
Kutcho Creek (DEV) |
| 2.0% NSR |
| Kutcho Copper Corp |
| Canada |
| 11.509 |
| 0.011 |
| 0.124 |
| 2.0% NSR |
| Capstone Mining |
| Canada |
| 11.509 | | 0.009 | | 0.100 |
La Ronde Zone 5 (DEV) |
| 2.0% NSR |
| Agnico Eagle |
| Canada |
| 6.873 |
| 0.058 |
| 0.401 | ||||||||||||
LaRonde Zone 5 |
| 2.0% NSR |
| Agnico Eagle |
| Canada |
| 10.237 | | 0.067 | | 0.686 | ||||||||||||
Mount Milligan |
| 35.0% of gold produced(17) |
| Centerra Gold |
| Canada |
| 522.282 |
| 0.010 |
| 5.216 |
| 35% of payable gold(20) |
| Centerra Gold |
| Canada |
| 210.572 | | 0.011 | | 2.407 |
Pine Cove (DEV) |
| 7.5% NPI |
| Anaconda Mining |
| Canada |
| 0.979 |
| 0.037 |
| 0.036 | ||||||||||||
Pine Cove |
| 7.5% NPI |
| Anaconda Mining |
| Canada |
| 0.979 | | 0.037 | | 0.036 | ||||||||||||
Rainy River |
| 6.5% of gold produced(18) |
| New Gold |
| Canada |
| 131.964 |
| 0.033 |
| 4.418 |
| 6.5% of gold produced(21) |
| New Gold |
| Canada |
| 85.507 | | 0.031 | | 2.636 |
Schaft Creek (DEV) |
| 3.5% NPI |
| Copper Fox/Teck |
| Canada |
| 1,037.054 |
| 0.006 |
| 5.775 | ||||||||||||
Williams |
| 0.97% NSR |
| Barrick |
| Canada |
| 18.017 |
| 0.059 |
| 1.068 |
| 0.97% NSR |
| Barrick |
| Canada |
| 18.017 | | 0.059 | | 1.068 |
Dolores |
| 3.25% NSR |
| Pan American |
| Mexico |
| 56.218 |
| 0.025 |
| 1.401 |
| 3.25% NSR |
| Pan American |
| Mexico |
| 48.171 | | 0.024 | | 1.178 |
Mulatos |
| 1.0 - 5.0% NSR(19) |
| Alamos |
| Mexico |
| 54.962 |
| 0.034 |
| 1.888 | ||||||||||||
Peñasquito(20) |
| 2.0% NSR - Sulfide and Oxide |
| Goldcorp |
| Mexico |
| 578.438 |
| 0.016 |
| 8.950 | ||||||||||||
Peñasquito |
| 2.0% NSR |
| Newmont |
| Mexico |
| 486.670 | | 0.017 | | 8.080 | ||||||||||||
Andacollo |
| 100% of gold produced(21) |
| Teck |
| Chile |
| 366.739 |
| 0.003 |
| 1.212 |
| 100% of payable gold(22) |
| Teck |
| Chile |
| 346.814 | | 0.003 | | 1.040 |
El Toqui |
| 0.0 - 3.0% NSR(22) |
| Laguna Gold |
| Chile |
| 2.326 |
| 0.045 |
| 0.105 | ||||||||||||
La Fortuna (DEV) |
| 1.4% NSR(23) |
| Goldcorp |
| Chile |
| 198.103 |
| 0.013 |
| 2.674 |
| 1.4% NSR(23) |
| Newmont |
| Chile |
| 198.103 | | 0.013 | | 2.674 |
Don Mario |
| 3.0% NSR |
| Orvana |
| Bolivia |
| 0.941 |
| 0.078 |
| 0.074 |
| 3.0% NSR |
| Orvana |
| Bolivia |
| 2.240 | | 0.054 | | 0.121 |
Don Nicolas (DEV) |
| 2.0% NSR |
| Compañía Inversora en Minas |
| Argentina |
| 1.327 |
| 0.148 |
| 0.196 | ||||||||||||
Don Nicolas |
| 2.0% NSR |
| Cerrado Gold |
| Argentina |
| 1.327 | | 0.148 | | 0.196 | ||||||||||||
Pueblo Viejo |
| 7.5% of gold produced(24) |
| Barrick (60%) |
| Dominican Republic |
| 89.683 |
| 0.081 |
| 7.224 |
| 7.5% of payable gold(24) |
| Barrick/Newmont |
| Dominican Republic |
| 78.264 | | 0.072 | | 5.670 |
El Limon |
| 3.0% NSR |
| B2Gold |
| Nicaragua |
| 0.904 |
| 0.122 |
| 0.110 |
| 3.0% NSR |
| Calibre |
| Nicaragua |
| 2.253 | | 0.127 | | 0.286 |
La India (DEV) |
| 3.0% NSR |
| Condor Gold |
| Nicaragua |
| 7.606 |
| 0.089 |
| 0.675 |
| 3.0% NSR |
| Condor Gold |
| Nicaragua |
| 7.606 | | 0.089 | | 0.675 |
Mara Rosa (DEV) |
| 1.0% NSR and 1.75% NSR |
| Amarillo Gold |
| Brazil |
| 20.955 |
| 0.048 |
| 0.998 |
| 2.75% NSR |
| Amarillo Gold |
| Brazil |
| 26.235 | | 0.034 | | 0.902 |
Balcooma (DEV) |
| 1.5% NSR |
| Consolidated Tin |
| Australia |
| 0.762 |
| 0.002 |
| 0.001 | ||||||||||||
Balcooma |
| 1.5% NSR |
| Consolidated Tin |
| Australia |
| 0.762 | | 0.002 | | 0.001 | ||||||||||||
Gwalia Deeps |
| 1.5% NSR |
| St . Barbara |
| Australia |
| 12.267 |
| 0.199 |
| 2.439 |
| 1.5% NSR |
| St. Barbara |
| Australia |
| 14.007 | | 0.170 | | 2.380 |
Jaguar Nickel (DEV) |
| 1.5% NSR |
| CopperChem |
| Australia |
| 1.323 |
| 0.008 |
| 0.010 |
| 1.5% NSR |
| Washington H. Soul Pattinson |
| Australia |
| 1.323 | | 0.008 | | 0.010 |
Kundip (DEV) |
| 1.0 - 1.5% GV(25) |
| ACH Minerals |
| Australia |
| 3.097 |
| 0.099 |
| 0.307 | ||||||||||||
Meekatharra (Nannine) |
| 1.5% NSR |
| Westgold Resources |
| Australia |
| 0.047 |
| 0.047 |
| 0.002 | ||||||||||||
Meekatharra (Paddy’s Flat) |
| 1.5% NSR |
| Westgold Resources |
| Australia |
| 4.445 |
| 0.092 |
| 0.409 | ||||||||||||
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| A$10 per gold ounce produced(26) |
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Meekatharra (Reedys) |
| 1.5%. 1.5 - 2.5%. 1% NSR(27) |
| Westgold Resources |
| Australia |
| 0.641 |
| 0.091 |
| 0.058 | ||||||||||||
Meekatharra (Yaloginda) |
| 0.45% NSR |
| Westgold Resources |
| Australia |
| 4.415 |
| 0.024 |
| 0.105 | ||||||||||||
Red Dam (DEV) |
| 2.5% NSR |
| Evolution Mining |
| Australia |
| 1.764 |
| 0.063 |
| 0.111 | ||||||||||||
King of the Hills |
| 1.5% NSR |
| Red 5 |
| Australia |
| 39.683 | | 0.036 | | 1.448 | ||||||||||||
Meekatharra |
| 1.5% NSR(25) |
| Westgold Resources |
| Australia |
| 5.524 | | 0.082 | | 0.454 | ||||||||||||
South Laverton |
| 1.5% NSR |
| Saracen |
| Australia |
| 16.303 |
| 0.074 |
| 1.210 |
| 1.5% NSR |
| Saracen |
| Australia |
| 25.144 | | 0.071 | | 1.786 |
Southern Cross |
| 1.5% NSR |
| Shandong Tianye |
| Australia |
| 9.639 |
| 0.099 |
| 0.959 |
| 1.5% NSR |
| Shandong Tianye |
| Australia |
| 10.538 | | 0.096 | | 1.010 |
Ulysses (DEV) |
| 1.5% NSR |
| Genesis Minerals |
| Australia |
| 0.082 |
| 0.119 |
| 0.010 | ||||||||||||
Wembley Durack (DEV) |
| 1.0% NSR |
| Westgold Resources | | Australia |
| 0.362 | | 0.055 | | 0.020 | ||||||||||||
Inata |
| 2.5% GSR |
| Balaji Group |
| Burkina Faso |
| 6.352 |
| 0.540 |
| 0.340 |
| 2.5% GSR |
| Balaji Group |
| Burkina Faso |
| 6.352 | | 0.054 | | 0.340 |
Taparko(28) |
| 2.0% GSR |
| Nord Gold |
| Burkina Faso |
| 6.504 |
| 0.074 |
| 0.483 | ||||||||||||
Wassa and Prestea |
| 10.5% of gold produced(29) |
| Golden Star Resources |
| Ghana |
| 22.783 |
| 0.074 |
| 1.693 | ||||||||||||
Taparko(26) |
| 2.0% GSR |
| Nord Gold |
| Burkina Faso |
| 6.504 | | 0.074 | | 0.483 | ||||||||||||
Prestea |
| 10.5% of payable gold (27) |
| Golden Star Resources |
| Ghana |
| 0.856 | | 0.353 | | 0.302 | ||||||||||||
Wassa |
| 10.5% of payable gold (27) |
| Golden Star Resources |
| Ghana |
| 18.406 | | 0.077 | | 1.410 |
25
23
Operators’ Estimated Proven and Probable Silver Reserves
As of December 31, 20172019(1)
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Silver(30) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| PROVEN + |
| RESERVES | ||||||||||||||
|
|
|
|
|
|
|
| PROBABLE |
| (3)(4)(5) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| Average |
| Silver | ||||||||||||
|
|
|
|
|
|
|
| Tons of |
| Silver |
| Contained | ||||||||||||
|
|
|
|
|
|
|
| Ore |
| Grade |
| Ozs(6) | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
Silver(28) | Silver(28) | |||||||||||||||||||||||
| | | | | | | | PROVEN + | | RESERVES | ||||||||||||||
| | | | | | | | PROBABLE | | (3)(4)(5) | ||||||||||||||
| | | | | | | | | | Average | | Silver | ||||||||||||
| | | | | | | | Tons of | | Silver | | Contained | ||||||||||||
| | | | | | | | Ore | | Grade | | Ozs(6) | ||||||||||||
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| (opt) |
| (M) |
| ROYALTY/METAL STREAM |
| OPERATOR |
| LOCATION |
| (M) |
| (opt) |
| (M) |
Gold Hill |
| 1.0 - 2.0% NSR(10) |
| Kinross |
| United States |
| 4.897 |
| 0.251 |
| 1.230 |
| 1.0 - 2.0% NSR(10,11) |
| Kinross | | United States |
| 4.897 | | 0.251 | | 1.230 |
|
| 0.6 - 0.9% NSR(11) |
|
|
|
|
|
|
|
|
|
| ||||||||||||
Hasbrouck (DEV) |
| 1.5% NSR |
| West Kirkland/Clover Nevada |
| United States |
| 35.616 |
| 0.297 |
| 10.569 | ||||||||||||
|
| 0.6 - 0.9% NSR(12) |
| | | |
| | | | | | ||||||||||||
Hasbrouck Mountain (DEV) |
| 1.5% NSR |
| West Vault Mining/Clover Nevada | | United States |
| 35.616 | | 0.297 | | 10.569 | ||||||||||||
Relief Canyon (DEV) | | 3.0% NSR(16) | | Americas Silver | | United States | | 20.665 | | 0.037 | | 0.760 | ||||||||||||
Kutcho Creek (DEV) |
| 2.0% NSR |
| Kutcho Copper Corp |
| Canada |
| 11.509 |
| 1.009 |
| 11.618 |
| 2.0% NSR |
| Kutcho Copper | | Canada |
| 11.509 | | 1.008 | | 11.600 |
Rainy River |
| 60% of silver produced |
| New Gold |
| Canada |
| 131.964 |
| 0.097 |
| 12.775 |
| 60% of silver produced (21) |
| New Gold | | Canada |
| 85.507 | | 0.073 | | 6.266 |
Schaft Creek (DEV) |
| 3.5% NPI |
| Copper Fox/Teck |
| Canada |
| 1,037.054 |
| 0.050 |
| 51.895 | ||||||||||||
Dolores |
| 2.0% NSR |
| Pan American |
| Mexico |
| 56.218 |
| 0.820 |
| 46.100 |
| 2.0% NSR |
| Pan American | | Mexico |
| 48.171 | | 0.762 | | 36.700 |
Peñasquito(21) |
| 2.0% NSR - Sulfide and Oxide |
| Goldcorp |
| Mexico |
| 578.438 |
| 0.094 |
| 545.560 | ||||||||||||
El Toqui |
| 0.0 - 3.0% NSR(22) |
| Laguna Gold |
| Chile |
| 2.326 |
| 0.588 |
| 1.367 | ||||||||||||
Peñasquito |
| 2.0% NSR |
| Newmont | | Mexico |
| 486.670 | | 0.969 | | 471.360 | ||||||||||||
Don Mario |
| 3.0% NSR |
| Orvana |
| Bolivia |
| 0.941 |
| 0.079 |
| 0.075 |
| 3.0% NSR |
| Orvana | | Bolivia |
| 2.240 | | 1.438 | | 3.221 |
Don Nicolas (DEV) |
| 2.0% NSR |
| Compañía Inversora en Minas |
| Argentina |
| 1.327 |
| 0.302 |
| 0.401 | ||||||||||||
Don Nicolas |
| 2.0% NSR |
| Cerrado Gold | | Argentina |
| 1.327 | | 0.302 | | 0.401 | ||||||||||||
Pueblo Viejo |
| 75% of silver produced(24) |
| Barrick (60%) |
| Dominican Republic |
| 89.683 |
| 0.508 |
| 45.521 |
| 75% of payable silver(24) |
| Barrick/Newmont | | Dominican Republic |
| 78.264 | | 0.469 | | 36.700 |
La India (DEV) |
| 3.0% NSR |
| Condor Gold |
| Nicaragua |
| 7.606 |
| 0.156 |
| 1.185 |
| 3.0% NSR |
| Condor Gold | | Nicaragua |
| 7.606 | | 0.156 | | 1.185 |
Balcooma (DEV) |
| 1.5% NSR |
| Consolidated Tin |
| Australia |
| 0.762 |
| 0.498 |
| 0.380 | ||||||||||||
Balcooma |
| 1.5% NSR |
| Consolidated Tin | | Australia |
| 0.762 | | 0.498 | | 0.380 | ||||||||||||
Jaguar Nickel (DEV) |
| 1.5% NSR |
| CopperChem |
| Australia |
| 1.323 |
| 2.268 |
| 3.000 |
| 1.5% NSR |
| Washington H. Soul Pattinson | | Australia |
| 1.323 | | 2.268 | | 3.000 |
Khoemacau (DEV) | | 80% of payable silver(29) | | Khoemacau Copper Mining | | Botswana | | 33.521 | | 0.567 | | 19.011 |
Operators’ Estimated Proven and Probable Base Metal Reserves
As of December 31, 20172019(1)
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Copper(31) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| PROVEN + |
|
| ||||||||||||||
|
|
|
|
|
|
|
| PROBABLE |
| RESERVES(3)(4)(5) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| Average |
|
| ||||||||||||
|
|
|
|
|
|
|
| Tons of |
| Base Metal |
| Base Metal | ||||||||||||
|
|
|
|
|
|
|
| Ore |
| Grade |
| Contained Lbs(6) | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
Copper(30) | Copper(30) | |||||||||||||||||||||||
| | | | | | | | PROVEN + | | | ||||||||||||||
| | | | | | | | PROBABLE | | RESERVES(3)(4)(5) | ||||||||||||||
| | | | | | | | | | Average | | | ||||||||||||
| | | | | | | | Tons of | | Base Metal | | Base Metal | ||||||||||||
| | | | | | | | Ore | | Grade | | Contained Lbs(6) | ||||||||||||
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| (%) |
| (M) | | ROYALTY/METAL STREAM | | OPERATOR | | LOCATION | | (M) | | (%) | | (M) |
Robinson |
| 3.0% NSR |
| KGHM |
| United States |
| 84.310 |
| 0.411% |
| 692.343 |
| 3.0% NSR |
| KGHM |
| United States | | 84.310 | | 0.41% | | 692.343 |
Kutcho Creek (DEV) |
| 2.0% NSR |
| Kutcho Copper Corp |
| Canada |
| 11.509 |
| 2.010% |
| 462.678 |
| 2.0% NSR |
| Kutcho Copper |
| Canada | | 11.509 | | 2.01% | | 463.000 |
Mount Milligan |
| 18.75% of copper produced(18) |
| Centerra Gold |
| Canada |
| 522.282 |
| 0.187% |
| 1,955.000 | | 18.75% of payable copper(20) | | Centerra Gold | | Canada | | 210.572 | | 0.23% | | 959.000 |
Schaft Creek (DEV) |
| 3.5% NPI |
| Copper Fox/Teck |
| Canada |
| 1,037.054 |
| 0.271% |
| 5,630.715 | ||||||||||||
Voisey’s Bay |
| 2.7% NSR |
| Vale |
| Canada |
| 35.715 |
| 0.963% |
| 688.195 |
| 2.7% NVR |
| Vale |
| Canada | | 31.857 | | 0.93% | | 590.221 |
Don Mario |
| 3.0% NSR |
| Orvana |
| Bolivia |
| 0.941 |
| 0.199% |
| 3.745 |
| 3.0% NSR |
| Orvana |
| Bolivia | | 2.240 | | 1.89% | | 84.723 |
La Fortuna (DEV) |
| 1.4% NSR(23) |
| Goldcorp |
| Chile |
| 198.103 |
| 0.494% |
| 1,959.099 |
| 1.4% NSR(23) |
| Newmont |
| Chile | | 198.103 | | 0.49% | | 1,959.099 |
Balcooma (DEV) |
| 1.5% NSR |
| Consolidated Tin |
| Australia |
| 0.762 |
| 2.130% |
| 32.466 | ||||||||||||
Balcooma |
| 1.5% NSR |
| Consolidated Tin |
| Australia | | 0.762 | | 2.13% | | 32.466 | ||||||||||||
Jaguar Nickel (DEV) |
| 1.5% NSR |
| CopperChem |
| Australia |
| 1.323 |
| 0.417% |
| 11.023 |
| 1.5% NSR | | Washington H. Soul Pattinson | | Australia | | 1.323 | | 0.42% | | 11.023 |
Las Cruces |
| 1.5% NSR |
| First Quantum |
| Spain |
| 4.740 |
| 4.549% |
| 431.202 |
| 1.5% NSR |
| First Quantum |
| Spain | | 1.874 | | 4.82% | | 180.757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lead(32) | ||||||||||||
|
|
|
|
|
|
|
| PROVEN + |
|
| ||
|
|
|
|
|
|
|
| PROBABLE |
| RESERVES(3)(4)(5) | ||
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
| Tons of |
| Base Metal |
| Base Metal |
|
|
|
|
|
|
|
| Ore |
| Grade |
| Contained Lbs(6) |
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| (%) |
| (M) |
Peñasquito(20) |
| 2.0% NSR - Sulfide |
| Goldcorp |
| Mexico |
| 567.712 |
| 0.315% |
| 3,560.010 |
El Toqui |
| 0.0 - 3.0% NSR(23) |
| Laguna Gold |
| Chile |
| 2.326 |
| 0.594% |
| 27.635 |
Balcooma (DEV) |
| 1.5% NSR |
| Consolidated Tin |
| Australia |
| 0.762 |
| 0.517% |
| 7.879 |
| | | | | | | | | | | | |
Lead(31) | ||||||||||||
| | | | | | | | PROVEN + | | | ||
| | | | | | | | PROBABLE | | RESERVES(3)(4)(5) | ||
| | | | | | | | | | Average | | |
| | | | | | | | Tons of | | Base Metal | | Base Metal |
| | | | | | | | Ore | | Grade | | Contained Lbs(6) |
PROPERTY | | ROYALTY | | OPERATOR | | LOCATION | | (M) | | (%) | | (M) |
Peñasquito |
| 2.0% NSR |
| Newmont |
| Mexico |
| 483.474 | | 0.34% | | 3,261.055 |
Balcooma |
| 1.5% NSR |
| Consolidated Tin |
| Australia |
| 0.762 | | 0.52% | | 7.879 |
26
24
| | | | | | | | | | | | |
Zinc(32) | ||||||||||||
| | | | | | | | PROVEN + | | | ||
| | | | | | | | PROBABLE | | RESERVES(3)(4)(5) | ||
| | | | | | | | | | Average | | |
| | | | | | | | Tons of | | Base Metal | | Base Metal |
| | | | | | | | Ore | | Grade | | Contained Lbs(6) |
PROPERTY | | ROYALTY | | OPERATOR | | LOCATION | | (M) | | (%) | | (M) |
Kutcho Creek (DEV) |
| 2.0% NSR |
| Kutcho Copper |
| Canada | | 11.509 | | 3.19% | | 734.000 |
Peñasquito |
| 2.0% NSR |
| Newmont |
| Mexico | | 483.474 | | 0.76% | | 7,389.628 |
Balcooma |
| 1.5% NSR |
| Consolidated Tin |
| Australia | | 0.762 | | 1.92% | | 29.274 |
Jaguar Nickel (DEV) |
| 1.5% NSR |
| Washington H. Soul Pattinson |
| Australia | | 1.323 | | 6.25% | | 165.347 |
| | | | | | | | | | | | |
Nickel(33) | ||||||||||||
| | | | | | | | PROVEN + | | | | |
| | | | | | | | PROBABLE | | | | RESERVES(3)(4)(5) |
| | | | | | | | Tons of | | Average | | Base Metal |
| | | | | | | | Ore | | Base Metal | | Contained Lbs(6) |
PROPERTY | | ROYALTY | | OPERATOR | | LOCATION | | (M) | | Grade (%) | | (M) |
Voisey’s Bay |
| 2.7% NVR |
| Vale |
| Canada | | 31.857 | | 2.11% | | 1,345.172 |
| | | | | | | | | | | | |
Cobalt(34) | ||||||||||||
| | | | | | | | PROVEN + | | | ||
| | | | | | | | PROBABLE | | RESERVES(3)(4)(5) | ||
| | | | | | | | | | Average | | |
| | | | | | | | Tons of | | Base Metal | | Base Metal |
| | | | | | | | Ore | | Grade | | Contained Lbs(6) |
PROPERTY | | ROYALTY | | OPERATOR | | LOCATION | | (M) | | (%) | | (M) |
Voisey’s Bay |
| 2.7% NVR |
| Vale |
| Canada | | 31.857 | | 0.12% | | 79.410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Zinc(33) | ||||||||||||
|
|
|
|
|
|
|
| PROVEN + |
|
| ||
|
|
|
|
|
|
|
| PROBABLE |
| RESERVES(3)(4)(5) | ||
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
| Tons of |
| Base Metal |
| Base Metal |
|
|
|
|
|
|
|
| Ore |
| Grade |
| Contained Lbs(6) |
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| (%) |
| (M) |
Kutcho Creek (DEV) |
| 2.0% NSR |
| Kutcho Copper Corp |
| Canada |
| 11.509 |
| 3.190% |
| 734.300 |
Peñasquito(20) |
| 2.0% NSR - Sulfide |
| Goldcorp |
| Mexico |
| 567.712 |
| 0.674% |
| 7,710.370 |
El Toqui |
| 0.0 - 3.0% NSR(22) |
| Laguna Gold |
| Chile |
| 2.326 |
| 7.233% |
| 336.480 |
Balcooma (DEV) |
| 1.5% NSR |
| Consolidated Tin |
| Australia |
| 0.762 |
| 1.921% |
| 29.274 |
Jaguar Nickel (DEV) |
| 1.5% NSR |
| CopperChem |
| Australia |
| 1.323 |
| 6.250% |
| 165.347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel(34) | ||||||||||||
|
|
|
|
|
|
|
| PROVEN + |
|
|
|
|
|
|
|
|
|
|
|
| PROBABLE |
|
|
| RESERVES(3)(4)(5) |
|
|
|
|
|
|
|
| Tons of |
| Average |
| Base Metal |
|
|
|
|
|
|
|
| Ore |
| Base Metal |
| Contained Lbs(6) |
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| Grade (%) |
| (M) |
Voisey’s Bay |
| 2.7% NSR |
| Vale |
| Canada |
| 35.715 |
| 2.130% |
| 1,521.586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
COBALT(35) | ||||||||||||
|
|
|
|
|
|
|
| PROVEN + |
|
| ||
|
|
|
|
|
|
|
| PROBABLE |
| RESERVES(3)(4)(5) | ||
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
| Tons of |
| Base Metal |
| Base Metal |
|
|
|
|
|
|
|
| Ore |
| Grade |
| Contained Lbs(6) |
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| (%) |
| (M) |
Voisey’s Bay |
| 2.7% NSR |
| Vale |
| Canada |
| 35.715 |
| 0.130% |
| 92.859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
MOLYBDENUM(36) | ||||||||||||
|
|
|
|
|
|
|
| PROVEN + |
|
| ||
|
|
|
|
|
|
|
| PROBABLE |
| RESERVES(3)(4)(5) | ||
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
| Tons of |
| Base Metal |
| Base Metal |
|
|
|
|
|
|
|
| Ore |
| Grade |
| Contained Lbs(6) |
PROPERTY |
| ROYALTY |
| OPERATOR |
| LOCATION |
| (M) |
| (%) |
| (M) |
Schaft Creek (DEV) |
| 3.5% NPI |
| Copper Fox/Teck |
| Canada |
| 1,037.054 |
| 0.018% |
| 373.34 |
1. | Reserves have been reported by the operators of record as of December 31, |
2. | Gold reserves were calculated by the operators at the following per ounce prices: A$1,800 - King of the Hills; A$1,725 - Meekatharra; A$1,600 - Southern Cross and South |
3. | Set forth below are the definitions of proven and probable reserves used by the |
27
(b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that the size, shape, depth and mineral content of the reserves are well established. “Probable (Indicated) Reserves” are reserves for which the quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, |
4. |
|
25
mineral reserve" conform to the Canadian Institute of Mining, Metallurgy and Petroleum definitions of these terms as of the effective date of estimation as required by National Instrument 43-101 of the Canadian Securities Administrators. For Australian issuers, definitions of "mineral reserve," "proven mineral reserve," and "probable mineral reserve" conform with the Australasian Code for Reporting of Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, as amended ("JORC Code"). |
5. | The reserves reported are either estimates received from the various operators or are based on documentation |
6. | “Contained ounces” or “contained pounds” do not take into account recovery losses in mining and processing the ore. |
7. | NSR sliding-scale schedule (price of gold per ounce |
8. | GSR1 and GSR 2 sliding-scale schedule (price of gold per ounce |
9. | NVR1C is the Crossroads portion of NVR1. |
10. | The royalty is capped at $10 million. As of June 30, |
| The 1.0% to 2.0% sliding-scale NSR royalty will pay 2.0% when the price of gold is above $350 per ounce and 1.0% when the price of gold falls to $350 per ounce or below. The 0.6% to 0.9% NSR sliding-scale schedule (price of gold per ounce |
| The 0.6% to 0.9% sliding-scale NSR applies to the M-ACE claims. The operator did not break out reserves or resources subject to the M-ACE claims royalty. |
| Royalty only applies to Section 29 which currently holds about 95% of the reserves reported for the property. |
14. | A Cordilleran royalty of 5% NSR applies to a portion of Section 28. |
|
|
| Reserves represent our interest based on our royalty ground covering approximately 69% of the resource footprint by area. |
| NSR sliding-scale schedule (price of gold per ounce |
| Goose Lake royalty applies to production above 400,000 ounces. |
| NSR sliding-scale schedule (price of gold per ounce |
| Centerra Gold will deliver 35% of payable gold produced, subject to a fixed payable percentage of 97%, and 18.75% of payable copper |
26
| New Gold will deliver: (a) gold in amounts equal to 6.50% of gold produced until 230,000 ounces have been delivered, and 3.25% of gold produced thereafter, and (b) silver in amounts equal to 60% of silver produced until 3.10 million ounces have been delivered, and 30% of silver produced thereafter, in each case at a purchase price equal to 25% of the spot price per ounce delivered. |
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|
28
| Teck will deliver gold in amounts equal to 100% of payable gold until 900,000 ounces have been delivered, and 50% of payable gold thereafter, subject to a fixed payable percentage of 89%, at a purchase price equal to 15% of the monthly average gold price for the month preceding the delivery date for each ounce delivered. As of June 30, 2020, approximately 237,100 ounces of payable gold have been delivered. |
|
|
| The royalty covers approximately 30% of the La Fortuna deposit. Reserves attributable to |
24. | Barrick will deliver: (a) gold in amounts equal to 7.50% of Barrick’s 60% interest in gold produced until 990,000 ounces have been delivered, and 3.75% of Barrick’s 60% interest in gold produced thereafter, at a purchase price equal to 30% of the spot price per ounce delivered until 550,000 ounces have been delivered, and 60% of the spot price per ounce delivered thereafter; and (b) silver in amounts equal to 75% of Barrick’s 60% interest in silver produced, subject to a |
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| There is a 0.75% GSR milling royalty that applies to ore that is mined outside of the defined area of the Taparko-Bouroum project that is processed through the Taparko facilities up to a maximum of 1.1 million tons per year. |
|
|
| Silver reserves were calculated by the operators at the following prices per ounce: |
| When production commences, KCM will deliver 80% of payable silver produced, subject to a fixed payable percentage of 90%. At KCM’s option and subject to various conditions, Royal Gold will make an additional advance payment for the right to purchase up to an additional 20% of the payable silver. The stream rate will drop by 50% upon the delivery of 32 million ounces of silver at the 80% stream level, and 40 million ounces of silver at the 100% stream level if the option is fully exercised. The purchase price is 20% of the spot price of silver. Depending on the achievement by Cupric of mill expansion throughput levels above 13,000 tonnes per day (30% above current mill design capacity), we will pay higher ongoing cash payments for ounces delivered in excess of specific annual thresholds. |
30. | Copper reserves were calculated by the operators at the following prices per pound: |
| Lead |
| Zinc |
| Nickel reserve price was calculated by the operator at the following price per pound: |
| Cobalt reserve price was calculated by the operator at the following price per pound: |
27 |
|
|
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
Refer to Note 14 of the notes to consolidated financial statements for a discussion on litigation associated with our Voisey’s Bay royalty.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
29
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Current StockholdersHolders
Our common stock is listed and traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “RGLD”. The following table sets forth, for each of the quarterly periods indicated, the range of high and low sales prices, in U.S. dollars, for our common stock on Nasdaq for each quarter since July 1, 2016.
“RGLD.” As of August 1, 2018, there were 762 stockholdersJuly 30, 2020, we had 773 holders of record of our common stock.
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|
| Sales Prices | ||||
Fiscal Year: |
|
|
| High |
| Low | ||
2018 |
| First Quarter (July, Aug., Sept.—2017) |
| $ | 94.39 |
| $ | 76.15 |
|
| Second Quarter (Oct., Nov., Dec.—2017) |
| $ | 90.13 |
| $ | 78.25 |
|
| Third Quarter (Jan., Feb., Mar.—2018) |
| $ | 90.51 |
| $ | 78.78 |
|
| Fourth Quarter (April, May, June—2018) |
| $ | 93.50 |
| $ | 85.15 |
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|
|
2017 |
| First Quarter (July, Aug., Sept.—2016) |
| $ | 87.74 |
| $ | 71.67 |
|
| Second Quarter (Oct., Nov., Dec.—2016) |
| $ | 79.50 |
| $ | 60.21 |
|
| Third Quarter (Jan., Feb., Mar.—2017) |
| $ | 73.16 |
| $ | 61.00 |
|
| Fourth Quarter (April, May, June—2017) |
| $ | 81.29 |
| $ | 67.10 |
This figure does not reflect the beneficial ownership of shares held in nominee name.
DividendsSales of Unregistered Equity Securities
We have paid a cash dividend on our common stock for each year beginning in calendar year 2000. Our boardNone.
Repurchases of directors has discretion in determining whether to declare a dividend based on a number of factors including prevailing gold and other metal prices, economic market conditions and funding requirements for future opportunities or operations.Equity Securities
For calendar year 2018, our annual dividend is $1.00 per share of common stock. We paid the first payment of $0.25 per share on January 19, 2018, to common stockholders of record at the close of business on January 5, 2018. We paid the second payment of $0.25 per share on April 30, 2018, to common stockholders of record at the close of business on April 6, 2018. We paid the third payment of $0.25 per share on July 20, 2018, to common stockholders of record at the close of business on July 6, 2018. Subject to board approval, we anticipate paying the fourth payment of $0.25 per share on October 19, 2018, to common shareholders of record at the close of business on October 6, 2018.
For calendar year 2017, our annual dividend was $0.96 per share of common stock, paid on a quarterly basis of $0.24 per share. For calendar year 2016, our annual dividend was $0.92 per share of common stock, paid on a quarterly basis of $0.23 per share.None.
30
ITEM 6. SELECTED FINANCIAL DATA
| | | | | | | | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||||||||
| | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | |||||
| | (Amounts in thousands, except per share data) | |||||||||||||
Revenue(1) |
| $ | 498,819 |
| $ | 423,056 |
| $ | 459,042 |
| $ | 440,814 |
| $ | 359,790 |
Operating income (loss)(2) | | $ | 198,945 | | $ | 140,707 | | $ | (74,535) | | $ | 145,942 | | $ | 4,816 |
Net income (loss) | | $ | 196,250 | | $ | 89,079 | | $ | (119,351) | | $ | 92,425 | | $ | (82,438) |
Net income (loss) attributable to Royal Gold common stockholders | | $ | 199,343 | | $ | 93,825 | | $ | (113,134) | | $ | 101,530 | | $ | (77,149) |
Net income (loss) per share attributable to Royal Gold common stockholders: | |
|
| |
|
| |
|
| |
|
| |
|
|
Basic | | $ | 3.04 | | $ | 1.43 | | $ | (1.73) | | $ | 1.55 | | $ | (1.18) |
Diluted | | $ | 3.03 | | $ | 1.43 | | $ | (1.73) | | $ | 1.55 | | $ | (1.18) |
Dividends declared per common share(3) | | $ | 1.11 | | $ | 1.05 | | $ | 0.99 | | $ | 0.95 | | $ | 0.91 |
| | | | | | | | | | | | | | | |
| | As of June 30, | |||||||||||||
| | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | |||||
| | (Amounts in thousands) | |||||||||||||
Stream and royalty interests, net |
| $ | 2,318,913 |
| $ | 2,339,316 |
| $ | 2,501,117 |
| $ | 2,892,256 |
| $ | 2,848,087 |
Total assets | | $ | 2,766,287 | | $ | 2,544,151 | | $ | 2,682,016 | | $ | 3,094,065 | | $ | 3,069,729 |
Debt | | $ | 300,439 | | $ | 214,554 | | $ | 351,027 | | $ | 586,170 | | $ | 600,685 |
Total liabilities | | $ | 464,168 | | $ | 373,698 | | $ | 540,747 | | $ | 773,801 | | $ | 783,844 |
Total Royal Gold stockholders’ equity | | $ | 2,272,217 | | $ | 2,136,681 | | $ | 2,102,167 | | $ | 2,275,377 | | $ | 2,229,016 |
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|
| Fiscal Year Ended June 30, | |||||||||||||
|
| 2018 |
| 2017 |
| 2016 |
| 2015 |
| 2014 | |||||
|
| (Amounts in thousands, except per share data) | |||||||||||||
Revenue(1) |
| $ | 459,042 |
| $ | 440,814 |
| $ | 359,790 |
| $ | 278,019 |
| $ | 237,162 |
Operating (loss) income(2) |
| $ | (74,535) |
| $ | 145,942 |
| $ | 4,816 |
| $ | 87,235 |
| $ | 108,720 |
Net (loss) income |
| $ | (119,351) |
| $ | 92,425 |
| $ | (82,438) |
| $ | 52,678 |
| $ | 63,472 |
Net (loss) income available to Royal Gold common stockholders |
| $ | (113,134) |
| $ | 101,530 |
| $ | (77,149) |
| $ | 51,965 |
| $ | 62,641 |
Net (loss) income per share available to Royal Gold common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (1.73) |
| $ | 1.55 |
| $ | (1.18) |
| $ | 0.80 |
| $ | 0.96 |
Diluted |
| $ | (1.73) |
| $ | 1.55 |
| $ | (1.18) |
| $ | 0.80 |
| $ | 0.96 |
Dividends declared per common share(3) |
| $ | 0.99 |
| $ | 0.95 |
| $ | 0.91 |
| $ | 0.87 |
| $ | 0.83 |
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
| As of June 30, | |||||||||||||
|
| 2018 |
| 2017 |
| 2016 |
| 2015 |
| 2014 | |||||
|
| (Amounts in thousands) | |||||||||||||
Stream and royalty interests, net |
| $ | 2,501,117 |
| $ | 2,892,256 |
| $ | 2,848,087 |
| $ | 2,083,608 |
| $ | 2,109,067 |
Total assets |
| $ | 2,682,016 |
| $ | 3,094,065 |
| $ | 3,069,729 |
| $ | 2,914,474 |
| $ | 2,882,316 |
Debt |
| $ | 351,027 |
| $ | 586,170 |
| $ | 600,685 |
| $ | 313,869 |
| $ | 302,632 |
Total liabilities |
| $ | 540,747 |
| $ | 773,801 |
| $ | 783,844 |
| $ | 503,981 |
| $ | 509,759 |
Total Royal Gold stockholders’ equity |
| $ | 2,102,167 |
| $ | 2,275,377 |
| $ | 2,229,016 |
| $ | 2,353,122 |
| $ | 2,354,725 |
(1) |
| Please refer to Item 7, MD&A, of this report for a discussion of recent developments that contributed to our |
28
(2) |
| Please refer to Note 4 of the notes to consolidated financial statements for discussion on the impairment recognized at Pascua-Lama, which was attributable for the operating loss during our fiscal year 2018. |
(3) |
| The2020, 2019, 2018, 2017 |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the changes in our financial condition and results of operations for the fiscal years ended June 30, 2019, and 2018, has been omitted from this Annual Report, but may be found in Item 7, MD&A, of our Annual Report on Form 10-K for the year ended June 30, 2019, filed with the SEC on August 8, 2019, which is available free of charge on the SEC’s website at www.sec.gov and our website at www.royalgold.com.
Overview
Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiringWe acquire and managingmanage precious metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests.
We manage our business under two segments:
Acquisition and Management of Stream Interests—A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. As of June 30, 2018,2020, we owned seven stream interests, which are on fivesix producing properties and onetwo development stage property.properties. Our stream interests accounted for approximately 71%72% of our total revenue for each of the fiscal years ended June 30, 20182020, and 2017.2019. We expect stream interests to continue representing a significant proportionportion of our total revenue.
31
Acquisition and Management of Royalty Interests—Royalties are non‑operatingnon-operating interests in mining projects that provide the right to a percentage of revenue or metals produced from the project after deducting specified costs, if any. As of June 30, 2018,2020, we owned royalty interests on 3435 producing properties, 2115 development stage properties and 130129 exploration stage properties, of which we consider 5348 to be evaluation stage projects. We use “evaluation stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. Royalties accounted for approximately 29%28% of our total revenue for each of the fiscal years ended June 30, 20182020, and 2017.2019.
We do not conduct mining operations on the properties in which we hold stream and royalty interests, and exceptinterests. Except for our interest in the Peak Gold JV, we are not required to contribute to capital costs, exploration costs, environmental costs, or other operating costs on those properties. Refer to Note 2 of our notes to consolidated financial statements for further discussion on the Peak Gold JV.
In the ordinary course of business, we engage in a continual review of opportunities to acquire existing stream and royalty interests, to establish new streams and royalties on operating mines, to create new stream and royalty interests through the financing of mine development or exploration, or to acquire companies that hold stream and royalty interests. We currently, and generally at any time, have acquisition opportunities in various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular opportunities, our analysis of technical, financial, legal and other confidential information of particular opportunities, submission of indications of interest and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes.
29
Our financial results are primarily tied to the price of gold and, to a lesser extent, the priceprices of silver and copper, together with the amounts of production from our producing stage stream and royalty interests. For the fiscal years ended June 30, 2018, 20172020 and 2016,2019, gold, silver, and copper price averages and percentage of revenue by metal were as follows:
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|
| Fiscal Year ended | |||||||||||||||||||||||
|
| June 30, 2018 |
| June 30, 2017 |
| June 30, 2016 | |||||||||||||||||||
| | | | | | | | | | | |||||||||||||||
| | Fiscal Year ended | |||||||||||||||||||||||
| | June 30, 2020 | | June 30, 2019 | |||||||||||||||||||||
Metal |
| Average |
| Percentage of Revenue |
| Average |
| Percentage |
| Average |
| Percentage |
| Average |
| Percentage of Revenue |
| Average |
| Percentage | |||||
Gold ($/ounce) |
| $ | 1,297 |
| 77% |
| $ | 1,259 |
| 85% |
| $ | 1,168 |
| 88% | | $ | 1,560 | | 79% | | $ | 1,263 | | 78% |
Silver ($/ounce) |
| $ | 16.72 |
| 9% |
| $ | 17.88 |
| 8% |
| $ | 15.32 |
| 3% | | $ | 16.90 | | 9% | | $ | 15.00 | | 9% |
Copper ($/pound) |
| $ | 3.06 |
| 11% |
| $ | 2.44 |
| 5% |
| $ | 2.22 |
| 4% | | $ | 2.57 | | 9% | | $ | 2.79 | | 9% |
Other |
|
| N/A |
| 3% |
|
| N/A |
| 2% |
|
| N/A |
| 5% | | | N/A | | 3% | | | N/A | | 4% |
Operators’ Production Estimates by Stream and Royalty Interest for Calendar 20182020
We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2018.2020. In some instances, an operator may revise its original calendar year guidance throughout the year. The following table shows such production estimates for our principal producing properties for calendar 20182020 as well as the actual production reported to us by the various operators through June 30, 2018.2020. The estimates and production reports are prepared by the operators of the mining properties.operators. We do not participate in the preparation or calculation of the operators’ estimates or production reports and have not independently assessed or verified, and disclaim all responsibility for, the accuracy of such information. Please refer to Part I, Item 2, Properties, of this report for further discussion on any updates at our principal producing and development properties.
32
Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 20182020
Principal Producing Properties
| | | | | | | | | | | | |
| | Calendar 2020 Operator’s Production | | Calendar 2020 Operator’s Production | ||||||||
| | Estimate(1) | | Actual(2) | ||||||||
| | Gold | | Silver | | Base Metals | | Gold | | Silver | | Base Metals |
Stream/Royalty |
| (oz.) |
| (oz.) |
| (lbs.) |
| (oz.) |
| (oz.) |
| (lbs.) |
Stream: | | | | | | | | | | | | |
Andacollo(3) |
| 53,000 |
| |
| |
| 27,500 |
| |
| |
Mount Milligan(4) |
| 140,000 - 160,000 |
| |
| |
| 69,300 |
| |
| |
Copper |
| |
| | | 80 - 90 Million |
| |
| |
| 39.1 Million |
Pueblo Viejo(5) | | 530,000 - 580,000 | | N/A | | | | 254,000 | | N/A | | |
Wassa(6) | | 165,000 - 170,000 | | | | | | 85,100 | | | | |
Royalty: |
| |
| |
| |
| |
| |
| |
Cortez GSR1 |
| 66,500 |
| |
| |
| 61,800 |
| |
| |
Cortez GSR2 |
| 109,000 |
| |
| |
| 48,300 |
| |
| |
Cortez GSR3 |
| 145,700 |
| |
| |
| 52,400 |
| |
| |
Cortez NVR1 |
| 113,200 |
| |
| |
| 88,700 |
| |
| |
Cortez NVR1C | | 29,900 | | | | | | 400 | | | | |
Peñasquito(7) |
| 510,000 | | 28 million |
| | | 185,000 | | 13.1 Million |
| |
Lead |
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|
|
| 190 million | | | | |
| 84 Million |
Zinc |
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|
|
| 360 million | | | | |
| 178 Million |
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|
| Calendar 2018 Operator’s Production Estimate |
| Calendar 2018 Operator’s Production | ||||||||
|
| Estimate(1) |
| Actual(2) | ||||||||
|
| Gold |
| Silver |
| Base Metals |
| Gold |
| Silver |
| Base Metals |
Stream/Royalty |
| (oz.) |
| (oz.) |
| (lbs.) |
| (oz.) |
| (oz.) |
| (lbs.) |
Stream: |
|
|
|
|
|
|
|
|
|
|
|
|
Andacollo(3) |
| 66,700 |
|
|
|
|
| 27,100 |
|
|
|
|
Mount Milligan(4) |
| 175,000 - 195,000 |
|
|
|
|
| 75,900 |
|
|
|
|
Copper |
|
|
|
|
| 40 - 47 million |
|
|
|
|
| 22.6 million |
Pueblo Viejo(5) |
| 585,000 - 615,000 |
| Not provided |
|
|
| 264,000 |
| Not provided |
|
|
Wassa and Prestea |
| 230,000 - 255,000 |
|
|
|
|
| 118,800 |
|
|
|
|
Royalty: |
|
|
|
|
|
|
|
|
|
|
|
|
Cortez GSR1 |
| 48,300 |
|
|
|
|
| 22,200 |
|
|
|
|
Cortez GSR2 |
| 2,200 |
|
|
|
|
| 600 |
|
|
|
|
Cortez GSR3 |
| 50,500 |
|
|
|
|
| 22,800 |
|
|
|
|
Cortez NVR1 |
| 31,600 |
|
|
|
|
| 13,500 |
|
|
|
|
Peñasquito(6) |
| 310,000 |
| Not provided |
|
|
| 171,000 |
| 9.6 million |
|
|
Lead |
|
|
|
|
| 160 million |
|
|
|
|
| 53.8 million |
Zinc |
|
|
|
|
| 300 million |
|
|
|
|
| 166.2 million |
(1) |
| Production estimates received from our operators are for calendar |
(2) |
| Actual production figures shown are from our operators and cover the period January 1, |
(3) |
| The estimated and actual production figures shown for Andacollo are contained gold in concentrate. |
(4) |
| The estimated and actual production figures shown for Mount Milligan are payable gold and copper in concentrate. |
30
(5) |
| The estimated and actual production figures shown for Pueblo Viejo are payable gold in doré and represent Barrick’s 60% interest in Pueblo Viejo. The operator did not provide estimated |
(6) |
|
(7) | The estimated and actual gold and silver production figures shown for Peñasquito are payable gold and silver in concentrate and doré. The estimated and actual lead and zinc production figures shown are payable lead and zinc in concentrate. |
33COVID-19 and current economic environment
TableSeveral of Contentsour operating counterparties announced temporary operational curtailments or the withdrawal or review of previously disclosed guidance due to the ongoing COVID-19 pandemic. The economic and societal impacts associated with COVID-19 are fluid and changing rapidly, and we are currently unable to predict the nature or extent of any impact on our results of operations and financial condition. We will continue to monitor any further developments that the COVID-19 pandemic may have on stream or royalty interests as part of our regular asset impairment analysis.
Historical Production
The following table discloses historical production for the past threetwo fiscal years for the principal producing properties that are subject to our stream and royalty interests, as reported to us by the operators of the mines:mines. We do not participate in the preparation or calculation of the operators’ production reports and have not independently assessed or verified, and disclaim all responsibility for, the accuracy of such information.
Historical Production(1) by Stream and Royalty Interest
Principal Producing Properties
For the Fiscal Years Ended June 30, 2018, 20172020 and 20162019
| | | | | | | | |
Stream/Royalty | | Metal | | 2020 | | 2019 | ||
Stream: |
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|
|
| |
|
| |
Mount Milligan |
| Gold |
| 63,700 | oz. |
| 61,700 | oz. |
| | Copper | | 12.7 | Mlbs. | | 8.3 | Mlbs. |
Andacollo |
| Gold |
| 48,100 | oz. |
| 55,000 | oz. |
Pueblo Viejo |
| Gold |
| 43,300 | oz. |
| 41,000 | oz. |
|
| Silver |
| 1.8 | Moz. |
| 2.1 | Moz. |
Wassa |
| Gold |
| 15,000 | oz. |
| 17,500 | oz. |
Royalty: |
|
|
|
| |
|
| |
Peñasquito |
| Gold |
| 312,200 | oz. |
| 158,800 | oz. |
|
| Silver |
| 27.8 | Moz. |
| 16.4 | Moz. |
|
| Lead |
| 182.3 | Mlbs. |
| 117.4 | Mlbs. |
|
| Zinc |
| 393.9 | Mlbs. |
| 216.2 | Mlbs. |
Cortez GSR1 |
| Gold |
| 91,300 | oz. |
| 84,600 | oz. |
Cortez GSR2 |
| Gold |
| 82,000 | oz. |
| 12,100 | oz. |
Cortez GSR3 |
| Gold |
| 171,800 | oz. |
| 96,700 | oz. |
Cortez NVR1 |
| Gold |
| 146,500 | oz. |
| 77,400 | oz. |
|
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|
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|
|
Stream/Royalty |
| Metal |
| 2018 |
| 2017 |
| 2016 | |||
Stream: |
|
|
|
|
|
|
|
|
|
|
|
Mount Milligan |
| Gold |
| 77,700 | oz. |
| 103,400 | oz. |
| 108,800 | oz. |
|
| Copper |
| 10.35 | Mlbs. |
| 2.57 | Mlbs. |
| N/A |
|
Andacollo |
| Gold |
| 44,400 | oz. |
| 47,800 | oz. |
| 41,600 | oz. |
Pueblo Viejo |
| Gold |
| 49,200 | oz. |
| 50,700 | oz. |
| 31,200 | oz. |
|
| Silver |
| 1.88 | Moz. |
| 1.56 | Moz. |
| 208,900 | oz. |
Wassa and Prestea |
| Gold |
| 23,000 | oz. |
| 20,300 | oz. |
| 20,100 | oz. |
Royalty: |
|
|
|
|
|
|
|
|
|
|
|
Peñasquito |
| Gold |
| 375,800 | oz. |
| 556,300 | oz. |
| 584,000 | oz. |
|
| Silver |
| 20.89 | Moz. |
| 20.71 | Moz. |
| 21.38 | Moz. |
|
| Lead |
| 122.15 | Mlbs. |
| 125.21 | Mlbs. |
| 134.21 | Mlbs. |
|
| Zinc |
| 348.48 | Mlbs. |
| 317.77 | Mlbs. |
| 332.98 | Mlbs. |
Cortez GSR1 |
| Gold |
| 76,300 | oz. |
| 62,900 | oz. |
| 62,600 | oz. |
Cortez GSR2 |
| Gold |
| 1,400 | oz. |
| 1,300 | oz. |
| 11,400 | oz. |
Cortez GSR3 |
| Gold |
| 77,700 | oz. |
| 64,200 | oz. |
| 74,000 | oz. |
Cortez NVR1 |
| Gold |
| 42,100 | oz. |
| 32,600 | oz. |
| 52,100 | oz. |
(1) |
| Historical production for our stream interests relates to the amount of stream metal sales |
Critical Accounting Policies
Listed below are the accounting policies that the Company believeswe believe are critical to itsour financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. Please also refer to Note 2 of the notes to consolidated financial statements for a discussion on recently issuedadopted and adoptedissued accounting pronouncements.
31
Use of Estimates
The preparation of our financial statements, in conformity with U.S. generally accepted accounting principles generally accepted in the United States of America,(“U.S. GAAP”), requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
Our most critical accounting estimates relate to our assumptions regarding future gold, silver, copper, and other metal prices and the estimates of reserves, production and recoveries of third‑party mine operators. We rely on reserve estimates reported by the operators onof the properties inon which we havehold stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long‑livedlong-lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts are adjusted and recorded in the period that the actual amounts are known.
34
Stream and Royalty Interests in Mineral Properties and Related Depletion
Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset under the Accounting Standards Codification (“ASC”) guidance.U.S. GAAP.
Acquisition costs of productionProduction stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as stream sales occur or royalty payments are recognized), which are estimated using proven and probable reserves as provided by the operator. Acquisition costs of stream and royalty interests on developmentDevelopment stage mineral properties, which are not yet in production, are not depleted until the property begins production. Acquisition costs of stream or royalty interests on explorationExploration stage mineral properties, where there are no proven and probable reserves, are not depleted. At such time as the associated exploration stage mineral interests are converted to proven and probable reserves, the cost basismineral property is depleted over the remainingits life, of the mineral property, using proven and probable reserves. Exploration costs are expensed when incurred.
Asset Impairment
We evaluate long‑livedlong-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts of an asset or group of assets may not be recoverable. The recoverability of the carrying value of stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest using estimates of proven and probable reserves and other relevant information received from the operators. We evaluate the recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in the price of gold, silver, copper and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur or may be reduced in the future, thus potentially affecting the future recoverability of our stream or royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows.
Estimates of gold, silver, copper, and other metal prices, and operators’ estimates of proven and probable reserves or mineralized material related to our stream or royalty properties and operators’ estimates of operating and capital costs are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties. It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests. Refer to Note 4 of the notes to consolidated financial statements for a discussion andof the results of our impairment assessmentsassessment results for the fiscal yearsyear ended June 30, 2018, 2017 and 2016.2020.
Revenue
RevenueUnder U.S. GAAP, a performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer. A contract’s transaction price is allocated to each distinct
32
performance obligation and recognized pursuantas revenue when, or as, a performance obligation is satisfied. In accordance with this guidance, revenue attributable to guidanceour stream interests and royalty interests is generally recognized at the point in ASC 605 and based upon amounts contractually due pursuanttime that control of the related metal production transfers to our customers. The amount of revenue we recognize further reflects the underlying streamingconsideration to which we are entitled under the respective stream or royalty agreement. Specifically,A more detailed summary of our revenue recognition policies for our stream and royalty interests is discussed below.
Stream Interests
A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more of the metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between ten days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. We settle our forward sales contracts via physical delivery of the metal to the purchaser (our customer) on the settlement date specified in the contract. Under our forward sales contracts, there is a single performance obligation to sell a contractually specified volume of metal to the purchaser, and we satisfy this obligation at the point in time of physical delivery. Accordingly, revenue from our metal sales is recognized on the date of settlement, which is the date that control, custody and title to the metal transfer to the purchaser.
Royalty Interests
Royalties are non-operating interests in accordance withmining projects that provide the termsright to a percentage of revenue or metals produced from the project after deducting specified costs, if any. We are entitled to payment for our royalty interest in a mining project based on a contractually specified commodity price (for example, a monthly or quarterly average spot price) for the period in which metal production occurred. As a royalty holder, we act as a passive entity in the production and operations of the underlying stream or royalty agreements subject to (i)mining project, and the pervasive evidencethird-party operator of the existencemining project is responsible for all mining activities, including subsequent marketing and delivery of all metal production to their ultimate customer. In all of our material royalty interest arrangements, we have concluded that we transfer control of our interest in the arrangements; (ii)metal production to the risksoperator at the point at which production occurs, and rewards having been transferred; (iii)thus, the stream oroperator is our customer. We have further determined that the transfer of each unit of metal production, comprising our royalty being fixed or determinable;interest, to the operator represents a separate performance obligation under the contract, and (iv)each performance obligation is satisfied at the collectability being reasonably assured. For our streaming agreements,point in time of metal production by the operator. Accordingly, we recognize revenue whenattributable to our royalty interests in the period in which metal is sold.
Refer to Note 2production occurs at the specified commodity price per the agreement, net of the notes to consolidated financial statements for discussion on recently issued Accounting Standards Update (“ASU”) guidance for the recognition of revenue from contracts with customers effective for the Company’s fiscal year beginning July 1, 2018.any contractually allowable offsite treatment, refining, transportation and, if applicable, mining costs.
Metal Sales
Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a
35
consecutive number of trading days between 10 days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policyactivity in effect at the time) commencing shortly after receipt and purchase of the metal. Temporary modifications may be made to our metal sales policyguidelines from time to time as required to meet the needs of the Company.our needs. Revenue from gold, silver and copper sales is recognized on the date of the settlement, which is also the date that title to the metal passes to the purchaser.
Cost of Sales
Cost of sales, which excludes depreciation, depletion and amortization, is specific to our stream agreements and is the result of our purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.
33
Exploration Costs
Exploration costs are specific to our Peak Gold JV for exploration and advancement of the Peak Gold project as discussed further in Note 2 of our notes to consolidated financial statements. Exploration costs associated with the exploration and advancement of Peak Gold are expensed when incurred.
Income Taxes
The Company accounts for income taxes in accordance with the guidance of ASC 740. The Company’sOur annual tax rate is based on income, statutory tax rates in effect and tax planning opportunities available to us in the various jurisdictions in which the Company operates. Significant judgment is required in determining the annual tax expense, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate or unpredicted results from the final determination of each year’s liability by taxing authorities.
The Company’sOur deferred income taxes reflect the impact of temporary differences between the reported amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. In evaluating the realizability of the deferred tax assets, management considers both positive and negative evidence that may exist, such as earnings history, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies in each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning strategies.
The Company’sOur operations may involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizesWe recognize potential liabilities and recordsrecord tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on itsour estimate of whether, and the extent to which, additional taxes will be due. The Company adjustsWe adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit; however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period which they are determined. The Company recognizesWe recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Liquidity and Capital Resources
Overview
At June 30, 2018,2020, we had current assets of $125.8$362.2 million compared to current liabilities of $51.4$43.6 million resulting in a working capital of $74.4$318.6 million and a current ratio of 28 to 1. This compares to current assets of $143.6$154.7 million and
36
current liabilities of $34.3$33.6 million at June 30, 2017,2019, resulting in a working capital of $109.3$121.1 million and a current ratio of approximately 45 to 1. The decreaseincrease in our current ratio was primarily resulted from a decreaseattributable to an increase in our income tax receivable due to a tax refund received from a foreign taxing authoritycash and equivalents, which is discussed further below under “Summary of approximately $21 million during the current year.Cash Flows.”
During the fiscal year ended June 30, 2018,2020, liquidity needs were met from $375.2$340.8 million in net revenuecash provided by operating activities and our available cash resources. During our fiscal year ended June 30, 2018, the Company repaid the remaining $250 million outstanding under the revolving credit facility. As of June 30, 2018, the Company2020, we had the full $1.0 billion$695 million available and $305 million outstanding under itsour revolving credit facility. Working capital, combined with the Company’s undrawnavailable capacity under our revolving credit facility, resulted in approximately $1.1$1 billion of total liquidity at June 30, 2018.2020. Refer to Note 56 of our notes to consolidated financial statements and below (“Recent Liquidity and Capital Resource Developments”) for further discussion on our debt. On July 2, 2020, we repaid $30 million of the outstanding borrowings under the credit facility. This payment increased the amount available under our revolving credit facility to $725 million and decreased the amount outstanding to $275 million.
34
We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for debt service, general and administrative expense costs and capital expenditures for the foreseeable future. Our current financial resources are also available to fund dividends and for acquisitions of stream and royalty interests.interests, including the remaining conditional funding schedule in connection with the Khoemacau silver stream acquisition. Our long-term capital requirements are primarily affected by our ongoing acquisition activities. The CompanyWe currently, and generally at any time, hashave acquisition opportunities in various stages of active review. In the event of one or more substantial stream andor royalty interest or other acquisitions, we may seek additional debt or equity financing as necessary.
Please refer to our risk factors included in Part I, Item 1A of this report for a discussion of certain risks that may impact the Company’sour liquidity and capital resources.
Recent Liquidity and Capital Resource DevelopmentDevelopments
Revolving Credit Facility Drawdown
On April 3, 2020, we drew an additional $200 million on our revolving credit facility. There is no immediate requirement for the additional funds. However, due to the uncertain environment caused by the COVID-19 pandemic, and the impact on certain operations where we hold a stream or royalty interest, we believe the drawdown was a prudent precautionary measure to help ensure cash is readily available to support continued business activities. We remain committed to reducing our debt, and absent the requirement to fund any new business opportunities, we expect to further manage our debt levels once the operating environment returns to normal.
Dividend Increase
On November 15, 2017,19, 2019, we announced an increase in our annual dividend for calendar 20182020 from $0.96$1.06 to $1.00,$1.12, payable on a quarterly basis of $0.25$0.28 per share. The newly declared dividend is 4.2%6% higher than the dividend paid during calendar 2017. Royal Gold has2019. We have steadily increased itsour annual dividend since calendar 2001.
Revolving Credit Facility Amendment
On September 20, 2019, we entered into a third amendment to our revolving credit facility dated as of June 2, 2017. Under the amendment, our Swiss subsidiary RGLD Gold was added as a co-borrower and joint and several obligor, certain of the Company’s Canadian subsidiaries were added as guarantors, and certain equity pledges that previously had been granted in favor of the lenders to support the facility were released, with the result that the facility is now unsecured.
Summary of Cash Flows
Operating Activities
Net cash provided by operating activities totaled $328.8$340.8 million for the fiscal year ended June 30, 2018,2020, compared to $266.9$253.2 million for the fiscal year ended June 30, 2017.2019. The increase was primarily due to an increase in proceeds received from our stream and royalty interests, net of production taxes and cost of sales, of approximately $23.0$49.5 million and a tax refund received from a foreign taxing authoritylower income taxes paid of approximately $21$12.9 million.
Investing Activities
Net cash provided by operatingused in investing activities totaled $266.9$152.9 million for the fiscal year ended June 30, 2017,2020, compared to $169.3cash used in investing activities of $5.6 million for the fiscal year ended June 30, 2016.2019. The increase in cash used in investing
35
activities was primarily due to an increase in proceeds received from ouracquisitions of stream and royalty interests, net of production taxes and cost of sales, of approximately $56.5 million. The increase was also due to a decrease in income taxes paid of approximately $49.2 million, which resulted from $47.7 million of cash taxes paid for the termination of the Andacollo royalty during fiscal year 2016, partially offset by $9.7 million of cash taxes paid to taxing authorities, as a condition for appealing an assessment, duringinterests. During the fiscal year ended June 30, 2017.2020, we made advance payments totaling $135.7 million for the Khoemacau silver stream acquisition.
InvestingFinancing Activities
Net cash used in investingprovided by financing activities totaled $10.6$11.8 million for the fiscal year ended June 30, 2018,2020, compared to cash used in investingfinancing activities of $200.1$216.9 million for the fiscal year ended June 30, 2017.2019. The decrease in cash used in investing
37
activities is due to a decrease in acquisitions of stream and royalty interests in mineral properties when compared to the prior fiscal year.
Net cash used in investing activities totaled $200.1 million for the fiscal year ended June 30, 2017, compared to $1.0 billion for the fiscal year ended June 30, 2016. The decrease in cash used in investing activities is primarily due to a decrease in acquisitions of stream and royalty interests in mineral properties compared to fiscal year ended June 30, 2016 (primarily the Pueblo Viejo and Andacollo stream acquisitions).
Financing Activities
Net cash used in financing activities totaled $315.3 million for the fiscal year ended June 30, 2018, compared to cash used in financing activities of $97.5 million for the fiscal year ended June 30, 2017. The increase in cash used in financing activities is primarily due to increased repaymenta decrease in debt repayments (net of amounts outstanding under our revolving credit facilityborrowings) when compared to the prior fiscal year.
Net cash used in financing activities totaled $97.5 million for the fiscal year ended June 30, 2017, compared to cash provided by financing activities of $214.0 million for the fiscal year ended June 30, 2016. The decrease in cash provided by financing activities is primarily due to the Company’s $350 million borrowing under its revolving credit facility to fund stream acquisitions during fiscal year 2016. During the fiscal year ended June 30, 2017, the Company repaid $95.0 million of the outstanding borrowings under the revolving credit facility.
Contractual Obligations
Our contractual obligations as of June 30, 2018,2020, are as follows:
| | | | | | | | | | | | | | | |
| | Payments Due by Period (in thousands) | |||||||||||||
| | | | | Less than | | | | | | | | More than | ||
Contractual Obligations | | Total | | 1 Year | | 1 - 3 Years | | 3 - 5 Years | | 5 Years | |||||
Revolving credit facility(1) |
| $ | 325,972 |
| $ | 4,258 |
| $ | 12,775 |
| $ | 308,939 |
| $ | — |
Operating leases | | $ | 9,210 |
| $ | 901 |
| $ | 1,854 |
| $ | 1,931 |
| $ | 4,524 |
Total | | $ | 335,182 | | $ | 5,159 | | $ | 14,629 | | $ | 310,870 | | $ | 4,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payments Due by Period (in thousands) | |||||||||||||
|
|
|
|
| Less than |
|
|
|
|
|
|
| More than | ||
Contractual Obligations |
| Total |
| 1 Year |
| 1 - 3 Years |
| 3 - 5 Years |
| 5 Years | |||||
2019 Notes(1) |
| $ | 380,638 |
| $ | 380,638 |
| $ | — |
| $ | — |
| $ | — |
(1) |
| Amounts represent principal ($ |
For information on our contractual obligations,revolving credit facility, see Note 5 of the notes6 to consolidated financial statements. The above table does not include stream commitments as discussed in Note 14 of the notes15 to consolidated financial statements. The Company believes itWe believe we will be able to fund all current obligations from net cash provided by operating activities.
Off‑BalanceOff-Balance Sheet Arrangements
We do not have any off‑balanceoff-balance sheet arrangements.
Results of Operations
Fiscal Year Ended June 30, 2018,2020, Compared with Fiscal Year Ended June 30, 20172019
For the fiscal year ended June 30, 2018,2020, we recorded a net lossincome attributable to Royal Gold stockholders of $113.1$199.3 million, or $1.73$3.04 per basic share and $3.03 per diluted share, as compared to net income attributable to Royal Gold stockholders of $101.5$93.8 million, or $1.55$1.43 per basic and diluted share, for the fiscal year ended June 30, 2017.2019. The decreaseincrease in our earnings per share was primarily attributable to impairment charges of approximately $239.4 million primarily on our royalty interest at Pascua-Lama, as discussed further in Note 4 of our notes to consolidated financial statements, during the three months ended March 31, 2018. This decrease was partially offset by(i) an increase in our revenue, which is discussed below. The effect of the impairment charges during the current year, was $2.68 per basic share, after taxes. The(ii) a decrease in our earnings per share was alsointerest expense and (iii) discrete income tax benefits recognized, primarily attributable to an increase in our incomerecent Swiss tax expense due toreform during the impacts of the Act and a non-cash functional currency election at certain of our Canadian subsidiaries. The combined effect of the Act quarter ended September 30, 2019and the non-cash functional currency election for incomerelease of an uncertain tax purposes was additional incomeliability resulting from a settlement agreement with a foreign tax expense of approximately $30.7 million
38
and $18.3 million, respectively, or $0.47 and $0.25 per basic share, respectively, during the current period. Refer to “Item 1, Recent Business Developments” and Note 7 of our notes to consolidated financial statements forauthority. Each are discussed further discussion on the Act.below.
For the fiscal year ended June 30, 2018,2020, we recognized total revenue of $459.0$498.8 million, which is comprised of stream revenue of $324.5$359.9 million and royalty revenue of $134.5$138.9 million, at an average gold price of $1,297$1,560 per ounce, an average silver price of $16.72$16.90 per ounce and an average copper price of $3.06$2.57 per pound, compared to total revenue of $440.8$423.1 million, which is comprised of stream revenue of $314.0$305.8 million and royalty revenue of $126.8$117.2 million, at an average gold price of $1,259$1,263 per ounce, an average silver price of $17.88$15.00 per ounce and an average copper price of $2.44$2.79 per pound, for the fiscal year ended June 30, 2017. 2019.
36
Revenue and the corresponding production, attributable to our stream and royalty interests, for the fiscal year ended June 30, 20182020 compared to the fiscal year ended June 30, 20172019 is as follows:
Revenue and Reported Production Subject to our Stream and Royalty Interests
Fiscal Years Ended June 30, 20182020 and 20172019
(In thousands, except reported production in ozs. and lbs.)
| | | | | | | | | | | | | | |
| | | | Year Ended | | Year Ended | ||||||||
| | | | June 30, 2020 | | June 30, 2019 | ||||||||
| | | | | | | Reported | | | | | Reported | ||
Stream/Royalty |
| Metal(s) |
| Revenue |
| Production(1) |
| Revenue |
| Production(1) | ||||
Stream(2): | | | | | | | | | | | | | | |
Mount Milligan | | | | $ | 131,425 | | | | | $ | 101,010 | | | |
| | Gold | | | | | 63,700 | oz. | | | | | 61,700 | oz. |
| | Copper | | | | | 12.7 | Mlbs. | | | | | 8.3 | Mlbs. |
Pueblo Viejo | | | | $ | 96,978 | | | | | $ | 82,844 | | | |
| | Gold | | | | | 43,300 | oz. | | | | | 41,000 | oz. |
| | Silver | | | | | 1.8 | Moz. | | | | | 2.1 | Moz. |
Andacollo | | Gold | | $ | 74,219 | | 48,100 | oz. | | $ | 69,264 | | 55,000 | oz. |
Wassa | | Gold | | $ | 23,203 | | 15,000 | oz. | | $ | 22,098 | | 17,500 | oz. |
Other(3) | | | | $ | 34,043 | | | | | $ | 30,608 | | | |
| | Gold | | | | | 20,300 | oz. | | | | | 22,600 | oz. |
| | Silver | | | | | 188,800 | oz. | | | | | 144,700 | oz. |
Total stream revenue | | | | $ | 359,868 | | | | | $ | 305,824 | | | |
| | | | | | | | | | | | | | |
Royalty(2): | | | | | | | | | | | | | | |
Peñasquito | | | | $ | 25,498 | | | | | $ | 13,865 | | | |
| | Gold | | | | | 312,200 | oz. | | | | | 158,800 | oz. |
| | Silver | | | | | 27.8 | Moz. | | | | | 16.4 | Moz. |
| | Lead | | | | | 182.3 | Mlbs. | | | | | 117.4 | Mlbs. |
| | Zinc | | | | | 393.9 | Mlbs. | | | | | 216.2 | Mlbs. |
Cortez | | Gold | | $ | 22,342 | | 173,300 | oz. | | $ | 11,383 | | 96,700 | oz. |
Other(3) | | Various | | $ | 91,111 | | N/A | | | $ | 91,984 | | N/A | |
Total royalty revenue | | | | $ | 138,951 | | | | | $ | 117,232 | | | |
Total revenue | | $ | 498,819 | | | | | $ | 423,056 | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended |
| Year Ended | ||||||||
|
|
|
| June 30, 2018 |
| June 30, 2017 | ||||||||
|
|
|
|
|
|
| Reported |
|
|
|
| Reported | ||
Stream/Royalty |
| Metal(s) |
| Revenue |
| Production(1) |
| Revenue |
| Production(1) | ||||
Stream(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mount Milligan |
|
|
| $ | 133,534 |
|
|
|
| $ | 136,736 |
|
|
|
|
| Gold |
|
|
|
| 77,700 | oz. |
|
|
|
| 103,400 | oz. |
|
| Copper |
|
|
|
| 10.35 | Mlbs. |
|
|
|
| 2.57 | Mlbs. |
Pueblo Viejo |
|
|
| $ | 95,055 |
|
|
|
| $ | 91,589 |
|
|
|
|
| Gold |
|
|
|
| 49,200 | oz. |
|
|
|
| 50,700 | oz. |
|
| Silver |
|
|
|
| 1.88 | Moz. |
|
|
|
| 1.56 | Moz. |
Andacollo |
| Gold |
| $ | 57,413 |
| 44,400 | oz. |
| $ | 60,251 |
| 47,800 | oz. |
Wassa and Prestea |
| Gold |
| $ | 29,804 |
| 23,000 | oz. |
| $ | 25,435 |
| 20,300 | oz. |
Other(4) |
| Various |
| $ | 8,710 |
| N/A |
|
| $ | N/A |
| N/A |
|
Total stream revenue |
|
|
| $ | 324,516 |
|
|
|
| $ | 314,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peñasquito |
|
|
| $ | 25,886 |
|
|
|
| $ | 26,687 |
|
|
|
|
| Gold |
|
|
|
| 375,800 | oz. |
|
|
|
| 556,300 | oz. |
|
| Silver |
|
|
|
| 20.89 | Moz. |
|
|
|
| 20.71 | Moz. |
|
| Lead |
|
|
|
| 122.15 | Mlbs. |
|
|
|
| 125.21 | Mlbs. |
|
| Zinc |
|
|
|
| 348.48 | Mlbs. |
|
|
|
| 317.77 | Mlbs. |
Cortez |
| Gold |
| $ | 8,155 |
| 77,700 | oz. |
| $ | 6,504 |
| 64,200 | oz. |
Other(4) |
| Various |
| $ | 100,485 |
| N/A |
|
| $ | 93,612 |
| N/A |
|
Total royalty revenue |
|
|
| $ | 134,526 |
|
|
|
| $ | 126,803 |
|
|
|
Total revenue |
| $ | 459,042 |
|
|
|
| $ | 440,814 |
|
|
|
(1) |
|
(2) |
|
(3) |
|
|
The increase in our total revenue for the fiscal year ended June 30, 2018,2020, compared with the fiscal year ended June 30, 2017,2019, resulted primarily from an increase in our stream revenue and an increase in the average gold and coppersilver prices. The increase in our stream revenue was primarily attributable to new gold and silver production from our Rainy River
39
stream, an increase in gold sales at Wassa and Prestea and increased copper sales at Mount Milligan and gold sales at Pueblo Viejo. These increases were partially offset by lower gold sales at Mount Milligan and Andacollo. SilverAndacollo which was due to a decrease in deliveries resulting from Rainy River begana temporary suspension of operations during ourthe December 20172019 quarter with silver sales beginning in the March 2018 quarter. Copper deliveries from Mount Milligan began during our June 2017 quarter.due to a worker’s strike.
37
Gold and silver ounces and copper pounds purchased and sold during the fiscal years ended June 30, 20182020 and 2017,2019, as well as gold, silver and copper in inventory as of June 30, 20182020 and 2017,2019, for our streamingstream interests were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Year Ended |
| Year Ended |
| As of |
| As of | ||||||||||||||||
|
| June 30, 2018 |
| June 30, 2017 |
| June 30, 2018 |
| June 30, 2017 | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||
| | Year Ended | | Year Ended | | As of | | As of | ||||||||||||||||
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | ||||||||||||||||
Gold Stream |
| Purchases (oz.) |
| Sales (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
Mount Milligan |
| 78,000 |
| 77,700 |
| 96,000 |
| 103,400 |
| 300 |
| 100 | | 59,900 | | 63,700 | | 68,500 | | 61,700 | | 3,300 | | 7,100 |
Andacollo |
| 51,700 |
| 44,400 |
| 47,900 |
| 47,800 |
| 7,400 |
| 100 | | 43,900 | | 48,100 | | 51,900 | | 55,000 | | 100 | | 4,300 |
Pueblo Viejo |
| 45,400 |
| 49,200 |
| 52,600 |
| 50,700 |
| 9,200 |
| 12,900 | | 45,000 | | 43,300 | | 41,200 | | 41,000 | | 11,100 | | 9,500 |
Wassa and Prestea |
| 25,900 |
| 23,000 |
| 19,900 |
| 20,300 |
| 3,900 |
| 1,000 | ||||||||||||
Rainy River |
| 6,800 |
| 5,900 |
| — |
| — |
| 800 |
| — | ||||||||||||
Wassa | | 16,500 | | 15,000 | | 16,600 | | 17,500 | | 2,900 | | 1,500 | ||||||||||||
Other | | 19,500 | | 20,300 | | 22,500 | | 22,600 | | 1,500 | | 2,200 | ||||||||||||
Total |
| 207,800 |
| 200,200 |
| 216,400 |
| 222,200 |
| 21,600 |
| 14,100 | | 184,800 | | 190,400 | | 200,700 | | 197,800 | | 18,900 | | 24,600 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Year Ended |
| Year Ended |
| As of |
| As of | ||||||||||||||||
|
| June 30, 2018 |
| June 30, 2017 |
| June 30, 2018 |
| June 30, 2017 | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||
| | Year Ended | | Year Ended | | As of | | As of | ||||||||||||||||
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | ||||||||||||||||
Silver Stream |
| Purchases (Moz.) |
| Sales (Moz.) |
| Purchases (Moz.) |
| Sales (Moz.) |
| Inventory (oz.) |
| Inventory (oz.) | | Purchases (oz.) | | Sales (oz.) | | Purchases (oz.) | | Sales (oz.) | | Inventory (oz.) | | Inventory (oz.) |
Pueblo Viejo |
| 1.89 |
| 1.88 |
| 1.78 |
| 1.56 |
| 540,200 |
| 536,800 | | 1,726,100 | | 1,750,400 | | 2,007,000 | | 2,071,700 | | 451,200 | | 475,600 |
Rainy River |
| 0.08 |
| 0.06 |
| — |
| — |
| 32,300 |
| — | ||||||||||||
Other | | 175,700 | | 188,800 | | 148,900 | | 144,700 | | 23,400 | | 36,500 | ||||||||||||
Total |
| 1.97 |
| 1.94 |
| 1.78 |
| 1.56 |
| 572,500 |
| 536,800 | | 1,901,800 | | 1,939,200 | | 2,155,900 | | 2,216,400 | | 474,600 | | 512,100 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Year Ended |
| Year Ended |
| As of |
| As of | ||||||||||||||||
|
| June 30, 2018 |
| June 30, 2017 |
| June 30, 2018 |
| June 30, 2017 | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||
| | Year Ended | | Year Ended | | As of | | As of | ||||||||||||||||
| | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 | ||||||||||||||||
Copper Stream |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Inventory (Mlbs.) |
| Inventory (Mlbs.) | | Purchases (Mlbs.) | | Sales (Mlbs.) | | Purchases (Mlbs.) | | Sales (Mlbs.) | | Inventory (Mlbs.) | | Inventory (Mlbs.) |
Mount Milligan |
| 10.35 |
| 10.35 |
| 2.57 |
| 2.57 |
| — |
| — | | 12.6 | | 12.7 | | 9.1 | | 8.3 | | 0.8 | | 0.8 |
Our royalty revenue increased during the fiscal year ended June 30, 2018,2020, compared with the fiscal year ended June 30, 2017,2019, primarily due to an increase in production at Peñasquito and Cortez and an increase in the average gold and copper prices and increased gold production at Cortez.silver prices. Refer to Part I, Item 2, Properties, for discussion and any updates on our principal producing properties.
Cost of sales were approximately $83.8increased to $83.9 million for the fiscal year ended June 30, 2018, compared to $87.32020, from $77.5 million for the fiscal year ended June 30, 2017.2019. The decreaseincrease was primarily due to decreasedincreased gold and copper sales from Mount Milligan and Andacollo.an increase in gold sales from Pueblo Viejo, partially offset by a decrease in silver sales from Pueblo Viejo. Cost of sales, which excludes depreciation, depletion and amortization, is specific to our stream agreements and is the result of RGLD Gold’s purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.
GeneralDepreciation, depletion and administrative expensesamortization increased to $35.5$175.4 million for the fiscal year ended June 30, 2018,2020, from $33.4$163.1 million for the fiscal year ended June 30, 2017.2019. The increase was primarily attributable to higher gold and copper sales at Mount Milligan and an increase in gold sales at Pueblo Viejo. An increase in depletion rates at Mount Milligan as a result of updated reserves, as discussed in Part I, Item 2, Properties, also contributed to the increase in our depletion expense during the current period was primarily due to an increaseperiod.
We recognized a gain in legal and litigation costs.
Exploration costs decreased to $8.9fair value changes in equity securities of $1.4 million for the fiscal year ended June 30, 2018, from $12.92020, compared to a loss in fair value changes in equity securities of $6.8 million for the fiscal year ended June 30, 2017. Exploration costs are specific2019. The change was primarily due to an increase in the exploration and advancementfair value of the Peak Gold JV,marketable equity securities as discussed further in Note 2 of5 to the notes to consolidated financial statements.
Depreciation, depletionInterest and amortizationother expense increaseddecreased to $163.7$9.8 million for the fiscal year ended June 30, 2018,2020, from $159.6$29.7 million for the fiscal year ended June 30, 2017. The increase was primarily attributable to increased gold sales from our Wassa and Prestea gold stream.
Impairment of royalty and stream interests was $239.4 million for the fiscal year ended June 30, 2018. The impairment of royalty interests was the result of our regular impairment analysis conducted during the three months ended March 31, 2018, and was primarily due to the presence of impairment indicators on our royalty interest at Pascua-Lama. Refer to Note 4 of our notes to consolidated financial statements for further discussion on our impairment analysis and results.
40
Interest and other income decreased to $4.2 million for the fiscal year ended June 30, 2018, from $9.3 million for the fiscal year ended June 30, 2017. The decrease was primarily due to a gain recognized ($3.4 million) on consideration received as part of the termination of our Phoenix Gold Project streaming interest during the prior period. Refer to Note 4 of our notes to consolidated financial statements for discussion on the Phoenix Gold Project restructuring during the prior period. The decrease in interest and other income was also due to consideration received as part of a legal settlement and termination of a non-principal royalty of approximately $2.8 million during the prior period.
Interest and other expense decreased to $34.2 million for the fiscal year ended June 30, 2018, from $36.4 million for the fiscal year ended June 30, 2017.2019. The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding under our revolving credit facility. The Company repaid the remaining $250 million outstanding under the revolving credit facility during fiscal year 2018.
During the fiscal year ended June 30, 2018, we recognized income tax expense totaling $14.8 million compared with $26.4 million during the fiscal year ended June 30, 2017. This resulted in an effective tax rate of (14.1%) during the current period when compared with 22.2% into the prior period. The increaseDuring the prior period, we settled the $370 million aggregate principal amount due under our convertible senior notes that matured in the effective tax rate for the fiscal year ended June 30, 2018 is primarily attributable to the effects of the Act and a non-cash functional currency election at certain of our Canadian subsidiaries.2019. Refer to “Item 1, Recent Business Developments” and Note 106 of our notes to consolidated financial statements for further discussion on the Act.
Fiscal Year Ended June 30, 2017, Compared with Fiscal Year Ended June 30, 2016
For the fiscal year ended June 30, 2017, we recorded net income attributable to Royal Gold stockholders of $101.5 million, or $1.55 per basic and diluted share, as compared to a net loss attributable to Royal Gold stockholders of $77.1 million, or $1.18 per basic and diluted share, for the fiscal year ended June 30, 2016. The increase in our earnings per share was primarily attributable to an increase in our revenue during fiscal 2017, as discussed below, impairment charges of approximately $99.0 million (including a royalty receivable write down of approximately $2.9 million) on our stream interest at the Phoenix Gold Project and certain other non-principal royalty interests during fiscal 2016, and the impact of $56 million of additional tax expense in fiscal year 2016 related to the termination of the Andacollo royalty interest and the liquidation of our Chilean subsidiary. The effect of the impairment charges during the fiscal year ended June 30, 2016, was $1.33 per basic share, after taxes. The effect of the tax expense attributable to the termination of the Andacollo royalty interest during the fiscal year ended June 30, 2016, was $0.86 per share.
For the fiscal year ended June 30, 2017, we recognized total revenue of $440.8 million, which is comprised of stream revenue of $314.0 million and royalty revenue of $126.8 million, at an average gold price of $1,259 per ounce, an average silver price of $17.88 per ounce and an average copper price of $2.40 per pound, compared to total revenue of $359.8 million, which is comprised of stream revenue of $238.0 million and royalty revenue of $121.8 million, at an average gold price of $1,168 per ounce, an average silver price of $15.32 per ounce and an average copper price of $2.22 per pound, for the fiscal year ended June 30, 2016. Revenue and the corresponding production, attributable to our stream and royalty interests, for the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016 is as follows:
41
Revenue and Reported Production Subject to our Stream and Royalty Interests
Fiscal Years Ended June 30, 2017 and 2016
(In thousands, except reported production in ozs. and lbs.)
|
|
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|
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|
|
|
|
|
| Fiscal Year ended |
| Fiscal Year ended | |||||||
|
|
|
| June 30, 2017 |
| June 30, 2016 | |||||||
|
|
|
|
|
|
| Reported |
|
|
|
| Reported | |
Stream/Royalty |
| Metal(s) |
| Revenue |
| Production(1) |
| Revenue |
| Production(1) | |||
Stream (2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mount Milligan |
|
|
| $ | 136,736 |
|
|
|
| $ | 125,438 |
|
|
|
| Gold |
|
|
|
| 103,400 | oz. |
|
|
|
| 108,800 |
|
| Copper |
|
|
|
| 2.57 | Mlbs. |
|
|
|
| N/A |
Pueblo Viejo(3) |
|
|
| $ | 91,589 |
|
|
|
| $ | 39,683 |
|
|
|
| Gold |
|
|
|
| 50,700 | oz. |
|
|
|
| 31,200 |
|
| Silver |
|
|
|
| 1.56 | Moz. |
|
|
|
| 208,900 |
Andacollo |
| Gold |
| $ | 60,251 |
| 47,800 | oz. |
| $ | 49,243 |
| 41,600 |
Wassa and Prestea |
| Gold |
| $ | 25,435 |
| 20,300 | oz. |
| $ | 23,346 |
| 20,100 |
Other(4) |
| Gold |
| $ | N/A |
| N/A |
|
| $ | 318 |
| 300 |
Total stream revenue |
|
|
| $ | 314,011 |
|
|
|
| $ | 238,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Peñasquito |
|
|
| $ | 26,687 |
|
|
|
| $ | 22,760 |
|
|
|
| Gold |
|
|
|
| 556,300 | oz. |
|
|
|
| 584,000 |
|
| Silver |
|
|
|
| 20.71 | Moz. |
|
|
|
| 21.38 |
|
| Lead |
|
|
|
| 125.21 | Mlbs. |
|
|
|
| 134.21 |
|
| Zinc |
|
|
|
| 317.77 | Mlbs. |
|
|
|
| 332.98 |
Cortez |
| Gold |
| $ | 6,504 |
| 64,200 | oz. |
| $ | 6,107 |
| 74,000 |
Other(4) |
| Various |
| $ | 93,612 |
| N/A |
|
| $ | 92,895 |
| N/A |
Total royalty revenue |
|
|
| $ | 126,803 |
|
|
|
| $ | 121,762 |
|
|
Total revenue |
|
|
| $ | 440,814 |
|
|
|
| $ | 359,790 |
|
|
|
|
|
|
The increase in our total revenue for the fiscal year ended June 30, 2017, compared with the fiscal year ended June 30, 2016, resulted primarily from an increase in our stream revenue, and an increase in the average gold and silver prices. The increase in our stream revenue was primarily attributable to increased gold production at our Pueblo Viejo and Andacollo gold streams and new silver production from our Pueblo Viejo silver stream. Our first silver stream delivery from Pueblo Viejo was in March 2016, and the first revenue from Pueblo Viejo silver sales was recognized in the June 2016 quarter.
42
Gold and silver ounces purchased and sold during the fiscal year ended June 30, 2017 and 2016, as well as gold, silver and copper in inventory as of June 30, 2017 and 2016, for our streaming interests were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended |
| Fiscal Year Ended |
| As of |
| As of | ||||
|
| June 30, 2017 |
| June 30, 2016 |
| June 30, 2017 |
| June 30, 2016 | ||||
Gold Stream |
| Purchases (oz.) |
| Sales (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
Mount Milligan |
| 96,000 |
| 103,400 |
| 111,000 |
| 108,800 |
| 100 |
| 7,500 |
Pueblo Viejo |
| 52,600 |
| 50,700 |
| 42,200 |
| 31,200 |
| 12,900 |
| 11,000 |
Andacollo |
| 47,900 |
| 47,800 |
| 41,700 |
| 41,600 |
| 100 |
| — |
Wassa and Prestea |
| 19,900 |
| 20,300 |
| 21,400 |
| 20,100 |
| 1,000 |
| 1,300 |
Phoenix Gold |
| — |
| — |
| 300 |
| 300 |
| — |
| — |
Total |
| 216,400 |
| 222,200 |
| 216,600 |
| 202,000 |
| 14,100 |
| 19,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended |
| Fiscal Year Ended |
| As of |
| As of | ||||
|
| June 30, 2017 |
| June 30, 2016 |
| June 30, 2017 |
| June 30, 2016 | ||||
Silver Stream |
| Purchases (Moz.) |
| Sales (Moz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
Pueblo Viejo |
| 1.78 |
| 1.56 |
| 532,600 |
| 208,900 |
| 536,800 |
| 323,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended |
| Fiscal Year Ended |
| As of |
| As of | ||||
|
| June 30, 2017 |
| June 30, 2016 |
| June 30, 2017 |
| June 30, 2016 | ||||
Copper Stream |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Inventory (Mlbs.) |
| Inventory (Mlbs.) |
Mount Milligan |
| 2.57 |
| 2.57 |
| N/A |
| N/A |
| — |
| N/A |
Our royalty revenue increased during the fiscal year ended June 30, 2017, compared with the fiscal year ended June 30, 2016, primarily due to an increase in the average metal prices. Refer to Part I, Item 2, Properties, for discussion and any updates on our principal producing properties.
Cost of sales were approximately $87.3 million for the fiscal year ended June 30, 2017, compared to $71.0 million for the fiscal year ended June 30, 2016. The increase is primarily attributable to an increase in gold production and new silver stream production at Pueblo Viejo, which resulted in additional cost of sales of approximately $15.6 million. Cost of sales is specific to our stream agreements and is the result of RGLD Gold’s purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.
General and administrative expenses increased to $33.4 million for the fiscal year ended June 30, 2017, from $31.7 million for the fiscal year ended June 30, 2016. The increase during fiscal year 2017 was primarily due to an increase in legal and litigation costs.
Exploration costs increased to $12.9 million for the fiscal year ended June 30, 2017, from $8.6 million for the fiscal year ended June 30, 2016. Exploration costs are specific to the exploration and advancement of the Peak Gold JV, as discussed further in Note 2 of the notes to consolidated financial statements.
Depreciation, depletion and amortization expense increased to $159.6 million for the fiscal year ended June 30, 2017, from $141.1 million for the fiscal year ended June 30, 2016. The increase was primarily attributable to increased gold sales and new silver sales from our gold and silver streams at Pueblo Viejo, which resulted in additional depletion of approximately $23.3 million during fiscal year 2017. This increase was partially offset by a decrease in depletion expense on our Voisey’s Bay royalty of approximately $9.5 million, due to the ongoing dispute related to the calculation of the NSR royalty (see Note 14 of our notes to consolidated financial statements).
Interest and other income increased to $9.3 million for the fiscal year ended June 30, 2017, from $3.7 million for the fiscal year ended June 30, 2016. The increase was primarily due to a gain recognized on consideration received as part of the termination of our Phoenix Gold Project streaming interest. In exchange for the termination of the Phoenix Gold Project streaming interest, the Company received approximately three million common shares of Rubicon Minerals Corporation (“Rubicon”), the operator of the Phoenix Gold Project. The fair value of the Rubicon common shares, and corresponding gain, received upon exchange was approximately $3.4 million. The increase in interest and other income was also due to
43
consideration received as part of a legal settlement and termination of a non-principal royalty of approximately $2.6 million.outstanding debt.
During the fiscal year ended June 30, 2017,2020, we recognized an income tax expensebenefit totaling $26.4$3.7 million compared with $60.7an expense of $17.5 million during the fiscal year ended June 30, 2016.2019. This resulted in an effective tax rate of 22.2%(1.9%) during fiscal year 2017,the current period, compared with (278.9%) during fiscal year 2016. The decrease16.4% in the prior period. The effective tax rate for the fiscal year endingended June 30, 2017 is2020
38
was primarily relatedimpacted by a net step-up of tax assets due to the discrete tax impacts attributable toenactment of the Company’s Andacollo transactionsFederal Act on Tax Reform and AHV Financing in Switzerland and the liquidationrelease of our Chilean subsidiary duringan uncertain tax liability resulting from a settlement agreement with a foreign tax authority. The effective tax rate for the fiscal year ended June 30, 2016.2019 was primarily impacted by true-ups related to the Tax Cuts and Jobs Act partially offset by the implementation of the global intangible low-taxed income tax regime.
Forward‑LookingForward-Looking Statements
Cautionary “Safe Harbor” Statement underThis report and our other public communications include “forward-looking statements” within the Private Securities Litigation Reform Actmeaning of 1995: With the exceptionU.S. federal securities laws. Forward-looking statements are any statements other than statements of historical matters, the matters discussed in this Annual Report on Form 10-Kfact. Forward-looking statements are forward-looking statements that involve risksnot guarantees of future performance, and uncertainties that could cause actual results tomay differ materially from projections or estimates contained herein. Such forward-lookingthese statements. Forward-looking statements include, without limitation, statements regarding projected production estimates and estimates pertaining to timing and commencement of production from the operators of properties where we hold stream and royalty interests; statements related to ongoing developments and expected developments at properties where we hold stream and royalty interests; effective tax rate estimates, including the effect of recently enacted tax reform; the adequacy of financial resources and funds to cover anticipated expenditures for debt service and general and administrative expenses as well as costs associated with exploration and business development and capital expenditures, expected delivery dates of gold, silver, copper and other metals, and our expectation that substantially all our revenues will be derived from stream and royalty interests. Words such asare often identified by words like “will,” “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” and variationsor negatives of these words comparable wordsor similar expressions. Forward-looking statements include, among others, the following: statements about our expected financial performance, including revenue, expenses, earnings or cash flow; operators’ expected operating and similar expressions generally indicate forward-looking statements, which speak only asfinancial performance, including production, deliveries, mine plans and reserves, development, cash flows and capital expenditures; planned and potential acquisitions or dispositions, including funding schedules and conditions; liquidity, financing and dividends; our overall investment portfolio; macroeconomic and market conditions including the impacts of the date the statement is made. Do not unduly rely on forward-looking statements. Actual results may differ materially from those expressedCOVID-19; prices for gold, silver, copper, nickel and other metals; potential impairments; or implied by these forward-looking statements. tax changes.
Factors that could cause actual results to differ materially from these forward-looking statements include, among others:
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as well as other factors described elsewhere in this report and our other reports filed with the SEC.report. Most of these factors are beyond our ability to predict or control. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.
Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any forward-looking statements, made herein, except as required by law. Readers are cautioned not to put undue reliance on forward‑lookingforward-looking statements.
45
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our earnings and cash flows are significantly impacted by changes in the market price of gold and other metals. Gold, silver, copper, and other metal prices can fluctuate significantly and are affected by numerous factors, such as demand, production levels, economic policies of central banks, producer hedging, world political and economic events and the strength of the U.S. dollar relative to other currencies.
During the fiscal year ended June 30, 2018,2020, we reported revenue of $459.0$498.8 million, with an average gold price for the period of $1,297$1,560 per ounce, an average silver price for the period of $16.72$16.90 per ounce and an average copper price of $3.06$2.57 per pound. Approximately 77%79% of our total recognized revenues for the fiscal year ended June 30, 20182020 were attributable to gold sales from our gold producing interests, as shown within the MD&A. For the fiscal year ended June 30, 2018,2020, if the price of gold had averaged 10% higher or lower per ounce, we would have recorded an increase or decrease in revenue of approximately $37.0$41.6 million.
Approximately 11%9% of our total reported revenue for the fiscal year ended June 30, 20182020 was attributable to silver sales from our silver producing interests. For the fiscal year ended June 30, 2020, if the price of silver had averaged 10% higher or lower per ounce, we would have recorded an increase or decrease in revenues of approximately $4.4 million.
Approximately 9% of our total reported revenue for the fiscal year ended June 30, 2020 was attributable to copper sales from our copper producing interests. For the fiscal year ended June 30, 2018,2020, if the price of copper had averaged 10% higher or lower per pound, we would have recorded an increase or decrease in revenues of approximately $5.2$5.0 million.
Approximately 9% of our total reported revenue for the fiscal year ended June 30, 2018 was attributable to silver sales from our silver producing interests. For the fiscal year ended June 30, 2018, if the price of silver had averaged 10% higher or lower per ounce, we would have recorded an increase or decrease in revenues of approximately $4.1 million.
46
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
| | |
| Page | |
| 41 | |
| 43 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | | 44 |
| 45 | |
| 46 | |
| 47 |
47
40
Report of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TheTo the Board of Directors and ShareholdersStockholders of Royal Gold, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Royal Gold, Inc. (the Company) as of June 30, 20182020 and 2017,2019, the related consolidated statements of operations and comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended June 30, 2018,2020, and the related notes (collectively(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2018,2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2018,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated August 9, 20186, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| |
Impairment Assessment of Stream and Royalty Interests in Mineral Properties | |
Description of the Matter | At June 30, 2020, the Company’s stream and royalty interest balance totaled $2.3 billion. As more fully described in Note 2 to the consolidated financial statements, the Company evaluates its stream and royalty interests for impairment whenever events or changes in circumstances indicate that the carrying amounts of the asset or group of assets may not be recoverable (“triggering events”). Management evaluates various qualitative factors in determining whether or not events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. The factors considered include, among others, significant changes in estimates of forecasted gold, silver, copper and other metal prices, significant changes in operators’ estimates of proven and probable reserves and other relevant information received from the operators, which |
41
may include operational or legal information that indicates production from mineral interests will not likely occur or may be significantly reduced in the future. Auditing the Company’s impairment assessment involved our subjective judgment because, in determining whether a triggering event occurred, management uses estimates that include, among others, assumptions about forecasted gold, silver, copper and other metal prices and total future production using reserve or other relevant information reported by the operators. Significant uncertainty exists with these assumptions. Further, management’s evaluation of any new information indicating that production will not likely occur or may be significantly reduced in the future requires significant judgment. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process over the impairment assessment. For example, we tested controls over the Company’s process for identifying and evaluating potential impairment triggers and related significant assumptions and judgments. To test the Company’s impairment assessment, our audit procedures included, among others, evaluating the significant assumptions, judgments and operating data used in the Company’s analysis. Specifically, we compared forecasted gold, silver, copper and other metal prices to available market information, and we corroborated reserve information to available operator or publicly available information. We involved our specialist and searched for and evaluated other publicly available information that corroborates or contradicts the reserve estimates or indicates that production from mineral interests will not likely occur or may be significantly reduced in the future. We also considered the professional qualifications and objectivity of management’s specialists and the reputation of the third-party operators. Further, we evaluated the reasonableness of changes to estimated proven and probable reserves using our experience with the Company’s stream and royalty interests and industry knowledge. |
/s/ Ernst & Young LLP
We have served as the Company’sCompany's auditor since 2010.
Denver, Colorado
August 9, 20186, 2020
48
42
ROYAL GOLD, INC.
As of June 30,
(In thousands, except share data)
|
|
|
|
|
|
|
|
| 2018 |
| 2017 | ||
ASSETS |
|
|
|
|
|
|
Cash and equivalents |
| $ | 88,750 |
| $ | 85,847 |
Royalty receivables |
|
| 26,356 |
|
| 26,886 |
Income tax receivable |
|
| 40 |
|
| 22,169 |
Stream inventory |
|
| 9,311 |
|
| 7,883 |
Prepaid expenses and other |
|
| 1,350 |
|
| 822 |
Total current assets |
|
| 125,807 |
|
| 143,607 |
Stream and royalty interests, net (Note 4) |
|
| 2,501,117 |
|
| 2,892,256 |
Other assets |
|
| 55,092 |
|
| 58,202 |
Total assets |
| $ | 2,682,016 |
| $ | 3,094,065 |
LIABILITIES |
|
|
|
|
|
|
Accounts payable |
| $ | 9,090 |
| $ | 3,908 |
Dividends payable |
|
| 16,375 |
|
| 15,682 |
Income tax payable |
|
| 18,253 |
|
| 5,651 |
Withholding taxes payable |
|
| 3,254 |
|
| 3,425 |
Other current liabilities |
|
| 4,411 |
|
| 5,617 |
Total current liabilities |
|
| 51,383 |
|
| 34,283 |
Debt (Note 5) |
|
| 351,027 |
|
| 586,170 |
Deferred tax liabilities |
|
| 91,147 |
|
| 121,330 |
Uncertain tax positions |
|
| 33,394 |
|
| 25,627 |
Other long-term liabilities |
|
| 13,796 |
|
| 6,391 |
Total liabilities |
|
| 540,747 |
|
| 773,801 |
Commitments and contingencies (Note 10) |
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued |
|
| — |
|
| — |
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,360,041 and 65,179,527 shares outstanding, respectively |
|
| 654 |
|
| 652 |
Additional paid-in capital |
|
| 2,192,612 |
|
| 2,185,796 |
Accumulated other comprehensive (loss) income |
|
| (1,201) |
|
| 879 |
Accumulated (losses) earnings |
|
| (89,898) |
|
| 88,050 |
Total Royal Gold stockholders’ equity |
|
| 2,102,167 |
|
| 2,275,377 |
Non-controlling interests |
|
| 39,102 |
|
| 44,887 |
Total equity |
|
| 2,141,269 |
|
| 2,320,264 |
Total liabilities and equity |
| $ | 2,682,016 |
| $ | 3,094,065 |
| | | | | | |
|
| June 30, |
| June 30, | ||
|
| 2020 | | 2019 | ||
ASSETS | | | | | | |
Cash and equivalents | | $ | 319,128 | | $ | 119,475 |
Royalty receivables | | | 27,689 | | | 20,733 |
Income tax receivable | | | 2,435 | | | 2,702 |
Stream inventory | | | 11,671 | | | 11,380 |
Prepaid expenses and other | | | 1,227 | | | 389 |
Total current assets | | | 362,150 | | | 154,679 |
Stream and royalty interests, net (Note 4) | | | 2,318,913 | | | 2,339,316 |
Other assets | | | 85,224 | | | 50,156 |
Total assets | | $ | 2,766,287 | | $ | 2,544,151 |
LIABILITIES | | | | | | |
Accounts payable | | $ | 2,484 | | $ | 2,890 |
Dividends payable | | | 18,364 | | | 17,372 |
Income tax payable | | | 13,323 | | | 6,974 |
Other current liabilities | | | 9,384 | | | 6,374 |
Total current liabilities | | | 43,555 | | | 33,610 |
Debt (Note 6) | | | 300,439 | | | 214,554 |
Deferred tax liabilities | | | 86,439 | | | 88,961 |
Uncertain tax positions | | | 25,427 | | | 36,573 |
Other long-term liabilities | | | 8,308 | | | - |
Total liabilities | | | 464,168 | | | 373,698 |
Commitments and contingencies (Note 15) | | | | | | |
EQUITY | | | | | | |
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued | | | — | | | — |
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,531,288 and 65,440,492 shares outstanding, respectively | | | 655 | | | 655 |
Additional paid-in capital | | | 2,210,429 | | | 2,201,773 |
Accumulated earnings (losses) | | | 61,133 | | | (65,747) |
Total Royal Gold stockholders’ equity | | | 2,272,217 | | | 2,136,681 |
Non-controlling interests | | | 29,902 | | | 33,772 |
Total equity | | | 2,302,119 | | | 2,170,453 |
Total liabilities and equity | | $ | 2,766,287 | | $ | 2,544,151 |
The accompanying notes are an integral part of these consolidated financial statements.
49
43
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income (Loss) Income
For the Years Ended June 30,
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| 2018 |
| 2017 |
| 2016 | |||
Revenue |
| $ | 459,042 |
| $ | 440,814 |
| $ | 359,790 |
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
| 83,839 |
|
| 87,265 |
|
| 70,979 |
General and administrative |
|
| 35,464 |
|
| 33,350 |
|
| 31,720 |
Production taxes |
|
| 2,268 |
|
| 1,760 |
|
| 3,978 |
Exploration costs |
|
| 8,946 |
|
| 12,861 |
|
| 8,601 |
Depreciation, depletion and amortization |
|
| 163,696 |
|
| 159,636 |
|
| 141,108 |
Impairment of stream and royalty interests and royalty receivables |
|
| 239,364 |
|
| - |
|
| 98,588 |
Total costs and expenses |
|
| 533,577 |
|
| 294,872 |
|
| 354,974 |
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
| (74,535) |
|
| 145,942 |
|
| 4,816 |
|
|
|
|
|
|
|
|
|
|
Gain on available-for-sale securities |
|
| - |
|
| - |
|
| 2,340 |
Interest and other income |
|
| 4,170 |
|
| 9,302 |
|
| 3,711 |
Interest and other expense |
|
| (34,214) |
|
| (36,378) |
|
| (32,625) |
(Loss) income before income taxes |
|
| (104,579) |
|
| 118,866 |
|
| (21,758) |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| (14,772) |
|
| (26,441) |
|
| (60,680) |
Net (loss) income |
|
| (119,351) |
|
| 92,425 |
|
| (82,438) |
Net loss attributable to non-controlling interests |
|
| 6,217 |
|
| 9,105 |
|
| 5,289 |
Net (loss) income attributable to Royal Gold common stockholders |
| $ | (113,134) |
| $ | 101,530 |
| $ | (77,149) |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
| $ | (119,351) |
| $ | 92,425 |
| $ | (82,438) |
Adjustments to comprehensive (loss) income, net of tax |
|
|
|
|
|
|
|
|
|
Unrealized change in market value of available-for-sale securities |
|
| (2,080) |
|
| 879 |
|
| 5,632 |
Reclassification adjustment for gains included in net income |
|
| - |
|
| - |
|
| (2,340) |
Comprehensive (loss) income |
|
| (121,431) |
|
| 93,304 |
|
| (79,146) |
Comprehensive loss attributable to non-controlling interests |
|
| 6,217 |
|
| 9,105 |
|
| 5,289 |
Comprehensive (loss) income attributable to Royal Gold stockholders |
| $ | (115,214) |
| $ | 102,409 |
| $ | (73,857) |
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share available to Royal Gold common stockholders: |
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share |
| $ | (1.73) |
| $ | 1.55 |
| $ | (1.18) |
Basic weighted average shares outstanding |
|
| 65,291,855 |
|
| 65,152,782 |
|
| 65,074,455 |
Diluted (loss) earnings per share |
| $ | (1.73) |
| $ | 1.55 |
| $ | (1.18) |
Diluted weighted average shares outstanding |
|
| 65,291,855 |
|
| 65,277,953 |
|
| 65,074,455 |
Cash dividends declared per common share |
| $ | 0.99 |
| $ | 0.95 |
| $ | 0.91 |
| | | | | | | | | |
| | For The Year Ended | |||||||
| | June 30, | | June 30, | | June 30, | |||
|
| 2020 |
| 2019 |
| 2018 | |||
Revenue (Note 7) | | $ | 498,819 | | $ | 423,056 | | $ | 459,042 |
| | | | | | | | | |
Costs and expenses | | | | | | | | | |
Cost of sales (excludes depreciation, depletion and amortization) | | | 83,890 | | | 77,535 | | | 83,839 |
General and administrative | | | 30,195 | | | 30,488 | | | 35,464 |
Production taxes | | | 3,824 | | | 4,112 | | | 2,268 |
Exploration costs | | | 5,190 | | | 7,158 | | | 8,946 |
Depreciation, depletion and amortization | | | 175,434 | | | 163,056 | | | 163,696 |
Impairment of royalty interests | | | 1,341 | | | — | | | 239,364 |
Total costs and expenses | | | 299,874 | | | 282,349 | | | 533,577 |
| | | | | | | | | |
Operating income (loss) | | | 198,945 | | | 140,707 | | | (74,535) |
| | | | | | | | | |
Fair value changes in equity securities | | | 1,418 | | | (6,800) | | | — |
Interest and other income | | | 2,046 | | | 2,320 | | | 4,170 |
Interest and other expense | | | (9,813) | | | (29,650) | | | (34,214) |
Income (loss) before income taxes | | | 192,596 | | | 106,577 | | | (104,579) |
| | | | | | | | | |
Income tax benefit (expense) | | | 3,654 | | | (17,498) | | | (14,772) |
Net income (loss) | | | 196,250 | | | 89,079 | | | (119,351) |
Net loss attributable to non-controlling interests | | | 3,093 | | | 4,746 | | | 6,217 |
Net income (loss) attributable to Royal Gold common stockholders | | $ | 199,343 | | $ | 93,825 | | $ | (113,134) |
| | | | | | | | | |
Net income (loss) | | $ | 196,250 | | $ | 89,079 | | $ | (119,351) |
Adjustments to comprehensive income (loss), net of tax | | | | | | | | | |
Unrealized change in market value of available-for-sale securities | | | — | | | — | | | (2,080) |
| | | | | | | | | |
Comprehensive income (loss) | | | 196,250 | | | 89,079 | | | (121,431) |
Comprehensive loss attributable to non-controlling interests | | | 3,093 | | | 4,746 | | | 6,217 |
Comprehensive income (loss) attributable to Royal Gold stockholders | | $ | 199,343 | | $ | 93,825 | | $ | (115,214) |
| | | | | | | | | |
Net income (loss) per share attributable to Royal Gold common stockholders: | | | | | | | | | |
Basic earnings (loss) per share | | $ | 3.04 | | $ | 1.43 | | $ | (1.73) |
Basic weighted average shares outstanding | | | 65,523,024 | | | 65,394,627 | | | 65,291,855 |
Diluted earnings (loss) per share | | $ | 3.03 | | $ | 1.43 | | $ | (1.73) |
Diluted weighted average shares outstanding | | | 65,643,390 | | | 65,505,535 | | | 65,291,855 |
Cash dividends declared per common share | | $ | 1.11 | | $ | 1.05 | | $ | 0.99 |
The accompanying notes are an integral part of these consolidated financial statements.
50
44
ROYAL GOLD, INC.
Consolidated Statements of Changes in Equity
For the Years Ended June 30, 2018, 20172020, 2019 and 20162018
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Royal Gold Stockholders |
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Additional |
| Other |
|
|
|
|
|
|
|
|
| ||
|
| Common Shares |
| Paid-In |
| Comprehensive |
| Accumulated |
| Non-controlling |
| Total | ||||||||
|
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| (Losses) Earnings |
| interests |
| Equity | ||||||
Balance at June 30, 2015 |
| 65,033,547 |
| $ | 650 |
| $ | 2,170,643 |
| $ | (3,292) |
| $ | 185,121 |
| $ | 62,805 |
| $ | 2,415,927 |
Stock-based compensation and related share issuances |
| 60,403 |
|
| 1 |
|
| 9,138 |
|
| — |
|
| — |
|
| — |
|
| 9,139 |
Net loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (77,149) |
|
| (5,289) |
|
| (82,438) |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| 3,292 |
|
| — |
|
| — |
|
| 3,292 |
Distributions to non-controlling interests |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (647) |
|
| (647) |
Dividends declared |
| — |
|
| — |
|
| — |
|
| — |
|
| (59,388) |
|
| — |
|
| (59,388) |
Balance at June 30, 2016 |
| 65,093,950 |
| $ | 651 |
| $ | 2,179,781 |
| $ | — |
| $ | 48,584 |
| $ | 56,869 |
| $ | 2,285,885 |
Stock-based compensation and related share issuances |
| 85,577 |
|
| 1 |
|
| 8,533 |
|
| — |
|
| — |
|
| — |
|
| 8,534 |
Non-controlling interest assignment |
| — |
|
| — |
|
| (2,518) |
|
| — |
|
| — |
|
| — |
|
| (2,518) |
Net income (loss) |
| — |
|
| — |
|
| — |
|
| — |
|
| 101,530 |
|
| (9,105) |
|
| 92,425 |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| 879 |
|
| — |
|
| — |
|
| 879 |
Distributions to non-controlling interests |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,877) |
|
| (2,877) |
Dividends declared |
| — |
|
| — |
|
| — |
|
| — |
|
| (62,064) |
|
| — |
|
| (62,064) |
Balance at June 30, 2017 |
| 65,179,527 |
| $ | 652 |
| $ | 2,185,796 |
| $ | 879 |
| $ | 88,050 |
| $ | 44,887 |
| $ | 2,320,264 |
Stock-based compensation and related share issuances |
| 180,514 |
|
| 2 |
|
| 4,236 |
|
| — |
|
| — |
|
| — |
|
| 4,238 |
Contributions from non-controlling interests |
| — |
|
| — |
|
| 2,580 |
|
| — |
|
| — |
|
| 432 |
|
| 3,012 |
Net loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (113,134) |
|
| (6,217) |
|
| (119,351) |
Other comprehensive loss |
| — |
|
| — |
|
| — |
|
| (2,080) |
|
| — |
|
| — |
|
| (2,080) |
Dividends declared |
| — |
|
| — |
|
| — |
|
| — |
|
| (64,814) |
|
| — |
|
| (64,814) |
Balance at June 30, 2018 |
| 65,360,041 |
| $ | 654 |
| $ | 2,192,612 |
| $ | (1,201) |
| $ | (89,898) |
| $ | 39,102 |
| $ | 2,141,269 |
| | | | | | | | | | | �� | | | | | | | | | |
| | Royal Gold Stockholders | | | | | | | ||||||||||||
| | | | | | | | | | Accumulated | | | | | | | | | | |
| | | | | | | Additional | | Other | | | | | | | | | | ||
| | Common Shares | | Paid-In | | Comprehensive | | Accumulated | | Non-controlling | | Total | ||||||||
| | Shares | | Amount | | Capital | | Income (Loss) | | (Losses) Earnings | | Interests | | Equity | ||||||
Balance at June 30, 2017 |
| 65,179,527 | | $ | 652 |
| $ | 2,185,796 | | $ | 879 | | $ | 88,050 | | $ | 44,887 | | $ | 2,320,264 |
Stock-based compensation and related share issuances |
| 180,514 | |
| 2 |
|
| 4,236 | |
| — | |
| — | |
| — | |
| 4,238 |
Distributions from non-controlling interests | | — | |
| — |
|
| 2,580 | |
| — | |
| — | |
| 432 | |
| 3,012 |
Net loss |
| — | |
| — |
|
| — | |
| — | |
| (113,134) | |
| (6,217) | |
| (119,351) |
Other comprehensive loss |
| — | |
| — |
|
| — | |
| (2,080) | |
| — | |
| — | |
| (2,080) |
Dividends declared |
| — | |
| — |
|
| — | |
| — | |
| (64,814) | |
| — | |
| (64,814) |
Balance at June 30, 2018 |
| 65,360,041 | | $ | 654 |
| $ | 2,192,612 | | $ | (1,201) | | $ | (89,898) | | $ | 39,102 | | $ | 2,141,269 |
Stock-based compensation and related share issuances |
| 80,451 | |
| 1 |
|
| 5,021 | |
| — | |
| — | |
| — | |
| 5,022 |
Distributions from (to) non-controlling interests | | — | |
| — |
|
| 4,140 | |
| — | |
| — | |
| (584) | |
| 3,556 |
Net income (loss) |
| — | |
| — |
|
| — | |
| — | |
| 93,825 | |
| (4,746) | |
| 89,079 |
Other comprehensive income (loss) |
| — | |
| — |
|
| — | |
| 1,201 | |
| (1,201) | |
| — | |
| — |
Dividends declared |
| — | |
| — |
|
| — | |
| — | |
| (68,473) | |
| — | |
| (68,473) |
Balance at June 30, 2019 |
| 65,440,492 | | $ | 655 |
| $ | 2,201,773 | | $ | — | | $ | (65,747) | | $ | 33,772 | | $ | 2,170,453 |
Stock-based compensation and related share issuances |
| 90,796 | |
| — |
|
| 4,936 | |
| — | |
| — | |
| — | |
| 4,936 |
Distributions from (to) non-controlling interests | | — | |
| — |
|
| 3,720 | |
| — | |
| — | |
| (777) | |
| 2,943 |
Net income (loss) |
| — | |
| — |
|
| — | |
| — | |
| 199,343 | |
| (3,093) | |
| 196,250 |
Dividends declared |
| — | |
| — |
|
| — | |
| — | |
| (72,463) | |
| — | |
| (72,463) |
Balance at June 30, 2020 |
| 65,531,288 | | $ | 655 |
| $ | 2,210,429 | | $ | — | | $ | 61,133 | | $ | 29,902 | | $ | 2,302,119 |
The accompanying notes are an integral part of these consolidated financial statements.
51
45
ROYAL GOLD, INC.
Consolidated Statements of Cash Flows
For the Years Ended June 30,
(In thousands)
| | | | | | | | | |
| | Year Ended | |||||||
| | June 30, | | June 30, | | June 30, | |||
|
| 2020 |
| 2019 |
| 2018 | |||
Cash flows from operating activities: | | | | | | | | | |
Net income (loss) | | $ | 196,250 | | $ | 89,079 | | $ | (119,351) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | | |
| | | | | | | | | |
Depreciation, depletion and amortization | | | 175,434 | | | 163,056 | | | 163,696 |
Amortization of debt discount and issuance costs | | | 1,136 | | | 15,288 | | | 15,046 |
Non-cash employee stock compensation expense | | | 9,116 | | | 6,617 | | | 8,279 |
Fair value changes in equity securities | | | (1,418) | | | 6,800 | | | — |
Deferred tax benefit | | | (32,399) | | | (1,745) | | | (32,843) |
Impairment of royalty interests | | | 1,341 | | | — | | | 239,364 |
Other | | | (148) | | | (2) | | | (197) |
Changes in assets and liabilities: | | | | | | | | | |
Royalty receivables | | | (6,957) | | | 5,623 | | | 530 |
Stream inventory | | | (291) | | | (2,069) | | | (1,428) |
Income tax receivable | | | 268 | | | (2,663) | | | 22,130 |
Prepaid expenses and other assets | | | (7,828) | | | 2,793 | | | 2,813 |
Accounts payable | | | (275) | | | (6,426) | | | 5,173 |
Income tax payable | | | 6,349 | | | (11,281) | | | 12,601 |
Uncertain tax positions | | | (11,146) | | | 3,180 | | | 7,767 |
Other liabilities | | | 11,320 | | | (15,084) | | | 5,244 |
Net cash provided by operating activities | | $ | 340,752 | | $ | 253,166 | | $ | 328,824 |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Acquisition of stream and royalty interests | | | (155,985) | | | (1,055) | | | (11,812) |
Repayment of Golden Star term loan | | | — | | | — | | | 20,000 |
Purchase of equity securities | | | (461) | | | (3,573) | | | (17,869) |
Other | | | 3,587 | | | (967) | | | (909) |
Net cash used in investing activities | | $ | (152,859) | | $ | (5,595) | | $ | (10,590) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | |
Repayment of debt | | | (115,000) | | | (370,000) | | | (250,000) |
Borrowings from revolving credit facility | | | 200,000 | | | 220,000 | | | — |
Net payments from issuance of common stock | | | (4,180) | | | (1,595) | | | (4,042) |
Common stock dividends | | | (71,471) | | | (67,477) | | | (64,118) |
Contributions from non-controlling interest | | | 3,720 | | | 4,140 | | | — |
Other | | | (1,309) | | | (1,914) | | | 2,829 |
Net cash provided by (used in) financing activities | | $ | 11,760 | | $ | (216,846) | | $ | (315,331) |
Net increase (decrease) in cash and equivalents | | | 199,653 | | | 30,725 | | | 2,903 |
Cash and equivalents at beginning of period | | | 119,475 | | | 88,750 | | | 85,847 |
Cash and equivalents at end of period | | $ | 319,128 | | $ | 119,475 | | $ | 88,750 |
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2017 |
| 2016 | |||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net (loss) income |
| $ | (119,351) |
| $ | 92,425 |
| $ | (82,438) |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
| 163,696 |
|
| 159,636 |
|
| 141,108 |
Amortization of debt discount and issuance costs |
|
| 15,046 |
|
| 13,825 |
|
| 12,985 |
Non-cash employee stock compensation expense |
|
| 8,279 |
|
| 9,983 |
|
| 10,039 |
Impairment of stream and royalty interests |
|
| 239,364 |
|
| — |
|
| 98,588 |
Gain on available-for-sale securities |
|
| — |
|
| — |
|
| (2,340) |
Deferred tax benefit |
|
| (32,843) |
|
| 1,556 |
|
| (4,983) |
Other |
|
| (197) |
|
| (4,874) |
|
| (390) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Royalty receivables |
|
| 530 |
|
| (6,883) |
|
| 19,508 |
Stream inventory |
|
| (1,428) |
|
| 1,606 |
|
| (7,203) |
Income tax receivable |
|
| 22,130 |
|
| (13,056) |
|
| (14,637) |
Prepaid expenses and other assets |
|
| 2,813 |
|
| (1,691) |
|
| (153) |
Accounts payable |
|
| 5,173 |
|
| (206) |
|
| (849) |
Income tax payable |
|
| 12,601 |
|
| 2,475 |
|
| 460 |
Withholding taxes payable |
|
| (171) |
|
| 1,411 |
|
| (2,486) |
Uncertain tax positions |
|
| 7,767 |
|
| 8,631 |
|
| 1,867 |
Other liabilities |
|
| 5,415 |
|
| 2,015 |
|
| 235 |
Net cash provided by operating activities |
| $ | 328,824 |
| $ | 266,853 |
| $ | 169,311 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Acquisition of stream and royalty interests |
|
| (11,812) |
|
| (203,721) |
|
| (1,346,109) |
Repayment of Golden Star term loan |
|
| 20,000 |
|
| — |
|
| — |
Purchase of available-for-sale securities |
|
| (17,869) |
|
| — |
|
| — |
Andacollo royalty termination |
|
| — |
|
| — |
|
| 345,000 |
Golden Star term loan |
|
| — |
|
| — |
|
| (20,000) |
Sale of available-for-sale securities |
|
| — |
|
| — |
|
| 11,905 |
Other |
|
| (909) |
|
| 3,605 |
|
| (309) |
Net cash used in investing activities |
| $ | (10,590) |
| $ | (200,116) |
| $ | (1,009,513) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Repayment of revolving credit facility |
|
| (250,000) |
|
| (95,000) |
|
| (75,000) |
Net payments from issuance of common stock |
|
| (4,042) |
|
| (2,426) |
|
| (353) |
Common stock dividends |
|
| (64,118) |
|
| (61,396) |
|
| (58,720) |
Debt issuance costs |
|
| (180) |
|
| (3,340) |
|
| (1,111) |
Borrowings from revolving credit facility |
|
| — |
|
| 70,000 |
|
| 350,000 |
Purchase of additional royalty interest from non-controlling interest |
|
| — |
|
| (2,518) |
|
| — |
Other |
|
| 3,009 |
|
| (2,843) |
|
| (830) |
Net cash (used in) provided by financing activities |
| $ | (315,331) |
| $ | (97,523) |
| $ | 213,986 |
Net increase (decrease) in cash and equivalents |
|
| 2,903 |
|
| (30,786) |
|
| (626,216) |
Cash and equivalents at beginning of period |
|
| 85,847 |
|
| 116,633 |
|
| 742,849 |
Cash and equivalents at end of period |
| $ | 88,750 |
| $ | 85,847 |
| $ | 116,633 |
See Note 11 for supplemental cash flow information.
The accompanying notes are an integral part of these consolidated financial statements.
52
46
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiring and managing precious metals streams, royalties and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one1 or more metals produced from a mine at a price determined for the life of the transaction by the purchase agreement. Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUEDADOPTED AND RECENTLY ADOPTEDISSUED ACCOUNTING PRONOUNCEMENTS
Summary of Significant Accounting Policies
Use of Estimates
The preparation of our financial statements in conformity with U.S. generally accepted accounting principles generally accepted in the United States of America(“U.S. GAAP”) requires the Companyus to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates.
Our most critical accounting estimates relate to our assumptions regarding future gold, silver, copper, and other metal prices and the estimates of reserves, production and recoveries of third‑party mine operators. We rely on reserve estimates reported by the operators on theof properties inon which we havehold stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long‑livedlong-lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts could differ significantlyare adjusted and are recorded in the period that the actual amounts are known.
Basis of Consolidation
The consolidated financial statements include the accounts of Royal Gold, Inc., its wholly‑wholly owned subsidiaries and an entity over which control is achieved through means other than voting rights. All intercompany accounts, transactions, income and expenses, and profits or losses have been eliminated on consolidation. The Company follows the Accounting Standards Codification (“ASC”) guidance for identification and reporting for entities over which control is achieved through means other than voting rights. The guidance defines such entities as Variable Interest Entities (“VIEs”).
Peak Gold JV
Royal Gold, through its wholly‑wholly owned subsidiary, Royal Alaska, LLC (“Royal Alaska”), and Contango ORE, Inc., through its wholly‑wholly owned subsidiary CORE Alaska, LLC, (together, “Contango”), entered into a limited liability company agreement for the Peak Gold JV, a joint venture for exploration and advancement of the Peak Gold Project located near Tok, Alaska. The Company hasWe have identified the Peak Gold JV as a VIE,Variable Interest Entity, with Royal Alaska as the primary beneficiary, due to the legal structure and certain related factors of the limited liability company agreement for the Peak Gold JV. The CompanyWe determined that the Peak Gold JV should be fully consolidated at fair value initially. The fair value of the Company’s non‑controllingour non-controlling interest is $45.7 million and is based on the underlying value of the mineral property assigned
53
to the Peak Gold JV, which is recorded as an exploration stage property within Stream and royalty interests, net on our consolidated balance sheetssheets.
As of June 30, 2020, and 2019, Royal Alaska has the right to obtain up toheld a 40% of the membership interest in the Peak Gold JV by making contributions of up to $30.0 million in cash to the Peak Gold JV by October 31, 2018. As of June 30, 2018 and 2017,JV. Royal Alaska has contributed $30.0 million and $18.0 million, respectively, and obtained a 40% and 29.5%, respectively, membership interest in the Peak Gold JV.
Royal Alaska will actacts as the manager of the Peak Gold JV and will be responsible for managing, directing and controlling the overall operations
47
unless Royal Alaska is unanimously removed or resigns that position in the manner provided in the Peak Gold JV limited liability company agreement.
Cash and Equivalents
Cash and equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Cash and equivalents were primarily held in cash deposit accounts as of June 30, 20182020 and 2017.2019.
Stream and Royalty Interests in Mineral Properties and Related Depletion
Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset under the ASC guidance.U.S. GAAP.
Acquisition costs of productionProduction stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as stream sales occur under stream interests or royalty payments are recognized), which are estimated using proven and probable reserves as provided by the operator. Acquisition costs of stream and royalty interests on developmentDevelopment stage mineral properties, which are not yet in production, are not depleted until the property begins production. Acquisition costs of stream or royalty interests on explorationExploration stage mineral properties, where there are no proven and probable reserves, are not depleted. WhenAt such time as the associated exploration stage mineral interests are converted to proven and probable reserves, the cost basismineral property is depleted over the remainingits life, of the mineral property, using proven and probable reserves. The carrying values of exploration stage mineral interests are evaluated for impairment when information becomes available indicating that the production will not occur in the future. Exploration costs are expensed when incurred.
Available‑for‑sale Securities
Investments in securities that management does not have the intent to sell in the near term and that have readily determinable fair values are classified as available‑for‑sale securities. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive (loss) income as a separate component of stockholders’ equity, except that declines in market value judged to be other than temporary are recognized in determining net income. When investments are sold, the realized gains and losses on these investments, determined using the specific identification method, are included in determining net income.
The Company’s policy for determining whether declines in fair value of available‑for‑sale securities are other than temporary includes a quarterly analysis of the investments and a review by management of all investments for which the cost exceeds the fair value. Any temporary declines in fair value are recorded as a charge to other comprehensive (loss) income. This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and management’s ability and intent to hold the securities until fair value recovers. If such impairment is determined by the Company to be other‑than‑temporary, the investment’s cost basis is written down to fair value and recorded in net income during the period the Company determines such impairment to be other‑than‑temporary. The new cost basis is not changed for subsequent recoveries in fair value. The carrying value of the Company’s available-for-sale securities as of June 30, 2018
54
and 2017 was $19.1 million and $3.7 million respectively, and is included in Other assets on our consolidated balance sheets. The Company realized a gain of approximately $2.3 million on its available-for-sale securities during the fiscal year ended June 30, 2016.
As discussed further below under Recently Issued and Recently Adopted Accounting Standards, new Accounting Standards Update (“ASU”) guidance effective for the Company’s fiscal year beginning July 1, 2018 will change how the Company recognizes changes in fair value for its securities classified as available-for-sale securities under current guidance.
Asset Impairment
We evaluate long‑livedlong-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts of an asset or group of assets may not be recoverable. TheWhen impairment indicators are identified, the recoverability of the carrying value of stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest using estimates of proven and probable reserves and other relevant information received from the operators. We evaluate the recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in the price of gold, silver, copper and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur or may be reduced in the future, thus potentially affecting the future recoverability of our stream or royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows.
Estimates of gold, silver, copper, and other metal prices, and operators’ estimates of proven and probable reserves or mineralized material related to our stream or royalty properties and operators’ estimates of operating and capital costs are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties. It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests. Refer to Note 4 for discussion and the results of our impairment assessments for the fiscal years ended June 30, 2018, 20172020, 2019 and 2016.2018.
Revenue Recognition
RevenueUnder U.S. GAAP, a performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized pursuantas revenue when, or as, a performance obligation is satisfied. In accordance with this guidance, revenue attributable to guidanceour stream interests and royalty interests is generally recognized at the point in ASC 605 and based upon amounts contractually due pursuanttime that control of the related metal production transfers to our customers. The amount of revenue we recognize further reflects
48
the underlying streamingconsideration to which we are entitled under the respective stream or royalty agreement. Specifically,A more detailed summary of our revenue recognition policies for our stream and royalty interests is recognizeddiscussed in accordance with the terms of the underlying stream or royalty agreements subject to (i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred; (iii) the stream or royalty being fixed or determinable; and (iv) the collectability being reasonably assured. For our streaming agreements, we recognize revenue when the metal is sold.Note 7.
Refer below under Recently Issued and Recently Adopted Accounting Standards for discussion on recently issued ASU guidance for the recognition of revenue from contracts with customers effective for the Company’s fiscal year beginning July 1, 2018.
Metal Sales
Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between 10 days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policyactivity in effect at the time) commencing shortly after receipt and purchase of the metal. Revenue from gold, silver and copper sales is recognized on the date of the settlement, which is also the date that title to the metal passes to the purchaser.
55
Cost of Sales
Cost of sales, which excludes depreciation, depletion and amortization, is specific to our stream agreements and is the result of our purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.
Production taxesTaxes
Certain royalty payments are subject to production taxes (or mining proceeds taxes), which are recognized at the time of revenue recognition. Production taxes are not income taxes and are included within the costs and expenses section in the Company’sour consolidated statements of operations and comprehensive income (loss) income..
Exploration Costs
Exploration costs are specific to the Peak Gold JV for the exploration and advancement of the Peak Gold Project, as discussed further above under Basis of Consolidation. Costs associated with the Peak Gold JV for the exploration and advancement of the Peak Gold Project are expensed when incurred.
Stock‑BasedStock-Based Compensation
The Company accounts for stock‑based compensation in accordance with the guidance of ASC 718. The Company recognizesWe recognize all share‑basedshare-based payments to employees, including grants of employee stock options, stock‑settledstock-settled stock appreciation rights (“SSARs”), restricted stock and performance shares, in itsour financial statements based upon their fair values.
Reportable Segments and Geographical Information
The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long‑lived assets (stream and royalty interests, net) as of June 30, 2018 and 2017 are geographically distributed as shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of June 30, 2018 |
| As of June 30, 2017 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total stream |
|
|
|
|
|
|
|
|
|
| Total stream | ||
|
| Stream |
| Royalty |
|
|
|
| and royalty |
| Stream |
| Royalty |
|
|
|
| and royalty | ||||||
|
| interest |
| interest |
| Impairments |
| interests, net |
| interest |
| interest |
| Impairments |
| interests, net | ||||||||
Canada |
| $ | 809,500 |
| $ | 214,562 |
| $ | (284) |
| $ | 1,023,778 |
| $ | 852,035 |
| $ | 221,618 |
| $ | — |
| $ | 1,073,653 |
Dominican Republic |
|
| 495,460 |
|
| — |
|
| — |
|
| 495,460 |
|
| 543,256 |
|
| — |
|
| — |
|
| 543,256 |
Chile |
|
| 328,331 |
|
| 453,306 |
|
| (239,080) |
|
| 542,557 |
|
| 348,778 |
|
| 453,369 |
|
| — |
|
| 802,147 |
Africa |
|
| 104,874 |
|
| 502 |
|
| — |
|
| 105,376 |
|
| 123,760 |
|
| 572 |
|
| — |
|
| 124,332 |
Mexico |
|
| — |
|
| 93,277 |
|
| — |
|
| 93,277 |
|
| — |
|
| 105,889 |
|
| — |
|
| 105,889 |
United States |
|
| — |
|
| 165,543 |
|
| — |
|
| 165,543 |
|
| — |
|
| 168,378 |
|
| — |
|
| 168,378 |
Australia |
|
| — |
|
| 34,254 |
|
| — |
|
| 34,254 |
|
| — |
|
| 37,409 |
|
| — |
|
| 37,409 |
Other |
|
| 12,039 |
|
| 28,833 |
|
| — |
|
| 40,872 |
|
| 12,030 |
|
| 25,162 |
|
| — |
|
| 37,192 |
Total |
| $ | 1,750,204 |
| $ | 990,277 |
| $ | (239,364) |
| $ | 2,501,117 |
| $ | 1,879,859 |
| $ | 1,012,397 |
| $ | — |
| $ | 2,892,256 |
56
The Company’s revenue, cost of sales and net revenue by reportable segment for our fiscal years ended June 30, 2018, 2017 and 2016 are geographically distributed as show in the following tables:
|
|
|
|
|
|
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|
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|
|
|
|
| Year Ended June 30, 2018 |
| Year Ended June 30, 2017 | ||||||||||||||
|
| Revenue |
| Cost of sales |
| Net revenue |
| Revenue |
| Cost of sales |
| Net revenue | ||||||
Streams: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
| $ | 142,244 |
| $ | 40,766 |
| $ | 101,478 |
| $ | 136,736 |
| $ | 45,954 |
| $ | 90,782 |
Dominican Republic |
|
| 95,055 |
|
| 28,496 |
|
| 66,559 |
|
| 91,589 |
|
| 27,191 |
|
| 64,398 |
Chile |
|
| 57,413 |
|
| 8,614 |
|
| 48,799 |
|
| 60,251 |
|
| 9,037 |
|
| 51,214 |
Africa |
|
| 29,804 |
|
| 5,963 |
|
| 23,841 |
|
| 25,435 |
|
| 5,083 |
|
| 20,352 |
Total streams |
| $ | 324,516 |
| $ | 83,839 |
| $ | 240,677 |
| $ | 314,011 |
| $ | 87,265 |
| $ | 226,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico |
| $ | 42,959 |
| $ | — |
| $ | 42,959 |
| $ | 41,945 |
| $ | — |
| $ | 41,945 |
United States |
|
| 39,496 |
|
| — |
|
| 39,496 |
|
| 35,282 |
|
| — |
|
| 35,282 |
Canada |
|
| 24,254 |
|
| — |
|
| 24,254 |
|
| 23,208 |
|
| — |
|
| 23,208 |
Australia |
|
| 13,710 |
|
| — |
|
| 13,710 |
|
| 12,943 |
|
| — |
|
| 12,943 |
Africa |
|
| 2,098 |
|
| — |
|
| 2,098 |
|
| 3,131 |
|
| — |
|
| 3,131 |
Chile |
|
| 473 |
|
| — |
|
| 473 |
|
| 1,648 |
|
| — |
|
| 1,648 |
Other |
|
| 11,536 |
|
| — |
|
| 11,536 |
|
| 8,646 |
|
| — |
|
| 8,646 |
Total royalties |
| $ | 134,526 |
| $ | — |
| $ | 134,526 |
| $ | 126,803 |
| $ | — |
| $ | 126,803 |
Total streams and royalties |
| $ | 459,042 |
| $ | 83,839 |
| $ | 375,203 |
| $ | 440,814 |
| $ | 87,265 |
| $ | 353,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended June 30, 2017 |
| Fiscal Year Ended June 30, 2016 | ||||||||||||||
|
| Revenue |
| Cost of sales |
| Net revenue |
| Revenue |
| Cost of sales |
| Net revenue | ||||||
Streams: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
| $ | 136,736 |
| $ | 45,954 |
| $ | 90,782 |
| $ | 125,755 |
| $ | 47,417 |
| $ | 78,338 |
Dominican Republic |
|
| 91,589 |
|
| 27,191 |
|
| 64,398 |
|
| 39,684 |
|
| 11,625 |
|
| 28,059 |
Chile |
|
| 60,251 |
|
| 9,037 |
|
| 51,214 |
|
| 49,243 |
|
| 7,280 |
|
| 41,963 |
Africa |
|
| 25,435 |
|
| 5,083 |
|
| 20,352 |
|
| 23,346 |
|
| 4,657 |
|
| 18,689 |
Total streams |
| $ | 314,011 |
| $ | 87,265 |
| $ | 226,746 |
| $ | 238,028 |
| $ | 70,979 |
| $ | 167,049 |
Royalties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico |
| $ | 41,945 |
| $ | — |
| $ | 41,945 |
| $ | 35,267 |
| $ | — |
| $ | 35,267 |
United States |
|
| 35,282 |
|
| — |
|
| 35,282 |
|
| 35,483 |
|
| — |
|
| 35,483 |
Canada |
|
| 23,208 |
|
| — |
|
| 23,208 |
|
| 30,676 |
|
| — |
|
| 30,676 |
Australia |
|
| 12,943 |
|
| — |
|
| 12,943 |
|
| 10,462 |
|
| — |
|
| 10,462 |
Africa |
|
| 3,131 |
|
| — |
|
| 3,131 |
|
| 1,868 |
|
| — |
|
| 1,868 |
Chile |
|
| 1,648 |
|
| — |
|
| 1,648 |
|
| 84 |
|
| — |
|
| 84 |
Other |
|
| 8,646 |
|
| — |
|
| 8,646 |
|
| 7,922 |
|
| — |
|
| 7,922 |
Total royalties |
| $ | 126,803 |
| $ | — |
| $ | 126,803 |
| $ | 121,762 |
| $ | — |
| $ | 121,762 |
Total streams and royalties |
| $ | 440,814 |
| $ | 87,265 |
| $ | 353,549 |
| $ | 359,790 |
| $ | 70,979 |
| $ | 288,811 |
Income Taxes
The Company accounts for income taxes in accordance with the guidance of ASC 740. The Company’sOur annual tax rate is based on income, statutory tax rates in effect, and tax planning opportunities available to us in the various jurisdictions in which the Company operates.we operate. Significant judgment is required in determining the annual tax expense, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate or unpredicted results from the final determination of each year’s liability by taxing authorities.
57
The Company’sOur deferred income taxes reflect the impact of temporary differences between the reported amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. In evaluating the realizability of the deferred tax assets, management considers both positive and negative evidence that may exist, such as earnings history, reversal of taxable temporary differences, forecasted operating earnings and available tax planning
49
strategies in each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning strategies.
The Company’sOur operations may involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizesWe recognize potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on itsour estimate of whether, and the extent to which, additional taxes will be due. The Company adjustsWe adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit; however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period which they are determined. The Company recognizesWe recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Comprehensive (Loss) Income
In addition to net income, comprehensive (loss) income includes changes in equity during a period associated with cumulative unrealized changes in the fair value of marketable securities held for sale, net of tax effects.
Earnings per Share
Basic earnings (loss) earnings per share is computed by dividing net income (loss) income available to Royal Gold common stockholders by the weighted average number of outstanding common shares for the period, considering the effect of participating securities. Diluted earnings (loss) earnings per share reflect the potential dilution that could occur if securities or other contracts that may require issuance of common shares were converted. Diluted earnings (loss) earnings per share is computed by dividing net income (loss) income available to common stockholders by the diluted weighted average number of common shares outstanding during each fiscal year.
Reclassifications
Certain income tax amounts in the prior period consolidated balance sheet and consolidated statement of cash flows have been reclassified to conform with the presentation in the current period consolidated balance sheet and consolidated statement of cash flows. The reclassifications had no effect on reported net (loss) income.
Recently IssuedAdopted and Recently AdoptedIssued Accounting Standards
Recently IssuedAdopted
Leases
In January 2017,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which requires recognition of right-of-use assets and lease payment liabilities on the balance sheet by lessees for all leases with terms greater than twelve months. Classification of leases as either a finance or operating lease will determine the recognition, measurement and presentation of expenses. ASU guidance clarifying2016-02 also requires certain quantitative and qualitative disclosures about material leasing arrangements.
Subsequently, in July 2018, the definition of a business and providingFASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”). ASU 2018-11 provides an additional guidancemodified retrospective transition method for determining whether transactions should be accountedadopting ASU 2016-02, which eliminates the need for as acquisitions of assets or businesses. Theadjusting prior period comparable financial statements prepared under legacy lease accounting guidance.
ASU 2016-02, together with ASU 2018-11, was effective July 1, 2019. We adopted the new guidance is effective forusing the Company’smodified retrospective approach set forth in ASU 2018-11, with the date of initial application on July 1, 2019. Comparative reporting periods were not adjusted upon adoption.
As permitted under the transition guidance, we elected to use the following practical expedients at transition:
● | To not reassess whether any expired or existing contracts were or contained leases; and |
● | To not reassess the lease classification for any expired or existing leases. |
50
In addition, we elected to use the following practical expedients at and subsequent to adoption in accordance with ASU 2016-02:
● | Not to separate non-lease from lease components, and instead account for each lease component and any associated non-lease components as a single lease component; and |
● | Not to recognize right-of-use assets and associated liabilities for short-term contracts with lease terms of 12 months or less. |
Our significant lease arrangements relate to our corporate office spaces and office equipment. Through the implementation process, we evaluated our lease arrangements, which included an analysis of contracts, and updating the internal controls and processes that are necessary to track and calculate the additional accounting and disclosure requirements as required upon adoption of ASU 2016-02.
We lease office space and office equipment under operating leases expiring at various dates through the fiscal year beginning July 1, 2018ending June 30, 2030. The following amounts were recorded in the consolidated balance sheets at June 30, 2020 (amounts in thousands):
| | | | | |
| | Classification | | June 30, 2020 | |
Operating Leases | | | | | |
Right-of-use assets - current |
| Prepaid expenses and other |
| $ | 823 |
Right-of-use assets - non-current | | Other assets | | | 7,087 |
Total right-of-use assets | | | | $ | 7,910 |
| | | | | |
Lease liabilities - current | | Other current liabilities | | $ | 901 |
Lease liabilities - non-current | | Other long-term liabilities | | | 8,309 |
Total operating lease liabilities | | | | $ | 9,210 |
Maturities of operating lease liabilities at June 30, 2020 are as follows (amounts in thousands):
| | | |
Fiscal Years: | | Operating Leases | |
2021 | | $ | 1,121 |
2022 | | | 1,119 |
2023 | | | 1,106 |
2024 | | | 1,116 |
2025 | | | 1,091 |
Thereafter | | | 4,799 |
Total lease payments | | $ | 10,352 |
Less imputed interest | | | (1,142) |
Total | | $ | 9,210 |
Other information pertaining to leases consist of the following:
| | | |
| | June 30, 2020 | |
Operating Lease Term and Discount Rate | | | |
Weighted average remaining lease term in years | | | 9 |
Weighted average discount rate | | | 2.5% |
We did not have any finance leases as of June 30, 2020. The adoption of ASU 2016-02 did not impact accumulated earnings (losses), our consolidated statements of operations and early adoption is permitted. The new guidance is required to be applied on a prospective basis. The Company is evaluating the new guidance.comprehensive income (loss), or our consolidated statements of cash flows.
51
Recently Issued
In JanuaryJune 2016, the FASB issued ASU guidance on the recognition and measurementNo. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of financial instruments. The amended guidance requires, among other things that equity securities classified as available-for-sale be measured at fair valueCredit Losses of Financial Instruments, which, together with subsequent amendments, changes in fair value recognized in net income rather than other comprehensive (loss) income as required under
58
previous guidance. The new guidancehow an entity will record credit losses from an “incurred loss” approach to an “expected loss” approach. This update is effective for the Company’s fiscal yearannual periods beginning after December 15, 2019 (i.e. July 1, 2018. The Company will record a cumulative-effect adjustment in Accumulated (losses) earnings as of adoption.
In February 2016, the FASB issued ASU guidance which changes the accounting2020 for leases. The new guidance is effective for the Company’s fiscal year beginning July 1, 2019,Royal Gold) and interim financial statement periods within those years, with early adoption is permitted. We are currently evaluatingundergoing our assessment of the new guidance and the impact if any, this guidanceit will have on our consolidated financial statements and footnoterelated disclosures.
In May 2014, the FASB issued ASU guidance for the recognition of revenue from contracts with customers. This ASU superseded virtually all of the existing revenue recognition guidance under U.S. GAAP. The core principle of the five step model is that an entity will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Entities can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. The standard is effective for the Company’s fiscal year beginning July 1, 2018.
We plan to implement the new ASU revenue recognition guidance Based on procedures performed as of July 1, 2018, using the modified retrospective method with the cumulative effect, if any, of initial adoption to be recognized in Accumulated (losses) earnings at the date of initial application. Through the implementation process, we have reviewed a sample of contracts that is representative of the composition of our material revenue streams and royalties. Based on the evaluation performed to-date, we do not anticipate thatJune 30, 2020, the adoption of the new ASU revenue recognition guidance will have a material impact, if any, to our consolidated financial statements. We continue to evaluate the new disclosure requirements, and we expect that our disclosures surrounding revenue recognition will be more robust upon adoption of the new revenue recognition guidance.
Recently Adopted
In March 2016, the FASB issued ASU guidance related to stock-based compensation. The new guidance simplifies the accounting for stock-based compensation transactions, including income tax consequences, statement of cash flows presentation, estimating forfeitures when calculating compensation expense, and classification of awards as either equity or liabilities.
The new standard requires all excess tax benefits and tax deficiencies to be recognized as income tax benefit (expense) in the income statement. The new guidance also requires presentation of excess tax benefits as an operating activity on the statement of cash flows rather than a financing activity and requires presentation of cash paid to a tax authority when shares are withheld to satisfy the employer’s statutory income tax withholding obligation as a financing activity. The new guidance also provides for an election to account for forfeitures of stock-based compensation.
The Company adopted the guidance effective July 1, 2017. With respect2020 is not expected to the forfeiture election, the Company will continue its current practice of estimating forfeitures when calculating compensation expense. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related disclosures. statements.
3. ACQUISITIONS
Acquisition of Additional Royalty Interest on Mara RosaAlturas royalty acquisition
On JuneJanuary 29, 2018, Royal Gold, through its wholly-owned subsidiary RG Royalties, LLC,2020, we entered into an agreement to purchasewith various private individuals for the acquisition of a 1.75% Net Smelter Returnnet smelter return (“NSR”) royalty of up to 1.06% (gold) and up to 1.59% (copper) on Amarillo Gold’s Mara Rosa goldmining concessions included as part of the Alturas project, in Goias State, Brazil for $10.8 million. The acquisitionwhich is in addition tolocated within the 1.00% NRS royalty on the Mara Rosa project previously acquiredCoquimbo Region of Chile and held by International Royalty Corporation, another wholly-ownedCompañia Minera Salitrales Limitada, a subsidiary of Royal Gold.Barrick Gold Corporation (“Barrick”). Total consideration for the royalty is up to $41 million, of which $11 million was paid on January 29, 2020. The new Mara Rosa royalty agreement includes a right of first refusal on future financing opportunities based on production from the project.
59
The acquisition$11 million paid as part of the additional royalty interest on Mara Rosa has been accounted for as an asset acquisition. The total purchase price of $10.8 million,funding schedule, plus direct transactionacquisition costs, hashave been recorded as an exploration stage royalty interest within Stream and royalty interests, neton our consolidated balance sheets.
Acquisition of Contango ORE, Inc. Common Stock
On June 28, 2018, Royal Gold acquired 682,556 shares of common stock of Contango ORE, Inc. (“CORE”) for consideration of $26 per share pursuant to a Stock Purchase Agreement (“SPA”) entered into on April 5, 2018 between Royal Gold and certain individual stockholders of CORE. Royal Gold expects to acquire a second and final tranche of 127,188 shares of CORE common stock pursuant to the SPA during our first or second quarter of fiscal year 2019.
The Company has accounted for the CORE common stock as an investment in available-for-sale securities (Note 1), which are included in Other Assets on our consolidated balance sheets. The Company recorded an unrealized lossA future payment of up to $20 million is conditioned based on a project construction decision by Barrick and the size of the minable mineralized material on the CORE sharesdate of approximately $1.5the construction decision. A further future payment of up to $10 million during fiscal year 2018.
Acquisition of Additional Royalty Interests at Cortez
On September 19, 2016, Royal Gold, through its wholly-owned subsidiary, Denver Mining Finance Company, Inc., acquired a 3.75% Net Value Royalty (“NVR”) covering a significant area of Barrick Gold Corporation’s (“Barrick”) Cortez mine, including the Crossroads deposit, from a private party seller for total consideration of $70 million. Giving effect to this acquisition, Royal Gold’s interests at Cortez Crossroads comprise a 4.52% NVR and a 5% sliding-scale Gross Smelter Return (“GSR”) royalty at current gold prices. Royal Gold’s interests onwill be made upon first production from the Pipeline and South Pipeline deposits as well as portions of the Gap deposit are comprised of a 4.91% NVR and a 5.71% GSRmining concessions.
Castelo de Sonhos royalty at current gold prices.acquisition
The acquisition of the additional royalty interests at Cortez has been accounted for asIn August 2019, we entered into an asset acquisition. The portion of the acquisition, plus direct transaction costs, attributable to the Pipeline and South Pipeline deposits as well as portions of the Gap deposit ($10.2 million) has been recorded as a production stage royalty interest while the portion of the acquisition attributable to the Crossroads deposit ($59.8 million) has been recorded as a development stage royalty interest. Both are included within Stream and royalty interests, net, on our consolidated balance sheets.
Acquisition ofagreement with TriStar Gold and Silver Stream at Pueblo Viejo
On September 29, 2015, RGLD Gold AG (“RGLD Gold”), a wholly-owned subsidiary of the Company, closed its Precious Metals Purchase and Sale Agreement with BarrickInc. and its wholly‑owned subsidiary, BGC Holdings Ltd.subsidiaries (together “TriStar”) to acquire (i) up to a 1.5% NSR royalty on the Castelo de Sonhos gold project (“BGC”CDS”) for a percentage of the gold and silver production attributable to Barrick’s 60% interest in the Pueblo Viejo mine, located in Brazil, and (ii) warrants to purchase up to 19,640,000 common shares of TriStar. Total consideration is $7.5 million and is payable over 3 payments, of which $4.5 million was paid in August 2019, $1.5 million was paid in November 2019, and the Dominican Republic. Pursuant to the Precious Metals Purchase and Sale Agreement, RGLD Gold made a single advancefinal payment of $610$1.5 million to BGC as part of the closing. was paid on March 30, 2020.
The transaction was effective as of July 1, 2015 for the gold stream and January 1, 2016 for the silver stream.
BGC will deliver gold to RGLD Gold in amounts equal to 7.50% of Barrick’s interest in the gold produced at the Pueblo Viejo mine until 990,000 ounces of gold have been delivered, and 3.75% of Barrick’s interest in gold produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of gold delivered until 550,000 ounces of gold have been delivered, and 60% of the spot price per ounce delivered thereafter. RGLD Gold began receiving gold deliveries during the quarter ended December 31, 2015.
BGC will deliver silver to RGLD Gold in amounts equal to 75% of Barrick’s interest in the silver produced at the Pueblo Viejo mine, subject to a minimum silver recovery of 70%, until 50 million ounces of silver have been delivered, and 37.50% of Barrick’s interest in silver produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of silver delivered until 23.10 million ounces of silver have been delivered, and 60% of the spot price per ounce of silver delivered thereafter. RGLD Gold began receiving silver deliveries during the quarter ended March 31, 2016.
60
The Pueblo Viejo gold and silver streamCDS royalty acquisition has been accounted for as an asset acquisition. The advance payment$7.5 million paid as part of $610 million,the aggregate funding schedule, plus direct transactionacquisition costs, have been recorded as a productionan exploration stage streamroyalty interest within Stream and royalty interests, neton our consolidated balance sheets.
The acquisition costwarrants have been recorded within Other assets on our consolidated balance sheets and have a carrying value of approximately $4.0 million as of June 30, 2020. The warrants have been classified as a financial asset instrument and are recorded at fair value at each reporting date using the Black-Scholes model. Any change in fair value of the Pueblo Viejo gold and silver stream interestwarrants at subsequent reporting periods will be depleted usingrecorded within Fair value changes in equity securities on our consolidated statements of operations and comprehensive income. As of June 30, 2020, the unitsCompany holds 19,640,000 warrants at an exercise price of production method, which is estimated using aggregate proven and probable reserves, as provided by Barrick.C$0.25 per common share with a term of approximately five years.
Acquisition and Amendment of GoldSilver Stream on Wassa and PresteaKhoemacau Copper Project
On July 28, 2015,February 25, 2019, our wholly owned subsidiary, RGLD Gold closedAG (“RGLD Gold”), entered into a $130 life of mine purchase and sale agreement with Khoemacau Copper Mining (Pty.) Limited (“KCM”) for the purchase of silver produced from the Khoemacau Project (“Khoemacau” or the “Project”) located in Botswana and owned by KCM. Under the purchase and sale agreement, subject to the satisfaction of certain conditions, RGLD Gold will make advance payments totaling $212
52
million gold stream transaction with a wholly‑owned subsidiarytoward the purchase of Golden Star Resources Ltd. (together “Golden Star”80% of the silver produced from Khoemacau until certain delivery thresholds are met (the “Base Silver Stream”). On December 30, 2015, the parties executed an amendment providing forAt KCM’s option and subject to various conditions, RGLD Gold will make up to an additional $15$53 million investment (for a total investment of $145 million) by RGLD Gold. The Company has noin advance payments for up to the remaining upfront deposit payments associated with the Wassa and Prestea gold stream.
Under the terms20% of the silver produced from Khoemacau (the “Option Silver Stream”). The stream transaction, Golden Starrate will deliverdrop to 40% of silver produced from Khoemacau following delivery to RGLD Gold 9.25% of gold32 million silver ounces under the Base Silver Stream, or to 50% of the silver produced from Khoemacau following delivery of 40 million silver ounces to RGLD Gold should KCM exercise the Wassa and Prestea mines, until the earlier of (i) December 31, 2017 or (ii) the date at which the Wassa and Prestea underground projects achieve commercial production. Effective January 1, 2018, the stream percentage increased to 10.5% of gold produced from the Wassa and Prestea projects until an aggregate 240,000 ounces have been delivered. Once the applicable delivery threshold is met, the stream percentage will decrease to 5.5% for the remaining life of the mines.
entire Option Silver Stream. RGLD Gold will pay Golden Star a cash price equal to 20% of the spot silver price for each ounce delivered under the Base Silver Stream and Option Silver Stream; however, if KCM achieves mill expansion throughput levels above 13,000 tonnes per day (30% above current mill design capacity), RGLD Gold will pay a higher ongoing cash price under the Base Silver Stream and Option Silver Stream for silver ounces delivered in excess of gold delivered atspecific annual thresholds.
RGLD Gold made its first advance payment of $65.8 million on November 5, 2019, its second advance payment of $22.0 million on February 2, 2020, and its third advance payment of $47.9 million on April 3, 2020. On July 5, 2020, RGLD Gold made its fourth advance payment of $11.1 million, which brings the time of delivery untiltotal contribution under the applicable delivery threshold is met,Base Silver Stream to $146.8 million. Further payments are subject to certain conditions and 30% of the spot price for each ounce of gold delivered thereafter.are scheduled to be made on a quarterly basis using an agreed formula and certification process as project spending progresses.
Also on July 28, 2015 and separate
Separate from the stream transaction byBase Silver Stream and Option Silver Stream, and subject to various conditions, RGLD Gold will make up to $25 million available to KCM toward the Company also fundedend of development of Khoemacau under a $20 million, 4 – year term loan to Golden Star and received warrants to purchase 5 million shares of Golden Star common stock, with a grant date fair value of approximately $0.8 million. Interestsubordinated debt facility. Any amounts drawn by KCM under the term loan is due quarterlydebt facility will carry interest at a rate equal to 62.5% of the average daily gold price for the relevant quarter divided by 10,000, but not to exceed 11.5%. The warrantsLIBOR + 11% and have a term of four years and an exercise price of $0.27.
On June 29, 2018, a subsidiary of Golden Star repaid its $20 million term loan facility, plus accrued interest,seven years. RGLD Gold will have the right to Royal Gold. Prior to payoff, the term loan was recorded within Other assets on our consolidated balance sheets as of June 30, 2017. The warrants that were partforce repayment of the term loan weredebt facility upon certain events.
We have accounted for the Silver Stream and Option Stream (if exercised during the quarter ended September 30, 2017. The Company sold all of the common shares of Golden Star received upon exercise of the warrants in October 2017
The Wassa and Prestea gold stream acquisition has been accounted forby KCM) as an asset acquisition.acquisition, consistent with the treatment of our other acquired streams. The aggregate$135.7 million in advance payments of $145 million, plus direct acquisition costs, have been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. The acquisition cost offor the Wassa and Prestea gold stream interest will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Golden Star.
Acquisition of Gold andBase Silver Stream at Rainy River
On July 20, 2015, RGLD Gold entered into a $175 million Purchase and Sale Agreement with New Gold, Inc. (“New Gold”), for a percentage of the gold and silver production from the Rainy River Project located in Ontario, Canada (“Rainy River”). Pursuant to the Purchase and Sale Agreement, RGLD Gold made an advance payment to New Gold, consisting of $100 million on July 20, 2015, and made the final scheduled payment of $75 million in November 2016. The Company has no further upfront deposit payments associated with the Rainy River gold and silver stream.
Under the Purchase and Sale Agreement, New Gold will deliver to RGLD Gold 6.50% of the gold produced at Rainy River until 230,000 gold ounces have been delivered, and 3.25% thereafter. New Gold also will deliver to RGLD Gold 60% of the silver produced at Rainy River until 3.10 million silver ounces have been delivered, and 30% thereafter. RGLD Gold will pay New Gold 25% of the spot price per ounce of gold and silver at the time of delivery.
61
The Rainy River gold and silver stream acquisition has been accounted for as an asset acquisition. The aggregate advance payments of $175 million,during our fiscal year 2020, plus direct transaction costs, have been recorded as a development stage stream interest within Stream and royalty interests, neton our consolidated balance sheets as of June 30, 2017. New Gold announced commercial production at Rainy River in October 2017. The Company reclassified the Rainy River stream interest to production stage from development stage during the three months ended December 31, 2017.
Acquisition of Gold Stream and Termination of Royalty Interest at Carmen de Andacollo
On July 9, 2015, RGLD Gold entered into a Long Term Offtake Agreement (the “Andacollo Stream Agreement”) with Compañía Minera Teck Carmen de Andacollo (“CMCA”), a 90% owned subsidiary of Teck Resources Limited (“Teck”). Pursuant to the Andacollo Stream Agreement, CMCA will sell and deliver to RGLD Gold 100% of payable gold from the Carmen de Andacollo (“Andacollo”) copper-gold mine located in Chile until 900,000 ounces have been delivered, and 50% thereafter, subject to a fixed payable percentage of 89%. RGLD Gold2020. Further advance payments made a $525 million advance payment in cash to CMCA upon entry into the Andacollo Stream Agreement, and RGLD Gold will also pay CMCA 15% of the monthly average gold price for the month preceding the delivery date for all gold purchased under the AndacolloSilver Stream Agreement.
The transaction encompasses certain of CMCA’s presently owned mining concessions on the Andacollo mine, as well as any other mining concessions presently owned or acquiredOption Stream (if exercised by CMCA or any of its affiliates within an approximate 1.5 kilometer area of interest, and certain other mining concessions that CMCA or its affiliates may acquire. The Andacollo Stream Agreement was effective July 1, 2015, and applies to all final settlements of gold received on or after that date. Deliveries to RGLD Gold are made monthly, and RGLD Gold began receiving gold deliveries during the quarter ended September 30, 2015.
Also on July 9, 2015, Royal Gold Chile Limitada (“RG Chile”), a wholly owned subsidiary of the Company, entered into a Royalty Termination Agreement with CMCA. The Royalty Termination Agreement terminated an amended Royalty Agreement originally dated January 12, 2010, which provided RG Chile with a royalty equivalent to 75% of the gold produced from the sulfide portion of the Andacollo mine until 910,000 payable ounces have been produced, and 50% of the gold produced thereafter. CMCA paid total consideration of $345 million to RG Chile in connection with the Royalty Termination Agreement. The net carrying value of the Andacollo royalty on the date of termination was approximately $207.5 million. The royalty termination transaction was taxable in Chile and the United States.
In accordance with relevant guidance from the ASC, the Company determined it should account for the Andacollo Stream Agreement and the Royalty Termination Agreement as a single transaction because both transactions closed on the same date, both transactions were with the same counterparty, and the same mineral interest (gold) was part of both transactions. As the Company accounted for the Andacollo Stream Agreement and Royalty Termination Agreement as a single transaction, it was further determined, based on the relevant ASC guidance, that no gainKCM) will be recognized as part of the transactions.
The Company accounted for the acquisition of the gold stream interest at Andacollo as an asset acquisition. For US GAAP financial reporting purposes on the date of acquisition, the Company’s new consolidated carrying value in its stream interest at Andacollo was approximately $388.2 million, which included direct acquisition costs, and has been recorded as a productiondevelopment stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. The Andacollo gold stream interest will be depleted usingsheets during the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Teck.period the advance payment occurs.
62
53
4. STREAM AND ROYALTY INTERESTS, NET
The following summarizes the Company’sour stream and royalty interests as of June 30, 20182020 and 2017:2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2018 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Impairments |
| Net | ||||
Production stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Mount Milligan |
| $ | 790,635 |
| $ | (152,833) |
| $ | — |
| $ | 637,802 |
Pueblo Viejo |
|
| 610,404 |
|
| (114,944) |
|
| — |
|
| 495,460 |
Andacollo |
|
| 388,182 |
|
| (59,851) |
|
| — |
|
| 328,331 |
Wassa and Prestea |
|
| 146,475 |
|
| (41,601) |
|
| — |
|
| 104,874 |
Rainy River |
|
| 175,727 |
|
| (4,028) |
|
| — |
|
| 171,699 |
Total production stage stream interests |
|
| 2,111,423 |
|
| (373,257) |
|
| — |
|
| 1,738,166 |
Production stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Voisey's Bay |
|
| 205,724 |
|
| (86,933) |
|
| — |
|
| 118,791 |
Peñasquito |
|
| 99,172 |
|
| (38,426) |
|
| — |
|
| 60,746 |
Holt |
|
| 34,612 |
|
| (21,173) |
|
| — |
|
| 13,439 |
Cortez |
|
| 20,878 |
|
| (11,241) |
|
| — |
|
| 9,637 |
Other |
|
| 483,795 |
|
| (364,795) |
|
| — |
|
| 119,000 |
Total production stage royalty interests |
|
| 844,181 |
|
| (522,568) |
|
| — |
|
| 321,613 |
Total production stage stream and royalty interests |
|
| 2,955,604 |
|
| (895,825) |
|
| — |
|
| 2,059,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Development stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
| 12,038 |
|
| — |
|
| — |
|
| 12,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Development stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Cortez |
|
| 59,803 |
|
| — |
|
| — |
|
| 59,803 |
Other |
|
| 74,610 |
|
| — |
|
| (284) |
|
| 74,326 |
Total development stage royalty interests |
|
| 134,413 |
|
| — |
|
| (284) |
|
| 134,129 |
Total development stage stream and royalty interests |
|
| 146,451 |
|
| — |
|
| (284) |
|
| 146,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
| 416,770 |
|
| — |
|
| (239,080) |
|
| 177,690 |
Other |
|
| 117,481 |
|
| — |
|
| - |
|
| 117,481 |
Total exploration stage royalty interests |
|
| 534,251 |
|
| — |
|
| (239,080) |
|
| 295,171 |
Total stream and royalty interests, net |
| $ | 3,636,306 |
| $ | (895,825) |
| $ | (239,364) |
| $ | 2,501,117 |
| | | | | | | | | | | | |
As of June 30, 2020 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Impairments |
| Net | ||||
Production stage stream interests: | | | | | | | | | | | | |
Mount Milligan | | $ | 790,635 | | $ | (236,352) | | $ | — | | $ | 554,283 |
Pueblo Viejo | | | 610,404 | | | (203,935) | | | — | | | 406,469 |
Andacollo | | | 388,182 | | | (110,521) | | | — | | | 277,661 |
Rainy River | | | 175,727 | | | (27,278) | | | — | | | 148,449 |
Wassa | | | 146,475 | | | (67,619) | | | — | | | 78,856 |
Total production stage stream interests | | | 2,111,423 | | | (645,705) | | | — | | | 1,465,718 |
Production stage royalty interests: | | | | | | | | | | | | |
Voisey's Bay | | | 205,724 | | | (101,381) | | | — | | | 104,343 |
Peñasquito | | | 99,172 | | | (44,614) | | | — | | | 54,558 |
Holt | | | 34,612 | | | (23,851) | | | — | | | 10,761 |
Cortez | | | 80,681 | | | (15,065) | | | — | | | 65,616 |
Other | | | 487,225 | | | (403,080) | | | (1,341) | | | 82,804 |
Total production stage royalty interests | | | 907,414 | | | (587,991) | | | (1,341) | | | 318,082 |
Total production stage stream and royalty interests | | | 3,018,837 | | | (1,233,696) | | | (1,341) | | | 1,783,800 |
| | | | | | | | | | | | |
Development stage stream interests: | | | | | | | | | | | | |
Khoemacau | | | 136,608 | | | — | | | — | | | 136,608 |
Other | | | 12,037 | | | — | | | — | | | 12,037 |
Development stage royalty interests: | | | | | | | | | | | | |
Other | | | 70,952 | | | — | | | — | | | 70,952 |
Total development stage stream and royalty interests | | | 219,597 | | | — | | | — | | | 219,597 |
| | | | | | | | | | | | |
Exploration stage royalty interests: | | | | | | | | | | | | |
Pascua-Lama | | | 177,690 | | | — | | | — | | | 177,690 |
Other | | | 137,826 | | | — | | | — | | | 137,826 |
Total exploration stage royalty interests | | | 315,516 | | | — | | | — | | | 315,516 |
Total stream and royalty interests, net | | $ | 3,553,950 | | $ | (1,233,696) | | $ | (1,341) | | $ | 2,318,913 |
63
54
| | | | | | | | | |
As of June 30, 2019 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Net | |||
Production stage stream interests: | | | | | | | | | |
Mount Milligan | | $ | 790,635 | | $ | (184,091) | | $ | 606,544 |
Pueblo Viejo | | | 610,404 | | | (158,819) | | | 451,585 |
Andacollo | | | 388,182 | | | (86,675) | | | 301,507 |
Rainy River | | | 175,727 | | | (14,522) | | | 161,205 |
Wassa | | | 146,475 | | | (56,919) | | | 89,556 |
Total production stage stream interests | | | 2,111,423 | | | (501,026) | | | 1,610,397 |
Total production stage stream and royalty interests | | | | | | | | | |
Production stage royalty interests: | | | | | | | | | |
Voisey's Bay | | | 205,724 | | | (95,564) | | | 110,160 |
Peñasquito | | | 99,172 | | | (40,659) | | | 58,513 |
Holt | | | 34,612 | | | (22,570) | | | 12,042 |
Cortez | | | 20,878 | | | (12,362) | | | 8,516 |
Other | | | 487,224 | | | (386,501) | | | 100,723 |
Total production stage royalty interests | | | 847,610 | | | (557,656) | | | 289,954 |
Total production stage stream and royalty interests | | | 2,959,033 | | | (1,058,682) | | | 1,900,351 |
Development stage stream interests: | | | | | | | | | |
Other | | | 12,038 | | | — | | | 12,038 |
| | | | | | | | | |
Development stage royalty interests: | | | | | | | | | |
Cortez | | | 59,803 | | | — | | | 59,803 |
Other | | | 70,952 | | | — | | | 70,952 |
Total development stage royalty interests | | | 130,755 | | | — | | | 130,755 |
Total development stage stream and royalty interests | | | 142,793 | | | — | | | 142,793 |
| | | | | | | | | |
Exploration stage royalty interests: | | | | | | | | | |
Pascua-Lama | | | 177,690 | | | — | | | 177,690 |
Other | | | 118,482 | | | — | | | 118,482 |
Total exploration stage royalty interests | | | 296,172 | | | — | | | 296,172 |
Total stream and royalty interests, net | | $ | 3,397,998 | | $ | (1,058,682) | | $ | 2,339,316 |
Mount Milligan
RGLD Gold owns the right to purchase 35% of the payable gold and 18.75% of the payable copper produced from the Mount Milligan copper-gold mine in British Columbia, Canada, which is operated by an indirect subsidiary of Centerra Gold Inc. (“Centerra”). The Company’s carrying value for its stream interest at Mount Milligan is $554.3 million as of June 30, 2020.
On October 30, 2019, Centerra reported that issues identified with decreasing long-term gold recoveries and increased costs in the short-to medium-term led them to record an impairment charge against their carrying value of the Mount Milligan mine under applicable accounting standards, and that it had begun a comprehensive technical review of the operation with the objective of publishing an updated National Instrument 43-101 (“NI 43-101”) technical report.
On March 26, 2020, Centerra published an updated NI 43-101 technical report for Mount Milligan which provided, among other things, a detailed update to the life of mine plan and reductions to the proven and probable reserves due to increased costs, lower expected productivities and lower process plant throughput.
Significant reductions in proven and probable reserves or mineralized material are indicators of potential impairment for Royal Gold’s stream and royalty interests. As part of our regular asset impairment analysis during the quarter ended March
55
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2017 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Impairments |
| Net | ||||
Production stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Mount Milligan |
| $ | 790,635 |
| $ | (114,327) |
| $ | — |
| $ | 676,308 |
Pueblo Viejo |
|
| 610,404 |
|
| (67,149) |
|
| — |
|
| 543,255 |
Andacollo |
|
| 388,182 |
|
| (39,404) |
|
| — |
|
| 348,778 |
Wassa and Prestea |
|
| 146,475 |
|
| (22,715) |
|
| — |
|
| 123,760 |
Total production stage stream interests |
|
| 1,935,696 |
|
| (243,595) |
|
| — |
|
| 1,692,101 |
Production stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Voisey's Bay |
|
| 205,724 |
|
| (85,671) |
|
| — |
|
| 120,053 |
Peñasquito |
|
| 99,172 |
|
| (34,713) |
|
| — |
|
| 64,459 |
Holt |
|
| 34,612 |
|
| (19,669) |
|
| — |
|
| 14,943 |
Cortez |
|
| 20,873 |
|
| (10,633) |
|
| — |
|
| 10,240 |
Other |
|
| 483,643 |
|
| (337,958) |
|
| — |
|
| 145,685 |
Total production stage royalty interests |
|
| 844,024 |
|
| (488,644) |
|
| — |
|
| 355,380 |
Total production stage stream and royalty interests |
|
| 2,779,720 |
|
| (732,239) |
|
| — |
|
| 2,047,481 |
Development stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Rainy River |
|
| 175,727 |
|
| — |
|
| — |
|
| 175,727 |
Other |
|
| 12,031 |
|
| — |
|
| — |
|
| 12,031 |
Total development stage stream interests |
|
| 187,758 |
|
| — |
|
| — |
|
| 187,758 |
Development stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
| 380,657 |
|
| — |
|
| — |
|
| 380,657 |
Cortez |
|
| 59,803 |
|
| — |
|
| — |
|
| 59,803 |
Other |
|
| 63,811 |
|
| — |
|
| — |
|
| 63,811 |
Total development stage royalty interests |
|
| 504,271 |
|
| — |
|
| — |
|
| 504,271 |
Total development stage stream and royalty interests |
|
| 692,029 |
|
| — |
|
| — |
|
| 692,029 |
Total exploration stage royalty interests |
|
| 152,746 |
|
| — |
|
| — |
|
| 152,746 |
Total stream and royalty interests, net |
| $ | 3,624,495 |
| $ | (732,239) |
| $ | — |
| $ | 2,892,256 |
31, 2020, we determined that an impairment of our stream interest at Mount Milligan was not necessary as (i) the financial impairment taken by Centerra does not impact the mine operating performance, and (ii) the reduction in reserves and mineralized material at Mount Milligan resulted in updated gold and copper depletion rates that remain well below current and long-term consensus gold and copper prices. As of June 30, 2020, the gold and copper depletion rates at our Mount Milligan stream interest are $764 per ounce of gold and $1.48 per pound of copper. Depletion rates well below current and long-term consensus metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable.
Rainy River
RGLD Gold owns the right to purchase 6.50% of the gold produced from the Rainy River mine, which is located in northwestern Ontario, Canada and is operated by New Gold, Inc. (“New Gold”), until 230,000 gold ounces have been delivered, and 3.25% thereafter; and 60% of the silver produced from the Rainy River mine until 3.1 million silver ounces have been delivered, and 30% thereafter. As of June 30, 2020, approximately 38,700 ounces of gold and approximately 410,500 ounces of silver have been delivered to RGLD Gold. The Company’s carrying value for its stream interest at Rainy River is $148.5 million as of June 30, 2020.
During the quarter ended December 31, 2019, New Gold reported that it continued to advance a comprehensive mine optimization study that would include a review of alternative open pit and underground mining scenarios at Rainy River On February 13, 2020, New Gold reported the results of the comprehensive optimization study that included an updated mine plan, which resulted in, among other things, a reduction in gold and silver reserves and the potential to extend the underground mine life beyond calendar 2028. New Gold published an updated NI 43-101 technical report for Rainy River on March 27, 2020, reflecting the updated mine plan and reserves.
Significant reductions in proven and probable reserves or mineralized material are indicators of potential impairment for the Company’s stream and royalty interests. As a result of the new information from New Gold, and as part of the Company’s regular asset impairment analysis, the Company determined that an impairment on its Rainy River stream interest was not necessary as of March 31, 2020 as the reduction in gold and silver reserves resulted in updated depletion rates that remain well below current and long-term consensus gold and silver prices. As of June 30, 2020, the gold and silver depletion rates at our Rainy River stream interest are $848 per ounce of gold and $11.27 per ounce of silver. Depletion rates well below current and long-term metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable.
COVID-19 and current economic environment
Several of our operating counterparties announced temporary operational curtailments or the withdrawal or review of previously disclosed guidance due to the ongoing COVID-19 pandemic. The economic and societal impacts associated with COVID-19 are fluid and changing rapidly, and we are currently unable to predict the nature or extent of any impact on our results of operations and financial condition. We will continue to monitor any further developments that the COVID-19 pandemic may have on stream or royalty interests as part of our regular asset impairment analysis.
Impairment of stream and royalty interests and royalty receivables
In accordance with our impairment accounting policy discussed in Note 1, impairments in the carrying value of each stream or royalty interestinterests are measured and recorded to the extent that the carrying value in each stream or royalty interest exceeds its estimated fair value, which is generally calculated using estimated future discounted cash‑flows. As part of the Company’scash-flows. For our regular asset impairment analysis, the Company determinedwe did not identify the presence of any impairment indicators and did not record any impairment
56
charges for the fiscal year ended of June 30, 2019. We identified impairment indicators and recorded impairment charges for the fiscal yearsyear ended June 30, 20182020, and 20162018 as summarized in the following table and discussed in detail below:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended June 30, | |||||||
|
|
| 2018 |
| 2017 |
| 2016 | |||
|
|
|
| (Amounts in thousands) | ||||||
Stream: |
|
|
|
|
|
|
|
|
|
|
Phoenix Gold |
|
| $ | — |
| $ | — |
| $ | 75,702 |
Royalty: |
|
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
| 239,080 |
|
| — |
|
| — |
Inata |
|
|
| — |
|
| — |
|
| 11,982 |
Wolverine |
|
|
| — |
|
| — |
|
| 5,307 |
Other |
|
|
| 284 |
|
| — |
|
| 3,127 |
Total impairment of stream and royalty interests |
|
| $ | 239,364 |
| $ | — |
| $ | 96,118 |
Inata royalty receivable |
|
|
|
|
|
| — |
|
| 2,855 |
Wolverine royalty receivable |
|
|
|
|
|
| — |
|
| (385) |
Total impairment of stream and royalty interests and royalty receivables |
|
| $ | 239,364 |
| $ | — |
| $ | 98,588 |
64
| | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||
|
| 2020 |
| 2019 |
| 2018 | |||
| | | (Amounts in thousands) | ||||||
Royalty: | | | | | | | | | |
Pascua-Lama | | | — | | | — | | | 239,080 |
Other | | | 1,341 | | | — | | | 284 |
Total impairment of royalty interests | | $ | 1,341 | | $ | — | | $ | 239,364 |
During the quarter ended June 30, 2019, we were made aware of Contentsinsolvency proceedings at one of our non-principal producing properties (El Toqui). During the quarter ended June 30, 2020, we obtained new information regarding the insolvency proceedings and determined our carrying value for El Toqui was not recoverable and an impairment of $1.3 million was necessary. Our carrying value for El Toqui is 0 as of June 30, 2020.
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pascua-Lama
We own a 0.78% to 5.45% sliding‑scalesliding-scale NSR royalty on gold and silver onproduction from the Chilean portion of the Pascua‑LamaPascua-Lama project, which straddles the border between Argentina and Chile, and is owned by Barrick. The Company ownsWe own an additional royalty equivalent to 1.09% of proceeds from copper produced from the Chilean portion of the project, net of allowable deductions, sold on or after January 1, 2017.
On January 18, 2018, Barrick reported that it is analyzing a revised sanction related to the Pascua-Lama project issued by Chile’s Superintendencia del Medio Ambiente (“SMA”) on January 17, 2018. The sanction is part of a re-evaluation process ordered by Chile’s Environmental Court in 2014 and relates to historical compliance matters at the Pascua-Lama project. According to Barrick, the SMA has not revoked Pascua-Lama’s environmental permit, but has ordered the closure of existing facilities on the Chilean side of the project, in addition to certain monitoring activities.
On February 6, 2018, in light of the SMA order to close surface facilities in Chile, and earlier plans to evaluate an underground mine, Barrick announced it reclassified Pascua-Lama’s proven and probable reserves, which are based on an open pit mine plan, as mineralized material. Barrick reported further details in its year-end results on February 14, 2018 and an update on the Pascua-Lama project at its February 22, 2018 Investor Day. A significant reduction in reserves or mineralized material are indicators of impairment.
On April 23, 2018, Barrick announced that work performed to-date on the prefeasibility study for a potential underground project has been suspended, and they will focus on adjusting the project closure plan for surface infrastructure on the Chilean side of the project. Barrick will continue to evaluate opportunities to de-risk the project while maintaining Pascua-Lama as an option for development in the future if economics improve and related risks can be mitigated.
As part of the impairment determination, the fair value for Pascua-Lama was estimated by calculating the net present value of the estimated future cash-flows, subject to our royalty interest, expected to be generated by the mining of the Pascua-Lama deposits. The CompanyWe applied a probability factor to itsour fair value calculation that Barrick will either proceed with an open-pit mine or an underground mine at Pascua. The estimates of future cash flows were derived from open-pit and underground mine models we developed by the Company using various information reported by Barrick. The metal price assumptions we used in the Company’s model were supported by consensus price estimates obtained by a number of industry analysts. The future cash flows were discounted using a discount rate which reflects specific market risk factors the Company associateswe associate with the Pascua-Lama royalty
57
interest. Following the impairment charge ($239.1 million) during the three months ended March 31, 2018, the Pascua-Lama royalty interest has a remaining carrying value of $177.7 million as of June 30, 2018.2020. As a result of Barrick’s reclassification of Pascua-Lama’s reserves to mineralized material, our Pascu-LamaPascua-Lama royalty interest was reclassified to exploration stage from development stage during our fiscal year ended June 30, 2018.
Phoenix Gold5. MARKETABLE EQUITY SECURITIES
RGLD Gold previously owned the right to purchase 6.30%
As of any gold produced from the Phoenix Gold Project until 135,000 ounces were delivered, and 3.15% thereafter. The Phoenix Gold Project is located in Red Lake, Ontario, Canada, and owned by Rubicon Minerals Corporation (“Rubicon”). On January 11, 2016, Rubicon provided an updated geologic model and mineralized material statement for the Phoenix Gold Project, which included a significant reduction in mineralized material compared to previous statements provided by Rubicon. Rubicon also announced that they were evaluating strategic alternatives, including merger and divestiture opportunities either at the corporate or asset level, obtaining new financing or capital restructurings. A significant reduction in mineralized material, along with recent decreases in the long‑term metal price assumptions used by the industry, are indicators of impairment.
During the quarter ended March 31, 2016, the Company independently evaluated the updated geologic model and mineralized material statement in an effort to properly assess the recoverability of our carrying value. The Company’s technical evaluation was completed by internal and external personnel and included an economic analysis of the Phoenix Gold Project and a detailed review of the geological model and mineralized material statement. Based upon the results
65
of the Company’s review of the updated geological model and mineralized material statement, and other factors, it was determined that our stream interest at the Phoenix Gold Project should be written down to zero as of March 31, 2016, resulting in an impairment charge of $77.7 million.
Inata
The Company owns a 2.5% gross smelter return royalty on all gold and silver produced from the Inata mine, located in Burkina Faso, West Africa. The Company’s carrying value for its royalty interest at Inata was approximately $12.0 million as of December 31, 2015. As part of the Company’s impairment assessment for the three months ended March 31, 2016, the Company was notified of an updated mine plan at Inata, which included a significant reduction in the life of the mine. Based upon our review of the updated mine plan, our royalty interest was written down to zero as of March 31, 2016.
The Company also had a royalty receivable of approximately $2.8 million associated with past due royalty payments on the Inata interest. As a result of the operator’s financial and operational difficulties and our review of the updated mine plan at Inata, the Company believes payment of the receivable is uncertain and provided for an allowance against the entire royalty receivable as of March 31, 2016. The Company continues to pursue collection of all past due payments.
Wolverine
The Company owns a 0.00% to 9.445% sliding‑scale NSR royalty on all gold and silver produced from the Wolverine underground mine and milling operation located in Yukon Territory, Canada, and operated by Yukon Zinc Corporation (“Yukon Zinc”). Prior to our fiscal year ended June 30, 2016, the Company recognized an impairment at Wolverine. During the quarter ended March 31, 2016, we were made aware of Yukon Zinc’s intentions to no longer recommission the mine. Based upon the updated developments and limited remaining mineralized material at Wolverine, the Company wrote down the remaining carrying value at Wolverine to zero as of March 31, 2016.
Phoenix Gold Stream Termination
On December 20, 2016, the owner of the Phoenix Gold Project, Rubicon, announced a restructuring transaction under Canadian regulations. As part of the restructuring transaction, RGLD Gold’s gold stream interest was terminated. In exchange for termination of the gold stream, RGLD Gold received approximately three million2020, our marketable equity securities include 809,744 common shares of Contango Ore, Inc., 3,949,575 common shares of Battle North Gold Corporation (formerly Rubicon Minerals Corporation), and three NSR royalties on properties owned by Rubicon, including a 1.0% NSR on the Phoenix Gold Project. warrants to purchase up to 19,640,000 common shares of TriStar. Our marketable equity securities are measured at fair value (Note 12) each reporting period with any changes in fair value recognized in net income.
The fair value of the Rubicon common shares upon exchange was $3.4our marketable equity securities increased $1.4 million and is recorded within Other assets on our consolidated balance sheetsdecreased $6.8 million for the years ended June 30, 2020 and is accounted for under our available-for-sale accounting policy, which is also discussed2019, respectively, and these changes are included in Note 2. The Company also recognized a corresponding gain on the fairFair value of the Rubicon common shares received upon exchange. The gain is recorded within Interest and other incomechanges in equity securities on our consolidated statements of operationsoperation and comprehensive income (loss) income.
Amendment to Mount Milligan
On October 20, 2016, Centerra Gold Inc. (“Centerra”). The carrying value of our marketable equity securities as of June 30, 2020 and Thompson Creek Metals Company Inc. (“Thompson Creek”) completed the Plan of Arrangement (the “Arrangement”) previously announced on July 5, 2016, pursuant to which Centerra acquired all of the issuedJune 30, 2019 was $17.9 million and outstanding common shares of Thompson Creek. RGLD Gold’s streaming interest at Mount Milligan was amended (the “amendment”) concurrently with the closing of the Arrangement.
Under the terms of the amendment, RGLD Gold’s 52.25% gold stream at Mount Milligan was amended to a 35% gold stream$16.0 million, respectively, and an 18.75% copper stream. RGLD Gold will continue to pay the lesser of $435 per ounce of gold delivered or the prevailing market price when purchased and will pay 15% of the spot price per metric tonne of copper delivered. Mount Milligan goldis included in concentrate in transit prior to October 20, 2016, was delivered to RGLD Gold under the previous 52.25% stream. Under the terms of both the original and amended agreements, there is a maximum of five months between concentrate shipment and final settlement. Accordingly, RGLD Gold began receiving gold and copper deliveries
66
reflecting the amended stream agreement in April 2017. The Company incurred approximately $7.7 million in direct transaction costs associated with the amendment. These direct transaction costs have been capitalized as part of the Mount Milligan streaming interest within Stream and royalty interests, net Other assets on our consolidated balance sheets.
5.6. DEBT
The Company’s debt as of June 30, 20182020 and 20172019 consists of the following:
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|
| As of June 30, 2018 |
| As of June 30, 2017 | ||||||||||||||||||||
|
| Principal |
| Unamortized Discount |
| Debt Issuance Costs |
| Total |
| Principal |
| Unamortized Discount |
| Debt Issuance Costs |
| Total | ||||||||
|
|
| (Amounts in thousands) |
|
| (Amounts in thousands) | ||||||||||||||||||
Convertible notes due 2019 |
| $ | 370,000 |
| $ | (12,764) |
| $ | (1,316) |
| $ | 355,920 |
| $ | 370,000 |
| $ | (25,251) |
| $ | (2,646) |
| $ | 342,103 |
Revolving credit facility |
|
| — |
|
| — |
|
| (4,893) |
|
| (4,893) |
|
| 250,000 |
|
| — |
|
| (5,933) |
|
| 244,067 |
Total debt |
| $ | 370,000 |
| $ | (12,764) |
| $ | (6,209) |
| $ | 351,027 |
| $ | 620,000 |
| $ | (25,251) |
| $ | (8,579) |
| $ | 586,170 |
| | | | | | | | | | | | | | | | | | |
| | As of June 30, 2020 | | As of June 30, 2019 | ||||||||||||||
|
| Principal |
| Debt Issuance Costs |
| Total |
| Principal |
| Debt Issuance Costs |
| Total | ||||||
| | | (Amounts in thousands) | | | (Amounts in thousands) | ||||||||||||
Revolving credit facility | | $ | 305,000 | | $ | (4,561) | | $ | 300,439 | | $ | 220,000 | | $ | (5,446) | | $ | 214,554 |
Total debt | | $ | 305,000 | | $ | (4,561) | | $ | 300,439 | | $ | 220,000 | | $ | (5,446) | | $ | 214,554 |
Convertible Senior Notes DueRevolving Credit Facility
On September 20, 2019,
In June 2012, the Company completed an offering of $370 million aggregate principal amount of convertible senior notes due 2019 (“2019 Notes”). The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is required we entered into a third amendment to make semi‑annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year, beginning December 15, 2012. The 2019 Notes mature on June 15, 2019. Generally, we classify debt that is maturing within one year as a current liability. However, the Company has the intent and ability to settle the principal amount of the 2019 Notes in cash primarily from its availableour revolving credit facility a non-current liability,dated as of June 2, 2017. Under the amendment, our Swiss subsidiary RGLD Gold was added as a co-borrower and joint and several obligor, certain of the Company’s Canadian subsidiaries were added as guarantors, and certain equity pledges that previously had been granted in favor of the lenders to support the facility were released, with the result being the facility is now unsecured.
As of June 30, 2018.
2020, we had $305 million outstanding and $695 million available under our revolving credit facility. As of June 30, 2020, the interest rate on borrowings under the revolving credit facility was LIBOR plus 1.10% for an all-in rate of 1.29%. Interest expense recognized on the 2019 Notesrevolving credit facility for the fiscal years ended June 30, 2018, 20172020, 2019 and 20162018 was approximately $24.5$7.0 million, $23.6$1.7 million and $22.8$5.7 million, respectively. Interest expense recognized includesrespectively, and included interest on the contractual coupon interest,outstanding borrowings and the accretion of the debt discount and amortization of the debt issuance costs, and is recorded in Interest and other expense consolidated statements of operations and comprehensive (loss) income.
Revolving credit facility
The Company maintains a $1.0 billion revolving credit facility. As of June 30, 2018, the Company had no amounts outstanding and $1.0 billion available under the revolving credit facility. The Company had $250 million outstanding under the revolving credit facility as of June 30, 2017. Royal Gold may repay borrowings under the revolving credit facility at any time without premium or penalty.
The Company wascosts. We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under the revolving credit facility as of June 30, 2018. Interest expense recognized on2020.
Royal Gold may repay any borrowings under the revolving credit facility for the fiscal years endedat any time without premium or penalty. The Company’s revolving credit facility matures on June 30, 2018, 2017 and 2016 was approximately $5.7 million, $9.9 million and $8.1 million, respectively, and included interest on the outstanding borrowings and the amortization of the debt issuance costs.3, 2024.
67
58
7. REVENUE
Revenue Recognition
Under U.S. GAAP, a performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, a performance obligation is satisfied. In accordance with this guidance, revenue attributable to our stream interests and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers. The amount of revenue we recognize further reflects the consideration to which we are entitled under the respective stream or royalty agreement. A more detailed summary of our revenue recognition policies for our stream and royalty interests is discussed below.
Stream Interests
A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more of the metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between ten days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. We settle our forward sales contracts via physical delivery of the metal to the purchaser (our customer) on the settlement date specified in the contract. Under our forward sales contracts, there is a single performance obligation to sell a contractually specified volume of metal to the purchaser, and we satisfy this obligation at the point in time of physical delivery. Accordingly, revenue from our metal sales is recognized on the date of settlement, which is the date that control, custody and title to the metal transfer to the purchaser.
Royalty Interests
Royalties are non-operating interests in mining projects that provide the right to a percentage of revenue or metals produced from the project after deducting specified costs, if any. We are entitled to payment for our royalty interest in a mining project based on a contractually specified commodity price (for example, a monthly or quarterly average spot price) for the period in which metal production occurred. As a royalty holder, we act as a passive entity in the production and operations of the mining project, and the third-party operator of the mining project is responsible for all mining activities, including subsequent marketing and delivery of all metal production to their ultimate customer. In all of our material royalty interest arrangements, we have concluded that we transfer control of our interest in the metal production to the operator at the point at which production occurs, and thus, the operator is our customer. We have further determined that the transfer of each unit of metal production, comprising our royalty interest, to the operator represents a separate performance obligation under the contract, and each performance obligation is satisfied at the point in time of metal production by the operator. Accordingly, we recognize revenue attributable to our royalty interests in the period in which metal production occurs at the specified commodity price per the agreement, net of any contractually allowable offsite treatment, refining, transportation and, if applicable, mining costs.
Royalty Revenue Estimates
For a small number of our royalty interests, we may not receive, or be entitled to receive, payment information, including production information from the operator, for the period in which metal production occurred prior to issuance of our financial statements. As a result, we may estimate revenue for these royalties based on available information, including public information, from the operator. If adequate information is not available from the operator or from other public sources before we issue our financial statements, we will recognize royalty revenue during the period in which the necessary payment information is received. Differences between estimates and actual amounts could differ significantly
59
and are recorded in the period that the actual amounts are known. Please also refer to our “Use of Estimates” accounting policy discussed in Note 2. For the quarter ended June 30, 2020, royalty revenue that was estimated or was attributable to metal production for a period prior to June 30, 2020, was not material.
Disaggregation of Revenue
We have identified 2 material revenue sources in our business: stream interests and royalty interests. These identified revenue sources are consistent with our reportable segments as discussed in Note 14.
Revenue by metal type attributable to each of our revenue sources is compriseddisaggregated as follows (amounts in thousands):
| | | | | | |
| | Year Ended | ||||
| | June 30, | | June 30, | ||
|
| 2020 |
| 2019 | ||
Stream revenue: | | | | | | |
Gold | | $ | 294,490 | | $ | 249,496 |
Silver | | | 32,744 | | | 33,282 |
Copper | | | 32,634 | | | 23,046 |
Total stream revenue | | $ | 359,868 | | $ | 305,824 |
Royalty revenue: | | | | | | |
Gold | | $ | 98,153 | | $ | 78,570 |
Silver | | | 9,996 | | | 5,497 |
Copper | | | 13,528 | | | 13,808 |
Other | | | 17,274 | | | 19,357 |
Total royalty revenue | | $ | 138,951 | | $ | 117,232 |
Total revenue | | $ | 498,819 | | $ | 423,056 |
Revenue by metal type attributable to each of our revenue sources is disaggregated as follows (amounts in thousands):
| | | | | | | | |
| | | | Year Ended | ||||
| | | | June 30, | | June 30, | ||
| | Metal(s) | | 2020 | | 2019 | ||
Stream revenue: | | | | | | | | |
Mount Milligan | | Gold & Copper | | $ | 131,425 | | $ | 101,010 |
Pueblo Viejo | | Gold & Silver | | | 96,978 | | | 82,844 |
Andacollo | | Gold | | | 74,219 | | | 69,264 |
Wassa | | Gold | | | 23,203 | | | 22,098 |
Other | | Gold & Silver | | | 34,043 | | | 30,608 |
Total stream revenue | | | | $ | 359,868 | | $ | 305,824 |
Royalty revenue: | | | | | | | | |
Peñasquito | | Gold, Silver, Lead & Zinc | | $ | 25,498 | | $ | 13,865 |
Cortez | | Gold | | | 22,342 | | | 11,383 |
Other | | Various | | | 91,111 | | | 91,984 |
Total royalty revenue | | | | $ | 138,951 | | $ | 117,232 |
Total revenue | | | | $ | 498,819 | | $ | 423,056 |
Refer to Note 14 for the following:
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|
|
| Fiscal Year Ended June 30, | |||||||
|
| 2018 |
| 2017 |
| 2016 | |||
|
|
| (Amounts in thousands) | ||||||
Stream interests |
| $ | 324,516 |
| $ | 314,011 |
| $ | 238,028 |
Royalty interests |
|
| 134,526 |
|
| 126,803 |
|
| 121,762 |
Total revenue |
| $ | 459,042 |
| $ | 440,814 |
| $ | 359,790 |
geographical distribution of our revenue by reportable segment.
7. STOCK‑BASED8. STOCK-BASED COMPENSATION
In November 2015, our shareholders of the Company approved the 2015 Omnibus Long‑TermLong-Term Incentive Plan (“2015 LTIP”). Under the 2015 LTIP, 2,500,000 shares of common stock have been authorized for future grants to officers, directors, key employees and other persons. The 2015 LTIP provides for the grant of stock options, unrestricted stock, restricted stock, dividend
60
equivalent rights, SSARs and cash awards. Any of these awards may, but need not, be made as performance incentives. Stock options granted under the 2015 LTIP may be non‑qualifiednon-qualified stock options or incentive stock options.
The CompanyWe recognized stock‑basedstock-based compensation expense as follows:
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|
|
|
|
|
|
| For the Fiscal Year Ended | |||||||
|
| June 30, | |||||||
|
| 2018 |
| 2017 |
| 2016 | |||
|
|
| (Amounts in thousands) | ||||||
Stock options |
| $ | 318 |
| $ | 393 |
| $ | 454 |
Stock appreciation rights |
|
| 1,988 |
|
| 1,851 |
|
| 1,687 |
Restricted stock |
|
| 4,487 |
|
| 3,840 |
|
| 3,686 |
Performance stock |
|
| 1,486 |
|
| 3,899 |
|
| 4,212 |
Total stock-based compensation expense |
| $ | 8,279 |
| $ | 9,983 |
| $ | 10,039 |
| | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||
| | | | | | | | | |
|
| 2020 | | 2019 |
| 2018 | |||
| | | (Amounts in thousands) | ||||||
Stock options | | $ | 163 | | $ | 221 | | $ | 318 |
Stock appreciation rights | | | 2,545 | | | 2,025 | | | 1,988 |
Restricted stock | | | 5,117 | | | 3,336 | | | 4,487 |
Performance stock | | | 1,291 | | | 1,035 | | | 1,486 |
Total stock-based compensation expense | | $ | 9,116 | | $ | 6,617 | | $ | 8,279 |
Stock‑basedStock-based compensation expense is included within General and administrative expense on the consolidated statements of operations and comprehensive income (loss) income..
Stock Options and Stock Appreciation Rights
Stock option and SSARs awards are granted with an exercise price equal to the closing market price of the Company’sour stock at the date of grant. Stock option and SSARs awards granted to officers, key employees and other persons vest based on one to three years of continuous service. Stock option and SSARs awards have 10 year contractual terms.
To determine stock‑basedstock-based compensation expense for stock options and SSARs, the fair value of each stock option and SSAR is estimated on the date of grant using the Black‑Scholes‑MertonBlack-Scholes-Merton (“Black‑Scholes”Black-Scholes”) option pricing model for all periods presented. The Black‑ScholesBlack-Scholes model requires key assumptions in order to determine fair value. Those key assumptions during the fiscal year 2018, 20172020, 2019 and 20162018 grants are noted in the following table:
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|
| Stock Options |
| SSARs |
| ||||||||
|
| 2018 |
| 2017 |
| 2016 |
| 2018 |
| 2017 |
| 2016 |
|
Weighted-average expected volatility |
| 42.2 | % | 41.7 | % | 36.9 | % | 42.4 | % | 41.1 | % | 36.9 | % |
Weighted-average expected life in years |
| 5.5 |
| 5.5 |
| 5.5 |
| 5.4 |
| 5.8 |
| 5.4 |
|
Weighted-average dividend yield |
| 1.10 | % | 1.11 | % | 1.06 | % | 1.10 | % | 1.11 | % | 1.00 | % |
Weighted-average risk free interest rate |
| 1.8 | % | 1.2 | % | 1.6 | % | 1.8 | % | 1.3 | % | 1.6 | % |
| | | | | | | | | | | | | |
| | Stock Options | | SSARs |
| ||||||||
| | 2020 | | 2019 |
| 2018 |
| 2020 | | 2019 | | 2018 |
|
Weighted-average expected volatility |
| 34.4 | % | 36.5 | % | 42.2 | % | 34.6 | % | 37.6 | % | 42.4 | % |
Weighted-average expected life in years |
| 4.5 |
| 4.5 |
| 5.5 |
| 4.7 |
| 5.2 |
| 5.4 | |
Weighted-average dividend yield |
| 1.0 | % | 1.1 | % | 1.1 | % | 1.0 | % | 1.1 | % | 1.1 | % |
Weighted-average risk free interest rate |
| 1.6 | % | 2.7 | % | 1.8 | % | 1.6 | % | 2.7 | % | 1.8 | % |
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The Company’sOur expected volatility is based on the historical volatility of the Company’sour stock over the expected option term. The Company’sOur expected option term is determined by historical exercise patterns along with other known employee or company information at the time of grant. The risk freerisk-free interest rate is based on the zero‑couponzero-coupon U.S. Treasury bond at the time of grant with a term approximate to the expected option term.
61
Stock Options
A summary of stock option activity for the fiscal year ended June 30, 2018,2020, is presented below.
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|
|
| Weighted- |
|
|
|
|
|
|
| Weighted- |
| Average |
|
|
| |
|
|
|
| Average |
| Remaining |
| Aggregate | ||
|
| Number of |
| Exercise |
| Contractual |
| Intrinsic Value | ||
|
| Shares |
| Price |
| Life (Years) |
| (in thousands) | ||
Outstanding at July 1, 2017 |
| 107,825 |
| $ | 64.13 |
|
|
|
|
|
Granted |
| 6,858 |
| $ | 87.42 |
|
|
|
|
|
Exercised |
| (48,123) |
| $ | 60.18 |
|
|
|
|
|
Forfeited |
| (333) |
| $ | 56.54 |
|
|
|
|
|
Outstanding at June 30, 2018 |
| 66,227 |
| $ | 69.35 |
| 6.2 |
| $ | 1,549 |
Exercisable at June 30, 2018 |
| 48,957 |
| $ | 68.36 |
| 5.6 |
| $ | 1,199 |
| | | | | | | | | | |
|
| |
| | |
| Weighted- |
| | |
| | | | Weighted- | | Average | | | | |
| | | | Average | | Remaining | | Aggregate | ||
| | Number of | | Exercise | | Contractual | | Intrinsic Value | ||
| | Shares | | Price | | Life (Years) | | (in thousands) | ||
Outstanding at July 1, 2019 |
| 42,298 | | $ | 70.65 |
|
|
| |
|
Granted |
| 1,604 | | $ | 124.60 |
|
|
| |
|
Exercised |
| (24,199) | | $ | 72.92 |
|
|
| |
|
Forfeited |
| (802) | | $ | 124.60 |
|
|
| |
|
Outstanding at June 30, 2020 |
| 18,901 | | $ | 70.38 |
| 6.0 | | $ | 1,020 |
Exercisable at June 30, 2020 |
| 15,623 | | $ | 65.96 |
| 5.5 | | $ | 912 |
The weighted‑averageweighted-average grant date fair value of options granted during the fiscal years ended June 30, 2020, 2019 and 2018, 2017was $17.42, $24.12 and 2016, was $27.12, $29.54 and $18.05, respectively. The total intrinsic value of options exercised during the fiscal years ended June 30, 2020, 2019 and 2018, 2017 and 2016, were $1.4$1.3 million, $0.5$0.7 million, and $0.1$1.4 million, respectively.
As of June 30, 2018,2020, there was approximately $0.2$0.1 million of total unrecognized stock‑basedstock-based compensation expense related to non‑vestedunvested stock options, which is expected to be recognized over a weighted‑averageweighted-average period of 1.61.5 years.
SSARs
A summary of SSARs activity for the fiscal year ended June 30, 2018,2020, is presented below.
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|
|
| Weighted- |
|
|
|
|
|
|
| Weighted- |
| Average |
|
|
| |
|
|
|
| Average |
| Remaining |
| Aggregate | ||
|
| Number of |
| Exercise |
| Contractual |
| Intrinsic Value | ||
|
| Shares |
| Price |
| Life (Years) |
| (in thousands) | ||
Outstanding at July 1, 2017 |
| 424,145 |
| $ | 66.19 |
|
|
|
|
|
Granted |
| 71,262 |
| $ | 87.42 |
|
|
|
|
|
Exercised |
| (241,421) |
| $ | 62.52 |
|
|
|
|
|
Forfeited |
| (1,100) |
| $ | 85.92 |
|
|
|
|
|
Outstanding at June 30, 2018 |
| 252,886 |
| $ | 75.60 |
| 7.3 |
| $ | 4,360 |
Exercisable at June 30, 2018 |
| 125,152 |
| $ | 71.59 |
| 6.2 |
| $ | 2,659 |
| | | | | | | | | | |
|
| |
| | |
| Weighted- | �� | | |
| | | | Weighted- | | Average | | | | |
| | | | Average | | Remaining | | Aggregate | ||
| | Number of | | Exercise | | Contractual | | Intrinsic Value | ||
| | Shares | | Price | | Life (Years) | | (in thousands) | ||
Outstanding at July 1, 2019 |
| 175,599 | | $ | 79.20 |
|
|
| |
|
Granted |
| 53,616 | | $ | 124.15 |
|
|
| |
|
Exercised |
| (101,823) | | $ | 81.02 |
|
|
| |
|
Forfeited |
| (4,788) | | $ | 124.60 |
|
|
| |
|
Outstanding at June 30, 2020 |
| 122,604 | | $ | 95.57 |
| 7.8 | | $ | 3,536 |
Exercisable at June 30, 2020 |
| 42,386 | | $ | 73.48 |
| 6.3 | | $ | 2,155 |
The weighted‑averageweighted-average grant date fair value of SSARs granted during the fiscal years ended June 30, 2020, 2019 and 2018 2017was $32.33, $26.37 and 2016 was $29.17, $29.76 and $18.35, respectively. The total intrinsic value of SSARs exercised during the fiscal years ended June 30, 2020, 2019 and 2018, 2017 and 2016, were $6.4was $4.6 million, $0.2$2.8 million, and $0.3$6.4 million, respectively.
As of June 30, 2018,2020, there was approximately $2.0$1.5 million of total unrecognized stock‑basedstock-based compensation expense related to non‑vestedunvested SSARs, which is expected to be recognized over a weighted‑averageweighted-average period of 1.81.9 years.
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Other Stock‑basedStock-based Compensation
Performance Shares
During fiscal 2018,2020, officers and certain employees were granted shares of restricted common stock that can only be earned only upon the Company’s achievement of certain pre‑definedpre-defined performance measures. Specifically, for performance shares granted in fiscal 2018, one‑half
62
2020, one-half of the shares awarded may vest upon the Company’sour achievement of annual growth in Net Gold Equivalent Ounces (“Net GEOs”) (“GEO Shares”). The second one‑halfone-half of performance shares granted in fiscal 20182020 may vest based on the Company’sour total shareholder return (“TSR”) compared to the TSRs of other members of the Market Vectors Gold Miners ETF (GDX) (“TSR Shares”). GEO Shares and TSR Shares may vest by linear interpolation in a range between zero0 shares if neither threshold Net GEO and TSR metric is met; to 100% of GEO Shares and TSR Shares awarded if both target Net GEO and TSR metrics are met; to 200% of the Net GEO and TSR shares awarded if both the maximum Net GEO and TSR metrics are met. The GEO Shares will expire in five years from the date of grant if the performance measure is not met, while the TSR Shares will expire in three years from the date of grant if the TSR market condition and three year service condition are not met.
The Company measuresWe measure the fair value of the GEO Shares based upon the market price of our common stock as of the date of grant. In accordance with ASC 718, theThe measurement date for the GEO Shares will be determined at such time that the performance goals are attained or that it is probable they will be attained. At such time that it is probable that a performance condition will be achieved, compensation expense will be measured by the number of shares that will ultimately be earned based on the grant date market price of our common stock. For shares that were previously estimated to be probable of vesting and are no longer deemed to be probable of vesting, compensation expense is reversed during the period in which it is determined they are no longer probable of vesting. Interim recognition of compensation expense will be made at such time as management can reasonably estimate the number of shares that will be earned.
In accordance with ASC 718, provided the market condition within the TSR Shares, the CompanyWe measured the grant date fair value using a Monte Carlo valuation model. The fair value of the TSR Shares ($64.6777.50 per share) is multiplied by the target number (100%) of TSR Shares granted to determine total stock‑basedstock-based compensation expense. Total stock‑basedstock-based compensation expense of the TSR Shares is amortized on a straight‑linestraight-line basis over the requisite service period, or three years. Stock‑basedStock-based compensation expense for the TSR Shares is recognized provided the requisite service period is rendered, regardless of when, if ever, the TSR market condition is satisfied. The CompanyWe will reverse previously recognized stock‑basedstock-based compensation expense attributable to the TSR Shares only if the requisite service period is not rendered.met.
A summary of the status of the Company’s non‑vestedour unvested Performance Shares at maximum (200%) attainment for the fiscal year ended June 30, 2018,2020, is presented below:
|
|
|
|
|
|
|
|
|
| Weighted- | |
|
|
|
| Average | |
|
| Number of |
| Grant Date | |
|
| Shares |
| Fair Value | |
Non-vested at July 1, 2017 |
| 233,845 |
| $ | 61.07 |
Granted |
| 68,020 |
| $ | 76.20 |
Vested |
| (70,046) |
| $ | 68.83 |
Forfeited |
| (13,030) |
| $ | 60.76 |
Non-attainment |
| (34,125) |
| $ | 71.77 |
Non-vested at June 30, 2018 |
| 184,664 |
| $ | 61.75 |
| | | | | |
|
| |
| Weighted- | |
| | | | Average | |
| | Number of | | Grant Date | |
| | Shares | | Fair Value | |
Outstanding at July 1, 2019 |
| 155,022 | | $ | 68.35 |
Granted |
| 32,840 | | $ | 100.48 |
Vested |
| (15,753) | | $ | 53.65 |
Forfeited |
| (15,525) | | $ | 98.15 |
Non-attainment |
| (11,672) | | $ | 52.79 |
Outstanding at June 30, 2020 |
| 144,912 | | $ | 80.59 |
As of June 30, 2018,2020, total unrecognized stock‑basedstock-based compensation expense related to Performance Shares was approximately $1.5 million, which is expected to be recognized over the average remaining vesting period of 1.82.2 years.
70
Restricted Stock
Officers, non‑executivenon-executive directors and certain employees may be granted shares of restricted stock that vest on continued service alone (“Restricted Stock”). During fiscal 2018,2020, officers and certain employees were granted 36,17017,710 shares of Restricted Stock. Restricted Stock granted to officers and certain employees vest over three years beginning after a two‑yeartwo-year holding period from the date of grant with one‑thirdone-third of the shares vesting in years three, four and five, respectively.
63
Also, our non-executive directors were granted 8,316 shares of Restricted Stock during fiscal year 2018, our non‑executive directors were granted 14,210 shares of Restricted Stock.2020. The non‑executivenon-executive directors’ shares of Restricted Stock vest 50% immediately and 50% one year after the date of grant.
The Company measuresWe measure the fair value of the Restricted Stock based upon the market price of our common stock as of the date of grant. Restricted Stock is amortized over the applicable vesting period using the straight‑linestraight-line method. Unvested shares of Restricted Stock are subject to forfeiture upon termination of employment or service with the Company.service.
A summary of the status of the Company’s non‑vestedour unvested Restricted Stock for the fiscal year ended June 30, 2018,2020, is presented below:
|
|
|
|
|
|
|
|
|
| Weighted- | |
|
|
|
| Average | |
|
| Number of |
| Grant Date | |
|
| Shares |
| Fair Value | |
Non-vested at July 1, 2017 |
| 166,810 |
| $ | 68.60 |
Granted |
| 50,380 |
| $ | 87.42 |
Vested |
| (69,440) |
| $ | 72.99 |
Forfeited |
| (2,967) |
| $ | 73.55 |
Non-vested at June 30, 2018 |
| 144,783 |
| $ | 72.94 |
| | | | | |
|
| |
| Weighted- | |
| | | | Average | |
| | Number of | | Grant Date | |
| | Shares | | Fair Value | |
Outstanding at July 1, 2019 |
| 142,969 | | $ | 77.13 |
Granted |
| 26,026 | | $ | 123.72 |
Vested |
| (63,054) | | $ | 92.90 |
Forfeited |
| (9,894) | | $ | 121.12 |
Outstanding at June 30, 2020 |
| 96,047 | | $ | 90.40 |
As of June 30, 2018,2020, total unrecognized stock‑basedstock-based compensation expense related to Restricted Stock was approximately $5.0$3.3 million, which is expected to be recognized over the weighted‑averageweighted-average vesting period of 3.03.1 years.
8. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has 10,000,000 authorized and unissued shares of $.01 par value Preferred Stock as of June 30, 2018 and 2017.
Common Stock Issuances
During the fiscal years ended June 30, 2018, 2017 and 2016, options to purchase 48,123, 17,198 and 2,500 shares, respectively, were exercised, resulting in proceeds of approximately $2.9 million, $0.5 million and $0.1 million, respectively.
9. EARNINGS PER SHARE (“EPS”)
Basic earnings (loss) earnings per common share were computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities. Unvested stock‑basedstock-based compensation awards that contain non‑forfeitablenon-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings per share pursuant to the two‑classtwo-class method. The Company’sOur unvested restricted stock awards contain non‑forfeitablenon-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. The Company’sOur unexercised stock options, unexercised SSARs and unvested performance
71
stock do not contain rights to dividends. Under the two‑classtwo-class method, the earnings (loss) earnings used to determine basic earnings (loss) earnings per common share are reduced by an amount allocated to participating securities. Use of the two‑classtwo-class method has an immaterial impact on the calculation of basic and diluted earnings (loss) earnings per common share.
The following table summarizes the effects of dilutive securities on diluted EPS for the period:
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended June 30, | |||||||
|
| 2018 |
| 2017 |
| 2016 | |||
|
| (in thousands, except per share data) | |||||||
Net (loss) income available to Royal Gold common stockholders |
| $ | (113,134) |
| $ | 101,530 |
| $ | (77,149) |
Weighted-average shares for basic EPS |
|
| 65,291,855 |
|
| 65,152,782 |
|
| 65,074,455 |
Effect of other dilutive securities |
|
| — |
|
| 125,171 |
|
| — |
Weighted-average shares for diluted EPS |
|
| 65,291,855 |
|
| 65,277,953 |
|
| 65,074,455 |
Basic (loss) earnings per share |
| $ | (1.73) |
| $ | 1.55 |
| $ | (1.18) |
Diluted (loss) earnings per share |
| $ | (1.73) |
| $ | 1.55 |
| $ | (1.18) |
period (amounts in thousands, except share data):
The calculation
| | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||
| | June 30, | | June 30, | | June 30, | |||
|
| 2020 |
| 2019 |
| 2018 | |||
Net income (loss) attributable to Royal Gold common stockholders | | $ | 199,343 | | $ | 93,825 | | $ | (113,134) |
Weighted-average shares for basic EPS | | | 65,523,024 | | | 65,394,627 | | | 65,291,855 |
Effect of other dilutive securities | | | 120,366 | | | 110,908 | | | — |
Weighted-average shares for diluted EPS | | | 65,643,390 | | | 65,505,535 | | | 65,291,855 |
Basic earnings (loss) per share | | $ | 3.04 | | $ | 1.43 | | $ | (1.73) |
Diluted earnings (loss) per share | | $ | 3.03 | | $ | 1.43 | | $ | (1.73) |
64
ROYAL GOLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. INCOME TAXES
For financial reporting purposes, (Loss) incomeIncome (loss) before income taxes includes the following components:
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended June 30, | |||||||
|
| 2018 |
| 2017 |
| 2016 | |||
|
| (Amounts in thousands) | |||||||
United States |
| $ | (39,662) |
| $ | 15,253 |
| $ | (230) |
Foreign |
|
| (64,917) |
|
| 103,613 |
|
| (21,528) |
|
| $ | (104,579) |
| $ | 118,866 |
| $ | (21,758) |
The Company’s
| | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||
| | 2020 | | 2019 | | 2018 | |||
| | (Amounts in thousands) | |||||||
United States |
| $ | 35,446 |
| $ | (3,776) |
| $ | (39,662) |
Foreign | |
| 157,150 | |
| 110,353 | |
| (64,917) |
| | $ | 192,596 | | $ | 106,577 | | $ | (104,579) |
Our Income tax (benefit) expense consisted of:
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended June 30, | |||||||
|
| 2018 |
| 2017 |
| 2016 | |||
|
| (Amounts in thousands) | |||||||
Current: |
|
|
|
|
|
|
|
|
|
Federal |
| $ | 24,621 |
| $ | 13,975 |
| $ | 45,878 |
State |
|
| 253 |
|
| 308 |
|
| 135 |
Foreign |
|
| 22,741 |
|
| 10,602 |
|
| 19,650 |
|
| $ | 47,615 |
| $ | 24,885 |
| $ | 65,663 |
Deferred and others: |
|
|
|
|
|
|
|
|
|
Federal |
| $ | (2,253) |
| $ | (1,443) |
| $ | (6,986) |
State |
|
| (223) |
|
| (18) |
|
| (78) |
Foreign |
|
| (30,367) |
|
| 3,017 |
|
| 2,081 |
|
| $ | (32,843) |
| $ | 1,556 |
| $ | (4,983) |
Total income tax expense |
| $ | 14,772 |
| $ | 26,441 |
| $ | 60,680 |
| | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||
| | 2020 | | 2019 | | 2018 | |||
| | (Amounts in thousands) | |||||||
Current: |
| |
|
| |
|
| |
|
Federal | | $ | 18,320 | | $ | (6,974) | | $ | 24,621 |
State | |
| 347 | |
| (13) | |
| 253 |
Foreign | |
| 10,078 | |
| 26,230 | |
| 22,741 |
| | $ | 28,745 | | $ | 19,243 | | $ | 47,615 |
Deferred and others: | |
|
| |
|
| |
|
|
Federal | | $ | (1,047) | | $ | 916 | | $ | (2,253) |
State | |
| (19) | |
| 17 | |
| (223) |
Foreign | |
| (31,333) | |
| (2,678) | |
| (30,367) |
| | $ | (32,399) | | $ | (1,745) | | $ | (32,843) |
Total income tax (benefit) expense | | $ | (3,654) | | $ | 17,498 | | $ | 14,772 |
The provision for income taxes for the fiscal years ended June 30, 2018, 20172020, 2019 and 2016,2018, differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre‑taxpre-tax income (net of
72
non‑controlling non-controlling interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences:
| | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||
| | 2020 | | 2019 | | 2018 | |||
| | (Amounts in thousands) | |||||||
Total expense (benefit) computed by applying federal rates |
| $ | 40,445 |
| $ | 22,381 |
| $ | (29,343) |
State and provincial income taxes, net of federal benefit | |
| 304 | |
| 135 | |
| (104) |
Excess depletion | |
| (1,291) | |
| (867) | |
| (1,440) |
Estimates for uncertain tax positions | |
| (11,146) | |
| 3,180 | |
| 8,574 |
Statutory tax attributable to non-controlling interest | |
| 654 | |
| 1,013 | |
| 1,736 |
Effect of foreign earnings | |
| (8,249) | |
| (6,921) | |
| 1,230 |
Effect of foreign earnings indefinitely reinvested | |
| — | |
| — | |
| (19,004) |
Realized foreign exchange gains | |
| — | |
| — | |
| 18,330 |
Unrealized foreign exchange gains | |
| (286) | |
| (38) | |
| (1,610) |
Effects of US income tax reform | | | — | | | — | |
| 30,675 |
Effects of Swiss income tax reform | | | (72,669) | | | — | | | — |
Changes in estimates | |
| 24 | |
| (1,538) | |
| (70) |
Valuation allowance | | | 47,840 | | | (47) | | | 6,337 |
Other | |
| 720 | |
| 200 | |
| (539) |
Total income tax (benefit) expense | | $ | (3,654) | | $ | 17,498 | | $ | 14,772 |
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year Ended June 30, | |||||||
|
| 2018 |
| 2017 |
| 2016 | |||
|
| (Amounts in thousands) | |||||||
Total expense computed by applying federal rates |
| $ | (29,343) |
| $ | 41,603 |
| $ | (7,615) |
State and provincial income taxes, net of federal benefit |
|
| (104) |
|
| 78 |
|
| (1) |
Excess depletion |
|
| (1,440) |
|
| (1,517) |
|
| (882) |
Estimates for uncertain tax positions |
|
| 8,574 |
|
| 2,870 |
|
| 1,866 |
Statutory tax attributable to non-controlling interest |
|
| 1,736 |
|
| 3,162 |
|
| 1,838 |
Effect of foreign earnings |
|
| 1,230 |
|
| 3,046 |
|
| 61,576 |
Effect of foreign earnings indefinitely reinvested |
|
| (19,004) |
|
| (22,922) |
|
| 3,406 |
Realized foreign exchange gains |
|
| 18,330 |
|
| — |
|
| — |
Unrealized foreign exchange gains |
|
| (1,610) |
|
| (746) |
|
| (2,439) |
Effects of US income tax reform |
|
| 30,675 |
|
| — |
|
| — |
Changes in estimates |
|
| (70) |
|
| (3,676) |
|
| 1,641 |
Valuation allowance |
|
| 6,337 |
|
| 4,374 |
|
| 849 |
Other |
|
| (539) |
|
| 169 |
|
| 441 |
|
| $ | 14,772 |
| $ | 26,441 |
| $ | 60,680 |
65
The current year effective tax rate includes the impact of U.S. tax legislation, as discussed below, the effects of a non-cash functional currency election to file certain Canadian income tax returnsFederal Act on Tax Reform and AHV Financing in U.S. dollars,Switzerland and the effectsrelease of the royalty impairments. Prior to the functional currency election, certain deferredan uncertain tax liabilities were measured on the difference between adjusted Canadian dollar acquisition cost and Canadian dollar tax basis. These deferred tax liabilities were then marked-to market every quarter, for income tax expense (benefit) purposes, to account for changes in the Canadian dollar to U.S. dollar exchange rate. Post-election, the applicable deferred tax liabilities will be measured on the difference between U.S. GAAP value and U.S. dollar tax basis.
On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act (the “Act”), was enacted and is effective for tax years including January 1, 2018. Certain other aspects of the Act are not effective for fiscal June 30 companies until July 1, 2018.
The Act, among other things, reduced the U.S. corporate income tax rate to 21% starting January 1, 2018. As the Company is a fiscal year tax payer, we applied a blended U.S. federal income tax rate of approximately 28.1% for the fiscal year ending June 30, 2018. The blended percentage was calculated on a pro-rata percentage of the number of days before and after January 1, 2018. The Company’s U.S. federal corporate income tax rate will be 21% for the fiscal year commencing on July 1, 2018 and all future years.
ASC 740, Income Taxes, requires recognition of the effects of tax law changes in the period of enactment. As a result, the Company recorded a net charge (expense) of $30.7 million for the year ended June 30, 2018. This amount is included in Income tax expense on our consolidated statements of operations and comprehensive (loss) income. The tax expense consists of three components: (i) a $12.3 million charge relating to the one-time mandatory tax on the net accumulated post-1986 untaxed earnings and profits of the Company’s foreign subsidiaries, which we will elect to pay over an eight-year period, (ii) a $1.2 million chargeposition resulting from the re-measurement of the Company’s net deferreda settlement agreement with a foreign tax assets and liabilities, and (iii) a $17.2 million charge related to re-measurement of the U.S. income tax impacts resulting from foreign uncertain tax positions.authority.
The net $30.7 million charge represents what the Company believes is a reasonable estimate of the impact of the Act. As the net charge is based on currently available information and interpretations, which are continuing to evolve, all amounts should be considered provisional. The Company will continue to analyze additional information and guidance related to the Act as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. The
73
final impacts may differ from the recorded amounts as of June 30, 2018 and the Company will continue to refine such amounts within the measurement period provided by Staff Accounting Bulletin No. 118 (“SAB 118”). The Company expects to complete its analysis no later than the second quarter of fiscal year 2019.
The Company is in the process of assessing the Act’s impact, if any, on its indefinite reinvestment assertion. If there are any changes to the indefinite reinvestment assertion as a result of our analysis of the Act, the Company will disclose any tax impacts in the appropriate period, pursuant to SAB 118.
The tax effects of temporary differences and carryforwards, which give rise to our deferred tax assets and liabilities at June 30, 20182020 and 2017,2019, are as follows:
|
|
|
|
|
|
|
|
| 2018 |
| 2017 | ||
|
| (Amounts in thousands) | ||||
Deferred tax assets: |
|
|
|
|
|
|
Stock-based compensation |
| $ | 805 |
| $ | 5,979 |
Net operating losses |
|
| 1,933 |
|
| 5,341 |
Foreign tax credits |
|
| 11,172 |
|
| 19,869 |
Other |
|
| 7,346 |
|
| 7,382 |
Total deferred tax assets |
|
| 21,256 |
|
| 38,571 |
Valuation allowance |
|
| (12,811) |
|
| (6,474) |
Net deferred tax assets |
| $ | 8,445 |
| $ | 32,097 |
Deferred tax liabilities: |
|
|
|
|
|
|
Mineral property basis |
| $ | (74,274) |
| $ | (122,870) |
Unrealized foreign exchange gains |
|
| (664) |
|
| (1,097) |
2019 Notes |
|
| (2,631) |
|
| (8,634) |
Investment in Peak Gold joint venture |
|
| (4,359) |
|
| (5,475) |
Other |
|
| (213) |
|
| (595) |
Total deferred tax liabilities |
|
| (82,141) |
|
| (138,671) |
Total net deferred taxes |
| $ | (73,696) |
| $ | (106,574) |
| | | | | | |
| | 2020 | | 2019 | ||
| | (Amounts in thousands) | ||||
Deferred tax assets: |
| |
|
| |
|
Stock-based compensation | | $ | 1,313 | | $ | 1,118 |
Net operating losses | |
| 104 | |
| 56 |
Foreign tax credits | | | 17,159 | | | 11,125 |
Amortizable tax goodwill | | | 67,287 | | | — |
Other | |
| 7,713 | |
| 7,960 |
Total deferred tax assets | |
| 93,576 | |
| 20,259 |
Valuation allowance | |
| (60,604) | |
| (12,764) |
Net deferred tax assets | | $ | 32,972 | | $ | 7,495 |
Deferred tax liabilities: | |
|
| |
|
|
Mineral property basis | | $ | (67,639) | | $ | (74,360) |
Unrealized foreign exchange gains | |
| (582) | |
| (582) |
Investment in Peak Gold joint venture | | | (3,955) | | | (4,353) |
Other | |
| (346) | |
| (150) |
Total deferred tax liabilities | |
| (72,522) | |
| (79,445) |
Total net deferred taxes | | $ | (39,550) | | $ | (71,950) |
The Company reviewsWe review the measurement of itsour deferred tax assets at each balance sheet date. The Company’s analysis indicates a cumulative three-years of historical losses primarily as the result of fiscal year 2018 and 2016 impairments of certain non-producing assets. Considering all available positive and negative evidence, including but not limited to recent earnings history and forecasted future results, the Company believes it is more likely-than-not that all net deferred tax assets not currently burdened with a valuation allowance will be fully realized. As of June 30, 20182020, and 2017, the Company had $12.82019, we recorded a valuation allowance of $60.6 million and $6.5$12.8 million, of valuation allowances recorded, respectively. The valuation allowance remaining at June 30, 20182020 is attributable to US foreign tax credits, andSwiss amortizable tax goodwill, capital loss and other tax attribute carryforwards in non‑USnon-US subsidiaries.
At June 30, 20182020 and 2017, the Company2019, we had $7.1$0.4 million and $32.1$0.2 million of net operating loss carry forwards, respectively. The decrease in the net operating loss carry forwards is primarily attributable to the utilization of net operating losses by non‑U.S. subsidiaries. The majority of the tax loss carry forwards are in jurisdictions that allow a twenty yeartwenty-year carry forward period. As a result, these losses do not begin to expire until the 20362038 tax year, and the Company anticipates the losses will be fully utilized.
74
As of June 30, 20182020, and 2017, the Company2019, we had $36.3$25.4 million and $28.5$36.5 million of unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’sour effective income tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2017 |
| 2016 | |||
|
| (Amounts in thousands) | |||||||
Total gross unrecognized tax benefits at beginning of year |
| $ | 28,542 |
| $ | 26,960 |
| $ | 26,120 |
Additions / Reductions for tax positions of current year |
|
| 1,624 |
|
| 1,394 |
|
| 840 |
Additions / Reductions for tax positions of prior years |
|
| 6,180 |
|
| 188 |
|
| — |
Reductions due to settlements with taxing authorities |
|
| — |
|
| — |
|
| — |
Reductions due to lapse of statute of limitations |
|
| — |
|
| — |
|
| — |
Total amount of gross unrecognized tax benefits at end of year |
| $ | 36,346 |
| $ | 28,542 |
| $ | 26,960 |
| | | | | | | | | |
| | 2020 | | 2019 | | 2018 | |||
| | (Amounts in thousands) | |||||||
Total gross unrecognized tax benefits at beginning of year |
| $ | 36,547 |
| $ | 36,346 |
| $ | 28,542 |
Additions / Reductions for tax positions of current year | |
| 537 | |
| 1,709 | |
| 1,624 |
Additions / Reductions for tax positions of prior years | | | (694) | | | (912) | | | 6,180 |
Reductions due to settlements with taxing authorities | |
| (11,001) | |
| (596) | |
| — |
Total amount of gross unrecognized tax benefits at end of year | | $ | 25,389 | | $ | 36,547 | | $ | 36,346 |
The Company or one of its subsidiaries filesWe file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal, state and local, and non‑U.S.non-U.S. income tax examinations by tax authorities
66
for fiscal years before 2014. As a result of (i) statutes of limitation that will begin to expire within the next 12 months in various jurisdictions, (ii) possible settlements of audit‑related issues with taxing authorities in various jurisdictions, with respect to which none of the issues are individually significant, and (iii) additional accrual of exposure and interest on existing items, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will notmay decrease by $24 million in the next 12 months.
The Company’sOur continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as part of itsour income tax expense. At June 30, 20182020 and 2017,2019, the amount of accrued income‑tax‑relatedincome-tax-related interest and penalties was $9.8 million and $6.8 million, respectively.$12.6 million. The gross unrecognized tax benefits reflected in the tabular reconciliation do not include interest and penalties and are not reduced by advanced deposits of $12.8$12.6 million made to taxing authorities.
11. SUPPLEMENTAL CASH FLOW INFORMATION
The Company’sOur supplemental cash flow information for the fiscal years endingended June 30, 2018, 20172020, 2019 and 20162018 is as follows:
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| 2018 |
| 2017 |
| 2016 | |||
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| (Amounts in thousands) | |||||||
Cash paid (received) during the period for: |
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Interest |
| $ | 16,049 |
| $ | 18,999 |
| $ | 17,691 |
Income taxes, net of refunds |
| $ | (3,058) |
| $ | 26,835 |
| $ | 76,072 |
Non-cash investing and financing activities: |
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Dividends declared |
| $ | 64,811 |
| $ | 62,066 |
| $ | 59,388 |
| | | | | | | | | |
| | 2020 | | 2019 | | 2018 | |||
| | (Amounts in thousands) | |||||||
Cash paid (received) during the period for: |
| |
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| |
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| |
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Interest | | $ | 4,900 | | $ | 10,638 | | $ | 16,049 |
Income taxes, net of refunds | | $ | 31,555 | | $ | 44,435 | | $ | (3,058) |
Non-cash investing and financing activities: | |
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| |
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Dividends declared | | $ | 72,463 | | $ | 68,473 | | $ | 64,814 |
12. FAIR VALUE MEASUREMENTS
ASC 820 establishesFair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, we utilize a three-tier fair value hierarchy, thatwhich prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of themeasuring fair value hierarchy under ASC 820 are described below:as follows:
Level 1: Quoted prices for identical instruments in active markets;
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model‑derivedmodel-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
75
Level 3: Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following table sets forth the Company’sour financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy.
| | | | | | | | | | | | | | | |
| | As of June 30, 2020 | |||||||||||||
| | | | Fair Value | |||||||||||
|
| Carrying Amount |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Assets (amounts in thousands): | | | | | | | | | | | | | | | |
Marketable equity securities(1) | | $ | 17,863 | | $ | 17,863 | | $ | 13,858 | | $ | 4,005 | | $ | — |
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| As of June 30, 2018 | |||||||||||||
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| Carrying |
| Fair Value | |||||||||||
|
| Amount |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Assets (In thousands): |
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Marketable equity securities(1) |
| $ | 19,210 |
| $ | 19,210 |
| $ | 19,210 |
| $ | — |
| $ | — |
Total assets |
| $ | 19,210 |
| $ | 19,210 |
| $ | 19,210 |
| $ | — |
| $ | — |
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Liabilities (In thousands): |
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Debt(2) |
| $ | 434,236 |
| $ | 393,132 |
| $ | 393,132 |
| $ | — |
| $ | — |
Total liabilities |
| $ | 434,236 |
| $ | 393,132 |
| $ | 393,132 |
| $ | — |
| $ | — |
(1) |
| Included in Other assets on |
|
|
The Company’sOur marketable equity securities classified within Level 1 of the fair value hierarchy are valued using quoted market prices in active markets. The fair value of the Level 1 marketable equity securities is calculated as the quoted market price of the marketable equity securitymarkets multiplied by the quantity of shares heldheld. The carrying value of our revolving credit facility (Note 6) approximates fair value as of June 30, 2020. The warrants issued by the Company. The Company’s debtTriStar (Note 5) classified within Level 12 of the fair
67
value hierarchy is valued using quoted pricesare model-derived (Black-Scholes) valuations in anwhich the significant inputs are observable in active market. markets.
As of June 30, 2018, the Company also2020, we had assets that, under certain conditions, are subject to measurement at fair value on a non‑recurringnon-recurring basis like those associated with stream and royalty interests, intangible assets and other long‑livedlong-lived assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if any of these assets are determined to be impaired. If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs. Refer to Note 4 for discussion of inputs used to develop fair value for those stream and royalty interests that were determined to be impaired during the fiscal years ended June 30, 2018 and 2016.2020.
13. MAJOR SOURCES OF REVENUE
Operators that contributed greater than 10% of the Company’sour total revenue for any of fiscal years 2018, 20172020, 2019 or 20162018 were as follows (revenue amounts in thousands):
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| ||||||||||||||||
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| Fiscal Year 2018 |
| Fiscal Year 2017 |
| Fiscal Year 2016 |
| |||||||||||||||||||||||||
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| Percentage of |
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| Percentage of |
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| Percentage of |
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| total |
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| total |
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| total |
| ||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
| | Fiscal Year Ended June 30, 2020 | | Fiscal Year Ended June 30, 2019 | | Fiscal Year Ended June 30, 2018 |
| |||||||||||||||||||||||||
| | | | | Percentage of | | | | | Percentage of | | | | | Percentage of |
| ||||||||||||||||
| | | | | total | | | | | total | | | | | total |
| ||||||||||||||||
Operator |
| Revenue |
| revenue |
| Revenue |
| revenue |
| Revenue |
| revenue |
| | Revenue | | revenue | | Revenue | | revenue | | Revenue | | revenue |
| ||||||
Centerra |
| $ | 133,534 |
| 29.1 | % | $ | 136,737 |
| 31.0 | % | $ | 125,438 |
| 34.9 | % |
| $ | 131,425 |
| 26.3 | % | $ | 101,011 |
| 23.9 | % | $ | 133,534 |
| 29.1 | % |
Barrick |
|
| 108,285 |
| 23.6 | % |
| 104,009 |
| 23.6 | % |
| 49,683 |
| 13.8 | % | |
| 125,458 |
| 25.2 | % |
| 99,283 |
| 23.5 | % |
| 108,285 |
| 23.6 | % |
Teck |
|
| 57,413 |
| 12.5 | % |
| 60,251 |
| 13.7 | % |
| 49,243 |
| 13.7 | % | |
| 74,219 |
| 14.9 | % |
| 69,264 |
| 16.4 | % |
| 57,413 |
| 12.5 | % |
14. SEGMENT INFORMATION
We manage our business under 2 reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long-lived assets (stream and royalty interests, net) as of June 30, 2020 and 2019 are geographically distributed as shown in the following table (amounts in thousands):
| | | | | | | | | | | | | | | | | | |
| | As of June 30, 2020 | | As of June 30, 2019 | ||||||||||||||
| | | | | | | | Total stream | | | | | | | | Total stream | ||
| | Stream | | Royalty | | and royalty | | Stream | | Royalty | | and royalty | ||||||
|
| interest |
| interest |
| interests, net |
| interest |
| interest |
| interests, net | ||||||
Canada | | $ | 702,732 | | $ | 189,855 | | $ | 892,587 | | $ | 767,749 | | $ | 200,251 | | $ | 968,000 |
Dominican Republic | | | 406,469 | | | — | | | 406,469 | | | 451,585 | | | — | | | 451,585 |
Chile | | | 277,661 | | | 223,922 | | ��� | 501,583 | | | 301,507 | | | 214,226 | | | 515,733 |
Africa | | | 215,463 | | | 321 | | | 215,784 | | | 89,556 | | | 321 | | | 89,877 |
Mexico | | | — | | | 75,951 | | | 75,951 | | | — | | | 83,748 | | | 83,748 |
United States | | | — | | | 159,445 | | | 159,445 | | | — | | | 163,398 | | | 163,398 |
Australia | | | — | | | 30,006 | | | 30,006 | | | — | | | 31,944 | | | 31,944 |
Rest of world | | | 12,038 | | | 25,050 | | | 37,088 | | | 12,038 | | | 22,993 | | | 35,031 |
Total | | $ | 1,614,363 | | $ | 704,550 | | $ | 2,318,913 | | $ | 1,622,435 | | $ | 716,881 | | $ | 2,339,316 |
Our reportable segments for purposes of assessing performance are shown below (amounts in thousands):
| | | | | | | | | | | | | | | |
| | Year Ended June 30, 2020 | |||||||||||||
|
| Revenue |
| Cost of sales |
| Production taxes |
| Depletion |
| Segment gross profit | |||||
Stream interests | | $ | 359,868 | | $ | 83,890 | | $ | — | | $ | 144,678 | | $ | 131,300 |
Royalty interests | | | 138,951 | | | — | | | 3,824 | | | 30,369 | | | 104,758 |
Total | | $ | 498,819 | | $ | 83,890 | | $ | 3,824 | | $ | 175,047 | | $ | 236,058 |
76
68
| | | | | | | | | | | | | | | |
| | Year Ended June 30, 2019 | |||||||||||||
|
| Revenue |
| Cost of sales |
| Production taxes |
| Depletion |
| Segment gross profit | |||||
Stream interests | | $ | 305,824 | | $ | 77,535 | | $ | — | | $ | 127,770 | | $ | 100,519 |
Royalty interests | | | 117,232 | | | — | | | 4,112 | | | 35,086 | | | 78,034 |
Total | | $ | 423,056 | | $ | 77,535 | | $ | 4,112 | | $ | 162,856 | | $ | 178,553 |
| | | | | | | | | | | | | | | |
| | Year Ended June 30, 2018 | |||||||||||||
|
| Revenue |
| Cost of sales |
| Production taxes |
| Depletion |
| Segment gross profit | |||||
Stream interests | | $ | 324,516 | | $ | 83,839 | | $ | — | | $ | 129,662 | | $ | 111,015 |
Royalty interests | | | 134,526 | | | — | | | 2,268 | | | 33,924 | | | 98,334 |
Total | | $ | 459,042 | | $ | 83,839 | | $ | 2,268 | | $ | 163,586 | | $ | 209,349 |
A reconciliation of total segment gross profit to the consolidated Income (loss) before income taxes is shown below (amounts in thousands):
| | | | | | | | | |
| | Year Ended June 30, | |||||||
| | | 2020 | | | 2019 | | | 2018 |
Total segment gross profit | | $ | 236,058 | | $ | 178,553 | | $ | 209,349 |
| | | | | | | | | |
Costs and expenses | | | | | | | | | |
General and administrative expenses | | | 30,195 | | | 30,488 | | | 35,464 |
Exploration costs | | | 5,190 | | | 7,158 | | | 8,946 |
Depreciation | | | 387 | | | 200 | | | 110 |
Impairment of royalty interests | | | 1,341 | | | — | | | 239,364 |
Operating income (loss) | | | 198,945 | | | 140,707 | | | (74,535) |
Fair value changes in equity securities | | | 1,418 | | | (6,800) | | | — |
Interest and other income | | | 2,046 | | | 2,320 | | | 4,170 |
Interest and other expense | | | (9,813) | | | (29,650) | | | (34,214) |
Income (loss) before income taxes | | $ | 192,596 | | $ | 106,577 | | $ | (104,579) |
69
Our revenue by reportable segment for the fiscal year’s ended June 30, 2020, 2019, and 2018 is geographically distributed as shown in the following table (amounts in thousands):
| | | | | | | | | |
| | Fiscal Year Ended June 30, | |||||||
|
| 2020 |
| 2019 |
| 2018 | |||
Stream interests: | | | | | | | | | |
Canada | | $ | 158,736 | | $ | 123,152 | | $ | 142,244 |
Dominican Republic | | | 96,978 | | | 82,844 | | | 95,055 |
Chile | | | 74,219 | | | 69,264 | | | 57,413 |
Africa | | | 29,935 | | | 30,564 | | | 29,804 |
Total stream interests | | $ | 359,868 | | $ | 305,824 | | $ | 324,516 |
| | | | | | | | | |
Royalty interests: | | | | | | | | | |
United States | | $ | 48,692 | | $ | 34,845 | | $ | 39,496 |
Canada | | | 30,524 | | | 32,602 | | | 24,254 |
Mexico | | | 32,731 | | | 27,224 | | | 42,959 |
Australia | | | 15,252 | | | 12,806 | | | 13,710 |
Africa | | | 2,575 | | | 1,416 | | | 2,098 |
Chile | | | — | | | — | | | 473 |
Rest of world | | | 9,177 | | | 8,339 | | | 11,536 |
Total royalty interests | | $ | 138,951 | | $ | 117,232 | | $ | 134,526 |
Total revenue | | $ | 498,819 | | $ | 423,056 | | $ | 459,042 |
15. COMMITMENTS AND CONTINGENCIES
Khoemacau Silver Stream Acquisition
Pursuant to its Khoemacau silver stream transaction in February 2019, RGLD Gold made its first advance payment of $65.8 million on November 5, 2019, its second advance payment of $22.0 million on February 2, 2020, and its third advance payment of $47.9 million on April 3, 2020. As of June 30, 2020, our conditional funding schedule for $76.3 million up to $129.3 million pursuant to our Khoemacau silver stream acquisition remains subject to certain conditions. On July 5, 2020, RGLD Gold made its fourth advance payment of $11.1 million.
Ilovica Gold Stream Acquisition
As of June 30, 2018, the Company’s2020, our conditional funding schedule of $163.75 million, as part of itsthe Ilovica gold stream acquisition in October 2014, remains subject to certain conditions.
Voisey’s Bay
70
The Company indirectly owns a royalty on the Voisey’s Bay mine in Newfoundland and Labrador owned by Vale Newfoundland & Labrador Limited (“VNL”). The royalty is directly owned by the Labrador Nickel Royalty Limited Partnership (“LNRLP”), in which the Company’s wholly‑owned indirect subsidiary, Voisey’s Bay Holding Corporation, is the general partner and 90% owner. The remaining 10% interest in LNRLP is owned by Altius Royalty Corporation, a company unrelated to Royal Gold.ROYAL GOLD, INC.
On October 6, 2017, LNRLP filed a Fresh as Amended Statement of Claim amending the original October 16, 2009 Statement of Claim and amendments thereto made in December 2014, in the Supreme Court of Newfoundland and Labrador Trial Division against Vale Inco Limited, now known as Vale Canada Limited and its wholly-owned subsidiaries, Vale Inco Atlantic Sales Limited and VNL, related to calculation of the NSR on the sale of concentrates, including nickel concentrates, from the Voisey’s Bay mine. LNRLP asserts that the defendants have incorrectly calculated the NSR since production at Voisey’s Bay began in late 2005 and since defendants began processing Voisey’s Bay concentrates at the new Long Harbour processing facility, and that the defendants have breached their contractual duties of good faith in several ways. LNRLP requests an order in respect of the correct calculation of future payments, and unspecified damages for non-payment and underpayment of past royalties to the date of the claim, together with additional damages until the date of trial, interest, costs and other damages. Trial is expected to commence in the first quarter of fiscal 2019.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15.16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of selected quarterly financial information (unaudited). Some amounts in the below table may not sum‑upsum-up in total as a result of rounding.
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| Net (loss) income |
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| Operating |
| attributable to |
| Basic (loss) |
| Diluted (loss) | ||||
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| (loss) |
| Royal Gold |
| earnings per |
| earnings per | ||||
|
| Revenue |
| income |
| stockholders |
| share |
| share | |||||
|
| (Amounts in thousands except per share data) | |||||||||||||
Fiscal year 2018 quarter-ended: |
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|
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|
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|
|
|
|
September 30, |
| $ | 112,476 |
| $ | 41,720 |
| $ | 28,631 |
| $ | 0.44 |
| $ | 0.44 |
December 31, |
|
| 114,348 |
|
| 40,962 |
|
| (14,765) |
|
| (0.23) |
|
| (0.23) |
March 31, |
|
| 115,983 |
|
| (193,464) |
|
| (153,650) |
|
| (2.35) |
|
| (2.35) |
June 30, |
|
| 116,235 |
|
| 36,247 |
|
| 26,650 |
|
| 0.41 |
|
| 0.41 |
|
| $ | 459,042 |
| $ | (74,535) |
| $ | (113,134) |
| $ | (1.73) |
| $ | (1.73) |
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Fiscal year 2017 quarter-ended: |
| (Amounts in thousands except per share data) | |||||||||||||
September 30, |
| $ | 117,947 |
| $ | 40,891 |
| $ | 29,787 |
| $ | 0.46 |
| $ | 0.46 |
December 31, |
|
| 106,961 |
|
| 34,481 |
|
| 28,062 |
|
| 0.43 |
|
| 0.43 |
March 31, |
|
| 106,972 |
|
| 35,951 |
|
| 23,661 |
|
| 0.36 |
|
| 0.36 |
June 30, |
|
| 108,934 |
|
| 34,619 |
|
| 20,020 |
|
| 0.31 |
|
| 0.31 |
|
| $ | 440,814 |
| $ | 145,942 |
| $ | 101,530 |
| $ | 1.55 |
| $ | 1.55 |
| | | | | | | | | | | | | | | |
| | | | | | | | Net income | | | | | | | |
| | | | | | | | attributable to | | | | | | | |
| | | | | Operating | | Royal Gold | | Basic earnings | | Diluted earnings | ||||
| | Revenue | | income | | stockholders | | per share | | per share | |||||
| | (Amounts in thousands except per share data) | |||||||||||||
Fiscal year 2020 quarter-ended: |
| |
|
| |
|
| |
|
| |
|
| |
|
September 30, | | $ | 118,774 | | $ | 48,781 | | $ | 70,453 | | $ | 1.07 | | $ | 1.07 |
December 31, | |
| 123,643 | |
| 53,307 | |
| 41,321 | |
| 0.63 | |
| 0.63 |
March 31, | |
| 136,437 | |
| 52,281 | |
| 38,554 | |
| 0.59 | |
| 0.59 |
June 30, | |
| 119,965 | |
| 44,576 | |
| 49,015 | |
| 0.75 | |
| 0.75 |
| | $ | 498,819 | | $ | 198,945 | | $ | 199,343 | | $ | 3.04 | | $ | 3.03 |
| |
| | | | | | | | | | | | | |
Fiscal year 2019 quarter-ended: | | (Amounts in thousands except per share data) | |||||||||||||
September 30, | | $ | 99,992 | | $ | 25,333 | | $ | 15,008 | | $ | 0.23 | | $ | 0.23 |
December 31, | |
| 97,592 | |
| 31,449 | |
| 23,586 | |
| 0.36 | |
| 0.36 |
March 31, | |
| 109,778 | |
| 43,201 | |
| 28,772 | |
| 0.44 | |
| 0.44 |
June 30, | |
| 115,694 | |
| 40,724 | |
| 26,459 | |
| 0.40 | |
| 0.40 |
| | $ | 423,056 | | $ | 140,707 | | $ | 93,825 | | $ | 1.43 | | $ | 1.43 |
77
71
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of June 30, 2018,Under the Company’s management,supervision and with the participation of the President andour management, including our Chief Executive Officer (the principal executive officer) and Chief Financial Officer, and Vice President Strategy (the principal financial and accounting officer) of the Company, carried out an evaluation ofwe evaluated the effectiveness of the design and operation of the Company’sour disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e)as of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).June 30, 2020. Based on suchthis evaluation, the Company’s President andour Chief Executive Officer and its Chief Financial Officer and Vice President Strategy have concluded that as of June 30, 2018, the Company’sour disclosure controls and procedures were effective to provideas of June 30, 2020, at the reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods and that such information is accumulated and communicated to the Company’s management, including the President and Chief Executive Officer and its Chief Financial Officer and Vice President Strategy, as appropriate to allow timely decisions regarding required disclosure.level.
Disclosure controls and procedures involve human diligence and compliance and are subject to lapses in judgment and breakdowns resulting from human failures. As a result, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
(b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act.reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2018.2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Framework). Based on management’s assessment and those criteria, management concluded that as of June 30, 2018, our internal control over financial reporting was effective as of June 30, 2020.
Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on our internal control over financial reporting as of June 30, 2020.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during our fourth fiscal quarter ended June 30, 2020, that materially affected, or is effective.reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our President and Chief Executive Office (the principal executive officer)Officer and Chief Financial Officer, and Vice President Strategy (the principal financial and accounting officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the CompanyRoyal Gold have been detected.
Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on our internal control over financial reporting as of June 30, 2018.
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(c) Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a‑15(f) under the Exchange Act during our fourth fiscal quarter ended June 30, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
(d) Report of Independent Registered Public Accounting Firm
TheTo the Board of Directors and ShareholdersStockholders of Royal Gold, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Royal Gold, Inc.’s internal control over financial reporting as of June 30, 2018,2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
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Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Royal Gold, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of June 30, 2018,2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of June 30, 20182020 and 2017,2019, the related consolidated statements of operations and comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended June 30, 2018,2020, and the related notes and our report dated August 9, 20186, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Denver, Colorado
August 9, 20186, 2020
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item iswill be included in the Company’sour Proxy Statement for its 2018our 2020 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2018,2020, and is incorporated by reference in this Annual Report on Form 10‑K.10-K.
The Company’s Code of Business Conduct and Ethics within the meaning of Item 406 of Regulation S‑K adopted by the SEC under the Exchange Act that applies to our principal executive officer and principal financial and accounting officer is available on the Company’s website at www.royalgold.com and in print without charge to any stockholder who requests a copy. Requests for copies should be directed to Royal Gold, Inc., Attention: Vice President, General Counsel and Secretary, 1660 Wynkoop Street, Suite 1000, Denver, Colorado, 80202. The Company intends to satisfy the disclosure requirements of Item 5.05 of Form 8‑K regarding any amendment to, or a waiver from, a provision of the Company’s Code of Business Conduct and Ethics by posting such information on the Company’s website.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item iswill be included in the Company’sour Proxy Statement for its 2018our 2020 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2018,2020, and is incorporated by reference in this Annual Report on Form 10‑K.10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item iswill be included in the Company’sour Proxy Statement for its 2018our 2020 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2018,2020, and is incorporated by reference in this Annual Report on Form 10‑K.10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item iswill be included in the Company’sour Proxy Statement for its 2018our 2020 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2018,2020, and is incorporated by reference in this Annual Report on Form 10‑K.10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item iswill be included in the Company’sour Proxy Statement for its 2018our 2020 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2018,2020, and is incorporated by reference in this Annual Report on Form 10‑K.10-K.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
Index to Financial Statements
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| Page | |
| 41 | |
| 43 | |
Consolidated Statements of Operations and Comprehensive Income (Loss) | | 44 |
| 45 | |
| 46 | |
| 47 |
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(b) Exhibits
Exhibit | Description | ||||
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3.1 | | ||||
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3.2 | | ||||
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3.3 | | ||||
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3.4 | | ||||
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4.1 | | ||||
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10.1▲ | | ||||
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10.2▲ | | ||||
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10.3▲ | | ||||
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10.4▲ | | ||||
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10.5▲ | | ||||
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10.6▲ | | ||||
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10.7▲ | | ||||
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Exhibit | Description | ||||
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10.8▲ | | ||||
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10.9▲ | | ||||
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10.10▲ | | ||||
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10.11▲ | | ||||
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10.12▲ | | ||||
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10.13▲ | | ||||
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10.14▲ | | ||||
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10.15▲ | | ||||
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10.16▲ | | ||||
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10.17▲ | | ||||
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10.18▲ | | ||||
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10.19▲ | | ||||
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Exhibit | Description | ||||
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10.20▲ | | ||||
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10.21▲ | | ||||
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10.22▲ | | ||||
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10.23▲ | | ||||
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10.24▲ | | ||||
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10.25▲ | | ||||
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10.26▲ | | ||||
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10.27▲ | | ||||
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10.28▲ | | ||||
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10.29▲ | | ||||
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10.30▲ | | ||||
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10.31▲ | | ||||
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Exhibit | Description | ||||
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10.32▲ | | ||||
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10.33▲ | | ||||
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10.34▲ | | ||||
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10.35▲ | | ||||
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10.36 | | ||||
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10.37 | | ||||
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10.38 | | Royalty Deed and Agreement, dated effective as of April 15, 1991, between ECM, Inc. and Royal Crescent Valley, Inc. (filed as Exhibit 10(1) to Royal Gold’s Annual Report on Form 10-K for the year ended June 30, 1991, and incorporated herein by reference) | |||
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10.39 | | ||||
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10.40 | | ||||
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10.41 | | ||||
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10.42† | | ||||
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Exhibit | Description | ||||
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10.43† | | ||||
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10.44 | | ||||
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10.45 | | ||||
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10.46 | | ||||
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10.47 | | ||||
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10.48 | | ||||
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10.49 | | ||||
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10.50 | | ||||
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10.51 | | ||||
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Exhibit | Description | ||||
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10.52 | | ||||
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21.1* | | ||||
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23.1* | | ||||
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31.1* | | ||||
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31.2* | | Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 | |||
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32.1* | | ||||
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32.2* | | ||||
| | | |||
101.INS* | | Inline XBRL Instance Document | |||
| | | |||
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document | |||
| | | |||
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
| | | |||
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||
| | | |||
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
| | | |||
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
| | | |||
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed or furnished herewith. |
| |
▲ | Identifies a management contract or compensation plan or arrangement. |
| |
† | Certain portions of this exhibit have been omitted by redacting a portion of the text (indicated by asterisks in the text). This exhibit has been filed separately with the U.S. Securities and Exchange Commission pursuant to a request for confidential treatment. |
(b) Exhibits
Reference is made to the Exhibit Index beginning on page 82 hereof.
The optional summary in Item 16 has not been included in this Form 10-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | |
| ROYAL GOLD, INC. | ||
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| ||
| | ||
Date: August | By: | /s/ | |
| |
| |
| | President, Chief Executive Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Date: August | By: | /s/ |
| |
|
| | President, Chief Executive Officer and Director |
| | |
Date: August | By: | /s/ |
| |
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| | Chief Financial Officer and |
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Date: August | By: | /s/ WILLIAM M. HAYES |
| | William M. Hayes |
| | Chairman |
| | |
Date: August | By: | /s/ C. KEVIN MCARTHUR |
| | C. Kevin McArthur |
| | Director |
| | |
Date: August | By: | /s/ JAMIE C. SOKALSKY |
| | Jamie C. Sokalsky |
| | Director |
| | |
Date: August | By: | /s/ |
| | Chris |
| | Director |
| | |
Date: August | By: | /s/ RONALD J. VANCE |
| | Ronald J. Vance |
| | Director |
| | |
Date: August | By: | /s/ SYBIL E. VEENMAN |
| | Sybil E. Veenman |
| | Director |
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