UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended SeptemberJune 30, 20222023
or
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-13357
Royal Gold, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
| 84-0835164 |
(State or Other Jurisdiction of | | (I.R.S. Employer |
Incorporation) | | Identification No.) |
| | |
1144 15th Street, Suite 2500 | | |
Denver, Colorado | | 80202 |
(Address of Principal Executive Offices) | | (Zip Code) |
Registrant’s telephone number, including area code (303) 573-1660
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol |
| Name of the Exchange on which Registered |
Common Stock, $0.01 par value | | RGLD | | Nasdaq Global Select Market |
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 65,643,71065,688,734 shares of Royal Gold common stock outstanding as of OctoberJuly 27, 2022.2023.
In this Quarterly Report on Form 10-Q, Royal Gold, Inc., together with its subsidiaries, is collectively referred to as “Royal Gold,” “we,” “us,” or “our.”
INDEX
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PART I | | FINANCIAL INFORMATION | | |
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| | Consolidated Statements of Operations and Comprehensive Income | | 4 |
| | | 5 | |
| | | 6 | |
| | | 7 | |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
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2
ITEM 1. FINANCIAL STATEMENTS
ROYAL GOLD, INC.
Consolidated Balance Sheets
(Unaudited, amounts in thousands except share data)
| | | | | | | | | | | | |
|
| September 30, |
| December 31, |
| June 30, |
| December 31, | ||||
|
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
ASSETS | | | | | | | | | | | | |
Cash and equivalents | | $ | 122,238 | | $ | 143,551 | | $ | 106,157 | | $ | 118,586 |
Royalty receivables | | | 28,476 | | | 54,088 | | | 36,458 | | | 49,405 |
Income tax receivable | | | 15,056 | | | 4,915 | | | 9,602 | | | 3,066 |
Stream inventory | | | 13,691 | | | 11,607 | | | 10,657 | | | 12,656 |
Prepaid expenses and other | | | 2,322 | | | 1,835 | | | 2,375 | | | 2,120 |
Total current assets | | | 181,783 | | | 215,996 | | | 165,249 | | | 185,833 |
Stream and royalty interests, net (Note 3) | | | 3,084,380 | | | 2,443,752 | ||||||
Stream and royalty interests, net (Note 2) | | | 3,155,561 | | | 3,237,402 | ||||||
Other assets | | | 110,630 | | | 97,284 | | | 118,899 | | | 111,287 |
Total assets | | $ | 3,376,793 | | $ | 2,757,032 | | $ | 3,439,709 | | $ | 3,534,522 |
LIABILITIES | | | | | | | | | | | | |
Accounts payable | | $ | 7,332 | | $ | 6,475 | | $ | 8,552 | | $ | 6,686 |
Dividends payable | | | 22,985 | | | 22,966 | | | 24,646 | | | 24,627 |
Income tax payable | | | 21,716 | | | 19,070 | | | 15,603 | | | 16,065 |
Other current liabilities | | | 12,443 | | | 12,917 | | | 14,267 | | | 16,209 |
Total current liabilities | | | 64,476 | | | 61,428 | | | 63,068 | | | 63,587 |
| | | | | | | ||||||
Debt (Note 5) | | | 446,327 | | | — | ||||||
Debt (Note 4) | | | 395,529 | | | 571,572 | ||||||
Deferred tax liabilities | | | 140,197 | | | 87,705 | | | 136,136 | | | 138,156 |
Other liabilities | | | 5,854 | | | 6,688 | | | 9,083 | | | 7,738 |
Total liabilities | | | 656,854 | | | 155,821 | | | 603,816 | | | 781,053 |
Commitments and contingencies (Note 12) | | | | | | | ||||||
Commitments and contingencies (Note 11) | | | | | | | ||||||
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 65,592,597 and 65,564,364 shares outstanding, respectively | | | 656 | | | 656 | ||||||
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,609,736 and 65,592,597 shares outstanding, respectively | | | 656 | | | 656 | ||||||
Additional paid-in capital | | | 2,211,353 | | | 2,206,159 | | | 2,217,559 | | | 2,213,123 |
Accumulated earnings | | | 495,570 | | | 381,929 | | | 605,347 | | | 527,314 |
Total Royal Gold stockholders’ equity | | | 2,707,579 | | | 2,588,744 | | | 2,823,562 | | | 2,741,093 |
Non-controlling interests | | | 12,360 | | | 12,467 | | | 12,331 | | | 12,376 |
Total equity | | | 2,719,939 | | | 2,601,211 | | | 2,835,893 | | | 2,753,469 |
Total liabilities and equity | | $ | 3,376,793 | | $ | 2,757,032 | | $ | 3,439,709 | | $ | 3,534,522 |
The accompanying notes are an integral part of these consolidated financial statements.
3
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited, amounts in thousands except share data)
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Revenue (Note 6) | | $ | 131,429 | | $ | 174,431 | | | 440,226 | | $ | 485,047 |
| | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | |
Cost of sales (excludes depreciation, depletion and amortization) | | | 23,221 | | | 27,230 | | | 69,670 | | | 73,367 |
General and administrative | | | 7,554 | | | 7,129 | | | 25,797 | | | 21,272 |
Production taxes | | | 1,119 | | | 2,054 | | | 4,765 | | | 6,042 |
Depreciation, depletion and amortization | | | 37,761 | | | 50,611 | | | 129,739 | | | 139,935 |
Total costs and expenses | | | 69,655 | | | 87,024 | | | 229,971 | | | 240,616 |
| | | | | | | | | | | | |
Operating income | | | 61,774 | | | 87,407 | | | 210,255 | | | 244,431 |
| | | | | | | | | | | | |
Fair value changes in equity securities | | | 356 | | | 176 | | | (1,221) | | | 4,035 |
Interest and other income | | | 3,571 | | | 819 | | | 5,665 | | | 2,227 |
Interest and other expense | | | (8,814) | | | (1,908) | | | (11,110) | | | (4,873) |
Income before income taxes | | | 56,887 | | | 86,494 | | | 203,589 | | | 245,820 |
| | | | | | | | | | | | |
Income tax expense | | | (10,954) | | | (16,028) | | | (20,347) | | | (39,242) |
Net income and comprehensive income | | | 45,933 | | | 70,466 | | | 183,242 | | | 206,578 |
Net income and comprehensive income attributable to non-controlling interests | | | (141) | | | (290) | | | (633) | | | (699) |
Net income and comprehensive income attributable to Royal Gold common stockholders | | $ | 45,792 | | $ | 70,176 | | $ | 182,609 | | $ | 205,879 |
Net income per share attributable to Royal Gold common stockholders: | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.70 | | $ | 1.07 | | $ | 2.78 | | $ | 3.14 |
Basic weighted average shares outstanding | | | 65,579,834 | | | 65,556,608 | | | 65,571,737 | | | 65,552,586 |
Diluted earnings per share | | $ | 0.70 | | $ | 1.07 | | $ | 2.78 | | $ | 3.13 |
Diluted weighted average shares outstanding | | | 65,660,152 | | | 65,627,845 | | | 65,661,197 | | | 65,628,827 |
Cash dividends declared per common share | | $ | 0.35 | | $ | 0.30 | | $ | 1.05 | | $ | 0.90 |
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | ||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Revenue (Note 5) | | $ | 144,042 | | $ | 146,441 | | $ | 314,434 | | $ | 308,796 |
| | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | |
Cost of sales (excludes depreciation, depletion and amortization) | | | 23,367 | | | 23,810 | | | 48,387 | | | 46,450 |
General and administrative | | | 9,093 | | | 9,312 | | | 20,093 | | | 18,243 |
Production taxes | | | 1,274 | | | 1,425 | | | 3,263 | | | 3,646 |
Depreciation, depletion and amortization | | | 38,412 | | | 43,989 | | | 84,741 | | | 91,976 |
Total costs and expenses | | | 72,146 | | | 78,536 | | | 156,484 | | | 160,315 |
| | | | | | | | | | | | |
Operating income | | | 71,896 | | | 67,905 | | | 157,950 | | | 148,481 |
| | | | | | | | | | | | |
Fair value changes in equity securities | | | (509) | | | (2,191) | | | 291 | | | (1,577) |
Interest and other income | | | 2,650 | | | 1,118 | | | 4,912 | | | 2,093 |
Interest and other expense | | | (8,408) | | | (1,398) | | | (17,582) | | | (2,296) |
Income before income taxes | | | 65,629 | | | 65,434 | | | 145,571 | | | 146,701 |
| | | | | | | | | | | | |
Income tax (expense) benefit | | | (2,029) | | | 5,911 | | | (17,900) | | | (9,393) |
Net income and comprehensive income | | | 63,600 | | | 71,345 | | | 127,671 | | | 137,308 |
Net income and comprehensive income attributable to non-controlling interests | | | (151) | | | (205) | | | (347) | | | (492) |
Net income and comprehensive income attributable to Royal Gold common stockholders | | $ | 63,449 | | $ | 71,140 | | $ | 127,324 | | $ | 136,816 |
Net income per share attributable to Royal Gold common stockholders: | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.97 | | $ | 1.08 | | $ | 1.94 | | $ | 2.08 |
Basic weighted average shares outstanding | | | 65,605,391 | | | 65,569,190 | | | 65,600,213 | | | 65,567,621 |
Diluted earnings per share | | $ | 0.97 | | $ | 1.08 | | $ | 1.93 | | $ | 2.08 |
Diluted weighted average shares outstanding | | | 65,762,903 | | | 65,678,320 | | | 65,736,028 | | | 65,661,653 |
Cash dividends declared per common share | | $ | 0.375 | | $ | 0.35 | | $ | 0.75 | | $ | 0.70 |
The accompanying notes are an integral part of these consolidated financial statements.
4
ROYAL GOLD, INC.
Consolidated Statements of Changes in Stockholders’ Equity
Three months ended SeptemberJune 30, 2022,2023, and 20212022
(unaudited, amounts in thousands except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Royal Gold Stockholders | | | | | | | | Royal Gold Stockholders | | | | | | | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | | | | | | | | | | | | Additional | | | | | | | | | | ||
| | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | ||||||||||||||
| | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | ||||||||||
Balance at June 30, 2022 |
| 65,569,687 | | $ | 656 |
| $ | 2,210,809 | | $ | 472,764 | | $ | 12,429 | | $ | 2,696,658 | |||||||||||||||||
Balance at March 31, 2023 |
| 65,599,348 | | $ | 656 |
| $ | 2,215,362 | | $ | 566,545 | | $ | 12,369 | | $ | 2,794,932 | |||||||||||||||||
Stock-based compensation and related share issuances |
| 22,910 | |
| — |
|
| 544 | |
| — | |
| — | |
| 544 |
| 10,388 | |
| — |
|
| 2,197 | |
| — | |
| — | |
| 2,197 |
Distributions to non-controlling interests | | — | |
| — |
|
| — | |
| — | |
| (210) | |
| (210) | | — | |
| — |
|
| — | |
| — | |
| (189) | |
| (189) |
Net income and comprehensive income |
| — | |
| — |
|
| — | | | 45,792 | |
| 141 | |
| 45,933 |
| — | |
| — |
|
| — | | | 63,449 | |
| 151 | |
| 63,600 |
Dividends declared |
| — | |
| — |
|
| — | |
| (22,986) | |
| — | |
| (22,986) |
| — | |
| — |
|
| — | |
| (24,647) | |
| — | |
| (24,647) |
Balance at September 30, 2022 |
| 65,592,597 | | $ | 656 |
| $ | 2,211,353 | | $ | 495,570 | | $ | 12,360 | | $ | 2,719,939 | |||||||||||||||||
Balance at June 30, 2023 |
| 65,609,736 | | $ | 656 |
| $ | 2,217,559 | | $ | 605,347 | | $ | 12,331 | | $ | 2,835,893 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Royal Gold Stockholders | | | | | | | | Royal Gold Stockholders | | | | | | | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | | | | | | | | | | | | Additional | | | | | | | | | | ||
| | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | ||||||||||||||
| | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | ||||||||||
Balance at June 30, 2021 |
| 65,551,061 | | $ | 656 |
| $ | 2,203,863 | | $ | 286,249 | | $ | 12,647 | | $ | 2,503,415 | |||||||||||||||||
Balance at March 31, 2022 |
| 65,568,799 | | $ | 656 |
| $ | 2,208,425 | | $ | 424,608 | | $ | 12,425 | | $ | 2,646,114 | |||||||||||||||||
Stock-based compensation and related share issuances |
| 12,741 | |
| — |
|
| 594 | |
| — | |
| — | |
| 594 |
| 888 | |
| — |
|
| 2,384 | |
| — | |
| — | |
| 2,384 |
Distributions to non-controlling interests | | — | |
| — |
|
| — | |
| — | |
| (271) | |
| (271) | | — | |
| — |
|
| — | |
| — | |
| (201) | |
| (201) |
Net income and comprehensive income |
| — | |
| — |
|
| — | |
| 70,176 | |
| 290 | |
| 70,466 |
| — | |
| — |
|
| — | |
| 71,140 | |
| 205 | |
| 71,345 |
Dividends declared |
| — | |
| — |
|
| — | |
| (19,691) | |
| — | |
| (19,691) |
| — | |
| — |
|
| — | |
| (22,984) | |
| — | |
| (22,984) |
Balance at September 30, 2021 |
| 65,563,802 | | $ | 656 |
| $ | 2,204,457 | | $ | 336,734 | | $ | 12,666 | | $ | 2,554,513 | |||||||||||||||||
Balance at June 30, 2022 |
| 65,569,687 | | $ | 656 |
| $ | 2,210,809 | | $ | 472,764 | | $ | 12,429 | | $ | 2,696,658 |
ROYAL GOLD, INC.
Consolidated Statements of Changes in Stockholders’ Equity
Nine MonthsSix months ended SeptemberJune 30, 2022,2023, and 20212022
(unaudited, amounts in thousands except share data)
| | | | | | | | | | | | | | | | | | |||||||||||||||||
| | Royal Gold Stockholders | | | | | | | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||||
| | | | | | | Additional | | | | | | | | | | ||||||||||||||||||
| | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | ||||||||||||||||||||||||
| | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | ||||||||||||||||||||||
Balance at December 31, 2022 |
| 65,592,597 | | $ | 656 |
| $ | 2,213,123 | | $ | 527,314 | | $ | 12,376 | | $ | 2,753,469 | |||||||||||||||||
Stock-based compensation and related share issuances |
| 17,139 | |
| — |
|
| 4,436 | |
| — | |
| — | |
| 4,436 | |||||||||||||||||
Distributions to non-controlling interests | | — | |
| — |
|
| — | |
| — | |
| (392) | |
| (392) | |||||||||||||||||
Net income and comprehensive income |
| — | |
| — |
|
| — | |
| 127,324 | |
| 347 | |
| 127,671 | |||||||||||||||||
Dividends declared |
| — | |
| — |
|
| — | |
| (49,291) | |
| — | |
| (49,291) | |||||||||||||||||
Balance at June 30, 2023 |
| 65,609,736 | | $ | 656 |
| $ | 2,217,559 | | $ | 605,347 | | $ | 12,331 | | $ | 2,835,893 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Royal Gold Stockholders | | | | | | | | Royal Gold Stockholders | | | | | | | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | | | | | | | | | | | | Additional | | | | | | | | | | ||
| | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | ||||||||||||||
| | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | ||||||||||
Balance at December 31, 2021 |
| 65,564,364 | | $ | 656 |
| $ | 2,206,159 | | $ | 381,929 | | $ | 12,467 | | $ | 2,601,211 |
| 65,564,364 | | $ | 656 |
| $ | 2,206,159 | | $ | 381,929 | | $ | 12,467 | | $ | 2,601,211 |
Stock-based compensation and related share issuances |
| 28,233 | |
| — |
|
| 5,194 | |
| — | |
| — | |
| 5,194 |
| 5,323 | |
| — |
|
| 4,650 | |
| — | |
| — | |
| 4,650 |
Distributions to non-controlling interests | | — | |
| — |
|
| — | |
| — | |
| (740) | |
| (740) | | — | |
| — |
|
| — | |
| — | |
| (530) | |
| (530) |
Net income and comprehensive income |
| — | |
| — |
|
| — | |
| 182,609 | |
| 633 | |
| 183,242 |
| — | |
| — |
|
| — | |
| 136,816 | |
| 492 | |
| 137,308 |
Dividends declared |
| — | |
| — |
|
| — | |
| (68,968) | |
| — | |
| (68,968) |
| — | |
| — |
|
| — | |
| (45,981) | |
| — | |
| (45,981) |
Balance at September 30, 2022 |
| 65,592,597 | | $ | 656 |
| $ | 2,211,353 | | $ | 495,570 | | $ | 12,360 | | $ | 2,719,939 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||||
| | Royal Gold Stockholders | | | | | | | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||||
| | | | | | | Additional | | | | | | | | | | ||||||||||||||||||
| | Common Shares | | Paid-In | | Accumulated | | Non-controlling | | Total | ||||||||||||||||||||||||
| | Shares | | Amount | | Capital | | Earnings | | Interests | | Equity | ||||||||||||||||||||||
Balance at December 31, 2020 |
| 65,548,415 | | $ | 656 |
| $ | 2,201,076 | | $ | 189,910 | | $ | 13,037 | | $ | 2,404,679 | |||||||||||||||||
Stock-based compensation and related share issuances |
| 15,387 | |
| — |
|
| 3,381 | |
| — | |
| — | |
| 3,381 | |||||||||||||||||
Distributions to non-controlling interests | | — | |
| — |
|
| — | |
| — | |
| (1,070) | |
| (1,070) | |||||||||||||||||
Net income and comprehensive income |
| — | |
| — |
|
| — | |
| 205,879 | |
| 699 | |
| 206,578 | |||||||||||||||||
Dividends declared |
| — | |
| — |
|
| — | |
| (59,055) | |
| — | |
| (59,055) | |||||||||||||||||
Balance at September 30, 2021 |
| 65,563,802 | | $ | 656 |
| $ | 2,204,457 | | $ | 336,734 | | $ | 12,666 | | $ | 2,554,513 | |||||||||||||||||
Balance at June 30, 2022 |
| 65,569,687 | | $ | 656 |
| $ | 2,210,809 | | $ | 472,764 | | $ | 12,429 | | $ | 2,696,658 |
The accompanying notes are an integral part of these consolidated financial statements.
5
ROYAL GOLD, INC.
Consolidated Statements of Cash Flows
(Unaudited, amounts in thousands)
| | | | | | | | | | | |
| | Nine Months Ended | Six Months Ended | ||||||||
| | September 30, | | September 30, | June 30, | | June 30, | ||||
|
| 2022 |
| 2021 | 2023 |
| 2022 | ||||
Cash flows from operating activities: | | | | | | | | | | | |
Net income and comprehensive income | | $ | 183,242 | | $ | 206,578 | $ | 127,671 | | $ | 137,308 |
Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities: | | | | | | | | | | | |
Depreciation, depletion and amortization | | | 129,739 | | | 139,935 | | 84,741 | | | 91,976 |
Non-cash employee stock compensation expense | | | 6,632 | | | 4,340 | | 4,579 | | | 4,542 |
Fair value changes in equity securities | | | 1,221 | | | (4,035) | | (291) | | | 1,577 |
Deferred tax (benefit) expense | | | (17,757) | | | 8,465 | |||||
Deferred tax benefit | | (7,139) | | | (28,114) | ||||||
Other | | | 734 | | | 1,418 | | 445 | | | 491 |
Changes in assets and liabilities: | | | | | | | | | | | |
Royalty receivables | | | 25,612 | | | (8,643) | | 12,948 | | | 17,220 |
Stream inventory | | | (2,083) | | | 1,678 | | 1,998 | | | (1,564) |
Income tax receivable | | | (10,141) | | | 4,858 | | (6,536) | | | (2,797) |
Prepaid expenses and other assets | | | (3,073) | | | (1,608) | | (2,641) | | | (1,359) |
Accounts payable | | | 857 | | | 2,859 | | 1,866 | | | 592 |
Income tax payable | | | 2,646 | | | 615 | | (462) | | | 4,976 |
Uncertain tax positions | | | — | | | (12,378) | |||||
Other liabilities | | | (1,310) | | | (1,111) | | (597) | | | (3,519) |
Net cash provided by operating activities | | $ | 316,319 | | $ | 342,971 | $ | 216,582 | | $ | 221,329 |
| | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | |
Acquisition of stream and royalty interests | | | (715,829) | | | (384,315) | | (2,670) | | | (37,841) |
Khoemacau subordinated debt facility | | | — | | | (25,000) | |||||
Proceeds from sale of equity securities | | | — | | | 8,651 | |||||
Sale of equity securities | | 107 | | | — | ||||||
Other | | | (676) | | | (910) | | (258) | | | (36) |
Net cash used in investing activities | | $ | (716,505) | | $ | (401,574) | $ | (2,821) | | $ | (37,877) |
| | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | |
Repayment of debt | | | (50,000) | | | (200,000) | | (175,000) | | | — |
Borrowings from revolving credit facility | | | 500,000 | | | 100,000 | |||||
Debt issuance costs | | (1,533) | | | — | ||||||
Net payments from issuance of common stock | | | (1,438) | | | (959) | | 253 | | | 108 |
Common stock dividends | | | (68,938) | | | (59,046) | | (49,271) | | | (45,953) |
Other | | | (751) | | | (3,043) | | (639) | | | (541) |
Net cash provided by (used in) financing activities | | $ | 378,873 | | $ | (163,048) | |||||
Net decrease in cash and equivalents | | | (21,313) | | | (221,651) | |||||
Net cash used in financing activities | $ | (226,190) | | $ | (46,386) | ||||||
Net (decrease) increase in cash and equivalents | | (12,429) | | | 137,066 | ||||||
Cash and equivalents at beginning of period | | | 143,551 | | | 381,859 | | 118,586 | | | 143,551 |
Cash and equivalents at end of period | | $ | 122,238 | | $ | 160,208 | $ | 106,157 | | $ | 280,617 |
The accompanying notes are an integral part of these consolidated financial statements.
6
1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS
Royal Gold, Inc., together with its subsidiaries (“Royal Gold,” the “Company,” “we,” “us,” or “our”), 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 one 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 a mining project that provide the right to revenue or metals produced from the project after deducting contractually specified costs, if any.
Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this Form 10-Q. Operating results for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2022.2023. These interim unaudited consolidated financial statements should be read in conjunction with our Transition Report on Form 10-K for the six monthsyear ended December 31, 2021,2022, filed with the Securities and Exchange Commission (“SEC”) on February 17, 16, 2023 (“2022 (“Transition Report”10-K”).
Recent Accounting Standards
We have evaluated all the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of these unaudited consolidated financial statements and do not believe the future adoption of any such standards will have a material impact on our consolidated financial statements.
2. ACQUISITIONS
Acquisition of Great Bear Royalties Corporation
On September 9, 2022, we completed the previously announced acquisition of all of the issued and outstanding shares of Great Bear Royalties Corporation (“GBR”) for cash consideration of approximately C$199.6 million (US$151.7 million) (“the Acquisition Price”). GBR’s sole material asset is a 2.0% net smelter return royalty (“Great Bear Royalty”) that covers the entirety of the Great Bear Project in the Red Lake district of Ontario, Canada, owned and operated by a subsidiary of Kinross Gold Corporation (“Kinross”). The Great Bear Royalty includes all metals produced from contiguous claims covering 9,140 hectares and will be registered on title to the relevant claims. Royalty payments will be made quarterly with applicable standard deductions. The purchase price was funded with available cash on hand.
As part of the acquisition and in exchange for information and access to the project provided by Kinross, we granted an option to Kinross to purchase a 25% interest in the Great Bear Royalty (0.5% of the 2.0% royalty rate) for an amount equal to 25% of the Acquisition Price, adjusted for inflation, at any time from the transaction closing date until the earlier of a construction decision for the Great Bear Project and 10 years after the transaction closing date.
The Great Bear Royalty is the sole material asset of GBR and represents substantially all the fair value of GBR’s gross assets. As a result, the GBR acquisition has been accounted for as an asset acquisition and the fair values of the GBR assets acquired are shown below:
7
| | | |
| | (in thousands) | |
Purchase Price | | $ | 151,679 |
Cash | | | 315 |
Other assets | | | 293 |
Royalty interests in mineral property (Great Bear royalty) | | | 151,071 |
Total allocated purchase price | | $ | 151,679 |
The $151.1 million allocated fair value of the Great Bear Royalty, plus $2.3 million of direct transaction costs and deferred tax of $53.6 million have been capitalized with the Great Bear Royalty interest and allocated to exploration stage royalty interests within Stream and royalty interests, net on our consolidated balance sheets. The deferred tax was recorded as a gross-up to the Great Bear Royalty mineral interest as prescribed by the applicable guidance.
Acquisition of Additional Royalty Interest on Cortez Complex
On August 2, 2022, we acquired a sliding scale gross royalty (“Cortez Complex Royalty”) on production from an area including the Cortez mine operational area and the Fourmile development project (the “Cortez Complex”) for cash consideration of $525 million. The area within the Cortez Complex is owned or controlled by Nevada Gold Mines LLC (“NGM”), a joint venture between Barrick Gold Corporation (“Barrick”) and Newmont Corporation, with the exception of the Fourmile development project which is 100% owned and operated by Barrick. The royalty is a life of mine sliding scale gross royalty payable at a rate of 0% at a gold price less than $400 per ounce, increasing to 3% at a gold price above $900 per ounce, and is payable on 40% of all production from the Cortez Complex. Based on information available, the royalty would not cover the existing deposits within the Robertson property. At current gold prices the Cortez Complex Royalty is an effective 1.2% gross royalty on the Cortez Complex and is not subject to any stepdowns or caps. Deductions from the Cortez Complex Royalty payments are limited to third-party royalties that existed prior to the creation of the royalty in 2008, which include the existing Crossroads and Pipeline royalties owned by Royal Gold. The purchase price was funded with debt and available cash on hand.
The acquisition has been accounted for as an asset acquisition and the $525 million cash consideration, plus direct acquisition costs, have been recorded and allocated between production and exploration stage royalty interests (Note 3) within Stream and royalty interests, net on our consolidated balance sheets. On the date of acquisition, approximately $199 million and $326 million was allocated to production stage and exploration stage royalty interests, respectively. The acquisition cost of the production stage Cortez Complex Royalty will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by NGM.
The royalty is payable after cumulative production from the Cortez Complex of 15 million gold equivalent ounces from January 1, 2008 onwards. During the quarter ended September 30, 2022, the production threshold was reached and approximately 3,300 ounces of gold production was attributable to the royalty. We expect all production from the Cortez Complex in the fourth quarter of 2022 to be subject to the royalty. The royalty is payable within forty-five days after the end of each calendar quarter.
Lawyers Royalty Acquisition
On March 24, 2022, we acquired a 0.5% net smelter returns royalty (“NSR”) on production from the Lawyers Project, currently operated by Benchmark Metals Inc., which is located in British Columbia, Canada. As part of this transaction, we also acquired a right of first offer (“ROFO”) for an existing 2.0% NSR royalty over the Ranch Project owned by Thesis Gold, Inc. that is located adjacent to the Lawyers Project. We paid $8.0 million in cash consideration for the royalty and ROFO to Guardsmen Resources Inc. The Lawyers Project acquisition has been accounted for as an asset acquisition. The $8.0 million cash consideration, plus direct acquisition costs, have been recorded as an exploration stage royalty interest (Note 3) within Stream and royalty interests, net on our consolidated balance sheets.
Khoemacau Silver Stream
On February 23, 2022, we made an advance payment of $10.0 million toward the option stream which increased our right to receive payable silver produced from Khoemacau from 90% to 93%, and on March 14, 2022, we made our final advance payment of $16.5 million toward the option stream which increased our right to receive payable silver produced from 93%
8
to 100%. Cumulative advance payments of $265 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.
As of September 30, 2022, $25.0 million of the subordinated debt facility, and $4.4 million of accrued interest remains outstanding on the Khoemacau subordinated debt facility, and these amounts are included in Other assets in our consolidated balance sheets. Refer to our Transition Report for further details on the Khoemacau silver stream acquisition and subordinated debt facility.
3. STREAM AND ROYALTY INTERESTS, NET
The following tables summarize our stream and royalty interests, net as of September 30, 2022 and December 31, 2021.
| | | | | | | | | |
As of September 30, 2022 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Net | |||
Production stage stream interests: | | | | | | | | | |
Mount Milligan | | $ | 790,635 | | $ | (379,708) | | $ | 410,927 |
Pueblo Viejo | | | 610,404 | | | (281,730) | | | 328,674 |
Andacollo | | | 388,182 | | | (149,586) | | | 238,596 |
Khoemacau | | | 265,911 | | | (11,621) | | | 254,290 |
Rainy River | | | 175,727 | | | (58,328) | | | 117,399 |
Wassa | | | 146,475 | | | (93,474) | | | 53,001 |
Other | | | 69,100 | | | (11,200) | | | 57,900 |
Total production stage stream interests | | | 2,446,434 | | | (985,647) | | | 1,460,787 |
| | | | | | | | | |
Production stage royalty interests: | | | | | | | | | |
Cortez | | | 280,219 | | | (28,352) | | | 251,867 |
Voisey's Bay | | | 205,724 | | | (117,228) | | | 88,496 |
Red Chris | | | 116,187 | | | (1,797) | | | 114,390 |
Peñasquito | | | 99,172 | | | (56,529) | | | 42,643 |
Other | | | 447,246 | | | (395,641) | | | 51,605 |
Total production stage royalty interests | | | 1,148,548 | | �� | (599,547) | | | 549,001 |
Total production stage stream and royalty interests | | | 3,594,982 | | | (1,585,194) | | | 2,009,788 |
| | | | | | | | | |
Development stage stream interests: | | | | | | | | | |
Other | | | 12,038 | | | — | | | 12,038 |
Development stage royalty interests: | | | | | | | | | |
Côté | | | 45,421 | | | — | | | 45,421 |
Other | | | 73,233 | | | | | | 73,233 |
Total development stage stream and royalty interests | | | 130,692 | | | — | | | 130,692 |
| | | | | | | | | |
Exploration stage stream interests: | | | | | | | | | |
NX Gold | | | 34,253 | | | — | | | 34,253 |
Exploration stage royalty interests: | | | | | | | | | |
Cortez | | | 325,654 | | | — | | | 325,654 |
Great Bear | | | 206,965 | | | — | | | 206,965 |
Pascua-Lama | | | 177,690 | | | — | | | 177,690 |
Red Chris | | | 48,895 | | | — | | | 48,895 |
Côté | | | 29,610 | | | — | | | 29,610 |
Other | | | 120,833 | | | — | | | 120,833 |
Total exploration stage stream and royalty interests | | | 943,900 | | | — | | | 943,900 |
Total stream and royalty interests, net | | $ | 4,669,574 | | $ | (1,585,194) | | $ | 3,084,380 |
9
| | | | | | | | | |
As of December 31, 2021 (Amounts in thousands): |
| Cost |
| Accumulated Depletion | | Net | |||
Production stage stream interests: | | | | | | | | | |
Mount Milligan | | $ | 790,635 | | $ | (336,921) | | $ | 453,714 |
Pueblo Viejo | | | 610,405 | | | (260,321) | | | 350,084 |
Andacollo | | | 388,182 | | | (139,035) | | | 249,147 |
Khoemacau | | | 239,411 | | | (3,402) | | | 236,009 |
Rainy River | | | 175,727 | | | (50,115) | | | 125,612 |
Wassa | | | 146,475 | | | (84,915) | | | 61,560 |
Other | | | 69,101 | | | (4,193) | | | 64,908 |
Total production stage stream interests | | | 2,419,936 | | | (878,902) | | | 1,541,034 |
| | | | | | | | | |
Production stage royalty interests: | | | | | | | | | |
Voisey's Bay | | | 205,724 | | | (113,602) | | | 92,122 |
Red Chris | | | 116,187 | | | — | | | 116,187 |
Peñasquito | | | 99,172 | | | (53,022) | | | 46,150 |
Cortez | | | 80,681 | | | (23,225) | | | 57,456 |
Other | | | 447,799 | | | (387,364) | | | 60,435 |
Total production stage royalty interests | | | 949,563 | | | (577,213) | | | 372,350 |
Total production stage stream and royalty interests | | | 3,369,499 | | | (1,456,115) | | | 1,913,384 |
| | | | | | | | | |
Development stage stream interests: | | | | | | | | | |
Other | | | 12,037 | | | — | | | 12,037 |
Development stage royalty interests: | | | | | | | | | |
Côté | | | 45,421 | | | — | | | 45,421 |
Other | | | 54,755 | | | — | | | 54,755 |
Total development stage stream and royalty interests | | | 112,213 | | | — | | | 112,213 |
| | | | | | | | | |
Exploration stage stream interests: | | | | | | | | | |
NX Gold | | | 30,974 | | | — | | | 30,974 |
Exploration stage royalty interests: | | | | | | | | | |
Pascua-Lama | | | 177,690 | | | — | | | 177,690 |
Red Chris | | | 48,895 | | | — | | | 48,895 |
Côté | | | 29,610 | | | — | | | 29,610 |
Other | | | 130,986 | | | — | | | 130,986 |
Total exploration stage royalty interests | | | 418,155 | | | — | | | 418,155 |
Total stream and royalty interests, net | | $ | 3,899,867 | | $ | (1,456,115) | | $ | 2,443,752 |
2. STREAM AND ROYALTY INTERESTS, NET
MountMilligan
On October 4, 2022, Centerra Gold, Inc. (“Centerra”) announced the highlights of an updated life of mine plan for Mount Milligan which provided, among other things, a four-year extension of the mine life to 2033The following tables summarize our stream and increases to the proven and probable reserves. As a result of the increase in proven and probable reserves, the gold and copper depletion rates on our Mount Milligan stream decreased to $416 per ounce of gold and $1.06 per pound of copperroyalty interests, net as of SeptemberJune 30, 2022 from $703 per ounce of gold2023 and $1.53 per pound of copper. Centerra reported that it expects to file a new technical report detailing the life of mine plan within 45 days of October 4,December 31, 2022.
4. MARKETABLE EQUITY SECURITIES
As of September 30, 2022, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc, 250,000 common shares of Goldon Resources Ltd. and 1,242,500 common shares of Mountain Boy Minerals Ltd. The common shares of Goldon Resources Ltd. and Mountain Boy Minerals Ltd. were acquired as part of the GBR acquisition. Our marketable equity securities are measured at fair value (Note 11) each reporting period with any changes in fair value recognized in net income.
| | | | | | | | | |
As of June 30, 2023 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Net | |||
Production stage stream interests: | | | | | | | | | |
Mount Milligan | | $ | 790,635 | | $ | (413,284) | | $ | 377,351 |
Pueblo Viejo | | | 610,404 | | | (295,407) | | | 314,997 |
Andacollo | | | 388,182 | | | (157,761) | | | 230,421 |
Khoemacau | | | 265,911 | | | (29,275) | | | 236,636 |
Rainy River | | | 175,727 | | | (68,476) | | | 107,251 |
Other | | | 232,703 | | | (121,328) | | | 111,375 |
Total production stage stream interests | | | 2,463,562 | | | (1,085,531) | | | 1,378,031 |
| | | | | | | | | |
Production stage royalty interests: | | | | | | | | | |
Cortez (Legacy Zone and CC Zone) | | | 353,850 | | | (47,402) | | | 306,448 |
Voisey's Bay | | | 205,724 | | | (119,356) | | | 86,368 |
Red Chris | | | 116,187 | | | (3,758) | | | 112,429 |
Peñasquito | | | 99,172 | | | (59,407) | | | 39,765 |
Other | | | 447,687 | | | (403,171) | | | 44,516 |
Total production stage royalty interests | | | 1,222,620 | | | (633,094) | | | 589,526 |
Total production stage stream and royalty interests | | | 3,686,182 | | | (1,718,625) | | | 1,967,557 |
| | | | | | | | | |
Development stage stream interests: | | | | | | | | | |
Other | | | 12,038 | | | — | | | 12,038 |
Development stage royalty interests: | | | | | | | | | |
Côté | | | 45,421 | | | — | | | 45,421 |
Other | | | 81,510 | | | — | | | 81,510 |
Total development stage stream and royalty interests | | | 138,969 | | | — | | | 138,969 |
| | | | | | | | | |
Exploration stage stream interests: | | | | | | | | | |
Xavantina | | | 19,565 | | | — | | | 19,565 |
Exploration stage royalty interests: | | | | | | | | | |
Cortez (Legacy Zone and CC Zone) | | | 456,471 | | | — | | | 456,471 |
Great Bear | | | 209,106 | | | — | | | 209,106 |
Pascua-Lama | | | 177,690 | | | — | | | 177,690 |
Red Chris | | | 48,895 | | | — | | | 48,895 |
Côté | | | 29,610 | | | — | | | 29,610 |
Other | | | 107,698 | | | — | | | 107,698 |
Total exploration stage stream and royalty interests | | | 1,049,035 | | | — | | | 1,049,035 |
Total stream and royalty interests, net | | $ | 4,874,186 | | $ | (1,718,625) | | $ | 3,155,561 |
108
The fair value of our marketable equity securities increased $0.4 million for the three months ended September 30, 2022, and decreased $1.2 million for nine months ended September 30, 2022, and increased $0.2 million and $4.0 million for the three and nine months ended September 30, 2021, respectively. These changes are included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income. The carrying value of our marketable equity securities as of September 30, 2022 and December 31, 2021, was $0.7 million and $1.7 million, respectively, and is included in Other assets on our consolidated balance sheets.
| | | | | | | | | | | | |
As of December 31, 2022 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Impairments | | Net | ||||
Production stage stream interests: | | | | | | | | | | | | |
Mount Milligan | | $ | 790,635 | | $ | (392,804) | | $ | — | | $ | 397,831 |
Pueblo Viejo | | | 610,404 | | | (289,537) | | | — | | | 320,867 |
Andacollo | | | 388,182 | | | (151,870) | | | — | | | 236,312 |
Khoemacau | | | 265,911 | | | (15,905) | | | — | | | 250,006 |
Rainy River | | | 175,727 | | | (61,601) | | | — | | | 114,126 |
Other | | | 215,576 | | | (110,711) | | | — | | | 104,865 |
Total production stage stream interests | | | 2,446,435 | | | (1,022,428) | | | — | | | 1,424,007 |
| | | | | | | | | | | | |
Production stage royalty interests: | | | | | | | | | | | | |
Cortez (Legacy Zone and CC Zone) | | | 353,772 | | | (35,276) | | | — | | | 318,496 |
Voisey's Bay | | | 205,724 | | | (118,327) | | | — | | | 87,397 |
Red Chris | | | 116,187 | | | (1,797) | | | — | | | 114,390 |
Peñasquito | | | 99,172 | | | (57,772) | | | — | | | 41,400 |
Other | | | 447,535 | | | (398,513) | | | — | | | 49,022 |
Total production stage royalty interests | | | 1,222,390 | | | (611,685) | | | — | | | 610,705 |
Total production stage stream and royalty interests | | | 3,668,825 | | | (1,634,113) | | | — | | | 2,034,712 |
| | | | | | | | | | | | |
Development stage stream interests: | | | | | | | | | | | | |
Other | | | 12,038 | | | — | | | — | | | 12,038 |
Development stage royalty interests: | | | | | | | | | | | | |
Côté | | | 45,421 | | | — | | | — | | | 45,421 |
Other | | | 74,225 | | | — | | | — | | | 74,225 |
Total development stage stream and royalty interests | | | 131,684 | | | — | | | — | | | 131,684 |
| | | | | | | | | | | | |
Exploration stage stream interests: | | | | | | | | | | | | |
Xavantina | | | 34,253 | | | — | | | — | | | 34,253 |
Exploration stage royalty interests: | | | | | | | | | | | | |
Cortez (Legacy Zone and CC Zone) | | | 456,318 | | | — | | | — | | | 456,318 |
Great Bear | | | 209,106 | | | — | | | — | | | 209,106 |
Pascua-Lama | | | 177,690 | | | — | | | — | | | 177,690 |
Red Chris | | | 48,895 | | | — | | | — | | | 48,895 |
Côté | | | 29,610 | | | — | | | — | | | 29,610 |
Other | | | 119,421 | | | — | | | (4,287) | | | 115,134 |
Total exploration stage royalty interests | | | 1,075,293 | | | — | | | (4,287) | | | 1,071,006 |
Total stream and royalty interests, net | | $ | 4,875,802 | | $ | (1,634,113) | | $ | (4,287) | | $ | 3,237,402 |
5.3. MARKETABLE EQUITY SECURITIES
As of June 30, 2023, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc and 250,000 common shares of Goldon Resources Ltd. Our marketable equity securities are measured at fair value (Note 10) each reporting period with any changes in fair value recognized in net income (amounts in thousands).
| | | | | | |
|
| June 30, | | December 31, | ||
|
| 2023 | | 2022 | ||
Carrying value of marketable securities(1) | | $ | 547 | | $ | 373 |
Change in fair value of marketable securities | | $ | (509) | | $ | (1,503) |
(1) Included in Other Assets on our consolidated balance sheets.
9
4. DEBT
Our debt as of SeptemberJune 30, 20222023 and December 31, 20212022 consists of the following (amounts in thousands):
| | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 | | As of December 31, 2021 | ||||||||||||||
|
| Principal |
| Debt Issuance Costs |
| Total |
| Principal |
| Debt Issuance Costs1 |
| Total | ||||||
| | | (Amounts in thousands) | | | (Amounts in thousands) | ||||||||||||
Revolving credit facility | | $ | 450,000 | | $ | (3,673) | | $ | 446,327 | | $ | — | | $ | (4,408) | | $ | (4,408) |
Total debt | | $ | 450,000 | | $ | (3,673) | | $ | 446,327 | | $ | — | | $ | (4,408) | | $ | (4,408) |
(1) Included in Other assets on our consolidated balance sheets.
| | | | | | | | | | | | | | | | | | |
| | As of June 30, 2023 | | As of December 31, 2022 | ||||||||||||||
|
| Principal |
| Debt Issuance Costs |
| Total |
| Principal |
| Debt Issuance Costs |
| Total | ||||||
| | | (Amounts in thousands) | | | (Amounts in thousands) | ||||||||||||
Revolving credit facility | | $ | 400,000 | | $ | (4,471) | | $ | 395,529 | | $ | 575,000 | | $ | (3,428) | | $ | 571,572 |
Total debt | | $ | 400,000 | | $ | (4,471) | | $ | 395,529 | | $ | 575,000 | | $ | (3,428) | | $ | 571,572 |
Revolving credit facility
On July 2, 2022,March 6, 2023, we borrowed $500repaid $75 million underand on June 6, 2023, we repaid $100 million of outstanding borrowings on our revolving credit facility.
On June 28, 2023, we entered into a fifth amendment to our revolving credit facility fordated as of June 2, 2017, as amended. The fifth amendment extended the acquisition ofscheduled maturity date from July 7, 2026 to June 28, 2028, replaced LIBOR with Secured Overnight Financing Rate (“Term SOFR”) as a benchmark interest rate and made certain other administrative changes to the Cortez Complex Royalty, and on September 6, 2022, we repaid $50 million of the outstanding borrowings. Refer to Note 2 of our notes to consolidated financial statements for further discussion on the Cortez Complex Royalty acquisition.existing revolving credit facility.
As of SeptemberJune 30, 2022,2023, we had $450$400 million outstanding and $550$600 million available under our revolving credit facility dated June 2, 2017, and as amended.facility. The interest rate on borrowings under our revolving credit facility as of SeptemberJune 30, 2022,2023, was LIBOR plus 1.10%1.20% for an all-in rate of 4.2%6.7%. Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $3.9$7.8 million and $4.4$16.3 million for the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, and $1.0$0.2 million and $2.1$0.5 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively. We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under theour revolving credit facility as of SeptemberJune 30, 2022.2023.
We may repay any borrowings under theour revolving credit facility at any time without premium or penalty.
6.5. REVENUE
Revenue Recognition
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
11
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.
10
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 occurs. 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 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 for that period. 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 and are recorded in the period that the actual amounts are known. Please also refer to our “Use of Estimates” accounting policy discussed in our Transition Report.2022 10-K. For the three months ended SeptemberJune 30, 2022,2023, royalty revenue that was estimated or was attributable to metal production for a period prior to SeptemberJune 30, 2022,2023, was not material.
Disaggregation of Revenue
We have identified two 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 10.9.
Revenue by metal type attributable to each of our revenue sources is disaggregated as follows (amounts in thousands):
| | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | ||||||||
| June 30, |
| June 30, |
| June 30, |
| June 30, | ||||
| 2023 | | 2022 | | 2023 | | 2022 | ||||
Stream revenue: | | | | | | | | | | | |
Gold | $ | 80,227 | | $ | 75,325 | | $ | 158,856 | | $ | 152,827 |
Silver | | 19,230 | | | 12,892 | | | 37,539 | | | 24,331 |
Copper | | 6,558 | | | 16,662 | | | 24,610 | | | 32,972 |
Total stream revenue | $ | 106,015 | | $ | 104,879 | | $ | 221,005 | | $ | 210,130 |
Royalty revenue: | | | | | | | | | | | |
Gold | $ | 30,169 | | $ | 28,974 | | $ | 73,037 | | $ | 66,890 |
Silver | | 2,721 | | | 3,512 | | | 5,667 | | | 7,829 |
Copper | | 1,572 | | | 3,281 | | | 6,630 | | | 9,986 |
Other | | 3,565 | | | 5,795 | | | 8,095 | | | 13,961 |
Total royalty revenue | $ | 38,027 | | $ | 41,562 | | $ | 93,429 | | $ | 98,666 |
Total revenue | $ | 144,042 | | $ | 146,441 | | $ | 314,434 | | $ | 308,796 |
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Revenue attributable to our principal stream and royalty interests is disaggregated as follows (amounts in thousands):
| | | | | | | | | | | | | | |
| | | | Three Months Ended | | Six Months Ended | ||||||||
| | | | June 30, |
| June 30, |
| June 30, |
| June 30, | ||||
| | Metal(s) | | 2023 | | 2022 | | 2023 | | 2022 | ||||
Stream revenue: | | | | | | | | | | | | | | |
Mount Milligan | | Gold & Copper | | $ | 41,208 | | $ | 45,627 | | $ | 87,863 | | $ | 88,043 |
Pueblo Viejo | | Gold & Silver | | | 23,540 | | | 19,812 | | | 45,898 | | | 43,076 |
Khoemacau | | Silver | | | 8,881 | | | 5,202 | | | 18,035 | | | 7,591 |
Andacollo | | Gold | | | 7,823 | | | 11,721 | | | 20,757 | | | 27,395 |
Other | | Gold & Silver | | | 24,563 | | | 22,517 | | | 48,452 | | | 44,025 |
Total stream revenue | | | | $ | 106,015 | | $ | 104,879 | | $ | 221,005 | | $ | 210,130 |
Royalty revenue: | | | | | | | | | | | | | | |
Cortez Legacy Zone | | Gold | | $ | 14,305 | | $ | 8,138 | | $ | 37,393 | | $ | 24,852 |
Cortez CC Zone | | Gold | | | 3,520 | | | — | | | 6,726 | | | — |
Peñasquito | | Gold, Silver, Lead & Zinc | | | 6,105 | | | 9,664 | | | 13,538 | | | 22,758 |
Other | | Various | | | 14,097 | | | 23,760 | | | 35,772 | | | 51,056 |
Total royalty revenue | | | | $ | 38,027 | | $ | 41,562 | | $ | 93,429 | | $ | 98,666 |
Total revenue | | | | $ | 144,042 | | $ | 146,441 | | $ | 314,434 | | $ | 308,796 |
Please refer to Note 9 for the geographical distribution of our revenue by reportable segment.
Revenue by metal type attributable to each of our revenue sources is disaggregated as follows (amounts in thousands):
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | ||||||||
| September 30, |
| September 30, |
| September 30, |
| September 30, | ||||
| 2022 | | 2021 | | 2022 | | 2021 | ||||
Stream revenue: | | | | | | | | | | | |
Gold | $ | 76,833 | | $ | 83,318 | | $ | 229,661 | | $ | 240,016 |
Silver | | 12,063 | | | 13,877 | | | 36,393 | | | 35,132 |
Copper | | 9,836 | | | 18,726 | | | 42,809 | | | 50,540 |
Total stream revenue | $ | 98,732 | | $ | 115,921 | | $ | 308,863 | | $ | 325,688 |
Royalty revenue: | | | | | | | | | | | |
Gold | $ | 23,163 | | $ | 43,417 | | $ | 90,054 | | $ | 111,826 |
Silver | | 2,648 | | | 3,952 | | | 10,477 | | | 12,517 |
Copper | | 1,285 | | | 4,967 | | | 11,271 | | | 12,960 |
Other | | 5,601 | | | 6,174 | | | 19,561 | | | 22,056 |
Total royalty revenue | $ | 32,697 | | $ | 58,510 | | $ | 131,363 | | $ | 159,359 |
Total revenue | $ | 131,429 | | $ | 174,431 | | $ | 440,226 | | $ | 485,047 |
Revenue attributable to our principal stream and royalty interests is disaggregated as follows (amounts in thousands):
| | | | | | | | | | | | | | |
| | | | Three Months Ended | | Nine Months Ended | ||||||||
| | | | September 30, |
| September 30, |
| September 30, |
| September 30, | ||||
| | Metal(s) | | 2022 | | 2021 | | 2022 | | 2021 | ||||
Stream revenue: | | | | | | | | | | | | | | |
Mount Milligan | | Gold & Copper | | $ | 41,553 | | $ | 53,455 | | $ | 129,596 | | $ | 131,061 |
Pueblo Viejo | | Gold & Silver | | | 21,156 | | | 27,198 | | | 64,232 | | | 83,957 |
Andacollo | | Gold | | | 12,170 | | | 11,601 | | | 39,565 | | | 52,491 |
Wassa | | Gold | | | 7,390 | | | 8,033 | | | 22,840 | | | 23,935 |
Khoemacau | | Silver | | | 5,050 | | | 107 | | | 12,641 | | | 107 |
Other | | Gold & Silver | | | 11,413 | | | 15,527 | | | 39,989 | | | 34,137 |
Total stream revenue | | | | $ | 98,732 | | $ | 115,921 | | $ | 308,863 | | $ | 325,688 |
Royalty revenue: | | | | | | | | | | | | | | |
Peñasquito | | Gold, Silver, Lead & Zinc | | $ | 9,010 | | $ | 12,212 | | $ | 31,768 | | $ | 38,739 |
Cortez | | Gold | | | 4,562 | | | 17,126 | | | 29,413 | | | 39,475 |
Other | | Various | | | 19,125 | | | 29,172 | | | 70,182 | | | 81,145 |
Total royalty revenue | | | | $ | 32,697 | | $ | 58,510 | | $ | 131,363 | | $ | 159,359 |
Total revenue | | | | $ | 131,429 | | $ | 174,431 | | $ | 440,226 | | $ | 485,047 |
Please refer to Note 10 for the geographical distribution of our revenue by reportable segment.
7.6. STOCK-BASED COMPENSATION
We recognized stock-based compensation expense as follows (amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended | ||||||||||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | | | June 30, | | June 30, | | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Restricted stock | | $ | 1,140 | | $ | 1,116 | | $ | 3,496 | | $ | 2,198 | | | $ | 1,540 | | $ | 1,201 | | $ | 3,154 | | $ | 2,356 |
Stock appreciation rights | | | 212 | | | 360 | | | 417 | | | 692 | |||||||||||||
Performance stock | | | 658 | | | (43) | | | 2,136 | | | 801 | | | | 183 | | | 847 | | | 993 | | | 1,478 |
Stock appreciation rights | | | 283 | | | 414 | | | 975 | | | 1,290 | | ||||||||||||
Stock options | | | 9 | | | 16 | | | 25 | | | 51 | | | | 8 | | | 10 | | | 15 | | | 16 |
Total stock-based compensation expense | | $ | 2,090 | | $ | 1,503 | | $ | 6,632 | | $ | 4,340 | | | $ | 1,943 | | $ | 2,418 | | $ | 4,579 | | $ | 4,542 |
Stock-based compensation expense is included within General and administrative expense in the consolidated statements of operations and comprehensive income.
During the three and six months ended June 30, 2023 and 2022, we granted the following stock-based compensation awards:
| | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | ||||||
| | | June 30, | | | June 30, | | | June 30, | | | June 30, |
|
| | 2023 |
| 2022 |
| | 2023 |
| 2022 | ||
| | | (Number of shares) | | | (Number of shares) | ||||||
Performance stock (at maximum 200% attainment) | | | — | | | — | | | 82,360 | | | 39,380 |
Restricted Stock | | | — | | | — | | | 56,530 | | | 28,220 |
Total equity awards granted | | | — | | | — | | | 138,890 | | | 67,600 |
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During the three and nine months ended September 30, 2022 and 2021, we granted the following stock-based compensation awards:
| | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | ||||||
| | | September 30, | | | September 30, | | | September 30, | | | September 30, |
|
| | 2022 |
| 2021 |
| | 2022 |
| 2021 | ||
| | | (Number of shares) | | | (Number of shares) | ||||||
Performance stock (at maximum 200% attainment) | | | — | | | 73,200 | | | 39,380 | | | 73,200 |
Restricted Stock | | | — | | | 50,604 | | | 28,220 | | | 50,604 |
Total equity awards granted | | | — | | | 123,804 | | | 67,600 | | | 123,804 |
As of SeptemberJune 30, 2022,2023, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | Unrecognized |
| Weighted- |
| | | | | | | Unrecognized |
| Weighted- | ||||
| | | | | | | | compensation | | average vesting | | | | | | | | compensation | | average vesting | ||||
| | | | | | | | expense |
| period (years) | | | | | | | | expense |
| period (years) | ||||
Restricted stock | | | | | | | | $ | 7,361 | | | 2.2 | | | | | | | | $ | 9,880 | | | 2.1 |
Performance stock | | | | | | | | | 5,265 | | | 2.0 | | | | | | | | | 7,666 | | | 2.2 |
Stock appreciation rights | | | | | | | | | 701 | | | 0.9 | | | | | | | | | 111 | | | 0.1 |
Stock options | | | | | | | | | 25 | | | 0.9 | | | | | | | | | 4 | | | 0.1 |
8.7. EARNINGS PER SHARE (“EPS”)
Basic EPS was computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of EPS pursuant to the two-class method. Our unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. Our unexercised stock option awards, unexercised stock-settled stock appreciation rights and unvested performance stock do not contain rights to dividends. Under the two-class method, the earnings used to determine basic EPS are reduced by an amount allocated to participating securities. Use of the two-class method has an immaterial impact on the calculation of basic and diluted EPS.
The following tables summarizetable summarizes the effects of dilutive securities on diluted EPS for the periods shown below (amounts in thousands, except share data):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | ||||||||||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | | June 30, | | June 30, | | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Net income attributable to Royal Gold common stockholders | | $ | 45,792 | | $ | 70,176 | | $ | 182,609 | | $ | 205,879 | | $ | 63,449 | | $ | 71,140 | | $ | 127,324 | | $ | 136,816 |
Weighted-average shares for basic EPS | | | 65,579,834 | | | 65,556,608 | | | 65,571,737 | | | 65,552,586 | | | 65,605,391 | | | 65,569,190 | | | 65,600,213 | | | 65,567,621 |
Effect of other dilutive securities | | | 80,318 | | | 71,237 | | | 89,460 | | | 76,241 | | | 157,512 | | | 109,130 | | | 135,815 | | | 94,032 |
Weighted-average shares for diluted EPS | | | 65,660,152 | | | 65,627,845 | | | 65,661,197 | | | 65,628,827 | | | 65,762,903 | | | 65,678,320 | | | 65,736,028 | | | 65,661,653 |
Basic EPS | | $ | 0.70 | | $ | 1.07 | | $ | 2.78 | | $ | 3.14 | | $ | 0.97 | | $ | 1.08 | | $ | 1.94 | | $ | 2.08 |
Diluted EPS | | $ | 0.70 | | $ | 1.07 | | $ | 2.78 | | $ | 3.13 | | $ | 0.97 | | $ | 1.08 | | $ | 1.93 | | $ | 2.08 |
9.8. INCOME TAXES
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | ||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Income tax expense | | $ | 10,954 | | $ | 16,028 | | $ | 20,347 | | $ | 39,242 |
Effective tax rate | | | 19.3% | | | 18.5% | | | 10.0% | | | 16.0% |
The following table provides the income tax expense (amounts in thousands) and effective tax rates for the periods indicated:
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | ||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Income tax expense (benefit) | | $ | 2,029 | | $ | (5,911) | | $ | 17,900 | | $ | 9,393 |
Effective tax rate | | | 3.1% | | | (9.0%) | | | 12.3% | | | 6.4% |
The effective tax rates for the three and six months ended June 30, 2023, and June 30, 2022, included discrete income tax benefits of $8.5 million and $18.8 million, respectively, attributable to the release of a valuation allowance on certain deferred tax assets, respectively.
1413
The effective tax rate for the nine months ended September 30, 2022, included a discrete income tax benefit of $18.8 million attributable to the release of a valuation allowance on certain deferred tax assets. The effective tax rate for the nine months ended September 30, 2021, included a discrete tax benefit of $12.0 million attributable to the settlement of an uncertain tax position with a foreign jurisdiction.
10.9. SEGMENT INFORMATION
We manage our business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Our long-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table (amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 | | As of December 31, 2021 | | As of June 30, 2023 | | As of December 31, 2022 | ||||||||||||||||||||||||||||
| | | | | | | | Total stream | | | | | | | | Total stream | | | | | | | | Total stream | | | | | | | | Total stream | ||||
| | Stream | | Royalty | | and royalty | | Stream | | Royalty | | and royalty | | Stream | | Royalty | | and royalty | | Stream | | Royalty | | and royalty | ||||||||||||
|
| interest |
| interest |
| interests, net |
| interest |
| interest |
| interests, net |
| interest |
| interest |
| interests, net |
| interest |
| interest |
| interests, net | ||||||||||||
Canada | | $ | 528,325 | | $ | 620,035 | | $ | 1,148,360 | | $ | 579,326 | | $ | 412,419 | | $ | 991,745 | | $ | 484,602 | | $ | 616,920 | | $ | 1,101,522 | | $ | 511,957 | | $ | 620,549 | | $ | 1,132,506 |
Dominican Republic | | | 328,674 | | | — | | | 328,674 | | | 350,083 | | | — | | | 350,083 | | | 314,998 | | | — | | | 314,998 | | | 320,867 | | | — | | | 320,867 |
Africa | | | 307,291 | | | 321 | | | 307,612 | | | 297,569 | | | 321 | | | 297,890 | | | 280,517 | | | 321 | | | 280,838 | | | 299,722 | | | 321 | | | 300,043 |
Chile | | | 238,596 | | | 224,116 | | | 462,712 | | | 249,147 | | | 224,116 | | | 473,263 | | | 230,421 | | | 224,116 | | | 454,537 | | | 236,312 | | | 224,116 | | | 460,428 |
United States | | | — | | | 626,525 | | | 626,525 | | | — | | | 107,761 | | | 107,761 | | | — | | | 810,487 | | | 810,487 | | | — | | | 823,203 | | | 823,203 |
Mexico | | | — | | | 53,046 | | | 53,046 | | | — | | | 60,977 | | | 60,977 | | | — | | | 45,703 | | | 45,703 | | | — | | | 50,156 | | | 50,156 |
Australia | | | — | | | 26,642 | | | 26,642 | | | — | | | 27,496 | | | 27,496 | | | — | | | 21,743 | | | 21,743 | | | — | | | 22,120 | | | 22,120 |
Rest of world | | | 104,192 | | | 26,617 | | | 130,809 | | | 107,920 | | | 26,617 | | | 134,537 | | | 99,095 | | | 26,638 | | | 125,733 | | | 101,440 | | | 26,639 | | | 128,079 |
Total | | $ | 1,507,078 | | $ | 1,577,302 | | $ | 3,084,380 | | $ | 1,584,045 | | $ | 859,707 | | $ | 2,443,752 | | $ | 1,409,633 | | $ | 1,745,928 | | $ | 3,155,561 | | $ | 1,470,298 | | $ | 1,767,104 | | $ | 3,237,402 |
Our reportable segments for purposes of assessing performance are shown below (amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2022 | | Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||
|
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit |
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit | ||||||||||
Stream interests | | $ | 98,732 | | $ | 23,221 | | $ | — | | $ | 32,576 | | $ | 42,935 | | $ | 106,015 | | $ | 23,367 | | $ | — | | $ | 29,352 | | $ | 53,296 |
Royalty interests | | | 32,697 | | | — | | | 1,119 | | | 5,063 | | | 26,515 | | | 38,027 | | | — | | | 1,274 | | | 8,945 | | | 27,808 |
Total | | $ | 131,429 | | $ | 23,221 | | $ | 1,119 | | $ | 37,639 | | $ | 69,450 | | $ | 144,042 | | $ | 23,367 | | $ | 1,274 | | $ | 38,297 | | $ | 81,104 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2021 | | Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||
|
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit |
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit | ||||||||||
Stream interests | | $ | 115,921 | | $ | 27,230 | | $ | — | | $ | 41,922 | | $ | 46,769 | | $ | 104,879 | | $ | 23,810 | | $ | — | | $ | 37,790 | | $ | 43,279 |
Royalty interests | | | 58,510 | | | — | | | 2,054 | | | 8,596 | | | 47,860 | | | 41,562 | | | — | | | 1,425 | | | 6,075 | | | 34,062 |
Total | | $ | 174,431 | | $ | 27,230 | | $ | 2,054 | | $ | 50,518 | | $ | 94,629 | | $ | 146,441 | | $ | 23,810 | | $ | 1,425 | | $ | 43,865 | | $ | 77,341 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2022 | | Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||
|
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit |
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit | ||||||||||
Stream interests | | $ | 308,863 | | $ | 69,670 | | $ | — | | $ | 106,745 | | $ | 132,448 | | $ | 221,005 | | $ | 48,387 | | $ | — | | $ | 63,104 | | $ | 109,514 |
Royalty interests | | | 131,363 | | | — | | | 4,765 | | | 22,623 | | | 103,975 | | | 93,429 | | | — | | | 3,263 | | | 21,408 | | | 68,758 |
Total | | $ | 440,226 | | $ | 69,670 | | $ | 4,765 | | $ | 129,368 | | $ | 236,423 | | $ | 314,434 | | $ | 48,387 | | $ | 3,263 | | $ | 84,512 | | $ | 178,272 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2021 | | Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||
|
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit |
| Revenue |
| Cost of sales (1) |
| Production taxes |
| Depletion (2) |
| Segment gross profit | ||||||||||
Stream interests | | $ | 325,688 | | $ | 73,367 | | $ | — | | $ | 113,263 | | $ | 139,058 | | $ | 210,130 | | $ | 46,450 | | $ | — | | $ | 74,169 | | $ | 89,511 |
Royalty interests | | | 159,359 | | | — | | | 6,042 | | | 26,394 | | | 126,923 | | | 98,666 | | | — | | | 3,646 | | | 17,561 | | | 77,459 |
Total | | $ | 485,047 | | $ | 73,367 | | $ | 6,042 | | $ | 139,657 | | $ | 265,981 | | $ | 308,796 | | $ | 46,450 | | $ | 3,646 | | $ | 91,730 | | $ | 166,970 |
(1) | Excludes depreciation, depletion and amortization. |
(2) | Depletion amounts are included within Depreciation, depletion and amortization on our consolidated statements of operations and comprehensive income. |
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A reconciliation of total segment gross profit to the consolidated Income before income taxes is shown below (amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | ||||||||||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | | June 30, | | June 30, | | June 30, | | June 30, | ||||||||
|
| | 2022 |
| | 2021 |
| | 2022 |
| | 2021 |
| | 2023 |
| | 2022 |
| | 2023 |
| | 2022 |
Total segment gross profit | | $ | 69,450 | | $ | 94,629 | | $ | 236,423 | | $ | 265,981 | | $ | 81,104 | | $ | 77,341 | | $ | 178,272 | | $ | 166,970 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative expenses | | | 7,554 | | | 7,129 | | | 25,797 | | | 21,272 | | | 9,093 | | | 9,312 | | | 20,093 | | | 18,243 |
Depreciation and amortization | | | 122 | | | 93 | | | 371 | | | 278 | | | 115 | | | 124 | | | 229 | | | 246 |
Operating income | | | 61,774 | | | 87,407 | | | 210,255 | | | 244,431 | | | 71,896 | | | 67,905 | | | 157,950 | | | 148,481 |
Fair value changes in equity securities | | | 356 | | | 176 | | | (1,221) | | | 4,035 | | | (509) | | | (2,191) | | | 291 | | | (1,577) |
Interest and other income | | | 3,571 | | | 819 | | | 5,665 | | | 2,227 | | | 2,650 | | | 1,118 | | | 4,912 | | | 2,093 |
Interest and other expense | | | (8,814) | | | (1,908) | | | (11,110) | | | (4,873) | | | (8,408) | | | (1,398) | | | (17,582) | | | (2,296) |
Income before income taxes | | $ | 56,887 | | $ | 86,494 | | $ | 203,589 | | $ | 245,820 | | $ | 65,629 | | $ | 65,434 | | $ | 145,571 | | $ | 146,701 |
Our revenue by reportable segment for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 is geographically distributed as shown in the following table (amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | ||||||||||||||||
| | September 30, | | September 30, | | September 30, | | September 30, | | June 30, | | June 30, | | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Stream interests: | | | | | | | | | | | | | | | | | | | | | | | | |
Canada | | $ | 46,861 | | $ | 64,031 | | $ | 152,938 | | $ | 158,679 | | $ | 50,848 | | $ | 54,591 | | $ | 107,829 | | $ | 106,077 |
Dominican Republic | | | 21,156 | | | 27,198 | | | 64,232 | | | 83,957 | | | 23,540 | | | 19,812 | | | 45,899 | | | 43,076 |
Africa | | | 18,763 | | | 14,540 | | | 36,301 | | | 25,375 | ||||||||||||
Chile | | | 12,170 | | | 11,601 | | | 39,566 | | | 52,491 | | | 7,823 | | | 11,721 | | | 20,757 | | | 27,395 |
Africa | | | 13,257 | | | 8,679 | | | 38,633 | | | 26,149 | ||||||||||||
Rest of world | | | 5,288 | | | 4,412 | | | 13,494 | | | 4,412 | | | 5,041 | | | 4,215 | | | 10,219 | | | 8,207 |
Total stream interests | | $ | 98,732 | | $ | 115,921 | | $ | 308,863 | | $ | 325,688 | | $ | 106,015 | | $ | 104,879 | | $ | 221,005 | | $ | 210,130 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Royalty interests: | | | | | | | | | | | | | | | | | | | | | | | | |
United States | | $ | 11,413 | | $ | 27,080 | | $ | 52,616 | | $ | 64,903 | | $ | 23,265 | | $ | 16,845 | | $ | 56,845 | | $ | 41,202 |
Mexico | | | 11,095 | | | 15,427 | | | 38,915 | | | 46,888 | | | 8,155 | | | 11,940 | | | 17,449 | | | 27,821 |
Australia | | | 5,081 | | | 4,040 | | | 9,180 | | | 8,086 | ||||||||||||
Canada | | | 4,826 | | | 6,402 | | | 21,377 | | | 24,616 | | | (97) | | | 5,773 | | | 6,495 | | | 16,551 |
Australia | | | 3,446 | | | 6,917 | | | 11,533 | | | 15,526 | ||||||||||||
Africa | | | — | | | 602 | | | 430 | | | 1,909 | | | — | | | 114 | | | — | | | 430 |
Rest of world | | �� | 1,917 | | | 2,082 | | | 6,492 | | | 5,517 | | | 1,623 | | | 2,850 | | | 3,460 | | | 4,576 |
Total royalty interests | | $ | 32,697 | | $ | 58,510 | | $ | 131,363 | | $ | 159,359 | | $ | 38,027 | | $ | 41,562 | | $ | 93,429 | | $ | 98,666 |
Total revenue | | $ | 131,429 | | $ | 174,431 | | $ | 440,226 | | $ | 485,047 | | $ | 144,042 | | $ | 146,441 | | $ | 314,434 | | $ | 308,796 |
11.10. FAIR VALUE MEASUREMENTS
Fair 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, which prioritizes the inputs used in measuring fair value 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-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
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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-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
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 our financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 | | As of June 30, 2023 | ||||||||||||||||||||||||||
| | | | Fair Value | | | | Fair Value | ||||||||||||||||||||||
|
| Carrying Value |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Carrying Value |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||||||||
Assets (amounts in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Marketable equity securities(1) | | $ | 655 | | $ | 655 | | $ | 117 | | $ | 538 | | $ | — | | $ | 547 | | $ | 547 | | $ | 11 | | $ | 536 | | $ | — |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2021 | | As of December 31, 2022 | ||||||||||||||||||||||||||
| | | | Fair Value | | | | Fair Value | ||||||||||||||||||||||
|
| Carrying Value |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Carrying Value |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||||||||
Assets (amounts in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Marketable equity securities(1) | | $ | 1,733 | | $ | 1,733 | | $ | — | | $ | 1,733 | | $ | — | | $ | 373 | | $ | 373 | | $ | 121 | | $ | 252 | | $ | — |
Our marketable securities classified within Level 1 of the fair value hierarchy are valued using quoted market prices in active markets multiplied by the quantity of shares held. The TriStar Gold Inc. warrants (Note 4)3) classified within Level 2 of the fair value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets. The carrying value of our revolving credit facility (Note 5)4) approximates fair value as of SeptemberJune 30, 2022.2023.
As of SeptemberJune 30, 2022,2023, we had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with stream and royalty interests, intangible assets and other long-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.
12.11. COMMITMENTS AND CONTINGENCIES
NX GoldXavantina Exploration Payment
On March 22, 2022,April 20, 2023, we made a $2.4 million advance payment of $3.2 million to a subsidiary of Ero Copper CorporationCorp. (“Ero”) as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions. This payment has beenwas recorded to exploration stage stream interests (Note 3) within Stream and royalty interests, net on our consolidated balance sheets. Assheets as of SeptemberJune 30, 2022, $6.82023. Advance payments of $4.4 million of advance payments remain if Ero meets certain success-based targets related to regional exploration and mineral resource additions through calendar 2024. Refer to Note 3 of our Transition Report2022 10-K for further information on the Xavantina (formerly referred to as NX Gold) Gold stream acquisition.Stream Acquisition.
Ilovica Gold Stream Acquisition
As of SeptemberJune 30, 2022,2023, our conditional funding schedule of $163.75 million, as part of the Ilovica gold stream acquisition entered into in October 2014, remains subject to certain conditions.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Presentation
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating ourthe financial condition and results of operations of Royal Gold. You should read this MD&A in conjunction with our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements included in our Transition Report on Form 10-K for the six monthsyear ended December 31, 2021,2022, filed with the Securities and Exchange Commission (“SEC”) on February 17, 16, 2023 (“2022 (“Transition Report”10-K”).
This MD&A contains forward-looking information. You should review our important note about forward-looking statements following this MD&A.
We do not own, develop, or mine the properties on which we hold stream or royalty interests. Certain information provided in this Quarterly Report on Form 10-Q about operating properties in which we hold interests, including information about mineral resources and reserves, historical production, production estimates, property descriptions, and property developments, was 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 SEC. We have not verified, and are not in a position to verify, and expressly disclaim any responsibility for the accuracy, completeness, or fairness of, this third-party information and refer 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.
Overview of Our Business
We acquire and manage precious metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or 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 |
● | Acquisition and Management of Royalty Interests — 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. As of |
We do not conduct mining operations on the properties in which we hold stream and royalty interests, and we generally are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties.
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We are continually reviewing opportunities to grow our portfolio, whether through the creation or acquisition of new or existing stream or royalty interests or other acquisition activity. We generally have acquisition opportunities in various stages of review. Our review process may include, for example, engaging consultants and advisors to analyze an opportunity; analysis of technical, financial, legal, environmental, social, governance and other confidential information regarding an opportunity; submission
18
of indications of interest and term sheets; participation in preliminary discussions and negotiations; and involvement as a bidder in competitive processes.
Business Trends and Uncertainties
Metal Prices
Our financial results are primarily tied to the price of gold, silver, copper, and other metals. Metal prices have fluctuated widely in recent years and we expect this volatility to continue. The marketability and price of metals are influenced by numerous factors beyond our control, and significant changes in metal prices can have a material effect on our revenue.
For the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, average metal prices and percentages of revenue by metal were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | ||||||||||||||||||||||||||||||||
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 | | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 | ||||||||||||||||||||||||
Metal |
| Average |
| Percentage |
| Average |
| Percentage |
| Average |
| Percentage |
| Average |
| Percentage |
| Average | | Percentage | | Average | | Percentage | | Average | | Percentage | | Average | | Percentage | ||||||||
Gold ($/ounce) | | $ | 1,729 | | 76% | | $ | 1,790 | | 73% | | $ | 1,824 | | 73% | | $ | 1,800 | | 73% | | $ | 1,976 | | 77% | | $ | 1,871 | | 71% | | $ | 1,932 | | 74% | | $ | 1,874 | | 71% |
Silver ($/ounce) | | $ | 19.23 | | 11% | | $ | 24.36 | | 10% | | $ | 21.92 | | 11% | | $ | 25.75 | | 10% | | $ | 24.13 | | 15% | | $ | 22.60 | | 10% | | $ | 23.31 | | 14% | | $ | 23.32 | | 10% |
Copper ($/pound) | | $ | 3.51 | | 8% | | $ | 4.25 | | 14% | | $ | 4.11 | | 12% | | $ | 4.17 | | 13% | | $ | 3.84 | | 6% | | $ | 4.31 | | 14% | | $ | 3.95 | | 10% | | $ | 4.43 | | 14% |
Other | | | N/A | | 5% | | | N/A | | 3% | | | N/A | | 4% | | | N/A | | 4% | | | N/A | | 2% | | | N/A | | 5% | | | N/A | | 2% | | | N/A | | 5% |
(1) Based on the average U.S. dollars London Bullion Market Association PM fixing price for gold and daily fixing price for silver, as applicable.
(2) Based on the average U.S. dollars London Metals Exchange settlement price for copper.
Acquisition of Great Bear Royalties CorporationAgreement to Acquire Royalty Interests on the Producing Santa Rita and Serrote Mines
On September 9, 2022June 12, 2023, we completedannounced that we entered into a binding commitment letter with ACG Acquisition Company to acquire new royalty interests on the previously announced acquisition of all of the issuedproducing Serrote and outstanding shares of Great Bear Royalties Corporation (“GBR”)Santa Rita mines in Brazil for total cash consideration of approximately C$199.6$250 million, (US$151.7 million) (the “Acquisition Price”). GBR’s sole material asset is a 2.0% net smelter return royalty (“Great Bear Royalty”) that covers the entiretysubject to satisfaction of the Great Bear Project in the Red Lake districtcertain conditions, including negotiation and execution of Ontario, Canada, owned and operated by a subsidiary of Kinross Gold Corporation (“Kinross”). The Great Bear Royalty includes all metals produced from contiguous claims covering 9,140 hectares and will be registered on title to the relevant claims. Royalty payments will be made quarterly with applicable standard deductions. Refer to Note 2 of our notes to consolidated financial statements for further discussion on the GBR acquisition. The purchase price was funded with available cash on hand.definitive documentation.
As partBased on current metal prices, we expect to fund the $250 million purchase price with approximately $50 million of the acquisitionavailable cash resources and in exchange for information and access to the project provided by Kinross, we granted an option to Kinross to purchaseapproximately $200 million from a 25% interest in the Great Bear Royalty (0.5% of the 2.0% royalty rate) for an amount equal to 25% of the Acquisition Price, adjusted for inflation, at any time from the transaction closing date until the earlier of a construction decision for the Great Bear Project and 10 years after the transaction closing date. draw on our revolving credit facility.
Acquisition of Additional Royalty Interest on Cortez ComplexGold/Platinum/Palladium Royalties
On August 2, 2022,At closing, we acquired a sliding scale gross royalty (“Cortez Complex Royalty”) on production from an area within the Cortez Complex forexpect to pay cash consideration of $525 million.$215 million in return for:
● | A gross smelter return royalty of 85% of the payable gold from the Serrote mine until the achievement of a royalty revenue threshold of $250 million from this royalty, and 45% thereafter; and, |
● | A gross smelter return royalty of 64 ounces of gold, 135 ounces of platinum and 100 ounces of palladium for each 1 million pounds of payable nickel produced from the Santa Rita mine until the achievement of a royalty revenue threshold of $100 million from this royalty, at which point the royalty on gold will continue and the royalty on platinum and palladium will terminate. |
Royalty revenue will be determined using fixed payabilities of 93% for gold at the Serrote mine and 86% for nickel at the Santa Rita mine. The area withinroyalties will have an economic effective date of May 1, 2023, and there will be no deductions applicable to the Cortez Complex is owned or controlled by Nevada Gold Mines LLC a joint venture between Barrick Gold Corporation (“Barrick”) and Newmont Corporation (“Newmont”), with the exception of the Fourmile development project which is 100% owned and operated by Barrick. The royalty is a life of mine sliding scale gross royalty payable at a rate of 0% at a gold price less than $400 per ounce, increasing to 3% at a gold price above $900 per ounce, and is payable on 40% of all production from the Cortez Complex except for the existing deposits within the Robertson property. The purchase price was funded with debt and available cash on hand. Refer to Note 2 and Note 5 of our notes to consolidated financial statements for further discussion on the Cortez complex royalty acquisition and funding.payments.
Lawyers Royalty Acquisition
On March 24, 2022, we acquired a 0.5% net smelter returns royalty (“NSR”) on production from the Lawyers Project, an exploration stage project currently operated by Benchmark Metals Inc., which is located in British Columbia, Canada. As part of this transaction, we also acquired a right of first offer (“ROFO”) for an existing 2.0% NSR royalty over the Ranch Project owned by Thesis Gold, Inc. that is located adjacent to the Lawyers Project. We paid $8.0 million in cash consideration for the royalty and ROFO to Guardsmen Resources Inc.
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Copper/Nickel Royalty
At closing, we expect to pay cash consideration of $35 million in return for a gross smelter return royalty on total payable copper and nickel production from the Serrote and Santa Rita mines at a rate of 0.50% during 2023 and 2024, 0.75% during 2025 and 1.10% thereafter until the achievement of a royalty revenue threshold of $90 million from this royalty, and 0.55% thereafter.
Royalty revenue will be determined using fixed payabilities of 97% for copper at the Serrote mine, and 86% for nickel and 72% for copper at the Santa Rita mine. The royalty will have an economic effective date of May 1, 2023, and there will be no deductions applicable to the royalty payments.
ESG Contribution
We will make a financial commitment of 0.25% of the annual royalty payments received to support programs benefiting the communities within the area of influence of each of the Serrote and Santa Rita mines.
Conditions to Closing
Closing of the proposed acquisition of the royalties will be conditional on the successful completion of the ACG transaction with Appian, a minimum working capital position for ACG at closing, and other closing conditions that are standard for transactions of this nature, including the negotiation and execution of definitive royalty and security agreements with ACG and an intercreditor agreement with the senior lenders.
Timing
Closing of the proposed acquisition of the royalties could occur within the coming weeks after completion of all conditions to closing.
NX GoldXavantina Exploration Payment
On March 22, 2022,April 20, 2023, we made a $2.4 million advance payment of $3.2 million to a subsidiary of Ero CopperGold Corporation (“Ero”) as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions. AsAdvance payments of September 30, 2022, up to $6.8$4.4 million of additional exploration and mineral resource addition payments remain if Ero meets certain success-based targets related to regional exploration and mineral resource additions through calendar 2024. Refer to Note 3 of our Transition Report2022 10-K for further information on the Xavantina (formerly referred to as NX Gold) Gold stream acquisition.Stream Acquisition.
Operators’ Production Estimates by Stream and Royalty Interest for Calendar 20222023
We generally receive annual production estimates from many of the operators of the producing mines in which we own a stream or royalty interest during the first quarter of each calendar year. In some instances, an operator may revise its original calendar year guidance throughout the year. The following table shows current production estimates for calendar 2022,2023, as well as actual production through SeptemberJune 30, 20222023 (except as otherwise noted), for our principal properties as reported to us by the operators.
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Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 20222023
Principal Producing Properties
| | | | | | | | | | | | |
| | Calendar Year 2022 Operator’s Production | | Calendar Year 2022 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) |
| 36,000 |
| |
| |
| 17,800 |
| |
| |
Mount Milligan(4) |
| 190,000 - 210,000 |
| |
| |
| 81,800 |
| |
| |
Copper |
| |
| | | 70 - 80 Million |
| |
| |
| 37.9 Million |
Pueblo Viejo(5) | | 400,000 - 440,000 | | N/A | | | | 330,000 | | N/A | | |
Wassa(6) | | 155,000 - 170,000 | | | | | | 125,600 | | | | |
Khoemacau(7) | | | | N/A | | | | | | N/A | | |
Royalty: |
| |
| |
| |
| |
| |
| |
Cortez(8) | | 280,000 | | | | | | 190,600 | | | | |
Peñasquito(9) |
| 475,000 | | 29 Million |
| | | 440,000 | | 23.3 Million |
| |
Lead |
|
|
|
|
| 150 Million | | | | |
| 112 Million |
Zinc |
|
|
|
|
| 350 Million | | | | |
| 297 Million |
| | | | | | | | | | | | |
| | Calendar Year 2023 Operator’s Production | | Calendar Year 2023 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) | 22,000 - 27,000 | | | 12,100 | | | ||||||
Mount Milligan(4) | 160,000 - 170,000 | | | 74,300 | | | ||||||
Copper | | | | 60 - 70 Million | | | 27.1 Million | |||||
Pueblo Viejo(5) | | 470,000 - 520,000 | | N/A | | | | 166,000 | | N/A | | |
Khoemacau(6) | | | | 1.5 - 1.7 Million | | | | | | 0.8 Million | | |
Royalty: | | | | | | | ||||||
Cortez(7) | | 940,000 - 1,060,000 | | | | | | 407,000 | | | | |
Peñasquito(8) | N/A | | N/A | | | 123,000 | | 13.8 Million | | |||
Lead | N/A | | | | | 86 Million | ||||||
Zinc | N/A | | | | | 180 Million |
(1) | Production estimates received from our operators are for calendar |
(2) | Actual production figures shown are from the operators and cover the period from January 1, |
(3) | The estimated and actual production |
(4) | The estimated and actual production figures shown for Mount Milligan are payable gold and copper in concentrate. |
(5) | The estimated and actual production figures shown for Pueblo Viejo are payable gold in doré and represent the 60% interest in Pueblo Viejo held by Barrick Gold Corporation (“Barrick”). |
(6) | The estimated and actual production |
(7) | The estimated and actual production figures for |
(8) |
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. Actual figures are for the period January 1, 2023 through June 30, 2023. Estimated production figures are not available as 2023 production guidance was withdrawn by Newmont Corporation (“Newmont”) on July 20, 2023. |
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Property Developments
This section provides recent updates for our principal properties as reported by the operators, either directly to us or in their publicly available documents.
Stream Interests
Andacollo
Gold stream deliveries from Andacollo were approximately 3,2003,700 ounces for the three months ended SeptemberJune 30, 2022,2023, compared to approximately 6,4009,900 ounces for the three months ended SeptemberJune 30, 2021.2022. The decrease in deliveries resulted
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primarily from Andacollo experiencing lower gold grades and lower gold recoveries, in line with the expected downward trend of gold grades, as well as differences in the timing of shipments and settlements during the periods.
As reported by Teck Resources Limited (“Teck”), a significant rainfall event in July caused operations to shut down for five days. We expect the impact of this shutdown will affect stream deliveries in the first quarter of 2023.
Gold production at Andacollo has trended lower since the beginning of 2021 due to lower ore grades, as anticipated in the mine plan. According to Teck Resources Limited (“Teck”), the period of lower grades is expected to last through 2023, and the mine plan then anticipates a transition to higher grade ore as the next phase of mining is developed over the following years. Teck has reported that the current life of mine for Andacollo is expected to continue until 2035 and that additional permits or permit amendments will be required to execute the life of mine plan.
Khoemacau Project
Silver stream deliveries from Khoemacau were approximately 290,700398,700 ounces for the three months ended SeptemberJune 30, 2022. First concentrate was shipped from Khoemacau in mid-July 2021 and silver stream deliveries2023, compared to us were approximately 105,800246,800 ounces for the three months ended SeptemberJune 30, 2022. Increased stream deliveries resulted from operations running at full capacity in the current period compared to the prior year period. Deliveries in the prior year period were lower due to the ramp-up of mining and processing operations throughout 2022 after completion of project construction in 2021.
According to Khoemacau Copper Mining (Pty.) Limited (“KCM”), the operator ofoperations at Khoemacau ramp-up of operations continued and average monthly underground production increased consistently duringat nameplate capacity through the quarter ended SeptemberJune 30, 2022, from approximately 7,3002023, after the target production rate of 3.7 million tonnes per day (8,000 tonsyear (10,000 tonnes per day) was achieved in June to approximately 8,000 tonnes per day (8,800 tons per day)December 2022. As projected in September 2022. Production has reached the target mining rate of 10,000 tonnes per day (11,000 tons per day) for short periods during the ramp up period but has not yet been consistently sustained at this level.mine plan, KCM expects payable silver production in 2023 to reach the target mining rate on a sustained basis toward the end of December 2022 and into the first quarter of 2023.
KCM continuesrange between 1.5 to expect that at full production Khoemacau will produce 155,000 to 165,000 tonnes (171,000 to 182,000 tons) of high-grade copper and silver concentrate a year, containing approximately 60,000 to 65,000 tonnes (66,000 to 72,000 tons) of payable copper and 1.8 to 2.01.7 million ounces, which is slightly below the life of payablemine average due to lower silver per year, over an approximate 20-year mine life fromgrades in the upper portion of the Zone 5.5 deposit and the top-down mining sequence.
Mount Milligan
Gold stream deliveries from Mount Milligan were approximately 18,40017,300 ounces for the three months ended SeptemberJune 30, 2022,2023, compared to approximately 10,80023,800 ounces for the three months ended SeptemberJune 30, 2021. Increased gold deliveries resulted from differences in the timing of shipments and settlements during the periods and gold grade variability in the concentrate shipments.
2022. Copper stream deliveries from Mount Milligan were approximately 4.52.5 million pounds during the three months ended SeptemberJune 30, 2022,2023, compared to approximately 2.64.0 million pounds during the three months ended SeptemberJune 30, 2021. Increased2022. Gold and copper stream deliveries resultedfor the three months ended June 30, 2023, relate to mine production during the approximate period November 2022 to January 2023. During this period Centerra Gold Inc. (“Centerra”) reported negative variances to copper head grade, gold head grade and recovery, as compared to the previous year period.
On July 31, 2023, Centerra reported that gold and copper production for the three months ended June 30, 2023, was impacted by lower grades and recoveries due to mine sequencing, although process plant throughput for the period averaged 61,482 tonnes per day and record tonnes were processed in the months of May and June. Centerra also reported that Mount Milligan remains on track to access higher-grade copper and gold ore from differencesphase 7 and phase 9 in the second half of the year.
Centerra continues to expect that full year 2023 production at Mount Milligan will be back-end weighted, with gold production at the low end of the guidance range of 160,000 to 170,000 ounces, and copper production tracking towards the mid-point of the guidance range of 60 to 70 million pounds. Centerra also expects to make four concentrate shipments in the third quarter and another four shipments in the fourth quarter, although the timing of shipments and settlements duringmay be affected by logistical delays resulting from labor disruptions in the periods.
Stream deliveries during the quarter from Mount Milligan provided for complete repaymentPort of the $781.5 million advance deposit made by Royal Gold to Thompson Creek Metals Company, Inc. (“Thompson Creek”), a subsidiary of Centerra Gold Inc. (“Centerra”). Royal Gold contributed three advance payments prior to and during the development of the mine in 2010 through 2012, in return for the right to acquire 52.25% of the payable gold produced from Mount Milligan. Royal
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Gold and Centerra subsequently amended the stream interest in 2016 to a 35% gold stream and 18.75% copper stream. Mount Milligan began commercial production in early 2014 and was Royal Gold’s first stream acquisition.
Subsequent to the end of the quarter on October 4, 2022, Centerra published the highlights of an updated life of mine plan for Mount Milligan. According to Centerra, the mine life is expected to be extended by over four years to 2033. Centerra expects total payable gold and copper to increase more than 800,000 ounces and 191 million pounds, respectively, from 2022 onwards when compared to the previous plan, with average annual production of 175,000 ounces of gold and 68 million pounds of copper.
Centerra also indicated the potential for future resource growth due to exploration success in areas proximal to the open pit. Centerra expects to file a new technical report detailing the life of mine plan and updated reserve and resource information within 45 days of October 4, 2022. As a result of the increase in proven and probable reserves as announced by Centerra, the gold and copper depletion rates on our Mount Milligan stream decreased to $416 per ounce of gold and $1.06 per pound of copper as of September 30, 2022 from $703 per ounce of gold and $1.53 per pound of copper. Royal Gold will update its annual SK1300 disclosure for the Mount Milligan technical report update within its 2022 Annual Report on Form 10-K, which we expect to file in February 2023.
Centerra remains on track to meet 2022 production guidance of between 190,000 to 210,000 ounces of payable gold and between 70 to 80 million pounds of payable copper.Vancouver.
Pueblo Viejo
Gold stream deliveries from Pueblo Viejo were approximately 8,9006,800 ounces for the three months ended SeptemberJune 30, 2022,2023, compared to approximately 9,2008,600 ounces for the three months ended SeptemberJune 30, 2021.2022. Decreased deliveries resulted from processing lower grade gold stockpile material.
During the current quarter, Barrick reported continued progress on the plant expansion and mine life extension project at Pueblo Viejo to increase throughput and allow the mine to maintain minimum average annual gold production of approximately 800,000 ounces after 2022 and beyond 2040 (100% basis).
With respect to the plant expansion, on August 8, 2022, Barrick reported that as of June 30, 2022, overall construction was 56% complete and it expects the expansion to be substantially completed by the end of 2022 with commissioning in the first quarter of 2023. With respect to the mine life extension, Barrick also disclosed that social, environmental and technical studies for additional tailings capacity continued to advance, and that a preferred site for a tailings storage facility (“TSF”) had been put forward for further evaluation. Barrick reported that the final location and construction of the additional TSF would be subject to the completion of an Environmental and Social Impact Assessment (“ESIA”) in accordance with Dominican Republic legislation and international standards, which would then be submitted to the Government of the Dominican Republic for evaluation and final decision. Further according to Barrick, basic engineering of the additional TSF is expected to be completed in the fourth quarter of 2022.
Silver stream deliveries were approximately 319,100150,700 ounces for the three months ended SeptemberJune 30, 2022,2023, compared to 396,500approximately 307,100 ounces for the three months ended SeptemberJune 30, 2021. During2022. Decreased silver deliveries resulted from lower silver recovery during the third quartercurrent period, and an additional 47,00089,300 ounces of silver deliveries were deferred. The deferred ounces are the result of a mechanism in the stream agreement that allows for the deferral of deliveries in a period if Barrick’s share of silver production is insufficient to cover its stream delivery obligations. The stream agreement terms include a fixed 70% silver recovery rate. If actual recovery rates fall below the contractual 70% recovery rate, ounces may
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be deferred with deferred ounces to be delivered in future periods as silver recovery allows. As of SeptemberJune 30, 2022,2023, approximately 530,000607,700 ounces remain deferred. We expect that silver recoveries could remain highly variable until the plant expansion project is complete and bottlenecks associated with the silver circuit and silver recovery can be fully addressed, and weis running at full production levels. We do not expect material deliveries of deferred silver this year.ounces while the plant ramps up to full production levels during 2023, and timing for the delivery of the entire deferred amount is uncertain.
WassaOn May 3 and May 10, 2023, Barrick provided updates on the plant expansion and mine life extension project at Pueblo Viejo. With respect to the plant expansion, Barrick reported that construction was 93% complete as of March 31, 2023, and commissioning and operations handover of new equipment was underway. With respect to the mine life extension, Barrick further disclosed on July 27, 2023, that the engineering design for the El Naranjo tailings storage facility (“TSF”) project continues to advance and that the environmental license for the new TSF was recently received. Barrick has also reported that geotechnical drilling and site investigation are ongoing to support a feasibility study on the TSF, which is due for completion in the second quarter of 2024.
Gold stream deliveries from Wassa were approximately 4,800 ounces for the three months ended September 30, 2022, compared to approximately 4,300 ounces for the three months ended September 30, 2021.
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Royalty Interests
Cortez
Production attributable to our royalty interest at the Cortez Complex was approximately 36,600179,900 ounces of gold for the three months ended SeptemberJune 30, 2022,2023, compared to approximately 98,30052,000 ounces of gold for the three months ended SeptemberJune 30, 2021. This production is attributable2022. The increase was primarily due to the Company’s legacyaddition of new royalties in 2022 that increased royalty interests, including overlapping royalties atcoverage over producing areas within the Pipeline and Crossroads deposits (known as GSR1, GSR2, GSR 3, NVR1 and NVR1C). Refer to the Business Trends and Uncertainties section of this MD&A for information on the recent Cortez Complex Royalty acquisition.Complex.
On August 8, 2022,May 3, 2023, Barrick reported that miningthe Record of Phase 5 of CrossroadsDecision (“ROD”) on the Goldrush project, which is located within the CC Zone, is expected to deliver oxide ore and underpin stronger performance for Cortez in the December quartersecond half of 2022.
As2023. Barrick also reported that mine development and test stoping in the Redhill zone is continuing and a result of the acquisition of the Cortez Complex Royalty, thereminor permit modification has been an increaseapproved that will allow underground development to continue until the ROD on the Goldrush Plan of over 300% in gold mineral reserves and an increase of over 1200% in measured and indicated gold mineral resources attributableOperations is received. According to our royalty interests at Cortez beyondBarrick, the resources and reserves previously disclosed in detail in our Transition Report. Referextension to the “Property Mineral Reservepermitting timeline is not expected to have a significant impact on the 2023 outlook and Mineral Resource Update for Cortez” section below. the potential impact, if any, on the outlook from 2024 onwards is currently being reviewed.
Peñasquito
DuringProduction attributable to our royalty interest at Peñasquito was approximately 48,100 ounces of gold, 6.0 million ounces of silver, 35.6 million pounds of lead and 89.7 million pounds of zinc for the three months ended SeptemberJune 30, 2022,2023. This compares to approximately 130,600 ounces of gold, production at Peñasquito was approximately 144,300 ounces;8.1 million ounces of silver, production was approximately 6.80 million ounces; lead production was approximately 29.6 million pounds; and zinc production was approximately 84.6 million pounds. Gold production was approximately 170,400 ounces; silver production was approximately 7.79 million ounces; lead production was approximately 41.9 million pounds; and zinc production was approximately 98.335.0 million pounds duringof lead and 84.9 million pounds of zinc for the three months ended SeptemberJune 30, 2021.2022. Newmont reported that production was lower in the current period due to a labor strike, and gold production was further impacted by lower mill recovery and ore grade mined.
On June 8, 2023, Newmont reported that operations at Peñasquito were suspended on June 7, 2023, following a strike action by the National Union of Mine and Metal Workers of the Mexican Republic. The suspension remains in effect as of the filing of this report and on July 20, 2023, Newmont announced the withdrawal of its full-year 2023 guidance for Peñasquito. Newmont further stated that it cannot estimate when the strike will be resolved, and it will reassess Peñasquito’s full year 2023 guidance once a resolution has been reached.
Results of Operations
Quarter Ended SeptemberJune 30, 2022,2023, Compared to Quarter Ended SeptemberJune 30, 20212022
For the quarter ended SeptemberJune 30, 2022,2023, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $45.8$63.4 million, or $0.70$0.97 per basic and diluted share, as compared to net income of $70.2$71.1 million, or $1.07$1.08 per basic and diluted share, for the quarter ended SeptemberJune 30, 2021.2022. The decrease in net income was primarily attributable to a decrease in revenue,higher debt-related interest expense and income tax expense, as discussed below.
For the quarter ended SeptemberJune 30, 2022,2023, we recognized total revenue of $131.4$144.0 million, comprised of stream revenue of $98.7$106.0 million and royalty revenue of $32.7$38.0 million at an average gold price of $1,729$1,976 per ounce, an average silver price of $19.23$24.13 per ounce and an average copper price of $3.51$3.84 per pound. This is compared to total revenue of $174.4$146.4 million for the three months ended SeptemberJune 30, 2021,2022, comprised of stream revenue of $115.9$104.9 million and royalty revenue of $58.5$41.6 million,
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at an average gold price of $1,790$1,871 per ounce, an average silver price of $24.36$22.60 per ounce and an average copper price of $4.25$4.31 per pound. Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended SeptemberJune 30, 2022,2023, compared to the quarter ended SeptemberJune 30, 2021,2022, are as follows:
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Revenue and Reported Production Subject to Our Stream and Royalty Interests
(Amounts in thousands, except reported production oz. and lbs.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Three Months Ended | | | | Three Months Ended | | Three Months Ended | ||||||||||||||||
| | | | September 30, 2022 | | September 30, 2021 | | | | June 30, 2023 | | June 30, 2022 | ||||||||||||||||
| | | | | | Reported | | | | Reported | | | | | | Reported | | | | Reported | ||||||||
Stream/Royalty |
| Metal(s) |
| Revenue |
| Production(1) |
| Revenue |
| Production(1) |
| Metal(s) |
| Revenue | | Production(1) | | Revenue | | Production(1) | ||||||||
Stream(2): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mount Milligan | | | | $ | 41,553 | | | | | $ | 53,455 | | | | | | | $ | 41,208 | | | | | $ | 45,627 | | | |
| | Gold | | | | | 18,200 | oz. | | | | | 19,300 | oz. | | Gold | | | | | 17,500 | oz. | | | | | 15,500 | oz. |
| | Copper | | | | | 2.7 | Mlbs. | | | | | 4.4 | Mlbs. | | Copper | | | | | 1.7 | Mlbs. | | | | | 4.0 | Mlbs. |
Pueblo Viejo | | | | $ | 21,156 | | | | | $ | 27,198 | | | | | | | $ | 23,540 | | | | | $ | 19,812 | | | |
| | Gold | | | | | 8,600 | oz. | | | | | 9,800 | oz. | | Gold | | | | | 7,400 | oz. | | | | | 7,100 | oz. |
| | Silver | | | | | 307,100 | oz. | | | | | 386,500 | oz. | | Silver | | | | | 362,200 | oz. | | | | | 274,500 | oz. |
Khoemacau | | Silver | | $ | 8,881 | | 373,000 | oz. | | $ | 5,202 | | 221,800 | oz. | ||||||||||||||
Andacollo | | Gold | | $ | 12,170 | | 6,800 | oz. | | $ | 11,601 | | 6,500 | oz. | | Gold | | $ | 7,823 | | 4,000 | oz. | | $ | 11,721 | | 6,300 | oz. |
Wassa | | Gold | | $ | 7,390 | | 4,200 | oz. | | $ | 8,033 | | 4,500 | oz. | ||||||||||||||
Khoemacau | | Silver | | $ | 5,050 | | 255,900 | oz. | | $ | 107 | | 4,500 | oz. | ||||||||||||||
Other(3) | | | | $ | 11,413 | | | | | $ | 15,527 | | | | | | | $ | 24,563 | | | | | $ | 22,517 | | | |
| | Gold | | | | | 5,900 | oz. | | | | | 6,300 | oz. | | Gold | | | | | 11,600 | oz. | | | | | 11,300 | oz. |
| | Silver | | | | | 51,100 | oz. | | | | | 165,400 | oz. | | Silver | | | | | 65,700 | oz. | | | | | 53,700 | oz. |
Total stream revenue | | | | $ | 98,732 | | | | | $ | 115,921 | | | | | | | $ | 106,015 | | | | | $ | 104,879 | | | |
| | | | | . | | | | | | | | | | | | | | . | | | | | | | | | |
Royalty(2): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cortez Legacy Zone | | Gold | | $ | 14,305 | | 68,100 | oz. | | $ | 8,138 | | 52,000 | oz. | ||||||||||||||
Cortez CC Zone | | Gold | | $ | 3,520 | | 111,500 | oz. | | | N/A | | | | ||||||||||||||
Peñasquito | | | | $ | 9,010 | | | | | $ | 12,212 | | | | | | | $ | 6,105 | | | | | $ | 9,664 | | | |
| | Gold | | | | | 144,300 | oz. | | | | | 170,300 | oz. | | Gold | | | | | 48,100 | oz. | | | | | 130,600 | oz. |
| | Silver | | | | | 6.8 | Moz. | | | | | 7.8 | Moz. | | Silver | | | | | 6.0 | Moz. | | | | | 8.1 | Moz. |
| | Lead | | | | | 29.6 | Mlbs. | | | | | 42.0 | Mlbs. | | Lead | | | | | 35.6 | Mlbs. | | | | | 35.0 | Mlbs. |
| | Zinc | | | | | 84.6 | Mlbs. | | | | | 98.3 | Mlbs. | | Zinc | | | | | 89.7 | Mlbs. | | | | | 84.9 | Mlbs. |
Cortez | | Gold | | $ | 4,562 | | 36,600 | oz. | | $ | 17,126 | | 106,300 | oz. | ||||||||||||||
Other(3) | | Various | | $ | 19,125 | | N/A | | | $ | 29,172 | | N/A | | | Various | | $ | 14,097 | | N/A | | | $ | 23,760 | | N/A | |
Total royalty revenue | | | | $ | 32,697 | | | | | $ | 58,510 | | | | | | | $ | 38,027 | | | | | $ | 41,562 | | | |
Total Revenue | | | | $ | 131,429 | | | | | $ | 174,431 | | | | | | | $ | 144,042 | | | | | $ | 146,441 | | | |
(1) | Reported production relates to the amount of stream metal sales and the metal sales attributable to our royalty interests for the three months ended |
(2) | Refer to “Property Developments” above for a discussion of recent developments at principal properties. |
(3) | Individually, except for our stream interest at Rainy River, which contributed |
The decrease in our total revenue resulted primarily from lower gold sales at Andacollo, lower copper sales at Mount Milligan and Pueblo Viejo, lower gold and silver production attributable to our interest at Cortez and Peñasquito, and lower average gold, silver and copper prices.asquito. The decrease was offset by higher gold production attributable to our interest at Cortez as a result of the newly acquired royalties and higher gold and silver sales at Khoemacau, which shipped its first concentrate duringprices when compared to the prior year quarter.period.
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Gold and silver ounces and copper pounds purchased and sold during the three months ended SeptemberJune 30, 20222023 and 2021,2022, and gold and silver ounces and copper pounds in inventory as of SeptemberJune 30, 2022,2023, and December 31, 2021,2022, for our streaming interests were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | | As of | | As of | | Three Months Ended | | Three Months Ended | | As of | | As of | ||||||||
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | December 31, 2021 | | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | December 31, 2022 | ||||||||
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 | | 18,400 | | 18,200 | | 10,800 | | 19,300 | | 8,700 | | 4,100 | | 17,300 | | 17,500 | | 23,800 | | 15,500 | | 3,800 | | 5,200 |
Pueblo Viejo | | 8,900 | | 8,600 | | 9,200 | | 9,800 | | 8,900 | | 8,600 | | 6,800 | | 7,400 | | 8,600 | | 7,100 | | 6,800 | | 7,900 |
Wassa | | 4,800 | | 4,200 | | 4,300 | | 4,500 | | 2,000 | | 1,600 | ||||||||||||
Andacollo | | 3,200 | | 6,800 | | 6,400 | | 6,500 | | — | | 2,200 | | 3,700 | | 4,000 | | 9,900 | | 6,300 | | 1,800 | | 3,800 |
Other | | 7,100 | | 5,900 | | 7,500 | | 6,300 | | 3,100 | | 2,200 | | 11,200 | | 11,600 | | 10,400 | | 11,300 | | 4,700 | | 4,100 |
Total | | 42,400 | | 43,700 | | 38,200 | | 46,400 | | 22,700 | | 18,700 | | 39,000 | | 40,500 | | 52,700 | | 40,200 | | 17,100 | | 21,000 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | | As of | | As of | | Three Months Ended | | Three Months Ended | | As of | | As of | ||||||||
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | December 31, 2021 | | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | December 31, 2022 | ||||||||
Silver 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.) |
Khoemacau | | 398,700 | | 373,000 | | 247,000 | | 221,800 | | 155,100 | | 105,900 | ||||||||||||
Pueblo Viejo | | 319,100 | | 307,100 | | 396,500 | | 386,500 | | 319,100 | | 316,000 | | 150,700 | | 362,200 | | 307,000 | | 274,500 | | 150,700 | | 337,800 |
Khoemacau | | 290,700 | | 255,900 | | 105,800 | | 4,500 | | 114,400 | | 42,000 | ||||||||||||
Other | | 64,300 | | 51,100 | | 109,700 | | 165,400 | | 29,600 | | 34,300 | | 70,600 | | 65,700 | | 55,200 | | 53,700 | | 25,500 | | 17,500 |
Total | | 674,100 | | 614,100 | | 612,000 | | 556,400 | | 463,100 | | 392,300 | | 620,000 | | 800,900 | | 609,200 | | 550,000 | | 331,300 | | 461,200 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | | As of | | As of | | Three Months Ended | | Three Months Ended | | As of | | As of | ||||||||
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | December 31, 2021 | | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | December 31, 2022 | ||||||||
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 | | 4.5 | | 2.7 | | 2.6 | | 4.4 | | 1.8 | | 0.9 | | 2.5 | | 1.7 | | 4.0 | | 4.0 | | 0.8 | | 0.9 |
Cost of sales, which excludes depreciation, depletion and amortization, decreased to $23.2$23.4 million for the three months ended SeptemberJune 30, 2022,2023, from $27.2$23.8 million for the three months ended SeptemberJune 30, 2021.2022. The decrease, when compared to the prior period,year quarter, was primarily due to a decrease in gold and silvercopper sales at Pueblo ViejoMount Milligan and lower gold sales at Mount Milligan,Andacollo, offset by higher silver sales at Khoemacau. Stream deliveriesCost of sales 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 (Mount Milligan) spot price near the date of metal delivery.
General and administrative costs decreased to $9.1 million for the three months ended June 30, 2023, from $9.3 million for the three months ended June 30, 2022. The decrease was primarily due to lower consulting costs and lower non-cash stock compensation expense during the current period.
Depreciation, depletion and amortization decreased to $38.4 million for the three months ended June 30, 2023, from $44.0 million for the three months ended June 30, 2022. The decrease was primarily due to lower depletion rates at Mount Milligan and Pueblo Viejo as a result of proven and probable mineral reserve increases when compared to the prior year quarter. The decrease was partially offset by higher depletion expense at Khoemacau began indue to the ramp-up of production and additional depletion expense from the newly acquired royalties at Cortez when compared to the prior year quarter.
Interest and other expense increased to $8.4 million for the three months ended June 30, 2023, from $1.4 million for the three months ended June 30, 2022. The increase was primarily due to higher interest expense as a result of higher average amounts outstanding under our revolving credit facility compared to the prior year quarter. We had $400 million outstanding under our revolving credit facility as of June 30, 2023, compared to zero outstanding as of June 30, 2022. The current all-in borrowing rate under our revolving credit facility was 6.7% as of June 30, 2023.
For the three months ended June 30, 2023, we recorded income tax expense of $2.0 million, compared with income tax benefit of $5.9 million for the three months ended June 30, 2022. The income tax expense resulted in an effective tax rate of 3.1% in the current period, compared with (9.0%) for the three months ended June 30, 2022. The three months ended June 30, 2023 and 2022, both included discrete tax benefits attributable to the release of a valuation allowance on certain deferred tax assets.
Six Months Ended June 30, 2023, Compared to Six Months Ended June 30, 2022
For the six months ended June 30, 2023, we recorded net income of $127.3 million, or $1.94 per basic and $1.93 per diluted share, as compared to net income of $136.8 million, or $2.08 per basic and diluted share, for the six months ended
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June 30, 2022. The decrease in net income was primarily attributable to higher debt-related interest expense and income tax expense, as discussed below.
For the six months ended June 30, 2023, we recognized total revenue of $314.4 million, comprised of stream revenue of $221.0 million and royalty revenue of $93.4 million at an average gold price of $1,932 per ounce, an average silver price of $23.31 per ounce and an average copper price of $3.95 per pound. This is compared to total revenue of $308.8 million for the six months ended June 30, 2022, comprised of stream revenue of $210.1 million and royalty revenue of $98.7 million, at an average gold price of $1,874 per ounce, an average silver price of $23.32 per ounce and an average copper price of $4.43 per pound. Revenue and the corresponding production attributable to our stream and royalty interests for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, are as follows:
Revenue and Reported Production Subject to Our Stream and Royalty Interests
(Amounts in thousands, except reported production oz. and lbs.)
| | | | | | | | | | | | | | |
| | | | Six Months Ended | | Six Months Ended | ||||||||
| | | | June 30, 2023 | | June 30, 2022 | ||||||||
| | | | | | | Reported | | | | | Reported | ||
Stream/Royalty |
| Metal(s) |
| Revenue | | Production(1) | | Revenue | | Production(1) | ||||
Stream(2): | | | | | | | | | | | | | | |
Mount Milligan | | | | $ | 87,863 | | | | | $ | 88,043 | | | |
| | Gold | | | | | 32,700 | oz. | | | | | 29,400 | oz. |
| | Copper | | | | | 6.2 | Mlbs. | | | | | 7.6 | Mlbs. |
Pueblo Viejo | | | | $ | 45,898 | | | | | $ | 43,076 | | | |
| | Gold | | | | | 15,300 | oz. | | | | | 15,600 | oz. |
| | Silver | | | | | 700,100 | oz. | | | | | 590,500 | oz. |
Andacollo | | Gold | | $ | 20,757 | | 11,000 | oz. | | $ | 27,395 | | 14,700 | oz. |
Khoemacau | | Silver | | $ | 18,035 | | 777,000 | oz. | | $ | 7,592 | | 221,800 | oz. |
Other(3) | | | | $ | 48,452 | | | | | $ | 44,024 | | | |
| | Gold | | | | | 23,500 | oz. | | | | | 22,000 | oz. |
| | Silver | | | | | 131,900 | oz. | | | | | 226,900 | oz. |
Total stream revenue | | | | $ | 221,005 | | | | | $ | 210,130 | | | |
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Royalty(2): | | | | | | | | | | | | | | |
Cortez Legacy Zone | | Gold | | $ | 37,393 | | 185,300 | oz. | | $ | 24,852 | | 154,000 | oz. |
Cortez CC Zone | | Gold | | | $ 6,726 | | 218,100 | | | | N/A | | | |
Peñasquito | | | | $ | 13,538 | | | | | $ | 22,758 | | | |
| | Gold | | | | | 103,700 | oz. | | | | | 264,100 | oz. |
| | Silver | | | | | 12.0 | Moz. | | | | | 15.7 | Moz. |
| | Lead | | | | | 72.1 | Mlbs. | | | | | 77.0 | Mlbs. |
| | Zinc | | | | | 188.9 | Mlbs. | | | | | 205.0 | Mlbs. |
Other(3) | | Various | | $ | 35,772 | | N/A | | | $ | 51,056 | | N/A | |
Total royalty revenue | | | | $ | 93,429 | | | | | $ | 98,666 | | | |
Total revenue | | $ | 314,434 | | | | | $ | 308,796 | | | |
(1)Reported production relates to the amount of stream metal sales and the metal sales attributable to our royalty interests for the six
months ended June 30, 2023, and 2022, and may differ from the operators’ public reporting due to a number of factors, including the timing of the operator’s concentrate shipments, the delivery of metal to us and our subsequent sale of the delivered metal. Refer to Note 5 to the notes to consolidated financial statements.
The increase in our total revenue resulted primarily from higher silver sales at Khoemacau due to the ramp-up and higher gold production attributable to our interests at Cortez as a result of the newly acquired royalties. The increase was partially offset by lower gold sales at Andacollo and lower gold and silver production at Peñasquito when compared to the prior year period.
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Gold and silver ounces and copper pounds purchased and sold during the six months ended June 30, 2023, and 2022, and gold and silver ounces and copper pounds in inventory as of June 30, 2023, and December 31, 2022, for our streaming interests were as follows:
| | | | | | | | | | | | |
| | Six Months Ended | | Six Months Ended | | As of | | As of | ||||
| | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | December 31, 2022 | ||||
Gold Stream |
| Purchases (oz.) |
| Sales (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
Mount Milligan | | 31,200 | | 32,700 | | 33,800 | | 29,400 | | 3,800 | | 5,200 |
Pueblo Viejo | | 14,200 | | 15,300 | | 15,700 | | 15,600 | | 6,800 | | 7,900 |
Andacollo | | 9,000 | | 11,000 | | 16,000 | | 14,700 | | 1,800 | | 3,800 |
Other | | 24,200 | | 23,500 | | 21,500 | | 22,000 | | 4,700 | | 4,100 |
Total | | 78,600 | | 82,500 | | 87,000 | | 81,700 | | 17,100 | | 21,000 |
| | | | | | | | | | | | |
| | Six Months Ended | | Six Months Ended | | As of | | As of | ||||
| | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | December 31, 2022 | ||||
Silver Stream |
| Purchases (oz.) |
| Sales (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
Khoemacau | | 826,200 | | 777,000 | | 362,100 | | 221,800 | | 155,100 | | 105,900 |
Pueblo Viejo | | 513,000 | | 700,100 | | 581,600 | | 590,500 | | 150,700 | | 337,800 |
Other | | 140,000 | | 131,900 | | 106,300 | | 226,900 | | 25,500 | | 17,500 |
Total | | 1,479,200 | | 1,609,000 | | 1,050,000 | | 1,039,200 | | 331,300 | | 461,200 |
| | | | | | | | | | | | |
| | Six Months Ended | | Six Months Ended | | As of | | As of | ||||
| | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | December 31, 2022 | ||||
Copper Stream |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Inventory (Mlbs.) |
| Inventory (Mlbs.) |
Mount Milligan | | 6.0 | | 6.2 | | 6.7 | | 7.6 | | 0.8 | | 0.9 |
Cost of sales, which excludes depreciation, depletion and amortization, increased to $48.4 million for the six months ended June 30, 2023, from $46.5 million for the six months ended June 30, 2022. The increase, when compared to the prior year was primarily due to higher silver sales at Khoemacau, offset by lower gold sales at Andacollo. Cost of sales 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 (Mount Milligan) spot price near the date of metal delivery.
General and administrative costs increased to $7.6$20.1 million for the threesix months ended SeptemberJune 30, 2022,2023, from $7.1$18.2 million for the threesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in employee-related costs including non-cash compensation expense.costs.
Depreciation, depletion and amortization decreased to $37.8$84.7 million for the threesix months ended SeptemberJune 30, 2022,2023, from $50.6$92.0 million for the threesix months ended SeptemberJune 30, 2021.2022. The decrease was primarily due to lower gold production at Cortez and lower gold sales and at Mount Milligan. Lower depletion rates at Mount Milligan and Pueblo Viejo as a result of proven and probable mineral reserve increases when compared to the prior quarter also contributed to the decrease. Refer to Note 3 of our notes to consolidated financial statements for further discussion on the decrease in depletion rates at Mount Milligan.year period. The decrease was partially offset by higher depletion expense at Khoemacau due to the ramp-up of production and additional depletion from Khoemacau which produced first deliveries inthe newly acquired royalties at Cortez when compared to the prior year comparable quarter.
Interest and other expense increased to $8.8$17.6 million for the threesix months ended SeptemberJune 30, 2022,2023, from $1.9$2.3 million for the threesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to higher interest expense as a result of the $500 million draw on thehigher average amounts outstanding under our revolving credit facility and foreign exchange losses related to the GBR acquisition.
For the three months ended September 30, 2022, we recorded an income tax expense of $11.0 million, compared with income tax expense of $16.0 million for the three months ended September 30, 2021. The income tax expense resulted in an effective tax rate of 19.3% in the current period, compared with 18.5% for the three months ended September 30, 2021.
Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021
For the nine months ended September 30, 2022, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $182.6 million, or $2.78 per basic and diluted share, as compared to net income of $205.9 million, or $3.14 per basic and diluted share, for the nine months ended September 30, 2021.
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For the nine months ended September 30, 2022, we recognized total revenue of $440.2 million, comprised of stream revenue of $308.9 million and royalty revenue of $131.4 million at an average gold price of $1,824 per ounce, an average silver price of $21.92 per ounce and an average copper price of $4.11 per pound. This is compared to total revenue of $485.0 million for the nine months ended September 30, 2021, comprised of stream revenue of $325.7 million and royalty revenue of $159.4 million, at an average gold price of $1,800 per ounce, an average silver price of $25.75 per ounce and an average copper price of $4.17 per pound. Revenue and the corresponding production attributable to our stream and royalty interests for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, are as follows:
Revenue and Reported Production Subject to Our Stream and Royalty Interests
(Amounts in thousands, except reported production oz. and lbs.)
| | | | | | | | | | | | | | |
| | | | Nine Months Ended | | Nine Months Ended | ||||||||
| | | | September 30, 2022 | | September 30, 2021 | ||||||||
| | | | | | | Reported | | | | | Reported | ||
Stream/Royalty |
| Metal(s) |
| Revenue |
| Production(1) |
| Revenue |
| Production(1) | ||||
Stream(2): | | | | | | | | | | | | | | |
Mount Milligan | | | | $ | 129,596 | | | | | $ | 131,061 | | | |
| | Gold | | | | | 47,600 | oz. | | | | | 44,700 | oz. |
| | Copper | | | | | 10.3 | Mlbs. | | | | | 12.2 | Mlbs. |
Pueblo Viejo | | | | $ | 64,232 | | | | | $ | 83,957 | | | |
| | Gold | | | | | 24,300 | oz. | | | | | 31,400 | oz. |
| | Silver | | | | | .9 | Moz. | | | | | 1.1 | Moz. |
Andacollo | | Gold | | $ | 39,565 | | 21,500 | oz. | | $ | 52,491 | | 29,000 | oz. |
Khoemacau | | Silver | | | 12,641 | | 580,400 | oz. | | $ | 107 | | 4,500 | oz. |
Wassa | | Gold | | $ | 22,840 | | 12,500 | oz. | | $ | 23,935 | | 13,200 | oz. |
Other(3) | | | | $ | 39,989 | | | | | $ | 34,137 | | | |
| | Gold | | | | | 19,600 | oz. | | | | | 14,500 | oz. |
| | Silver | | | | | 175,300 | oz. | | | | | 303,700 | oz. |
Total stream revenue | | | | $ | 308,863 | | | | | $ | 325,688 | | | |
| | | | | | | | | | | | | | |
Royalty(2): | | | | | | | | | | | | | | |
Peñasquito | | | | $ | 31,768 | | | | | $ | 38,739 | | | |
| | Gold | | | | | 408,300 | oz. | | | | | 530,500 | oz. |
| | Silver | | | | | 22.6 | Moz. | | | | | 23.5 | Moz. |
| | Lead | | | | | 106.6 | Mlbs. | | | | | 133.8 | Mlbs. |
| | Zinc | | | | | 289.6 | Mlbs. | | | | | 319.3 | Mlbs. |
Cortez | | Gold | | $ | 29,413 | | 190,600 | oz. | | $ | 39,475 | | 241,300 | oz. |
Other(3) | | Various | | $ | 70,182 | | N/A | | | $ | 81,145 | | N/A | |
Total royalty revenue | | | | $ | 131,363 | | | | | $ | 159,359 | | | |
Total revenue | | $ | 440,226 | | | | | $ | 485,047 | | | |
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The decrease in our total revenue resulted primarily from lower gold sales at Andacollo and Pueblo Viejo and lower gold production at Cortez and Peñasquito. The decrease was offset by $26.1 million of new revenue from the NX Gold and Khoemacau streams which were not in full production during the prior year comparable period.
Cost of sales, which excludes depreciation, depletion and amortization, decreased to $69.7 million for the nine months ended September 30, 2022, from $73.4 million for the nine months ended September 30, 2021. The decrease, when compared to the prior period,year period. We had $400 million outstanding under our revolving credit facility as of June 30, 2023, compared to zero outstanding as of June 30, 2022. The current all-in borrowing rate under our revolving credit facility was primarily due to a decrease in gold and silver sales at Pueblo Viejo and lower gold sales at Andacollo, offset by higher silver sales at Khoemacau. Stream deliveries from Khoemacau began in the prior year comparable period. Cost6.7% as of sales 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 prevailingJune 30, 2023.
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market price of gold when purchased, whileFor the cash payment for our other streams is a set contractual percentage of the gold, silver or copper (Mount Milligan) spot price near the date of metal delivery.
Gold and silver ounces and copper pounds purchased and sold during the ninesix months ended SeptemberJune 30, 2022 and 2021, and gold and silver ounces and copper pounds in inventory as of September 30, 2022, and December 31, 2021, for our streaming interests were as follows:
Revenue and Reported Production Subject to Our Stream and Royalty Interests
(Amounts in thousands, except reported production oz. and lbs.)
| | | | | | | | | | | | |
| | Nine Months Ended | | Nine Months Ended | | As of | | As of | ||||
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | December 31, 2021 | ||||
Gold Stream |
| Purchases (oz.) |
| Sales (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
Mount Milligan | | 52,200 | | 47,600 | | 43,800 | | 44,700 | | 8,700 | | 4,100 |
Pueblo Viejo | | 24,600 | | 24,300 | | 30,100 | | 31,400 | | 8,900 | | 8,600 |
Andacollo | | 19,300 | | 21,500 | | 28,400 | | 29,000 | | — | | 2,200 |
Wassa | | 12,800 | | 12,500 | | 12,300 | | 13,200 | | 2,000 | | 1,600 |
Other | | 20,500 | | 19,600 | | 15,800 | | 14,500 | | 3,100 | | 2,200 |
Total | | 129,400 | | 125,500 | | 130,400 | | 132,800 | | 22,700 | | 18,700 |
| | | | | | | | | | | | |
| | Nine Months Ended | | Nine Months Ended | | As of | | As of | ||||
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | December 31, 2021 | ||||
Silver Stream |
| Purchases (oz.) |
| Sales (oz.) |
| Purchases (oz.) |
| Sales (oz.) |
| Inventory (oz.) |
| Inventory (oz.) |
Pueblo Viejo | | 900,700 | | 897,600 | | 1,030,500 | | 1,052,100 | | 319,100 | | 316,000 |
Khoemacau | | 652,800 | | 580,400 | | 105,800 | | 4,500 | | 114,400 | | 42,000 |
Other | | 170,600 | | 175,300 | | 280,500 | | 303,700 | | 29,600 | | 34,300 |
Total | | 1,724,100 | | 1,653,300 | | 1,416,800 | | 1,360,300 | | 463,100 | | 392,300 |
| | | | | | | | | | | | |
| | Nine Months Ended | | Nine Months Ended | | As of | | As of | ||||
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | December 31, 2021 | ||||
Copper Stream |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Purchases (Mlbs.) |
| Sales (Mlbs.) |
| Inventory (Mlbs.) |
| Inventory (Mlbs.) |
Mount Milligan | | 11.2 | | 10.3 | | 11.2 | | 12.2 | | 1.8 | | 0.9 |
General and administrative costs increased to $25.8 million for the nine months ended September 30, 2022, from $21.3 million for the nine months ended September 30, 2021. The increase was primarily due to an increase in employee-related costs including non-cash compensation expense, as well as higher costs associated with certain environmental, social and governance initiatives.
Depreciation, depletion and amortization decreased to $129.7 million for the nine months ended September 30, 2022, from $139.9 million for the nine months ended September 30, 2021. The decrease was primarily due to lower gold sales at Mount Milligan and Andacollo and lower gold and silver sales at Pueblo Viejo. Refer to Note 3 of our notes to consolidated financial statements for further discussion on the decrease in depletion rates at Mount Milligan. The decrease in depletion was partially offset by the additional depletion from the newly acquired Khoemacau and NX Gold streams when compared to the prior year period.
Interest and other expense increased to $11.1 million for the nine months ended September 30, 2022, from $4.9 million for the nine months ended September 30, 2021. The increase was primarily due to higher interest expense as a result of the $500 million draw on the revolving credit facility in July 2022 as part of the Cortez Complex Royalty acquisition discussed earlier in this MD&A and foreign exchange losses related to the GBR acquisition.
For the nine months ended September 30, 2022,2023, we recorded income tax expense totaling $20.3of $17.9 million, compared with income tax expense of $39.2$9.4 million for the ninesix months ended SeptemberJune 30, 2021.2022. The income tax expense resulted in an effective tax rate of 10.0%12.3% in the current period, compared with 16.0%6.4% for the ninesix months ended SeptemberJune 30, 2021.2022. The ninesix months ended SeptemberJune 30, 2023 and June 30, 2022, included a discrete income tax benefitbenefits attributable to the release of a valuation allowance on certain deferred tax assets. The nine months ended September 30, 2021, included a discrete tax benefit attributable to the settlement of an uncertain tax position with a foreign jurisdiction.
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Liquidity and Capital Resources
Overview
At SeptemberJune 30, 2022,2023, we had current assets of $181.8$165.3 million compared to current liabilities of $64.5$63.1 million, which resulted in working capital of $117.3$102.2 million and a current ratio of approximately 3 to 1. This compares to current assets of $216.0$185.8 million and current liabilities of $61.4$63.6 million at December 31, 2021,2022, resulting in working capital of $154.6$122.2 million and a current ratio of approximately 43 to 1. The decrease in working capital was primarily due to a decrease in our available cash, as a result ofwhich resulted from increased debt repayments during the Cortez Complex Royalty and GBR acquisitions.current period.
During the ninesix months ended SeptemberJune 30, 2022,2023, liquidity needs were met from $316.3$216.6 million in net cash provided by operating activities and our available cash resources. As of SeptemberJune 30, 2022,2023, we had $550$600 million available and $450$400 million outstanding under our revolving credit facility.
Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $667$702 million of total liquidity at SeptemberJune 30, 2022. 2023. We were in compliance with each financial covenant under the revolving credit facility as of SeptemberJune 30, 2022.2023. Refer to Note 54 of our notes to consolidated financial statements and below under Recent Liquidity Developments for further discussion on our debt.
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, including any conditional funding schedules. Our long-term capital requirements are primarily affected by our ongoing acquisition activities. We currently, and generally at any time, have acquisition opportunities in various stages of active review. In the event of one or more substantial stream or royalty interest or other acquisitions, we may seek additional debt or equity financing as necessary. We occasionally borrow and repay amounts under our revolving credit facility and may do so in the future.
Please refer to our risk factors included in Part 1, Item 1A of our Transition Report2022 10-K for a discussion of certain risks that may impact our liquidity and capital resources.
Recent Liquidity Developments
Revolving Credit Facility DrawAmendment
In July 2022,On June 28, 2023, we borrowed $500 million underentered into a fifth amendment to our revolving credit facility dated as of June 2, 2017. The fifth amendment extended the scheduled maturity date from July 7, 2026 to fundJune 28, 2028, replaced LIBOR with Secured Overnight Financing Rate (“Term SOFR”) as a benchmark interest rate and made certain other administrative changes to the acquisition of the Cortez Complex Royalty, and on Septemberexisting revolving credit facility.
Revolving Credit Facility Repayment
On June 6, 2022,2023, we made a $50$100 million principal payment towards the outstanding balance on the revolving credit facility leaving $550$600 million available as of SeptemberJune 30, 2022.2023.
Cash Flows
Operating Activities
Net cash provided by operating activities totaled $316.3$216.6 million for the ninesix months ended SeptemberJune 30, 2022,2023, compared to $343.0$221.3 million for the ninesix months ended SeptemberJune 30, 2021.2022. The decrease was primarily due to ahigher interest payments on
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amounts outstanding under our revolving credit facility during the current period. The decrease was partially offset by an increase in cash proceeds received from our stream interests, net of cost of sales, of approximately $16.9 millionwhen compared to the prior year period. Higher income taxes paid due to the change in year-end of $9.8 million compared to the prior year period also contributed to the decrease.
Investing Activities
Net cash used in investing activities totaled $716.5$2.8 million for the ninesix months ended SeptemberJune 30, 2022,2023, compared to $401.6$37.9 million for the ninesix months ended SeptemberJune 30, 2021.2022. The increase over the prior year perioddecrease was primarily due to higherfewer acquisitions of royalty and stream interests duecompared to the GBR and Cortez Complex Royalty acquisitions.prior year period.
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Financing Activities
Net cash provided by financing activities totaled $378.9 million for the nine months ended September 30, 2022, compared to net cash used in financing activities of $163.1totaled $226.2 million for the ninesix months ended SeptemberJune 30, 2021.2023, compared to $46.4 million for the six months ended June 30, 2022. The increase was primarily due to a $500repayments of $175 million draw on our revolving credit facility during the current year period.
Recently Adopted Accounting Standards and Critical Accounting Policies
Refer to Note 1 of our notes to consolidated financial statements for further discussion on any recently adopted accounting standards. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Transition Report2022 10-K for discussion on our critical accounting policies.
Property Mineral Reserve and Mineral Resource Update for Cortez
Below is certain updated information regarding the estimates of mineral resources and mineral reserves (as such terms are defined in Subpart 1300 of Regulation S-K (“SK1300”)) previously reported by the operator of Cortez and included in our Transition Report on Form 10-KT (“Form 10-KT”) and our Current Report on Form 8-K dated April 12, 2022.
On August 1, 2022, we acquired an additional royalty at Cortez that we refer to as the Cortez Complex Royalty. The updated disclosures herein reflect the change in Royal Gold’s royalty position on the Cortez property as a result of that acquisition.
We own various royalty positions at Cortez, including: (1) overlapping royalties covering the Pipeline and Crossroads deposits (known as GSR1, GSR2, GSR 3, NVR1 and NVR1C); (2) a 1% NVR on a portion of the Goldrush development property (NVR2); and (3) the Cortez Complex Royalty. The Cortez Complex Royalty covers an area including the Cortez mine operational area (including the Fourmile development project owned by Barrick). Refer to footnote 3 in each of the tables below for further detail regarding our royalties at Cortez.
Deductions under the Cortez Complex Royalty are limited to third-party royalties that existed prior to the creation of the royalty in 2008, which include the royalties listed under (1) and (2) above. The Cortez Complex Royalty is not subject to any stepdowns or caps. Based on the information available to Royal Gold, the Cortez Complex Royalty does not cover the existing deposits in the Robertson property.
As a result of the acquisition of the Cortez Complex Royalty, there has been an increase of 380% in gold mineral reserves and an increase of 1230% in measured and indicated gold mineral resources attributable to our royalty interests at Cortez beyond the resources and reserves previously disclosed in detail in our Transition Report.
The disclosures below are derived from the Annual Information Form of Barrick, dated March 18, 2022, attached as Exhibit 99.1 to Barrick’s Annual Report on Form 40-F for the year ended December 31, 2021, which reports resources and reserves for Cortez pursuant to National Instrument 43-101 and CIM Standards, and nonpublic mineral resource and reserve updates provided by Barrick to us specific to the portions of the property to which our legacy royalty interests apply. Measurement units presented in this section are US standard units. There may be rounding differences due to unit conversions.
Table 1 Cortez – Summary of Gold Mineral Resources at December 31, 2021, Based on $1,500 Au (1)(2)(3)
| Amount Tons (M) | Au Grade opt | Cut-Off Grade | Metallurgical Recovery |
Measured Mineral Resources | 0.8 | 0.203 | (4) | (4) |
Indicated Mineral Resources | 28.1 | 0.099 | (4) | (4) |
Measured + Indicated Mineral Resources | 28.9 | 0.102 | (4) | (4) |
Inferred Mineral Resources | 47.5 | 0.159 | (4) | (4) |
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Table 2 Cortez – Summary of Gold Mineral Reserves at December 31, 2021, Based on $1,200 Au and $16.50 Ag (1)(2)(3)
| Amount Tons (M) | Au Grade opt | Cut-Off Grade | Metallurgical Recovery |
Proven Mineral Reserves | 4.0 | 0.126 | (4) | (4) |
Probable Mineral Reserves | 113.8 | 0.122 | (4) | (4) |
Total Mineral Reserves | 117.7 | 0.122 | (4) | (4) |
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Forward-Looking Statements
This report and our other public communications include “forward-looking statements” within the meaning of U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from these statements.
Forward-looking statements are often identified by words like “will,” “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” or negatives of these words or similar expressions. Forward-looking statements include, among others, statementstatements regarding the following: volatilitythe proposed acquisition of metal pricesnew royalty interests on the producing Serrote and factors impacting same;Santa Rita mines in Brazil, including the details of the anticipated royalties thereon and funding of the purchase price; our expected financial performance and outlook, including sales volume, revenue, expenses, and tax rates, earnings or cash flow;rates; operators’ expected operating and financial performance, including production, deliveries, mine plans, mine lives, facilities,estimates of mineral resources and mineral reserves, access to and adequacy of water sources, development, cash flows and liquidity, capital requirements, capital expenditures and completion of feasibility studies, permitting activities and environmental impact studies; effectsresolution of the pandemic; estimateslabor strikes; receipt of fair valuemetal deliveries; anticipated liquidity, capital resources, financing and potential impairments; tax changes; deferralstockholder returns; deliveries of deferred silver ounces from Pueblo Viejo; impact on stream deliveries due to rainfall and the resulting temporary shutdown of operations at Andacollo; anticipated stronger performance at Cortezprices for the fourth quarter of 2022; adequacy of our current financial resourcesgold, silver, copper, nickel and funds from operations to cover anticipated expenditures for the foreseeable future; seeking additional debt or equity
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financing as necessary; borrowing and repaying amounts under our revolving credit facility; and disclosure controls and procedures and internal controls over financial reporting.other metals.
The risks and uncertaintiesFactors that could cause actual results to differ materially from those in forward lookingthese forward-looking statements include, without limitation,among others, the following: a lower-price environment for gold, silver, copper, nickel or other metals; operating activities or financial performance of operators,properties on which we hold stream or royalty interests, including inaccuracies in the operator’s disclosures, variations between actual and forecasted performance, the operator’soperators’ ability to complete projects on schedule and as planned, the operator’soperators’ changes to mine plans and mineral reserves and mineral resources the operator’s(including updated mineral reserve and mineral resource information), liquidity needs, mining and environmental hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, contractual issues involving our stream or royalty agreement,agreements, or operational disruptions due to public health crises; environmental risks, including those caused by climate change; potential cyber-attacks, including ransomware;disruptions; the timing of deliveries of metals from operators; risks associated with doing business in foreign countries; the impact of inadequately assessing new acquisitions; increased competition for stream and royalty interests; effectsenvironmental risks, included those caused by climate change; the risk that the conditions to closing for the potential acquisition of globalroyalties on the Serrote and regionalSanta Rita mines may not be satisfied; delays in the completion of the plant expansion at Pueblo Viejo; potential cyber-attacks, including ransomware; our ability to identify, finance, value and complete acquisitions; adverse economic and market conditions, including as a resultconditions; impact of government policies, war, natural disasters,health epidemics and public health issues;pandemics; changes in laws or regulations governing us, operators or operating properties; changes in management and key employees; the risk that any announcement relating to an acquisition could have adverse effects on the market price of Royal Gold’s common stock; the risk of litigation related to acquisitions; and the diversion of management time from ongoing business operations due to acquisition-related issues; and other risk factors described in our reports filed with the Securities and Exchange Commission, including our Transition Report.2022 10-K. Most of these factors are beyond our ability to predict or control. Other unpredictable or unknown factors not discussed in this presentation could also have material adverse effects on forward looking statements.
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Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any
forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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, inflation and the strength of the U.S. dollar relative to other currencies. Please see the risk factor entitled “Our revenue is subject to volatility in metal prices, which could negatively affect our results of operations or cash flow.,” under Part I, Item 1A of our Transition Report,2022 10-K, for more information about risks associated with metal price volatility.
During the ninesix months ended SeptemberJune 30, 2022,2023, we reported revenue of $440.2$314.4 million, with an average gold price for the period of $1,824$1,932 per ounce, an average silver price of $21.92$23.31 per ounce, and an average copper price of $4.11$3.95 per pound. The table below shows the impact that a 10% increase or decrease in the average price of the specified metal would have had on our total reported revenue for the ninesix months ended SeptemberJune 30, 2022:2023:
| | |
Metal | Percentage of Total Reported Revenue Associated with Specified Metal | Amount by Which Total Reported Revenue Would Have Increased or Decreased If Price of Specified Metal Had Averaged 10% Higher or Lower in Period |
Gold |
| $ |
Silver | 14% | $2.4 million |
Copper |
| $ |
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer (the principal executive officer) and Chief Financial Officer (the principal financial and accounting officer), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of SeptemberJune 30, 2022.2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of SeptemberJune 30, 2022,2023, at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended SeptemberJune 30, 2022,2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial 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 Royal Gold have been detected.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors included in the section entitled “Risk Factors” of our Transition Report.2022 10-K.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
| | | | |
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid Per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs |
| — | — | N/A | N/A |
| — | — | N/A | N/A |
| — | — | N/A | N/A |
Total | — |
| N/A | N/A |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5. OTHER INFORMATION
None.On June 14, 2023, Paul Libner, Chief Financial Officer and Treasurer of Royal Gold, adopted a trading plan that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Securities Exchange Act of 1934, as amended, regarding the sale of up to 1,700 shares of common stock of Royal Gold. The plan provides that sales may begin on September 13, 2023, and will end on September 30, 2024, or such earlier date as all 1,700 shares are sold.
No non-Rule 10b5-1 trading arrangements (as defined by Item 408(a) of Regulation S-K) were entered into by a Section 16 director or officer of the Company during the quarter.
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ITEM 6. EXHIBITS
Exhibit |
| Description | |||
| | | |||
3.1 | | ||||
| | | |||
3.2 | | ||||
| | | |||
10.1 | |
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31.1* | | ||||
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31.2* | | ||||
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32.1‡ | | ||||
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32.2‡ | | ||||
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101* | | The following financial statements from Royal Gold, Inc.’s Quarterly Report on Form 10-Q for the quarter ended | |||
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104* | | The cover page from Royal Gold, Inc.’s Quarterly Report on Form 10-Q for the quarter ended |
* | Filed herewith. |
‡ | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements 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. | |
| | |
Date: | | |
| By: | /s/ William Heissenbuttel |
| | William Heissenbuttel |
| | President and Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
Date: | By: | /s/ Paul Libner |
| | Paul Libner |
| | Chief Financial Officer and Treasurer |
| | (Principal Financial and Accounting Officer) |
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