ROYAL GOLD INC 10-Q

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 the 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 Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on February 13, 2025 (“2024 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, in certain cases 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 the production, development or exploration 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 and obligation 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 March 31, 2025, we owned 9 stream interests, which are on 7 producing properties and 2 development stage properties. Stream interests accounted for approximately 63% of our total revenue for the three months ended March 31, 2025 and 69% for the three months ended March 31, 2024. We expect stream interests to continue representing a significant portion of our total revenue. • 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 March 31, 2025, we owned royalty interests on 33 producing properties, 17 development stage properties and 116 exploration stage properties, of which we consider 50 to be evaluation stage projects. We use “evaluation stage” to describe exploration stage properties that contain mineral resources and on which operators are engaged in the search for mineral reserves. Royalty interests accounted for 37% of our total revenue for the three months ended March 31, 2025 and 31% for the three months ended March 31, 2024. 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. 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 of indications of interest and term sheets; participation in preliminary discussions and negotiations; and involvement as a bidder in competitive processes. 16 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 months ended March 31, 2025 and 2024, average metal prices and percentages of revenue by metal were as follows: Three Months Ended March 31, 2025 March 31, 2024 Metal Average Price Percentage of Revenue Average Price Percentage of Revenue Gold ($/ounce) (1) $ 2,860 75% $ 2,070 75% Silver ($/ounce) (1) $ 31.88 12% $ 23.34 13% Copper ($/pound) (2) $ 4.24 9% $ 3.83 9% Other N/A 4% N/A 3% ______________________________________________ (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. Recent Developments Additional Xavantina Stream On March 28, 2025, we entered into an additional precious metals purchase agreement (“Additional Stream”) with Ero Gold Corporation, a wholly owned subsidiary of Ero Copper Corporation, and certain of its affiliates for gold produced from the Xavantina mine for an advance payment of $50 million. The Additional Stream is incremental to the precious metals purchase agreement dated June 29, 2021 (“Base Stream”), and significantly extends the area of interest. When considered with the Base Stream, the Additional Stream effectively increases the threshold for stream deliveries at the 25% stream rate from 93,000 ounces to 160,000 ounces, with deliveries payable at a cash price of 40% of the spot gold price. As of March 31, 2025, 46,500 ounces of gold have been delivered under the Base Stream at a cash purchase price of 20% of the spot gold price for each ounce delivered, which will increase to 40% of the spot gold price for each ounce delivered upon the delivery of 49,000 ounces. The purchase price was funded with available cash on hand. 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 5,500 ounces for the three months ended March 31, 2025, compared to approximately 4,900 ounces for the three months ended March 31, 2024. Stream deliveries typically occur approximately 5 months after mine production and are based on a fixed payability factor of 89%. According to Teck Resources Limited ("Teck"), gold production in the three months ended March 31, 2025, was approximately 7,400 ounces compared to 3,400 ounces in the prior year period. Mill throughput was significantly higher in the three month period ended March 31, 2025, as a result of increased water availability compared to the prior year period, which was impacted by drought conditions. Teck expects 2025 gold production at Andacollo to range between 35,000 and 39,000 ounces compared to actual gold production of 20,800 ounces in 2024. The expected increase is primarily driven by 17 higher mill throughput due to increased water availability, which was impacted by drought conditions throughout much of 2024. The mine life of Andacollo is expected to continue until 2037, although Teck has reported that additional environmental permits will be required to extend the mine life beyond 2031. Mount Milligan Gold stream deliveries from Mount Milligan were approximately 16,100 ounces for the three months ended March 31, 2025, compared to approximately 15,200 ounces for the three months ended March 31, 2024. Copper stream deliveries from Mount Milligan were approximately 3.1 million pounds during the three months ended March 31, 2025, compared to approximately 3.4 million pounds during the three months ended March 31, 2024. Increased gold deliveries in the current period primarily resulted from differences in the timing of shipments and settlements during the periods, as well as higher throughput and gold grades; decreased copper deliveries in the current period resulted from differences in the timing of shipments and settlements, which offset the production improvement related to the higher throughput. Gold stream deliveries are based on a fixed payability factor of 97% and copper stream deliveries are based on a minimum payability factor of 95%. On February 20, 2025, Centerra Gold Inc. ("Centerra") provided Mount Milligan production guidance for 2025. Centerra expects gold production to range between 165,000 and 185,000 ounces, and copper production to range between 50 and 60 million pounds, with production of both metals to be weighted toward the second half of the year compared to 2024 gold and copper production of 167,600 ounces and 54.3 million pounds, respectively. Centerra also reported that a Pre-feasibility Study (“PFS”) to evaluate the substantial mineral resources to unlock additional value beyond the current mine life is on track to be completed in the third quarter of 2025. According to Centerra, it is optimistic that the mine life can be extended beyond the current mine life of approximately 2036, which is based on the available space in the existing tailings storage facility. Centerra also reported that it is evaluating options for additional tailings capacity and expects that the PFS will incorporate an increase in annual mill throughput in the range of 10% through ball mill motor upgrades and additional downstream flowsheet improvements, which may also improve overall metal recovery. Pueblo Viejo Gold stream deliveries from Pueblo Viejo were approximately 5,800 ounces for the three months ended March 31, 2025, compared to approximately 5,800 ounces for the three months ended March 31, 2024. Gold stream deliveries are based on a fixed payability factor of 99.9%. Silver stream deliveries were approximately 204,700 ounces for the three months ended March 31, 2025, compared to approximately 218,200 ounces for the three months ended March 31, 2024. Silver stream deliveries are based on a fixed payability factor of 99.0%. Gold and silver deliveries are quarterly and typically occur one to three months after mine production. On May 7, 2025, Barrick Mining Corporation ("Barrick") reported that 2025 gold production guidance of 370,000 to 410,000 ounces for its 60% share of Pueblo Viejo in the Dominican Republic is unchanged after completing a 35-day shutdown for debottlenecking work on the expanded plant in the first quarter of the year. This guidance compares to 2024 gold production of 352,000 ounces. Barrick also provided a progress update on the mine life extension project, where activity is focused on housing, resettlement and the El Naranjo tailings storage facility. The housing project continues with 220 homes constructed and 18 families resettled. Engineering work is ongoing for the tailings storage facility and the overall schedule remains on track to have the starter dam completed ahead of the existing El Llagal dam reaching capacity. Royalty Interests Cortez Production attributable to the Company’s royalty interest at the Cortez Complex was approximately 150,800 ounces of gold for the three months ended March 31, 2025, of which 31,100 ounces were attributable to the Legacy Zone, and 119,700 ounces were attributable to the CC Zone, compared to approximately 194,200 ounces of gold for the three months ended March 31, 2024, of which 69,200 ounces were attributable to the Legacy Zone, and 125,000 ounces were attributable to the CC Zone. 18 On May 7, 2025, Barrick reported that 2025 gold production guidance of approximately 680,000 to 765,000 ounces (100% basis) is unchanged at the Cortez Complex in Nevada. This guidance compares to 2024 gold production of 722,000 ounces. We estimate our overall average royalty rate on this production to be approximately 3.1% for 2025. Additionally, Barrick reported continued progress at the various projects underway at Cortez. At Goldrush, the sinking of the first eight ventilation shafts and the installation of underground primary fans were completed, which enable increased mining rates. At the Fourmile project, the exploration drilling campaign to define the orebody and delineate the overall footprint commenced, and the pre-feasibility study is expected to start in 2025. At the Hanson project, exploration drilling is focused on the Birch target for 2025, and at the Swift project, exploration results have extended the footprint of anomalous gold mineralization 900 meters to the south. Results of Operations Quarter Ended March 31, 2025, Compared to Quarter Ended March 31, 2024 For the three months ended March 31, 2025, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $113.5 million, or $1.72 per basic and diluted share, as compared to net income of $47.2 million, or $0.72 per basic and diluted share, for the three months ended March 31, 2024. The increase in net income was primarily attributable to higher revenue and lower tax expense, each discussed below. For the three months ended March 31, 2025, we recognized total revenue of $193.4 million, comprised of stream revenue of $122.5 million and royalty revenue of $71.0 million at an average gold price of $2,860 per ounce, an average silver price of $31.88 per ounce and an average copper price of $4.24 per pound. This is compared to total revenue of $148.9 million for the three months ended March 31, 2024, comprised of stream revenue of $102.5 million and royalty revenue of $46.4 million, at an average gold price of $2,070 per ounce, an average silver price of $23.34 per ounce and an average copper price of $3.83 per pound. Revenue and the corresponding production attributable to our stream and royalty interests for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, are as follows: 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 March 31, 2025 March 31, 2024 Reported Reported Stream/Royalty Metal(s) Revenue Production (1) Revenue Production (1) Stream (2) : Mount Milligan $ 42,808 $ 34,995 Gold 11,800 oz. 12,500 oz. Copper 2.2 Mlbs. 2.5 Mlbs. Pueblo Viejo $ 28,751 $ 17,760 Gold 7,700 oz. 6,200 oz. Silver 219,400 oz. 223,000 oz. Andacollo Gold $ 12,744 4,400 oz. $ 11,689 5,700 oz. Other (3) $ 38,179 $ 38,084 Gold 9,400 oz. 13,800 oz. Silver 378,000 oz. 412,000 oz. Total stream revenue $ 122,482 $ 102,528 . Royalty (2) : Cortez Legacy Zone Gold $ 11,143 31,100 oz. $ 13,365 69,200 oz. Cortez CC Zone Gold $ 3,554 119,700 oz. $ 4,411 125,000 oz. Other (3) Various $ 56,257 N/A $ 28,598 N/A Total royalty revenue $ 70,954 $ 46,374 Total Revenue $ 193,436 $ 148,902 19 _______________________________________________ (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 March 31, 2025, and 2024, 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. (2) Refer to “Property Developments” above for a discussion of recent developments at principal properties. (3) Individually, no stream or royalty included within the “Other” category contributed greater than 10% of our total revenue for either period. In our 2024 10-K, Khoemac a u and Peñasquito were reclassified from principal to non-principal stream and royalty properties, respectively, and are shown within "Other" in the table above. The increase in our total revenue resulted primarily from higher average gold, silver and copper prices compared to the prior period. Higher gold sales from Pueblo Viejo and higher gold and zinc production from Peñasquito (included within "Other" royalty revenue in the table above) also contributed to the increase. These increases were partially offset by lower production from Cortez and lower gold sales from Xavantina (included within "Other" stream revenue in the table above) when compared to the prior year period. Gold and silver ounces and copper pounds purchased and sold during the three months ended March 31, 2025 and 2024, and gold and silver ounces and copper pounds in inventory as of March 31, 2025, and December 31, 2024, for our streaming interests were as follows: Three Months Ended Three Months Ended As of As of March 31, 2025 March 31, 2024 March 31, 2025 December 31, 2024 Gold Stream Purchases (oz.) Sales (oz.) Purchases (oz.) Sales (oz.) Inventory (oz.) Inventory (oz.) Mount Milligan 16,100 11,800 15,200 12,500 8,800 4,500 Pueblo Viejo 5,800 7,700 5,800 6,200 5,800 7,700 Andacollo 5,500 4,400 4,900 5,700 1,100 — Other 8,800 9,400 13,800 13,700 2,700 3,300 Total 36,200 33,300 39,700 38,100 18,400 15,500 Three Months Ended Three Months Ended As of As of March 31, 2025 March 31, 2024 March 31, 2025 December 31, 2024 Silver Stream Purchases (oz.) Sales (oz.) Purchases (oz.) Sales (oz.) Inventory (oz.) Inventory (oz.) Pueblo Viejo (1) 204,700 219,400 218,200 223,000 204,700 219,400 Other (2) 367,500 378,000 383,100 412,000 108,500 119,000 Total 572,200 597,400 601,300 635,000 313,200 338,400 Three Months Ended Three Months Ended As of As of March 31, 2025 March 31, 2024 March 31, 2025 December 31, 2024 Copper Stream Purchases (Mlbs.) Sales (Mlbs.) Purchases (Mlbs.) Sales (Mlbs.) Inventory (Mlbs.) Inventory (Mlbs.) Mount Milligan 3.1 2.2 3.4 2.5 0.9 — _______________________________________________ (1) Pueblo Viejo silver purchases for the three months ended March 31, 2025 do not include 300,200 ounces of silver permitted to be deferred based on the terms of the Pueblo Viejo stream agreement. Total deferred silver ounces were 2.0 million ounces at March 31, 2025, and the timing for the delivery of this deferred amount is uncertain. (2) In our 2024 10-K, Khoemac a u was reclassified from a principal to a non-principal property and is shown within "Other" in the table above. Cost of sales, which excludes depreciation, depletion and amortization, increased to $24.5 million for the three months ended March 31, 2025, from $21.8 million for the three months ended March 31, 2024. The increase, when compared to the prior year period, was primarily due to higher gold, silver and copper prices and higher gold sales from Pueblo Viejo. Cost of sales is specific to our stream agreements and, except for Mount Milligan, is the result of our purchase of metal for a cash payment that is a set contractual percentage of the spot price for that metal near the date of metal delivery. For Mount Milligan, the cash payments under the stream agreement are the lesser of $435 per ounce or the prevailing market price of gold when purchased and 15% of the spot price for copper near the date of metal delivery. Separately, and in 20 addition to the cash payments under the stream agreement, the Mount Milligan Cost Support Agreement provides for cash payments on gold and copper deliveries that are expected to begin after certain thresholds are met or earlier, if metal prices are below certain thresholds and if requested by Centerra. For further detail on the Mount Milligan Cost Support Agreement refer to our 2024 10-K. General and administrative costs decreased to $11.1 million for the three months ended March 31, 2025, from $11.4 million for the three months ended March 31, 2024. The decrease was primarily due to lower consulting costs offset by higher non-cash stock compensation expense compared to the prior year period. Depreciation, depletion and amortization decreased to $33.0 million for the three months ended March 31, 2025, from $38.8 million for the three months ended March 31, 2024. The decrease was primarily due to lower stream depletion rates as a result of proven and probable mineral reserve increases by our operators, lower gold sales from Xavantina and lower gold production at Cortez compared to the prior year period. Interest and other expense decreased to $1.2 million for the three months ended March 31, 2025, from $4.6 million for the three months ended March 31, 2024. The decrease was primarily due to lower interest expense as a result of lower average amounts outstanding under our revolving credit facility compared to the prior year period. For the three months ended March 31, 2025, there was no outstanding debt compared to average amounts outstanding of $221 million at an average all-in borrowing rate of 6.6% for the prior year period. For the three months ended March 31, 2025, we recorded income tax expense of $10.4 million, compared to $27.0 million for the three months ended March 31, 2024. The income tax expense resulted in an effective tax rate of 8.4% in the current period, compared with 36.4% for the three months ended March 31, 2024. The lower income tax expense for the three months ended March 31, 2025, included a $12.0 million discrete be nefit, net of valuation allowance, for additional recoverable basis in foreign jurisdictions an d a $1.7 million discrete benefit related to a withholding tax refund on a foreign royalty. The higher income tax expense for the three months ended March 31, 2024, was primarily attributable to a $13.0 million discrete income tax expense related to the consideration from the Mount Milligan Cost Support Agreement. Liquidity and Capital Resources Overview At March 31, 2025, we had current assets of $316.5 million compared to current liabilities of $66.8 million, which resulted in working capital of $249.7 million. This compares to current assets of $275.3 million and current liabilities of $85.2 million at December 31, 2024, resulting in working capital of $190.1 million. The increase in working capital was primarily due to an increase in our available cash, which primarily resulted from higher net cash proceeds from our stream and royalty interests, partially offset by the $50 million paid for the additional Xavantina stream during the current period. During the three months ended March 31, 2025, liquidity needs were met from $136.4 million in net cash provided by operating activities and our available cash resources. Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $1.2 billion of total liquidity at March 31, 2025. As of March 31, 2025, we had no outstanding debt and $1.0 billion available under our revolving credit facility. We were in compliance with each financial covenant under the revolving credit facility as of March 31, 2025. We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for debt service and general and administrative expense costs 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 2024 10-K for a discussion of certain risks that may impact our liquidity and capital resources. 21 Recent Liquidity Developments Operating Activities Net cash provided by operating activities totaled $136.4 million for the three months ended March 31, 2025, compared to $138.3 million for the three months ended March 31, 2024. The decrease was primarily due to cash proceeds of $24.5 million received for the Mount Milligan Cost Support Agreement and $12.0 million of interest from the repayment of the Khoemac a u debt facility in the prior year period and higher income taxes paid in the current period of $8.4 million. This decrease was partially offset by higher net cash proceeds received from our stream and royalty interests of $37.2 million and lower debt cash interest payments of $4.1 million when compared to the prior year period. Investing Activities Net cash used in investing activities totaled $58.3 million for the three months ended March 31, 2025, compared to net cash provided by investing activities of $23.6 million for the three months ended March 31, 2024. The period over period change was primarily due to the $50 million payment for the acquisition of the additional Xavantina stream in the current period, whereas the prior period included $25 million received from the repayment of principal on the Khoemac a u subordinated debt facility. Financing Activities Net cash used in financing activities totaled $32.8 million for the three months ended March 31, 2025, compared to $128.1 million for the three months ended March 31, 2024. The decrease was primarily due to lower debt repayments when compared to the prior year period. This decrease was partially offset by higher dividend payments compared to the prior 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 2024 10-K for discussion on our critical accounting policies. 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, statements regarding the following: our expected financial performance and outlook, including sales volume, revenue, expenses, tax rates, earnings, and cash flows; operators’ expected operating and financial performance and other anticipated developments relating to their properties and operations, including production, deliveries, estimates of mineral resources and mineral reserves, environmental and feasibility studies, technical reports, mine plans, capital requirements, liquidity, and capital expenditures; opportunities for investments, acquisitions and other transactions; anticipated benefits from investments, acquisitions, and other transactions; receipt and timing of future metal deliveries, including deferred amounts at Pueblo Viejo; the timing and amount of future benefits and obligations in connection with the Mount Milligan Cost Support Agreement; anticipated liquidity, capital resources, financing, and stockholder returns; borrowings and repayments under our revolving credit facility; and prices for gold, silver, copper, and other metals. Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the following: changes in the price of gold, silver, copper, or other metals; operating activities or financial performance of properties on which we hold stream or royalty interests, including variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, operators’ changes to mine plans and mineral reserves and mineral resources (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, other adverse government or court actions, or operational disruptions; changes of control of properties or operators; contractual issues involving our stream or royalty agreements; the timing of deliveries of metals from operators and our subsequent sales of metal; risks associated with doing business in foreign countries; increased competition for stream and royalty 22 interests; environmental risks, including those caused by climate change; potential cyber-attacks, including ransomware; our ability to identify, finance, value, and complete investments, acquisitions, or other transactions; adverse economic and market conditions; effects of health epidemics and pandemics; changes in laws or regulations governing us, operators, or operating properties; changes in management and key employees; and other factors described in this report and in our other reports filed with the SEC, including our 2024 10-K. Most of these factors are beyond our ability to predict or control. Other unpredictable or unknown factors not discussed in this report or our other reports could also have material adverse effects on forward-looking statements. Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.