What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-05-07 · 161 added, 263 removed, 317 unchanged (57% of the section changed)

3 unchanged sentences

(Unaudited, amounts in thousands except share data)

September 30,

Cash and equivalents

21 unchanged sentences

Additional paid-in capital

Accumulated earnings (losses)

Accumulated earnings

Total Royal Gold stockholders’ equity

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Revenue (Note 7)

6 unchanged sentences

Total costs and expenses

Gain on sale of Peak Gold JV interest

Operating income

3 unchanged sentences

Income before income taxes

Income tax (expense) benefit

Income tax benefit

Net income and comprehensive income

1 unchanged sentence

Net income and comprehensive income attributable to Royal Gold common stockholders

Net income per share available to Royal Gold common stockholders:

Net income per share attributable to Royal Gold common stockholders:

Basic earnings per share

9 unchanged sentences

Common Shares

Comprehensive

Non-controlling

Income (Loss)

(Losses) Earnings

Balance at December 31, 2019

Stock-based compensation and related share issuances

Distributions from (to) non-controlling interests

Net income and comprehensive income

Dividends declared

Balance at March 31, 2020

Royal Gold Stockholders

Common Shares

Comprehensive

Non-controlling

Income (Loss)

(Losses) Earnings

Balance at December 31, 2018

Stock-based compensation and related share issuances

Distributions from (to) non-controlling interests

Net income and comprehensive income

Dividends declared

Balance at March 31, 2019

Royal Gold Stockholders

Common Shares

Comprehensive

Non-controlling

Income (Loss)

(Losses) Earnings

Balance at June 30, 2020

Stock-based compensation and related share issuances

Distributions from (to) non-controlling interests

Net income and comprehensive income

Sale of Peak Gold JV interest

Distributions to non-controlling interests

Net income (loss) and comprehensive income (loss)

Dividends declared

Balance at March 31, 2020

Balance at September 30, 2020

Royal Gold Stockholders

Common Shares

Comprehensive

Non-controlling

Income (Loss)

(Losses) Earnings

2 unchanged sentences

Distributions from (to) non-controlling interests

Net income and comprehensive income

Other comprehensive income (loss)

Net income (loss) and comprehensive income (loss)

Dividends declared

Balance at March 31, 2019

Balance at September 30, 2019

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(Unaudited, amounts in thousands)

Nine Months Ended

Three Months Ended

September 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation, depletion and amortization

Amortization of debt discount and issuance costs

Gain on sale of Peak Gold JV interest

Non-cash employee stock compensation expense

13 unchanged sentences

Acquisition of stream and royalty interests

Purchase of equity securities

Net cash used in investing activities

Proceeds from sale of Peak Gold JV interest

Proceeds from sale of Contango shares

Net cash provided by investing activities

Cash flows from financing activities:

2 unchanged sentences

Common stock dividends

Contributions from non-controlling interest

Net cash used in financing activities

Net (decrease) increase in cash and equivalents

Net increase in cash and equivalents

Cash and equivalents at beginning of period

3 unchanged sentences

Notes to Consolidated Financial Statements

OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS

Royal Gold, Inc.

(“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiring and managing metal streams, royalties and similar interests.

We seek to acquire existing stream and royalty interests or to finance mining projects that are in production or in the development stage in exchange for stream or royalty interests.

OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS

Royal Gold 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.

A royalty is a non-operating interest in a mining project that provides the right to revenue or metals produced from the project after deducting contractually specified costs, if any.

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

5 unchanged sentences

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 nine months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2020.

These interim unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed with the Securities and Exchange Commission on August 8, 2019 (“Fiscal 2019 10-K”).

Certain amounts in the prior period consolidated balance sheet have been reclassified for comparative purposes to conform with the presentation in the current period balance sheet.

Reclassified amounts were not material.

Operating results for the three months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021.

These interim unaudited financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 filed with the Securities and Exchange Commission on August 6, 2020 (“Fiscal 2020 10-K”).

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842 ), which requires recognition of right-of-use assets and lease payment liabilities on the balance sheet by lessees for all leases with terms greater than twelve months.

Classification of leases as either a finance or operating lease will determine the recognition, measurement and presentation of expenses.

ASU 2016-02 also requires certain quantitative and qualitative disclosures about material leasing arrangements.

Subsequently, in July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements (“ASU 2018-11”).

ASU 2018-11 provides an additional modified retrospective transition method for adopting ASU 2016-02, which eliminates the need for adjusting prior period comparable financial statements prepared under legacy lease accounting guidance.

ASU 2016-02, together with ASU 2018-11, was effective for the Company July 1, 2019.

The Company adopted the new guidance using the modified retrospective approach set forth in ASU 2018-11, with the date of initial application on July 1, 2019.

Comparative reporting periods were not adjusted upon adoption.

As permitted under the transition guidance, the Company has elected to use the following practical expedients at transition:

● To not reassess whether any expired or existing contracts were or contained leases;

● To not reassess the lease classification for any expired or existing leases.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

In addition, the Company has elected to use the following practical expedients at and subsequent to adoption in accordance with ASU 2016-02:

● Not to separate non-lease from lease components, and instead account for each lease component and any associated non-lease components as a single lease component;

● Not to recognize right-of-use assets and associated liabilities for short-term contracts with lease terms of 12 months or less.

The Company’s significant lease arrangements relate to its office spaces.

These arrangements are for leases of assets such as corporate office space and office equipment.

Through the implementation process, the Company evaluated its lease arrangements, which included an analysis of contracts, and updating the internal controls and processes that are necessary to track and calculate the additional accounting and disclosure requirements as required upon adoption of ASU 2016-02.

The Company leases office space and office equipment under operating leases expiring at various dates through the fiscal year ending June 30, 2030.

The following amounts were recorded in the consolidated balance sheets at March 31, 2020 (amounts in thousands):

Classification

March 31, 2020

Operating Leases

Right-of-use assets - current

Prepaid expenses and other

Right-of-use assets - non-current

Total right-of-use assets

Lease liabilities - current

Other current liabilities

Lease liabilities - non-current

Other long-term liabilities

Total operating lease liabilities

Maturities of operating lease liabilities at March 31, 2020 were as follows (amounts in thousands):

Fiscal Years:

Operating Leases

Total lease payments

Less imputed interest

Other information pertaining to leases consist of the following:

March 31, 2020

Operating Lease Term and Discount Rate

Weighted average remaining lease term in years

Weighted average discount rate

The Company did not have any finance leases as of March 31, 2020.

The adoption of ASU 2016-02 did not impact accumulated earnings (losses), our consolidated statements of operations and comprehensive income, or our consolidated statements of cash flows.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Recently Issued Accounting Standards

Current Expected Credit Loss

In June 2016, the FASB issued ASU No.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses of Financial Instruments , which, together with subsequent amendments, changes how an entity will record credit losses from an “incurred loss” approach to an “expected loss” approach.

This update is effective for annual periods beginning after December 15, 2019 (i.e.

July 1, 2020 for the Company) and interim financial statement periods within those years, with early adoption permitted.

The Company is currently undergoing its assessment of the new guidance and the impact it will have on our consolidated financial statements and related disclosures.

Based on procedures performed as of March 31, 2020, the Company does not expect the adoption to have a material impact on the Company’s consolidated financial statements.

The Company will adopt the new guidance effective July 1, 2020.

Alturas royalty acquisition

On January 29, 2020, a wholly-owned subsidiary of the Company entered into an agreement with various private individuals for the acquisition of a net smelter return (“NSR”) royalty of up to 1.06 % (gold) and up to 1.59 % (copper) on mining concessions included as part of the Alturas project, which is located within the Coquimbo Region of Chile and held by a subsidiary of Barrick Gold Corporation (“Barrick”), Compañia Minera Salitrales Limitada.

Total consideration for the royalty is up to $ 41 million, of which $ 11 million was paid on January 29, 2020.

The $ 11 million paid as part of the funding schedule, plus direct acquisition costs, have been recorded as an exploration stage royalty interest within Stream and royalty interests, net on our consolidated balance sheets.

A future payment of up to $ 20 million is conditional based on a project construction decision by Barrick and the size of the minable mineralized material on the date of the construction decision.

A further future payment of up to $ 10 million will be made to the private individuals upon first production from the mining concessions.

Castelo de Sonhos royalty acquisition

In August 2019, a subsidiary of the Company entered into an agreement with TriStar Gold Inc.

and its subsidiaries (together “TriStar”) to acquire (i) up to a 1.5 % NSR royalty on the Castelo de Sonhos gold project (“CDS”), located in Brazil, and (ii) warrants to purchase up to 19,640,000 common shares of TriStar.

Total consideration is $ 7.5 million and is payable over three payments, of which $ 4.5 million was paid in August 2019, $ 1.5 million was paid in November 2019, and the final payment of $ 1.5 million was paid on March 30, 2020.

The CDS royalty acquisition has been accounted for as an asset acquisition.

The $ 7.5 million paid as part of the aggregate funding schedule, plus direct acquisition costs, have been recorded as an exploration stage royalty interest within Stream and royalty interests, net on our consolidated balance sheets.

The warrants have been recorded within Other assets on our consolidated balance sheets and have a carrying value of approximately $ 0.3 million as of March 31, 2020.

The warrants have been classified as a financial asset instrument and are recorded at fair value at each reporting date using the Black-Scholes model.

Any change in fair value of the warrants at subsequent reporting periods will be recorded within Fair value changes in equity securities on our consolidated statements of operations and comprehensive income.

As of March 31, 2020, the Company holds 19,640,000 warrants at an exercise price of C$ 0.25 per common share with a term of approximately five years .

This update is effective for annual periods beginning after December 15, 2019 and interim financial statement periods within those years, with early adoption permitted.

On July 1, 2020, we adopted the new guidance and, based on our assessment, the adoption of the new guidance did not have any impact on our consolidated financial statements.

SALE OF PEAK GOLD JV INTEREST

On September 30, 2020, we entered into an agreement with an affiliate of Kinross Gold Corporation to sell our 40 % membership interest in the Peak Gold Project for cash consideration of $ 49.2 million and to sell our 809,744 common shares in Contango Ore, Inc.

(“Contango”), our partner in Peak Gold, LLC, for cash consideration of $ 12.1 million.

In addition to the total cash consideration of $ 61.3 million, we received the following royalty interests:

● An incremental 28 % net smelter royalty on silver produced from an area of interest which includes the current Peak Gold Project resource area, in respect of which Peak Gold, LLC retains the right to acquire 50 % of this royalty;

● An incremental 1 % net smelter return royalty on certain State of Alaska mining claims, increasing our royalty on this area from 2 % to 3 %.

The royalties are recorded as exploration stage royalty interests in Stream and royalty interests, net in our consolidated balance sheets at September 30, 2020 and have a combined value of approximately $ 4.4 million.

We recorded a gain of $ 33.9 million on the sale of our 40 % membership interest in the Peak Gold Project.

The mark-to-market increase of $ 3.6 million on the sale of our 809,744 common shares in Contango is included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income.

ROYAL GOLD, INC.

1 unchanged sentence

STREAM AND ROYALTY INTERESTS, NET

The following tables summarize the Company’s stream and royalty interests, net as of March 31, 2020 and June 30, 2019.

As of March 31, 2020 (Amounts in thousands):

The following tables summarize our stream and royalty interests, net as of September 30, 2020 and June 30, 2020.

As of September 30, 2020 (Amounts in thousands):

Accumulated Depletion

1 unchanged sentence

Mount Milligan

Wassa and Prestea

Total production stage stream interests

16 unchanged sentences

Mount Milligan

Wassa and Prestea

Total production stage stream interests

Total production stage stream and royalty interests

Production stage royalty interests:

10 unchanged sentences

( 1,233,696 )

Mount Milligan

The Company’s wholly-owned subsidiary, RGLD Gold AG (“RGLD Gold”), owns the right to purchase 35 % of the payable gold and 18.75 % of the payable copper produced from the Mount Milligan copper-gold mine in British Columbia, Canada, which is operated by an indirect subsidiary of Centerra Gold Inc.

(“Centerra”).

The Company’s carrying value for its stream interest at Mount Milligan is $ 572.3 million as of March 31, 2020.

On October 30, 2019, Centerra reported that issues identified with decreasing long-term gold recoveries and increased costs in the short-to medium-term led them to record an impairment charge against their carrying value of the Mount Milligan mine under applicable accounting standards, and that it had begun a comprehensive technical review of the operation with the objective of publishing an updated National Instrument 43-101 (“NI 43-101”) technical report.

On March 26, 2020, Centerra published an updated NI 43-101 technical report for Mount Milligan which provided, among other things, a detailed update to the life of mine plan and reductions to the proven and probable reserves due to increased costs, lower expected productivities and lower process plant throughput.

Significant reductions in proven and probable reserves or mineralized material are indicators of potential impairment for Royal Gold’s stream and royalty interests.

As part of the Company’s regular asset impairment analysis, the Company determined that an impairment of our stream interest at Mount Milligan was not necessary as (i) the financial impairment taken by Centerra does not impact the mine operating performance, and (ii) the reduction in reserves and mineralized material at Mount Milligan resulted in gold and copper depletion rates that are well below current and long-term consensus gold and copper prices.

As of March 31, 2020, the gold and copper depletion rates at our Mount Milligan stream interest are $ 764 per ounce of gold and $ 1.48 per pound of copper.

Depletion rates well below current and long-term consensus metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable.

Separation of the Wassa and Prestea and Bogoso Stream Agreement

On October 1, 2020, we announced the separation of the Wassa, and Prestea and Bogoso gold stream agreements into separate stream agreements effective September 30, 2020.

This separation was completed to facilitate the sale by Golden Star Resources Ltd.

(“Golden Star”) of the Prestea and Bogoso mines to Future Global Resources (“FGR”).

The Wassa stream agreement, which remains with Golden Star, provides us the right to purchase 10.5 % of the gold produced from the Wassa mine until the delivery of 240,000 ounces, after which the stream percentage will decrease to 5.5 %.

The cash purchase price for gold is 20 % of the spot price per ounce delivered until the delivery of 240,000 ounces, and 30 % of the spot price per ounce delivered thereafter.

The Prestea and Bogoso stream agreement with FGR provides us the right to purchase 5.5 % of the gold produced from the Prestea and Bogoso mines in return for a cash purchase price of 30 % of the spot price per ounce delivered.

The material terms of both the Wassa stream agreement and the Prestea/Bogoso stream agreement, including security and the rights and obligations of both Royal Gold and Golden Star, remain substantially consistent with those terms in the original agreement.

The Wassa, and Prestea and Bogoso streams are recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets and have a carrying value of $ 75.9 million as of September 30, 2020.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

RGLD Gold owns the right to purchase 6.50 % of the gold produced from the Rainy River mine, which is located in northwestern Ontario, Canada and is operated by New Gold, Inc.

(“New Gold”), until 230,000 gold ounces have been delivered, and 3.25 % thereafter;

and 60 % of the silver produced from the Rainy River mine until 3.1 million silver ounces have been delivered, and 30 % thereafter.

As of March 31, 2020, approximately 35,700 ounces of gold and approximately 373,100 ounces of silver have been delivered to RGLD Gold.

The Company’s carrying value for its stream interest at Rainy River is $ 152.6 million as of March 31, 2020.

During the quarter ended December 31, 2019, New Gold reported that it continued to advance a comprehensive mine optimization study that would include a review of alternative open pit and underground mining scenarios at Rainy River On February 13, 2020, New Gold reported the results of the comprehensive optimization study that included an updated mine plan, which resulted in, among other things, a reduction in gold and silver reserves and the potential to extend the underground mine life beyond calendar 2028.

New Gold published an updated NI 43-101 technical report for Rainy River on March 27, 2020, reflecting the updated mine plan and reserves.

Significant reductions in proven and probable reserves or mineralized material are indicators of potential impairment for the Company’s stream and royalty interests.

As a result of the new information from New Gold, and as part of the Company’s regular asset impairment analysis, the Company determined that an impairment on its Rainy River stream interest was not necessary as of March 31, 2020 as the reduction in gold and silver reserves resulted in depletion rates that are well below current and long-term consensus gold and silver prices.

As of March 31, 2020, the gold and silver depletion rates at our Rainy River stream interest are $ 848 per ounce of gold and $ 11.27 per ounce of silver.

Depletion rates well below current and long-term metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable.

COVID-19 and current economic environment

Several of our operating counterparties have recently announced temporary operational curtailments or the withdrawal or review of previously disclosed guidance due to the ongoing COVID-19 pandemic.

The economic and societal impacts associated with COVID-19 are fluid and changing rapidly, and we are currently unable to predict the nature or extent of any impact on our results of operations and financial condition.

The Company will continue to monitor any further developments that the COVID-19 pandemic may have on stream or royalty interests as part of our regular asset impairment analysis.

During the quarter ended June 30, 2019, the Company was made aware of insolvency proceedings at one of our non-principal producing properties, El Toqui.

The outcome of these insolvency proceedings may impact our royalty interests and the associated carrying value, which is approximately $ 1.3 million as of March 31, 2020.

The Company continues to monitor these insolvency proceedings as part of our regular asset impairment analysis.

Based on the results of these insolvency proceedings, the Company could determine that a future write-down of our interest to an amount less than the current carrying value or to zero is necessary.

Earlier in calendar 2020, several of our operating counterparties announced temporary operational curtailments or the withdrawal or review of disclosed guidance due to the ongoing COVID-19 pandemic.

The economic and societal impacts associated with COVID-19 remain fluid and continue to change rapidly.

We continue to monitor any developments that the COVID-19 pandemic may have on our stream or royalty interests as part of our regular asset impairment analysis.

MARKETABLE EQUITY SECURITIES

As of March 31, 2020, the Company’s marketable equity securities include 809,744 common shares of Contango Ore, Inc., 3,949,575 common shares of Rubicon Minerals Corporation, and warrants to purchase up to 19,640,000 common shares of TriStar.

As of September 30, 2020, our marketable equity securities include 3,949,575 common shares of Battle North Gold Corporation, and warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc.

Our marketable equity securities are measured at fair value (Note 12) each reporting period with any changes in fair value recognized in net income.

The fair value of our marketable equity securities decreased $ 3.8 million and $ 5.0 million for the three and nine months ended March 31, 2020, respectively, and increased $ 1.8 million and decreased $ 3.3 million for the three and nine months ended March 31, 2019, respectively, and is included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income.

The carrying value of the Company’s marketable equity securities as of March 31, 2020 and June 30, 2019 was $ 11.5 million and $ 16.0 million, respectively, and is included in Other assets on the Company’s consolidated balance sheets.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

The Company’s debt as of March 31, 2020 and June 30, 2019 consists of the following:

As of March 31, 2020

As discussed in Note 2, on September 30, 2020, we sold 809,744 common shares of Contango for total consideration of $ 12.1 million and recorded a mark-to-market increase of $ 3.6 million on the sale, which is included in Fair value changes in equity securities in our consolidated statement of operations and comprehensive income.

The fair value of our marketable equity securities increased $ 2.5 million and decreased $ 1.4 million for the three months ended September 30, 2020 and 2019, respectively, and 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, 2020 and June 30, 2020 was $ 8.3 million and $ 17.9 million, respectively, and is included in Other assets on our consolidated balance sheets.

Our debt as of September 30, 2020 and June 30, 2020 consists of the following:

As of September 30, 2020

As of June 30, 2020

5 unchanged sentences

Revolving credit facility

On September 20, 2019, the Company entered into a third amendment to our revolving credit facility dated as of June 2, 2017.

Under the amendment, the Company’s Swiss subsidiary RGLD Gold was added as a co-borrower and joint and several obligor, certain of the Company’s Canadian subsidiaries were added as guarantors, and certain equity pledges that previously had been granted in favor of the lenders to support the facility were released, with the result that the facility is now unsecured.

As of March 31, 2020, the Company had $ 105 million outstanding and $ 895 million available under the revolving credit facility.

As of March 31, 2020, the interest rate on borrowings under the revolving credit facility was LIBOR plus 1.10 % for an all-in rate of 1.87 %.

Interest expense, which includes interest on the outstanding borrowings under the revolving credit facility and the amortization of the debt issuance costs, was $ 1.2 million and $ 5.0 million for the three and nine months ended March 31, 2020, respectively, and $ 0.3 million and $ 0.9 million for the three and nine months ended March 31, 2019, respectively.

As discussed in Note 5 to the consolidated financial statements in the Company’s Fiscal 2019 10-K, the Company has financial covenants associated with its revolving credit facility.

As of March 31, 2020, the Company was in compliance with each financial covenant.

On April 3, 2020, the Company drew an additional $ 200 million on its revolving credit facility at an interest rate of LIBOR plus 1.10 % for an all-in rate of 2.54 %, resulting in a total of $ 305 million outstanding and $ 695 million available.

There is no immediate requirement for the additional funds.

However, due to the uncertain environment caused by the COVID-19 pandemic and the impact on certain operations where we hold a stream or royalty interest, we believe the drawdown was a prudent precautionary measure to help ensure cash is readily available to support continued business activities.

We occasionally borrow and repay amounts under our revolving credit facility and may do so in the future.

Royal Gold may repay any borrowings under the revolving credit facility at any time without premium or penalty.

As of September 30, 2020, we had $ 275 million outstanding and $ 725 million available under our revolving credit facility.

As of September 30, 2020, the interest rate on borrowings under our revolving credit facility was LIBOR plus 1.10 % for an all-in rate of 1.40 %.

Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $ 1.3 million and $ 2.2 million for the three months ended September 30, 2020, and 2019, respectively.

As discussed in Note 6 to the consolidated financial statements in our Fiscal 2020 10-K, we have financial covenants associated with our revolving credit facility.

As of September 30, 2020, we were in compliance with each financial covenant.

On October 2, 2020, we repaid $ 75 million of the outstanding borrowings under our revolving credit facility.

This increased the amount available under our revolving credit facility to $ 800 million and decreased the amount outstanding to $ 200 million.

Royal Gold may repay any borrowings under our revolving credit facility at any time without premium or penalty.

Our revolving credit facility matures on June 3, 2024.

Our significant lease arrangements relate to our office spaces.

These arrangements are for leases of assets such as corporate office space and office equipment.

We lease office space and office equipment under operating leases expiring at various

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

dates through the fiscal year ending June 30, 2030.

The following amounts were recorded in the consolidated balance sheets at September 30, 2020 (amounts in thousands):

Classification

September 30, 2020

Operating Leases

Right-of-use assets - current

Prepaid expenses and other

Right-of-use assets - non-current

Total right-of-use assets

Lease liabilities - current

Other current liabilities

Lease liabilities - non-current

Other long-term liabilities

Total operating lease liabilities

Maturities of operating lease liabilities at September 30, 2020 were as follows (amounts in thousands):

Fiscal Years:

Operating Leases

Total lease payments

Less imputed interest

Other information pertaining to leases consist of the following:

September 30, 2020

Operating Lease Term and Discount Rate

Weighted average remaining lease term in years

Weighted average discount rate

We did not have any finance leases as of September 30, 2020.

Revenue Recognition

Under current ASC 606 – Revenue from Contracts with Customers (“ASC 606”) guidance, 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.

GAAP guidance, 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.

5 unchanged sentences

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

The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between ten days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between ten days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal.

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.

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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, the Company will recognize royalty revenue during the period in which the necessary payment information is received.

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 Fiscal 2020 10-K.

For the three and nine months ended March 31, 2020, royalty revenue that was estimated or was attributable to metal production for a period prior to March 31, 2020, was not material.

For the three months ended September 30, 2020, royalty revenue that was estimated or was attributable to metal production for a period prior to September 30, 2020, was not material.

Disaggregation of Revenue

2 unchanged sentences

These identified revenue sources are consistent with our reportable segments as discussed in Note 11.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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,

Stream revenue:

3 unchanged sentences

Total revenue

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Revenue attributable to our principal stream and royalty interests is disaggregated as follows (amounts in thousands):

Three Months Ended

Nine Months Ended

September 30,

Stream revenue:

9 unchanged sentences

Please refer to Note 11 for the geographical distribution of our revenue by reportable segment.

Contract Receivables

Under our forward sales contracts related to our metal streaming arrangements, payment is due from the purchaser on the day of settlement.

Accordingly, our metal stream sales contracts do not give rise to a receivable under ASC 606.

Under our royalty arrangements, payment is typically due by the royalty payor either (i) monthly, typically thirty days after month-end or (ii) quarterly, typically thirty to sixty days after the respective quarter-end.

Revenue related to production that has occurred as of the reporting date but for which payment has not been received represents a receivable (rather than a contract asset) under ASC 606 as payment by the operator is unconditional upon the production of metal.

As of March 31, 2020, and June 30, 2019, our royalty receivables were $ 32.3 million and $ 20.7 million, respectively.

Practical Expedients Utilized

Our forward sales contracts related to our metal streaming arrangements are short-term in nature with a term of one year or less.

For these contracts, we have utilized the practical expedient allowed in ASC 606 that exempts us from presenting the transaction price allocated to remaining performance obligations (i.e.

forecasts of unearned revenue) for contracts with an original expected term of one year or less.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Our royalty arrangements generally cover metal production over the life of a mine and, thus, have a contract term that is greater than one year.

Under these contracts, variability related to future production volumes and market pricing is allocated entirely to those future production volumes from the mining operation.

Consequently, we have utilized an alternative practical expedient allowed in ASC 606 that exempts us from presenting the transaction price allocated to remaining performance obligations (i.e.

forecasts of unearned revenue) if the variable consideration in a contract is allocated entirely to a wholly unsatisfied performance obligation.

STOCK-BASED COMPENSATION

The Company recognized stock-based compensation expense as follows:

We recognized stock-based compensation expense as follows:

Three Months Ended

Nine Months Ended

(Amounts in thousands)

September 30,

(Amounts in thousands)

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Stock-based compensation expense is included within General and administrative expense in the consolidated statements of operations and comprehensive income.

During the three and nine months ended March 31, 2020, the Company granted the following stock-based compensation awards:

During the three months ended September 30, 2020 and 2019, we granted the following stock-based compensation awards:

Three Months Ended

Nine Months Ended

(Number of shares)

September 30,

(Number of shares)

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Total equity awards granted

As of March 31, 2020, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

As of September 30, 2020, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:

average vesting

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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 earnings per share pursuant to the two-class method.

The Company’s unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared.

The Company’s unexercised stock option awards and unexercised SSARs and unvested performance stock do not contain rights to dividends.

Under the two-class method, the earnings used to determine basic earnings per

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

common share are reduced by an amount allocated to participating securities.

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 earnings per common share 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 earnings per common share.

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Three Months Ended

Nine Months Ended

Net income and comprehensive income available to Royal Gold common stockholders

September 30,

Net income attributable to Royal Gold common stockholders

Weighted-average shares for basic EPS

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Three Months Ended

Nine Months Ended

(Amounts in thousands, except rate)

September 30,

(Amounts in thousands, except rate)

Income tax (expense) benefit

Income tax benefit

Effective tax rate

The effective tax rate for the nine months ended March 31, 2020, included discrete tax benefits attributable to the remeasurement of certain deferred tax assets and a net step-up in the basis of tax assets due to the enactment of the Federal Act on Tax Reform and AHV Financing (Swiss Tax Reform).

The effective tax rate for the nine months ended March 31, 2019 included benefits related to the transition tax as part of H.R.

1, originally known as the Tax Cuts and Jobs Act, which was due to consideration of new U.S.

Treasury regulations and IRS guidance released during the period.

On April 30, 2020, the Company entered into a settlement agreement with a foreign taxing authority related to an uncertain tax position recorded on our consolidated balance sheets as of March 31, 2020.

We continue to analyze the impacts of the settlement on our consolidated financial statements, including the release of uncertain tax positions during our fourth quarter ending June 30, 2020.

The effective tax rate for the three months ended September 30, 2020, included discrete tax benefits ($ 24.5 million) attributable to the settlement of an uncertain tax position with a foreign jurisdiction and the release of a valuation allowance related to deferred tax assets.

The effective tax rate for the three months September 30, 2019 included a discrete tax benefit ($ 32.3 million) primarily related to the remeasurement of certain deferred tax assets and a net step-up in the basis of tax assets due to the enactment of Swiss Tax Reform.

ROYAL GOLD, INC.

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SEGMENT INFORMATION

The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests.

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.

Royal Gold’s long-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table (amounts in thousands):

As of March 31, 2020

As of September 30, 2020

As of June 30, 2020

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Rest of world

The Company’s reportable segments for purposes of assessing performance are shown below (amounts in thousands):

Three Months Ended March 31, 2020

Cost of sales (1)

Production taxes

Depletion (2)

Segment gross profit

Stream interests

Royalty interests

Three Months Ended March 31, 2019

Our reportable segments for purposes of assessing performance are shown below (amounts in thousands):

Three Months Ended September 30, 2020

Cost of sales (1)

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Royalty interests

Nine Months Ended March 31, 2020

Three Months Ended September 30, 2019

Cost of sales (1)

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Royalty interests

Nine Months Ended March 31, 2019

Cost of sales

Production taxes

Segment gross profit

Stream interests

Royalty interests

(1) Excludes depreciation, depletion and amortization

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Three Months Ended

Nine Months Ended

September 30,

Total segment gross profit

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Depreciation and amortization

Gain on sale of Peak Gold member interest

Operating income

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Income before income taxes

The Company’s revenue by reportable segment for the three and nine months ended March 31, 2020 and 2019 is geographically distributed as shown in the following table (amounts in thousands):

Our revenue by reportable segment for the three months ended September 30, 2020 and 2019 is geographically distributed as shown in the following table (amounts in thousands):

Three Months Ended

Nine Months Ended

September 30,

Stream interests:

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FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under ASC 820 are described below:

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:

Quoted prices for identical instruments in active markets;

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and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets;

Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

The following table sets forth the Company’s financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy.

As of March 31, 2020

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, 2020

Carrying Amount

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Marketable equity securities (1)

(1) Included in Other assets on the Company’s consolidated balance sheets.

The Company’s marketable equity 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 by the Company.

The warrants classified within Level 2 of the fair value hierarchy are valued each period using the Black-Scholes model.

The warrants are part of the TriStar transaction (Note 2), and have been classified as a financial asset instrument.

The carrying value of the Company’s revolving credit facility (Note 5) approximates fair value as of March 31, 2020.

As of March 31, 2020, the Company also 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.

(1) Included in Other assets on our consolidated balance sheets.

Our marketable equity 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 carrying value of our revolving credit facility (Note 5) approximates fair value as of September 30, 2020.

The TriStar Gold warrants 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.

As of September 30, 2020, 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.

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Khoemac a u Silver Stream Acquisition

Pursuant to its Khoemac a u silver stream transaction in February 2019, RGLD Gold made its first advance payment of $ 65.8 million on November 5, 2019 and its second advance payment of $ 22.0 million on February 2, 2020.

As of March 31, 2020, the Company’s conditional funding schedule for $ 124.2 million up to $ 177.2 million pursuant to its Khoemac a u silver stream acquisition remains subject to certain conditions.

On April 3, 2020, RGLD Gold made its third advance payment of $ 47.9 million.

Pursuant to our Khoemac a u silver stream transaction in February 2019, we made the following advance payments under our conditional funding schedule:

● $ 65.8 million – November 5, 2019

● $ 22.0 million – February 2, 2020

● $ 47.9 million – April 3, 2020

● $ 11.1 million – July 5, 2020

● $ 32.5 million – October 5, 2020

Including the fifth advance payment made on October 5, 2020, we have made total contributions of $ 179.3 million.

We expect to commit the remaining $ 32.7 million in calendar year 2021 for the Base Silver Stream and $ 85.7 million should Khoemacau Copper Mining (Pty.) Limited elect to fully exercise the Option Silver Stream.

Further payments are subject to certain conditions and are scheduled to be made on a quarterly basis using an agreed formula and certification process as project spending progresses.

Refer to our Fiscal 2020 10-K for further details on the Khoemac a u silver stream acquisition.

Ilovica Gold Stream Acquisition

As of March 31, 2020, the Company’s conditional funding schedule for $ 163.75 million related to its Ilovica gold stream acquisition made in October 2014 remains subject to certain conditions.

As of September 30, 2020, our conditional funding schedule of $ 163.75 million, as part of the Ilovica gold stream acquisition in October 2014, remains subject to certain conditions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements