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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-05-07 · 182 added, 342 removed, 120 unchanged (81% of the section changed)

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 our financial condition and results of operations.

Royal Gold, Inc.

(“Royal Gold”, the “Company”, “we”, “us”, or “our”) recommends that you 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 our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2019 (“Fiscal 2019 10-K”).

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 our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed with the Securities and Exchange Commission (the “SEC”) on August 6, 2020 (“Fiscal 2020 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 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.

We refer to “GSR,” “NSR,” “NVR,” “metal stream (or “stream”)” and other types of royalty or similar interests throughout this MD&A.

These terms are defined in our Fiscal 2020 10-K.

Statement Regarding Third Party Information

Royal Gold does not own, develop, or mine the properties on which it holds stream or royalty interests, except for our interest in the Peak Gold, LLC joint venture (“Peak Gold JV”) as described further in our Fiscal 2019 10-K.

Certain information provided in this report, including the Operator’s Production Estimates by Stream and Royalty Interest for Calendar 2020 and Property Developments, has been provided to us by the operators of properties where we own interests or is publicly available information filed by these operators with applicable securities regulatory bodies, including the SEC.

Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for, the accuracy, completeness or fairness of such third-party information and refers the reader to the public reports filed by the operators for information regarding those properties.

Royal Gold, 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 projects that are in production or in the development stage in exchange for stream or royalty interests.

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 March 31, 2020, we owned seven stream interests, which are on six producing properties and two development stage properties.

Stream interests accounted for 71% and 72% of our total revenue for the three and nine months ended March 31, 2020, compared to 71% and 70% for the three and nine months ended March 31, 2019.

We expect stream interests to continue representing a significant proportion of our total revenue.

As of September 30, 2020, we owned eight stream interests, which are on six producing properties and two development stage properties.

Stream interests accounted for 73% of our total revenue for the three months ended September 30, 2020.

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, 2020, we owned royalty interests on 36 producing properties, 14 development stage properties and 129 exploration stage properties, of which we consider 48 to be evaluation stage projects.

As of September 30, 2020, we owned royalty interests on 34 producing properties, 15 development stage properties and 131 exploration stage properties, of which we consider 49 to be evaluation stage projects.

We use “evaluation stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves.

Royalties accounted for 29% and 28% of our total revenue for the three and nine months ended March 31, 2020, compared to 29% and 30% for the three and nine months ended March 31, 2019.

We do not conduct mining operations on the properties in which we hold stream and royalty interests, and except for our interest in the Peak Gold JV, we generally are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties.

In the ordinary course of business, we engage in a continual review of opportunities to acquire existing stream and royalty interests, to establish new streams and royalties on operating mines, to create new stream and royalty interests through the financing of mine development or exploration, or to acquire companies that hold stream and royalty interests.

We currently, and generally at any time, have acquisition opportunities in various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular opportunities, our analysis of technical, financial, legal and other confidential information of particular opportunities, submission of indications of interest and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes.

Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver and copper, together with the amounts of production from our producing stage stream and royalty interests.

The price of gold, silver, copper and other metals has fluctuated widely in recent years.

The marketability and the price of metals are influenced by numerous factors beyond the control of the Company and significant declines in the price of gold, silver or copper could have a material and adverse effect on the Company’s results of operations and financial condition.

For the three and nine months ended March 31, 2020 and 2019, gold, silver and copper price averages and percentage of revenue by metal were as follows:

Three Months Ended

Nine Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

March 31, 2019

Royalties accounted for 27% of our total revenue for the three months ended September 30, 2020

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, and other confidential information of an opportunity;

submission 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

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 the 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 September 30, 2020, and 2019, average metal prices and percentages of revenue by metal were as follows:

Fiscal Three months ended

September 30, 2020

September 30, 2019

Percentage of Revenue

Gold ($/ounce)

1 unchanged sentence

Copper ($/pound)

Recent Business Developments

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, as discussed more fully in the individual property discussions throughout this MD&A.

In addition, due to the uncertain environment, in April 2020 we drew an additional $200 million on our revolving credit facility, as discussed more fully in the liquidity section of this MD&A.

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.

Please refer to our risk factors included in Part II, Item 1A of this Quarterly Report on Form 10-Q for more information about risks associated with COVID-19.

Leadership changes

As previously announced, we recently made several key leadership changes as a result of our ongoing management succession planning.

After a thorough search process, our Board of Directors appointed William Heissenbuttel as our President and Chief Executive Officer and a member of the Board of Directors, effective January 2, 2020.

Heissenbuttel most recently served as our Chief Financial Officer and Vice President Strategy.

In addition, the Board of Directors promoted the following executives effective January 2, 2020:

Mark Isto, Executive Vice President and Chief Operating Officer;

Paul Libner, Chief Financial Officer and Treasurer;

and Randy Shefman, Vice President and General Counsel.

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.

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 was 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 in March 2020.

Aggregate funds invested by the Company will be used by TriStar primarily to advance CDS to the feasibility stage, including advancing permitting activities.

A Preliminary Economic Assessment for CDS was prepared by TriStar in calendar 2018 and was based on a total of 2.0 million ounces of mineralized material at an average grade of approximately 1.0 gram per tonne.

Since August 2019, TriStar has completed reverse circulation drilling, which is being completed to support the preparation of a preliminary feasibility study.

Refer to Note 2 of our notes to consolidated financial statements for further discussion.

Principal Stream and Royalty Interests

The Company considers both historical and future potential revenues in determining which stream and royalty interests in our portfolio are principal to our business.

Estimated future potential revenues from both producing and development properties are based on a number of factors, including reserves subject to our stream and royalty interests, production estimates, feasibility studies, metal price assumptions, mine life, legal status and other factors and assumptions, any of which could change and could cause the Company to conclude that one or more of such stream and royalty interests are no longer principal to our business.

Currently, our principal producing stream and royalty interests are listed alphabetically in the following table.

Please refer to our Fiscal 2019 10-K for further discussion of our principal producing stream and royalty interests.

Principal Producing Properties

Stream or royalty interests

(Gold unless otherwise stated)

Region IV, Chile

Compañía Minera Teck Carmen de Andacollo (“Teck”)

Gold stream - 100% of gold produced (until 900,000 ounces delivered;

50% thereafter)

Nevada Gold Mines LLC ("NGM"), a joint venture between Barrick and Newmont Corporation ("Newmont")

0.40% to 5.0% sliding-scale GSR GSR2:

0.40% to 5.0% sliding-scale GSR GSR3:

0.71% GSR NVR1:

NVR1C 4.52% NVR

Mount Milligan

British Columbia, Canada

Centerra Gold Inc.

("Centerra")

Gold stream - 35.00% of payable gold

Copper stream - 18.75% of payable copper

Zacatecas, Mexico

2.0% NSR (gold, silver, lead, zinc)

Sanchez Ramirez, Dominican Republic

Barrick (60%)

Gold stream - 7.5% of gold produced (until 990,000 ounces delivered;

3.75% thereafter)

Silver stream - 75% of silver produced (until 50.0 million ounces delivered;

37.5% thereafter)

Ontario, Canada

New Gold, Inc.

Gold stream - 6.5% of gold produced (until 230,000 ounces delivered;

3.25% thereafter)

Silver stream - 60% of silver produced (until 3.1 million ounces delivered;

30% thereafter)

Western Region of Ghana

Golden Star Resources Ltd.

(“Golden Star”)

Gold stream - 10.5% of gold produced (until 240,000 ounces delivered;

5.5% thereafter) (1)

(1) The 240,000 ounce threshold includes production from Golden Star’s Prestea mine.

COVID-19 and the Current Economic Environment

Since the beginning of calendar year 2020, several of our operating counterparties have instituted temporary operational curtailments due to the ongoing COVID-19 pandemic.

The pandemic and resulting economic and societal impacts have also made it difficult for operators to forecast expected production amounts and, at times, operators have had to withdraw or revise previously disclosed guidance.

In turn, our revenue and the value of our investments may be similarly impacted.

The effects of the pandemic are fluid and changing rapidly, and we are currently unable to predict the nature or extent of any impact on our results of operations and financial condition.

We continue to monitor the impact of developments associated with the pandemic on stream and royalty interests as part of our regular asset impairment analysis.

Sale of Peak Gold JV Interest

On September 30, 2020, we announced we had entered into an agreement with Kinross Gold Corporation to sell our interest in the Peak Gold Project and our common share position in Contango Ore, Inc.

(“Contango”), our partner in Peak Gold, LLC, the owner of the Peak Gold Project.

Consideration received for the sale of these interests included cash of $61.3 million, an incremental 28% net smelter return royalty on silver produced from an area of interest which includes the current Peak Gold Project resource area, and an incremental 1% net smelter return royalty on certain State of Alaska mining claims acquired by a wholly owned subsidiary of Contango in the transaction.

Peak Gold, LLC, retains the right to acquire 50% of the incremental 28% net smelter return royalty on silver for $4 million.

After this transaction, our interests in the Peak Gold Project and State of Alaska mining claim property owned by Contango consist solely of net smelter return royalties.

Refer to Note 2 of our notes to consolidated financial statements for further discussion on the sale of the Peak Gold JV interest.

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 agreement 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.

As of October 1, 2020, approximately 124,800 ounces remain to be delivered from the Wassa mine until the 240,000 ounce delivery threshold is reached.

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.

Operators’ Production Estimates by Stream and Royalty Interest for Calendar 2020

We generally receive annual production estimates from many of the operators of our producing mines during the first quarter of each calendar year.

In some instances, an operator may revise their original calendar year guidance throughout the year.

The following table shows current production estimates for our principal producing properties for calendar 2020 as well as the actual production reported to us by the various operators through March 31, 2020.

The estimates and production reports are prepared by the operators of the mining properties.

We do not participate in the preparation or calculation of the operators’ estimates or production reports and have not independently assessed or verified, and disclaim all responsibility for, the accuracy of such information.

Please refer to “Property Developments” below within this MD&A for further discussion on our principal producing and development stage properties.

In some instances, an operator may revise its original calendar year guidance throughout the year.

The following table shows current production estimates for calendar 2020, as well as actual production through September 30, 2020, for our principal properties as reported to us by the operators.

Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 2020

9 unchanged sentences

530,000 - 580,000

Rainy River (6)

165,000 - 170,000

Not released yet

Peñasquito (7)

(1) Production estimates received from our operators are for calendar 2020, unless otherwise noted in footnotes to this table.

Please refer to our cautionary statement regarding third party information at the beginning of this MD&A.

There can be no assurance that production estimates received from our operators will be achieved.

Please also refer to our cautionary language regarding forward-looking statements following this MD&A, as well as the Risk Factors identified in Part II, Item 1A of this report and our Fiscal 2019 10-K for information regarding factors that could affect actual results.

(2) Actual production figures shown are from our operators and cover the period January 1, 2020 through March 31, 2020 , unless otherwise noted in footnotes to this table.

There can be no assurance that operators will achieve their production estimates.

(2) Actual production figures are provided by our operators and cover the period from January 1, 2020, through September 30, 2020, unless otherwise noted in footnotes to this table.

(3) The estimated and actual production figures shown for Andacollo are contained gold in concentrate.

(4) Centerra has reported that its previously reported calendar year 2020 production guidance is under review due to the ongoing COVID-19 pandemic and related impacts to operations.

The actual production figures shown for Mount Milligan are payable gold and copper in concentrate.

(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 Barrick’s 60% interest in Pueblo Viejo.

The operator did not provide estimated or actual silver production.

(6) New Gold has withdrawn its previously reported calendar year 2020 production guidance due to the COVID-19 pandemic.

The actual production figures shown are produced gold and silver in doré.

(6) The estimated and actual production figures shown for Wassa are payable gold in doré.

(8) Newmont has withdrawn its previously reported calendar year 2020 production guidance due to the COVID-19 pandemic.

The actual gold and silver production figures shown for Peñasquito are payable gold and silver in concentrate and doré.

The actual lead and zinc production figures shown are payable lead and zinc in concentrate.

(7) The estimated and actual gold and silver production figures shown for Peñasquito are payable gold and silver in concentrate and doré.

The estimated and actual lead and zinc production figures shown are payable lead and zinc in concentrate.

Property Developments

The following property development information is provided by the operators of the properties, either to Royal Gold or in various documents made publicly available.

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

Gold stream deliveries from Andacollo were approximately 9,500 ounces of gold for the three months ended March 31, 2020, compared to approximately 9,900 ounces of gold for the three months ended March 31, 2019.

As previously reported by Teck, Andacollo experienced a temporary suspension of operations during the quarter ended December 31, 2019, due to a workers’ strike.

We anticipate the impact of the strike to be reflected in our financial results beginning with the quarter ended June 30, 2020, as we generally receive gold deliveries from Andacollo within six months of concentrate shipment.

With respect to COVID-19 pandemic impacts, Teck reported they maintained normal production levels while reducing the on-site workforce where possible and working with our contractors and the local communities to ensure adequate preventative measures are in place.

Khoemac a u Project

In February 2019, the Company’s wholly-owned subsidiary, RGLD Gold AG (“RGLD Gold”) entered into a silver stream with Khoemac a u Copper Mining (Pty.) Limited (“KCM”) for the purchase of silver produced from the Khoemac a u project (“Khoemac a u” or the “Project”) located in Botswana.

Please refer to our Fiscal 2019 10-K for further details on the Khoemac a u silver stream acquisition.

According to KCM, progress continued at Khoemac a u during the March 2020 quarter and the project reached approximately 43% of construction completion as of March 31, 2020 with 80% of the capital committed.

According to KCM, activities are focused on underground development, boxcut construction, construction of accommodation, power and water infrastructure at Zone 5, completing construction of the haul road between Zone 5 and the Boseto mill, and refurbishment of the Boseto mill.

KCM also reported that underground development on two of the five planned declines started in early February 2020 and further two started in early March 2020.

On April 3, 2020, RGLD Gold made its third advance payment of $47.9 million, which brings the total contribution to $135.7 million.

RGLD Gold expects to commit approximately $65 million during the remainder of calendar year 2020, and the total remaining commitment in calendar year 2021 is expected to range from approximately $11 million for the base stream of 80% of payable silver up to approximately $64 million should KCM elect to increase the stream from 80% to 100% of payable silver.

Gold stream deliveries from Andacollo were approximately 9,500 ounces of gold for the three months ended September 30, 2020, compared to approximately 9,700 ounces of gold for the three months ended September 30, 2019.

Teck reported that Andacollo production in the September 2020 quarter was lower than the prior year quarter due to lower ore grades and mill recoveries as well as reduced mill throughput.

According to Teck, a higher proportion of ore processed from stockpiles due to blasting constraints impacted copper grades and mill recoveries.

In addition, mill throughput was impacted by several longer than planned maintenance shutdowns, which were performed by local contractors to comply with COVID-19 travel restrictions.

Impacts to our gold stream deliveries are realized approximately six months after site production.

Teck expects grades to continue to decline towards reserve grades in calendar year 2020 and future years.

The current life of mine for Andacollo is expected to continue until calendar year 2035.

According to Teck, additional permits or permit amendments will be required to execute the life of mine plan.

According to Khoemac a u Copper Mining (Pty.) Limited (“KCM”), progress continued at the Khoemac a u Project (“Khoemac a u”) during the September 2020 quarter, and the project reached approximately 70% of construction completion as of September 30, 2020, with 87% of the capital committed.

According to KCM, activities are focused on refurbishment and upgrading of the Boseto mill, underground development, completion of accommodation, power and water infrastructure at Zone 5 and completion of haul road construction between Zone 5 and the Boseto mill.

Also, according to KCM, underground development has cumulatively advanced 5,045 meters in the three mines.

The six-month state of emergency declared by the Government of Botswana in March 2020 to help prevent the spread of COVID-19 was extended on September 28, 2020, for an additional six months through March 2021.

Mining remains designated as an “essential service” and KCM reports that general development activity at Khoemac a u is continuing.

However, due to the impacts experienced from prior lockdowns and travel restrictions, KCM reports that some activities, largely related to the process plant refurbishment and upgrade, have been impacted or rescheduled.

Barring any potential further impacts caused by COVID-19 considerations, KCM continues to expect the first shipment of concentrate to occur late in the third calendar quarter of 2021.

On October 5, 2020, we made our fifth advance payment of $32.5 million, which brings the total contribution to $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 KCM elect to fully exercise the Option Silver Stream.

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

According to KCM, although a six-month state of emergency has been declared by the Government of Botswana to help prevent the spread of COVID-19, mining has been designated an “essential service” and activity at Khoemac a u is continuing.

Barring any potential delays caused by COVID-19 considerations, KCM continues to expect the first shipment of concentrate by mid-calendar 2021.

Mount Milligan

Gold stream deliveries from Mount Milligan were approximately 12,100 ounces for the three months ended March 31, 2020, compared to approximately 23,100 ounces for the three months ended March 31, 2019.

Decreased deliveries resulted from differences in the timing of shipments and settlements during the periods.

Copper stream deliveries from Mount Milligan were approximately 3.40 million pounds during the three months ended March 31, 2020, compared to approximately 2.46 million pounds during the three months ended March 31, 2019.

Gold stream deliveries from Mount Milligan were approximately 19,600 ounces for the three months ended September 30, 2020, compared to approximately 14,000 ounces for the three months ended September 30, 2019.

Increased deliveries resulted from differences in the timing of shipments and settlements during the periods.

On March 26, 2020, Centerra published an updated National Instrument 43-101 (“NI 43-101”) technical report for the Mount Milligan mine, which provides a detailed update to the life of mine plan contained in the previous NI 43-101 report for Mount Milligan published by Centerra in calendar 2017.

Centerra reported a reduction in proven and probable reserves due to increased costs, lower expected productivities, and lower process plant throughput compared to their calendar 2017 report, as well as an update to the resource model and re-estimation of metallurgical recoveries.

Details for the reserves and updated mine plan, which does not contemplate any growth capital or inclusion of additional mineralized material, were reported by Centerra as follows:

● Reserves as of December 31, 2019 containing 2.4 million ounces of gold and 959 million pounds of copper (comprised of 191.0 million tonnes grading 0.39 grams per tonne of gold and 0.23% of copper).

Reserves were calculated using a gold price of $1,250 per ounce, a copper price of $3.00 per pound, and an exchange rate of US$ 1.00 to C$ 1.25;

● Production based on a 9-year reserve life through calendar 2028;

● Average life of mine recoveries of 61.8% for gold and 80.6% for copper;

● Life of mine payable gold production of 1.45 million ounces, or an average of 161,000 ounces per year;

● Life of mine payable copper production of 735.6 million pounds, or an average of 81.7 million pounds per year;

● Average life of mine all-in sustaining cost of $704 per ounce of gold sold on a by-product basis, which includes sustaining capital and copper revenue credits (assuming a copper price of $3.00 per pound and an exchange rate of US$ 1.00 to C$ 1.25).

As of March 31, 2020, approximately 62% of the total $781.5 million advance payment for our investment at Mount Milligan has been returned.

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 earlier financial impairment taken by Centerra does not impact the mine operating performance, and (ii) the reduction in reserves and mineralized material at Mount Milligan resulted in 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 metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable The Company will continue to monitor future developments at Mount Milligan as part of its regular asset impairment analysis.

On April 1, 2020, Centerra announced that reductions of manpower and throughput to 50,000 tonnes per day at Mount Milligan would occur as a result of actions implemented to combat the COVID-19 pandemic.

On May 1, 2020, Centerra announced that processing of surface ore stockpiles using only the primary crusher continued during this period of reduced operations, and a planned two-week maintenance shut-down occurred during mid-April 2020.

Centerra further reported that process plant operations restarted in late April and mine operations are expected to ramp up production in mid-May, and the short-term decrease in activity is not expected to have a material impact on calendar 2020 production, or cause changes to calendar 2020 guidance.

Gold stream deliveries from Pueblo Viejo were approximately 10,200 ounces of gold for the three months ended March 31, 2020, compared to approximately 12,400 ounces of gold for the three months ended March 31, 2019.

Silver stream deliveries were approximately 394,700 ounces of silver for the three months ended March 31, 2020, compared to approximately 553,000 ounces of silver for the three months ended March 31, 2019.

Barrick reports that it continues to advance engineering and evaluation work towards a feasibility study for the process plant expansion and proposed tailings storage facility that could extend the mine life at Pueblo Viejo to beyond calendar

Copper stream deliveries from Mount Milligan were approximately 5.8 million pounds for the three months ended September 30, 2020, compared to approximately 2.4 million pounds for the three months ended September 30, 2019.

Increased deliveries resulted from differences in the timing of shipments and settlements during the periods.

On November 4, 2020, Centerra confirmed that there is no change to the previously issued production guidance for Mount Milligan for calendar year 2020 of 140,000 to 160,000 payable ounces of gold and 80 to 90 million pounds of copper.

Gold stream deliveries from Pueblo Viejo were approximately 9,400 ounces for the three months ended September 30, 2020, compared to approximately 10,500 ounces for the three months ended September 30, 2019.

Silver stream deliveries were approximately 408,600 ounces for the three months ended September 30, 2020, compared to 462,500 ounces for the three months ended September 30, 2019.

The decrease in deliveries resulted from lower gold and silver production in addition to differences in the timing of refinery settlements.

Barrick reports that it continues to advance work on the project to expand the process plant and tailings storage facilities that could extend the mine life at Pueblo Viejo beyond calendar 2040.

Barrick estimates that the process plant and tailings expansion project could significantly increase throughput and allow the mine to maintain average annual gold production of approximately 800,000 ounces after calendar 2022 (on a 100% basis), and that the increase in tailings storage capacity has the potential to convert approximately 11 million ounces of mineralized material to reserves (on a 100% basis).

Gold stream deliveries from Rainy River were approximately 3,600 ounces of gold for the three months ended March 31, 2020, compared to 4,400 ounces of gold for the three months ended March 31, 2019.

Silver stream deliveries were approximately 40,800 ounces of silver for the three months ended March 31, 2020, compared to approximately 35,700 ounces of silver for the three months ended March 31, 2019.

On February 13, 2020, New Gold announced the results of an updated life of mine plan for the Rainy River mine.

The corresponding NI 43-101 technical report was filed on March 27, 2020.

New Gold reported that the mine plan was based on proven and probable reserves estimated at a gold price of $1,275 per ounce and a silver price of $17.00 per ounce, and it expects there may remain potential to extend the underground mine life beyond calendar 2028 should the prevailing gold price support the development of additional underground mining areas during that period and/or exploration efforts increase the resource inventory.

Key highlights of the updated plan as reported by New Gold include:

● A mine plan covering the calendar 2020 to 2028 period, which considers mining from a smaller and higher-grade open pit through to early 2025, with concurrent mining from a smaller and more selective underground operation from 2022 through 2027.

Processing of stockpiled low-grade open pit material is expected to supplement underground mill feed during calendar 2026 to 2028;

● Overall gold grade of 1.10 grams per tonne mined and 1.06 grams per tonne milled;

● Average gold recovery of 89%;

● Average gold equivalent production of 289,000 ounces per year (including 3.6 million ounces of silver converted to gold equivalent using a gold price of $1,300 per ounce and silver price of $16.00 per ounce);

● Proven and probable reserves of 2.636 million ounces of contained gold and 6.266 million ounces of contained silver as at December 31, 2019.

As of March 31, 2020, approximately 22% of the total $175 million advance payment for our investment at Rainy River has been returned.

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 consensus metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable.

The Company will continue to monitor future developments at Rainy River as part of its regular asset impairment analysis.

According to New Gold, as a result of measures to address the spread of COVID-19, Rainy River completed a voluntary two-week shutdown from March 20 to April 2, 2020.

On April 29, 2020 New Gold reported that the mill facility is operating at full capacity with ore supplied from the open pit and medium-grade stockpile, and the mine is operating at approximately 70% of the productivity achieved before the shutdown.

New Gold announced that it has withdrawn its calendar 2020 guidance until the impact of COVID-19 is better understood.

Gold stream deliveries from Wassa were approximately 3,800 ounces of gold for the three months ended March 31, 2020, compared to approximately 4,600 ounces of gold for the three months ended March 31, 2019.

On March 27, 2020, Golden Star reported that deep drilling in calendar 2019 successfully extended the mineralization at Wassa by approximately 700 feet to the south where the deposit remains open to the south and down dip.

Golden Star further reported that the exploration strategy during calendar 2020 would transition away from growth of the overall resource to infill drilling to help define the potential mine plans for the southern extension of the operation.

According to Golden Star, as of December 31, 2019 the proven mineral reserve at Wassa increased 87% over the prior year period to 1.4 million ounces of gold, and total underground mineralized material at Wassa contained approximately 11.2 million ounces of gold.

Golden Star announced earlier it has taken a proactive response to the COVID-19 pandemic threat by implementing a range of procedures to protect and monitor the health and safety of their workforce and has not reported any production disruptions with respect to the pandemic.

Barrick reported during the quarter that the environmental impact assessment for the plant has been submitted to the authorities, and orders have been placed for long lead items.

Barrick also reported that field work for the baseline environmental assessment of the additional tailings capacity has started and constructive discussions with the authorities regarding permitting are well underway.

Barrick expects the proportion of lower grade stockpile ore in the feed blend to steadily increase until the mine expansion pits are fully developed as part of the decision on the proposed plant and tailings expansion project.

For calendar year 2020, Barrick indicated gold production attributable to its interest (60% basis) at Pueblo Viejo is expected to be between 530,000 and 580,000 ounces.

Gold stream deliveries from Wassa were approximately 4,000 ounces for the three months ended September 30, 2020, compared to approximately 2,900 ounces for the three months ended September 30, 2019.

We entered into a stream agreement with Golden Star on May 6, 2015, as amended (the “Original Stream Agreement”), which provided for the right to purchase 10.5% of the gold produced from Golden Star’s Wassa, and Prestea and Bogoso mines until an aggregate delivery of 240,000 ounces, after which the stream percentage would decrease to 5.5%.

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

Effective September 30, 2020, the Wassa, and Prestea and Bogoso stream agreements were separated into two stream agreements to facilitate the sale by Golden Star of the Prestea and Bogoso mines.

The gold stream rates and cash purchase prices for the separated Wassa stream agreement remain consistent with the Original Stream Agreement, and the gold delivery threshold of 240,000 ounces will apply to the Wassa mine only.

From May 6, 2015, through September 30, 2020, approximately 115,200 ounces of payable gold were delivered by Golden Star from the Wassa, and Prestea and Bogoso mines, consisting of 73,700 ounces from Wassa and 41,500 ounces from Prestea and Bogoso.

Based on these deliveries, as of September 30, 2020, approximately 124,800 ounces remain to be delivered from Wassa before the 240,000 ounce delivery threshold is reached.

On July 28, 2020, Golden Star reported calendar year 2020 gold production guidance for Wassa of between 165,000 to 170,000 ounces, up from the previous guidance range of 155,000 to 165,000 ounces.

On October 28, 2020, Golden Star reported the underground operation had produced ore at a record average rate of 4,960 tonnes per day during the quarter and confirmed the capacity of the current ramp system to support a 5,000 tonnes per day rate.

The underground mining rate has now exceeded 4,000 tonnes per day for five consecutive quarters.

The ore processing rate exceeded an average of 6,000 tonnes per day with the addition of low-grade stockpiled material.

Golden Star reported the advancement of several projects to support continued increase in the mining rate with the new paste fill plan achieving 98% construction completion and the completion of a new 11kV surface substation.

According to Golden Star, work on a preliminary economic assessment on the development of the Southern Extension of the Wassa ore body commenced during Q3 2020.

The study is intended to lay out a roadmap for the infrastructure and investment required for the potential expansion of the mining operation into the inferred resource areas.

The study is expected to be completed later this year for announcement to the market in early 2021.

Royalty Interests

Production attributable to the Company’s royalty interest at Cortez increased to 57,700 ounces of gold over the prior year quarter of 32,700 ounces of gold, as a result of production ramping up at the Crossroads deposit, which is subject to the NVR1C, GSR2 and portions of the NVR1 and GSR3 royalty interests.

During the current quarter, Barrick provided the Company with an updated reserve statement and life of mine plan for Cortez.

According to Barrick, as of December 31, 2019, total proven and probable reserves subject to the Company’s royalty interests contained 3.5 million ounces of gold (consisting of 87.0 million tonnes of ore at a grade of 1.26 grams per tonne).

Reserves were calculated at a gold price of $1,200 per ounce.

Further according to Barrick, total gold production at Cortez from the regions subject to the Company’s interests is expected to be approximately 175,000 ounces in calendar 2020, increasing to an approximate average of 425,000 ounces from calendar 2021 through calendar 2026.

The expected production increase from calendar 2020 to calendar 2021 is primarily due to higher contribution from the Crossroads deposit, which is expected to ramp up through calendar 2023 and offset declining production from the other royalty regions.

Gold, silver, lead and zinc production attributable to our royalty interest at Peñasquito increased approximately 161%, 76%, 76% and 71%, respectively, when compared to the prior year quarter.

The increase in production resulted from improved operations and higher grades from the main Peñasco pit.

On May 5, 2020, Newmont announced that operations at Peñasquito were placed on care and maintenance on April 12, 2020 due to a Mexican federal government decree to temporarily suspend all non-essential activities in Mexico as part of a nationwide effort to help slow the spread of COVID-19.

Newmont further stated that it has continued to engage with government at all levels on a restart plan, and the site is well positioned to ramp back up quickly and efficiently over a two-week period once operations are allowed to restart.

Production attributable to our royalty interest at Cortez was approximately 37,600 ounces of gold for the three months ended September 30, 2020, compared to approximately 35,100 ounces of gold for the three months ended September 30, 2019.

Barrick expects production to increase from calendar year 2020 to calendar year 2021 primarily due to higher contribution from the Crossroads deposit, which is expected to ramp up through calendar year 2023 and offset declining production from the other royalty regions.

Gold, silver and zinc production attributable to our royalty interest at Peñasquito increased approximately 269%, 38% and 40%, respectively, when compared to the prior year quarter, while lead production decreased 9% when compared to the prior year quarter.

According to Newmont, the increase in production was attributable to higher mill throughput and higher recoveries, partially offset by lower grades, with the exception of a higher gold grade.

Mill throughput was negatively impacted by the suspension of operations in the September 2019 quarter.

Newmont reported positive improvements in mill throughput from their full potential program, which has focused on the front end of the milling operation.

Blast fragmentation in the open pit is also receiving focus from the full potential program, which Newmont expects to contribute to improved throughput.

On July 30, Newmont provided full year 2020 production guidance for Peñasquito of 510,000 ounces of gold, 28 million ounces of silver, 360 million pounds of zinc, and 190 million pounds of lead.

Results of Operations

Quarter Ended March 31, 2020 , Compared to Quarter Ended March 31, 2019

For the quarter ended March 31, 2020, we recorded net income and comprehensive income attributable to Royal Gold stockholders of $38.6 million, or $0.59 per basic and diluted share, as compared to net income and comprehensive income attributable to Royal Gold stockholders of $28.8 million, or $0.44 per basic and diluted share, for the quarter ended March 31, 2019.

The increase in our earnings per share was primarily attributable to an increase in revenue and a decrease in our interest expense, each discussed further below.

These increases were partially offset by an increase in our general and administrative expenses (discussed further below) and a decrease in the fair value of the marketable equity securities the Company holds.

Refer to Note 4 of our notes to consolidated financial statements for further discussion on our marketable equity securities.

For the quarter ended March 31, 2020, we recognized total revenue of $136.4 million, comprised of stream revenue of $97.5 million and royalty revenue of $39.0 million at an average gold price of $1,583 per ounce, an average silver price of $16.90 per ounce and an average copper price of $2.56 per pound.

This is compared to total revenue of $109.8 million for the three months ended March 31, 2019, comprised of stream revenue of $77.8 million and royalty revenue of $32.0 million, at an average gold price of $1,304 per ounce, an average silver price of $15.57 per ounce and an average copper price of $2.82 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019 are as follows:

Quarter Ended September 30, 2020, Compared to Quarter Ended September 30, 2019

For the quarter ended September 30, 2020, we recorded net income of $106.9 million, or $1.63 per basic and diluted share, as compared to net income of $70.5 million, or $1.07 per basic and diluted share, for the quarter ended September 30, 2019.

The increase in net income was primarily attributable to an increase in revenue, a one-time gain attributable to the sale of our Peak Gold JV interest and various discrete income tax benefits, each discussed below.

These increases were partially offset by an increase in our cost of sales and an increase in depreciation, depletion and amortization expense, each discussed below.

For the quarter ended September 30, 2020, we recognized total revenue of $146.9 million, comprised of stream revenue of $106.5 million and royalty revenue of $40.4 million at an average gold price of $1,909 per ounce, an average silver price of $24.26 per ounce and an average copper price of $2.96 per pound.

This is compared to total revenue of $118.8 million for the three months ended September 30, 2019, comprised of stream revenue of $87.0 million and royalty revenue of $31.8 million, at an average gold price of $1,472 per ounce, an average silver price of $16.98 per ounce and an average copper price of $2.63 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended September 30, 2020, compared to the quarter ended September 30, 2019, are as follows:

Revenue and Reported Production Subject to Our Stream and Royalty Interests

Quarter Ended March 31, 2020 and 2019

Quarter Ended September 30, 2020 and 2019

(Amounts in thousands, except reported production ozs.

1 unchanged sentence

Three Months Ended

March 31, 2020

March 31, 2019

September 30, 2020

September 30, 2019

Stream/Royalty

6 unchanged sentences

Total Revenue

(1) Reported production relates to the amount of metal sales subject to our stream and royalty interests for the three months ended March 31, 2020 and 2019 and may differ from the operators’ public reporting.

(2) Refer to “Property Developments” above for further discussion on our principal stream and royalty interests.

(3) Individually, no stream or royalty included within the “Other” category for royalties contributed greater than 5% of our total revenue for either period.

The increase in our total revenue for the three months ended March 31, 2020, compared with the three months ended March 31, 2019, resulted primarily from an increase in our stream revenue and an increase in the average gold and silver prices.

The increase in our stream revenue was primarily attributable to an increase in gold sales at Andacollo and Pueblo Viejo and higher copper sales at Mount Milligan.

These increases were partially offset by lower gold sales at Rainy River and Mount Milligan due to a decrease in deliveries.

Please refer to “Property Developments” earlier within this MD&A for further discussion on recent developments regarding properties covered by certain of our stream and royalty interests.

Gold and silver ounces and copper pounds purchased and sold during the three months ended March 31, 2020 and 2019, and gold and silver ounces and copper pounds in inventory as of March 31, 2020, and June 30, 2019, for our streaming interests were as follows:

(1) Reported production relates to the amount of metal sales subject to our stream and royalty interests for the three months ended September 30, 2020, and 2019, and may differ from the operators’ public reporting.

(2) Refer to “Property Developments” above for a discussion of recent developments at principal properties.

(3) Individually, except for Rainy River which contributed 6% of total revenue for the three months ended September 30, 2019, no stream or royalty included within the “Other” category contributed greater than 5% of our total revenue for either period.

The increase in our total revenue resulted primarily from an increase in the average gold, silver and copper prices compared to the prior period.

Gold and silver ounces and copper pounds purchased and sold during the three months ended September 30, 2020 and 2019, and gold and silver ounces and copper pounds in inventory as of September 30, 2020, and June 30, 2020, for our streaming interests were as follows:

Three Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

September 30, 2020

September 30, 2019

September 30, 2020

June 30, 2020

6 unchanged sentences

Three Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

September 30, 2020

September 30, 2019

September 30, 2020

June 30, 2020

6 unchanged sentences

Three Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

September 30, 2020

September 30, 2019

September 30, 2020

June 30, 2020

7 unchanged sentences

Mount Milligan

Cost of sales, which excludes depreciation, depletion and amortization, increased to $22.0 million for the three months ended March 31, 2020 from $19.1 million for the three months ended March 31, 2019.

The increase was primarily due to increased gold sales from Pueblo Viejo and Andacollo and increased gold and silver prices when compared to the prior year quarter.

Cost of sales is specific to our stream agreements and is the result of RGLD Gold’s purchase of gold, silver and copper for a cash payment.

Cost of sales, which excludes depreciation, depletion and amortization, increased to $21.9 million for the three months ended September 30, 2020 from $20.1 million for the three months ended September 30, 2019.

The increase was primarily due to an increase in the gold, silver and copper prices when compared to the prior period.

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 $9.6 million for the three months ended March 31, 2020 from $6.8 million for the three months ended March 31, 2019.

The increase was due to additional non-cash stock compensation expense of approximately $3.3 million primarily as a result of the accelerated vesting of certain equity awards in connection with the recent retirement of our former President and Chief Executive Officer and our former Vice President and General Counsel.

Depreciation, depletion and amortization increased to $51.2 million for the three months ended March 31, 2020 from $39.4 million for the three months ended March 31, 2019.

Explorations costs decreased to $0.6 million for the three months ended September 30, 2020, from $2.6 million for the three months ended September 30, 2019.

Exploration costs were specific to the exploration and advancement of the Peak Gold JV.

Due to COVID-19, exploration activities and corresponding costs decreased compared to the prior period.

On September 30, 2020, we sold our Peak Gold JV interest which is discussed earlier in this MD&A and Note 2 of our notes to consolidated financial statements.

Depreciation, depletion and amortization increased to $46.3 million for the three months ended September 30, 2020 from $38.7 million for the three months ended September 30, 2019.

The increase was primarily due to higher copper sales at Mount Milligan and higher gold sales at Pueblo Viejo.

An increase in the depletion rates at Mount Milligan and Rainy River as a result of updated reserves, as discussed above also contributed to the increase in our depletion expense.

Interest and other expense decreased to $2.1 million for the three months ended March 31, 2020, from $7.5 million for the three months ended March 31, 2019.

The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding when compared to the prior period.

As discussed in our Fiscal 2019 10-K, the Company settled the $370 million aggregate principal amount due under its convertible senior notes that matured in June 2019.

Refer to Note 5 of our notes to consolidated financial statements for further discussion on our outstanding debt.

During the three months ended March 31, 2020, we recognized an income tax expense totaling $8.7 million, compared with an income tax expense of $9.4 million during the three months ended March 31, 2019.

The income tax expense resulted in an effective tax rate of 18.5% in the current period, compared with 24.7% in the quarter ended March 31, 2020.

The three months ended March 31, 2020 effective tax rate included income tax benefits resulting from foreign exchange rate movements compared to the U.S.

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.

Nine Months Ended March 31, 2020 , Compared to Nine Months Ended March 31, 2019

For the nine months ended March 31, 2020, we recorded net income and comprehensive income attributable to Royal Gold stockholders of $150.3 million, or $2.30 per basic share and $2.29 per diluted share, as compared to net income and comprehensive income attributable to Royal Gold stockholders of $67.4 million, or $1.03 per basic and diluted share, for the nine months ended March 31, 2019.

The increase in our earnings per share was primarily attributable to (i) an increase in revenue, (ii) a decrease in our interest expense and (iii) discrete income tax benefits recognized, primarily attributable to recent Swiss tax reform during the quarter ended September 30, 2019.

Each are discussed further below.

For the nine months ended March 31, 2020, we recognized total revenue of $378.9 million, which is comprised of stream revenue of $274.1 million and royalty revenue of $104.8 million at an average gold price of $1,512 per ounce, an average silver price of $17.07 per ounce and an average copper price of $2.62 per pound.

This is compared to total revenue of $307.4 million for the nine months ended March 31, 2019, which was comprised of stream revenue of $215.5 million and royalty revenue of $91.9 million, at an average gold price of $1,248 per ounce, an average silver price of $15.04 per ounce and an average copper price of $2.80 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the nine months ended March 31, 2020 compared to the nine months ended March 31, 2019 are as follows:

Revenue and Reported Production Subject to Our Stream and Royalty Interests

Nine Months Ended March 31, 2020 and 2019

(Amounts in thousands, except reported production ozs.

Nine Months Ended

March 31, 2020

March 31, 2019

Stream/Royalty

Production (1)

Mount Milligan

Total stream revenue

Royalty (2) :

Total royalty revenue

Total revenue

(1) Reported production relates to the amount of metal sales subject to our stream and royalty interests for the nine months ended March 31, 2020 and 2019 , and may differ from the operators’ public reporting.

(2) Refer to “Property Developments” above for further discussion on our principal stream and royalty interests.

(3) Individually, no stream or royalty included within the “Other” category contributed greater than 5% of our total revenue for either period.

The increase in our total revenue for the nine months ended March 31, 2020, compared with the nine months ended March 31, 2019, resulted primarily from an increase in our stream revenue and an increase in the average gold and silver prices.

The increase in our stream revenue was primarily attributable to an increase in gold and copper sales at Mount Milligan and gold sales at Pueblo Viejo.

These increases were partially offset by lower gold sales at Rainy River and Wassa.

Gold and silver ounces and copper pounds purchased and sold during the nine months ended March 31, 2020 and 2019, and gold and silver ounces and copper pounds in inventory as of March 31, 2020, and June 30, 2020, for our streaming interests were as follows:

Nine Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

June 30, 2019

Purchases (oz.)

Inventory (oz.)

Mount Milligan

Nine Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

June 30, 2019

Silver Stream

Purchases (oz.)

Inventory (oz.)

Nine Months Ended

March 31, 2020

March 31, 2019

March 31, 2020

June 30, 2019

Copper Stream

Purchases (Mlbs.)

Sales (Mlbs.)

Purchases (Mlbs.)

Sales (Mlbs.)

Inventory (Mlbs.)

Mount Milligan

Cost of sales increased to $63.2 million for the nine months ended March 31, 2020 from $53.8 million for the nine months ended March 31, 2019.

The increase was primarily due to increased gold and copper sales from Mount Milligan, higher gold sales from Pueblo Viejo, and an increase in gold and silver prices over the prior year quarter.

Cost of sales is specific to our stream agreements and is the result of RGLD Gold’s purchase of gold, silver and copper for a cash payment.

Depreciation, depletion and amortization increased to $130.0 million for the nine months ended March 31, 2020 from $120.7 million for the nine months ended March 31, 2019.

The increase was primarily attributable to higher gold and copper sales and depletion rates at Mount Milligan and an increase in gold sales and depletion rates at Pueblo Viejo.

This increase was partially offset by lower depletion at Wassa due to a decrease in gold sales over the prior period.

Interest and other expense decreased to $7.1 million for the nine months ended March 31, 2020, from $22.8 million for the nine months ended March 31, 2019.

The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding when compared to the prior period.

As discussed in our Fiscal 2019 10-K, the Company settled the $370 million aggregate principal amount due under its convertible senior notes that matured in June 2019.

An increase in depletions rates at Mount Milligan, as previously discussed in our FY 2020 10-K, also contributed to the increase.

The increase was partially offset by a decrease in gold sales at Andacollo when compared to the prior period.

We recognized an increase in fair value changes in equity securities of $2.5 million for the three months ended September 30, 2020, compared to a decrease of $1.4 million for the three months ended September 30, 2019.

The increase was primarily due to a $3.6 million mark-to-market increase on the sale of 809,744 Contango common shares as part of the sale of our interest in the Peak Gold JV.

Refer to Note 4 of our notes to consolidated financial statements for further discussion on our marketable equity securities.

Interest and other expense decreased to $1.9 million for the three months ended September 30, 2020, from $2.8 million for the three months ended September 30, 2019.

The decrease was primarily attributable to lower interest expense as a result of lower interest rates on our outstanding debt when compared to the prior period.

Refer to Note 5 of our notes to consolidated financial statements for further discussion on our outstanding debt.

During the nine months ended March 31, 2020, we recognized an income tax benefit totaling $3.7 million, compared with an income tax expense of $11.4 million during the nine months ended March 31, 2019.

This resulted in an effective tax rate of (2.6%) in the current period, compared with 15.1% during the nine months ended March 31, 2019.

The decrease in the effective tax rate for the nine months ended March 31, 2020 was 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 the Federal Act on Tax Reform and AHV Financing (Swiss Tax Reform) during the September 2019 quarter.

The effective tax rate for the nine months ended March 31, 2019 included an income tax benefit related to the transition tax as part of the Act, which was due to consideration of new U.S.

Treasury regulations and IRS guidance released during the period.

During the three months ended September 30, 2020, we recorded an income tax benefit totaling $(2.4) million, compared with an income tax benefit of $(23.5) million during the three months ended September 30, 2019.

The income tax benefit resulted in an effective tax rate of (2.3%) in the current period, compared with (51.9%) in the quarter ended September

The three months ended September 30, 2020 effective tax rate included income tax benefits ($24.5 million) resulting primarily from the release of an uncertain tax position due to a settlement agreement with a foreign tax authority and a change to the realizability of certain deferred tax assets.

The three months ended September 30, 2019 effective tax rate included an income tax benefit ($32.3 million) primarily related to the enactment of the Federal Act on Tax Reform and AHV Financing in Switzerland (Swiss Tax Reform).

Liquidity and Capital Resources

At March 31, 2020, we had current assets of $150.6 million compared to current liabilities of $49.8 million resulting in working capital of $100.8 million and a current ratio of approximately 3 to 1.

At September 30, 2020, we had current assets of $469.8 million compared to current liabilities of $56.1 million resulting in working capital of $413.6 million and a current ratio of 8 to 1.

This compares to current assets of $362.2 million and current liabilities of $43.6 million at June 30, 2020, resulting in working capital of $318.6 million and a current ratio of approximately 8 to 1.

During the nine months ended March 31, 2020, liquidity needs were met from $249.2 million in net cash provided by operating activities and our available cash resources.

During the nine months ended March 31, 2020, the Company repaid $115 million of the outstanding borrowings under the revolving credit facility.

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

Working capital, combined with the Company’s undrawn revolving credit facility, resulted in approximately $1 billion of total liquidity at March 31, 2020.

The Company was in compliance with each financial covenant under the revolving credit facility as of March 31, 2020.

Refer to Note 5 of our notes to consolidated financial statements for further discussion on our debt.

The increase in working capital was primarily due to proceeds from the sale of our Peak Gold JV interest and increased revenue.

During the three months ended September 30, 2020, liquidity needs were met from $94.2 million in net cash provided by operating activities and our available cash resources.

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

Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $1.1 billion of total liquidity at September 30, 2020.

We were in compliance with each financial covenant under the revolving credit facility as of September 30, 2020.

Refer to Note 5 of our notes to consolidated financial statements for further discussion on our outstanding debt.

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

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

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 the conditional funding schedule in connection with the Khoemac a u silver stream acquisition.

Our long-term capital requirements are primarily affected by our ongoing acquisition activities.

The Company currently, and generally at any time, has acquisition opportunities in various stages of active review.

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 Fiscal 2019 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of certain risks that may impact the Company’s liquidity and capital resources.

Recent Liquidity and Capital Resource Developments

Revolving Credit Facility Drawdown

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.

Summary of Cash Flows

Please refer to our risk factors included in Part 1, Item 1A of our Fiscal 2020 10-K for a discussion of certain risks that may impact our liquidity and capital resources.

Operating Activities

Net cash provided by operating activities totaled $249.2 million for the nine months ended March 31, 2020, compared to $180.9 million for the nine months ended March 31, 2019.

The increase is primarily due to an increase in proceeds received from our stream interests, net of cost of sales, of approximately $51.7 million and lower income taxes paid of $6.0 million over the prior period.

Net cash provided by operating activities totaled $94.2 million for the three months ended September 30, 2020, compared to $71.2 million for the three months ended September 30, 2019.

The increase was primarily due to an increase in proceeds received from our stream and royalty interests, net of cost of sales and production taxes, of approximately $20.1 million.

Investing Activities

Net cash used in investing activities totaled $105.1 million for the nine months ended March 31, 2020, compared to net cash used in investing activities of $4.8 million for the nine months ended March 31, 2019.

The increase in cash used in investing activities is primarily due to an increase in the acquisition of stream and royalty interests.

The Company has made advance payments totaling $87.8 million for the Khoemac a u silver stream acquisition during the nine months ended March 31, 2020.

Net cash provided by investing activities totaled $49.7 million for the three months ended September 30, 2020, compared to net cash provided by investing activities of $0.5 million for the three months ended September 30, 2019.

The increase was primarily due to $49.2 million received for the sale of our Peak Gold JV investment and $12.1 million for the sale of our Contango shares.

This increase was partially offset by an advance payment of $11.1 million for the Khoemac a u silver stream acquisition during the current period.

Financing Activities

Net cash used in financing activities totaled $169.9 million for the nine months ended March 31, 2020, compared to $48.9 million for the nine months ended March 31, 2019.

The increase in cash used in financing activities is primarily due to an increase in repayments on our revolving credit facility.

The Company repaid $115.0 million on our revolving credit facility during the nine months ended March 31, 2020.

Net cash used in financing activities totaled $49.8 million for the three months ended September 30, 2020, compared to $69.2 million for the three months ended September 30, 2019.

The decrease was primarily due to a decrease in repayments

on our revolving credit facility.

We repaid $30.0 million on our revolving credit facility during the three months ended September 30, 2020, compared to $50.0 million during the three months ended September 30, 2019.

Recently Adopted Accounting Standards and Critical Accounting Policies

18 unchanged sentences

Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the following:

a low-price environment for gold, silver, copper, nickel 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, changes to mine plans and reserves, liquidity needs, mining and environmental hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, contractual issues involving our stream or royalty agreements;

a lower-price environment for gold, silver, copper, nickel or other metals;

risks associated with doing business in foreign countries;

3 unchanged sentences

changes in management and key employees;

and other factors described elsewhere in this report and our other SEC reports, including our Fiscal 2019 10-K and subsequent Quarterly Reports on Form 10-Q.

and other factors described in Item 1A.

Risk Factors of our Fiscal 2020 10-K.

Most of these factors are beyond our ability to predict or control.

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.

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.

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 2. Management’s Discussion and Analysis