What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2021-02-04 · 96 added, 86 removed, 425 unchanged (30% of the section changed)

35 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue (Note 7)

25 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended December 31, 2020 and 2019

Three months ended March 31, 2021 and 2020

(unaudited, amounts in thousands except share data)

2 unchanged sentences

Non-controlling

(Losses) Earnings

Balance at September 30, 2020

Earnings (Losses)

Balance at December 31, 2020

Stock-based compensation and related share issuances

2 unchanged sentences

Dividends declared

Balance at December 31, 2020

Balance at March 31, 2021

Royal Gold Stockholders

1 unchanged sentence

Non-controlling

(Losses) Earnings

Balance at September 30, 2019

Earnings (Losses)

Balance at December, 2019

Stock-based compensation and related share issuances

2 unchanged sentences

Dividends declared

Balance at December 31, 2019

Balance at March 31, 2020

ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Six months ended December 31, 2020 and 2019

Nine months ended March 31, 2021 and 2020

(unaudited, amounts in thousands except share data)

2 unchanged sentences

Non-controlling

(Losses) Earnings

Earnings (Losses)

Balance at June 30, 2020

2 unchanged sentences

Distributions to non-controlling interests

Net income (loss) and comprehensive income (loss)

Net income and comprehensive income

Dividends declared

Balance at December 31, 2020

Balance at March 31, 2021

Royal Gold Stockholders

7 unchanged sentences

Dividends declared

Balance at December 31, 2019

Balance at March 31, 2020

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

2 unchanged sentences

(Unaudited, amounts in thousands)

Six Months Ended

Nine Months Ended

Cash flows from operating activities:

Net income and comprehensive income

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities:

Depreciation, depletion and amortization

17 unchanged sentences

Proceeds from sale of Contango shares

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

21 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 six months ended December 31, 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”).

Operating results for the three and nine months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021.

These interim unaudited consolidated 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

6 unchanged sentences

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.

On September 30, 2020, we entered into an agreement with an affiliate of Kinross Gold Corporation to sell our 40 % membership interest in the Manh Choh Project (formerly known as 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, the owner of the Manh Choh Project, 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 return royalty on silver produced from an area of interest which includes the current Peak Gold Project resource area.

● An incremental 28 % net smelter return royalty on silver produced from an area of interest which includes the current Manh Choh Project resource area.

Peak Gold, LLC retains the right to acquire 50 % of this royalty for consideration of $ 4.0 million;

● 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, increasing our royalty on this area from 2 % to 3 %.

The royalties were recorded as exploration stage royalty interests in Stream and royalty interests, net in our consolidated balance sheet as of December 31, 2020 and were assigned a combined value of approximately $ 4.4 million on the date of the transaction.

We recorded a gain of $ 33.9 million on the sale of our 40 % membership interest in the Peak Gold Project during the three months ended September 30, 2020.

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 and was recognized during the three months ended September 30, 2020.

The royalties are recorded as exploration stage royalty interests in Stream and royalty interests, net in our consolidated balance sheet as of March 31, 2021 and were assigned a combined value of approximately $ 4.4 million on the date of the transaction.

We recorded a gain of $ 33.9 million on the sale of our 40 % membership interest in the Manh Choh Project during the three months ended September 30, 2020.

The mark-to-market increase of $ 3.6 million on the sale of our 809,744

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

common shares in Contango is included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income and was recognized during the three months ended September 30, 2020.

STREAM AND ROYALTY INTERESTS, NET

The following tables summarize our stream and royalty interests, net as of December 31, 2020 and June 30, 2020.

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

The following tables summarize our stream and royalty interests, net as of March 31, 2021 and June 30, 2020.

As of March 31, 2021 (Amounts in thousands):

Accumulated Depletion

32 unchanged sentences

( 1,233,696 )

Separation of the Wassa and Prestea/Bogoso Stream Agreement

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

Separation of the Wassa and Prestea and Bogoso Stream Agreement

On October 1, 2020, we announced the separation of the Wassa gold stream and the Prestea and Bogoso gold streams into two 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/Bogoso mines to Future Global Resources (“FGR”).

The Wassa stream agreement, which remains with Golden Star, continues to provide 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 %.

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

The Wassa stream agreement, which remains with Golden Star, continues to provide us the right to purchase 10.5 % of the gold payable 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 remains at 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 December 31, 2020, approximately 110,200 ounces remain to be delivered from the Wassa mine until the 240,000 ounce delivery threshold is reached.

The Prestea/Bogoso stream agreement with FGR provides us the right to purchase 5.5 % of the gold produced from the Prestea/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 stream is recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets and has a carrying value of $ 73.6 million as of December 31, 2020.

As of March 31, 2021, approximately 115,700 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 payable 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 and 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 stream is recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets and has a carrying value of $ 70.3 million as of March 31, 2021.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

COVID-19 and current economic environment

Throughout 2020 and into 2021, several of our operating counterparties have instituted temporary operational curtailments due to the ongoing COVID-19 pandemic.

COVID-19 Pandemic

Throughout calendar 2020 and into calendar 2021, several of our operating counterparties have instituted temporary operational curtailments due to the ongoing COVID-19 pandemic.

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

For the most part, our results of operations and financial condition have not been materially impacted by these measures to date.

However, the effects of the pandemic are fluid and changing rapidly, including with respect to vaccine and treatment developments and deployment and potential mutations of COVID-19.

However, the effects of the pandemic will ultimately depend on many factors that are outside of our control, including the severity and duration of the pandemic, government and operator actions in response to the pandemic, and the development, availability, and public acceptance of effective treatments and vaccines.

As a result, we are currently unable to predict the nature or extent of any future impact on our results of operations and financial condition.

1 unchanged sentence

MARKETABLE EQUITY SECURITIES

As of December 31, 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.

As of March 31, 2021, our marketable equity securities include 3,949,575 common shares of Battle North Gold Corporation (“Battle North Gold”), 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.

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 for the three months ended September 30, 2020.

The fair value of our marketable equity securities decreased $ 0.4 million and increased $ 2.2 million for the three and six months ended December 31, 2020, 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 December 31, 2020 and June 30, 2020 was $ 7.9 million and $ 17.9 million, respectively, and is included in Other assets on our consolidated balance sheets.

Our debt as of December 31, 2020 and June 30, 2020 consists of the following:

As of December 31, 2020

On March 15, 2021, Evolution Mining Limited announced it had entered into a definitive arrangement with Battle North Gold to acquire all of the issued and outstanding shares of Battle North Gold at a price of $ 2.65 Canadian dollars per common share, payable in cash.

The transaction remains subject to the affirmative vote of Battle North Gold’s shareholders, which is expected to be held in May 2021, and is expected to close during the quarter ending June 30, 2021.

The fair value of our marketable equity securities increased $ 1.9 million and $ 4.0 million for the three and nine months ended March 31, 2021, 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 March 31, 2021 and June 30, 2020 was $ 9.8 million and $ 17.9 million, respectively, and is included in Other assets on our consolidated balance sheets.

Our debt as of March 31, 2021 and June 30, 2020 consists of the following:

As of March 31, 2021

As of June 30, 2020

5 unchanged sentences

Revolving credit facility

As of December 31, 2020, we had $ 200 million outstanding and $ 800 million available under our revolving credit facility.

The interest rate on borrowings under our revolving credit facility as of December 31, 2020 was LIBOR plus 1.10 % for an all-in rate of 1.33 %.

Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $ 1.0 million and $ 2.2 million for the three and six months ended December 31, 2020, respectively, and $ 1.6 million and $ 3.8 million for the three and six months ended December 31, 2019, respectively.

As of March 31, 2021, we had $ 150 million outstanding and $ 850 million available under our revolving credit facility.

The interest rate on borrowings under our revolving credit facility as of March 31, 2021 was LIBOR plus 1.10 % for an all-in rate of 1.34 %.

Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $ 0.8 million and $ 3.0 million for the three and nine months ended March 31, 2021, respectively, and $ 1.2 million and $ 5.0 million for the three and nine months ended March 31, 2020, 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 December 31, 2020, we were in compliance with each financial covenant.

On January 4, 2021, we repaid $ 50 million of the outstanding borrowings under our revolving credit facility.

This increased the amount available under our revolving credit facility to $ 850 million and decreased the amount outstanding to $ 150 million.

As of March 31, 2021, we were in compliance with each financial covenant.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

On April 1, 2021, we repaid the remaining outstanding borrowings ($ 150 million) under our revolving credit facility.

This increased the amount available under our revolving credit facility to $ 1 billion and decreased the amount outstanding to zero .

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

3 unchanged sentences

We lease 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 December 31, 2020 (amounts in thousands):

The following amounts were recorded in the consolidated balance sheets at March 31, 2021 (amounts in thousands):

Classification

December 31, 2020

March 31, 2021

Operating Leases

8 unchanged sentences

Total operating lease liabilities

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

Maturities of operating lease liabilities at March 31, 2021 were as follows (amounts in thousands):

Fiscal Years:

2 unchanged sentences

Less imputed interest

Other information pertaining to leases consist of the following:

December 31, 2020

Other information pertaining to leases consists of the following:

March 31, 2021

Operating Lease Term and Discount Rate

1 unchanged sentence

Weighted average discount rate

We did not have any finance leases as of December 31, 2020.

We did not have any finance leases as of March 31, 2021.

Revenue Recognition

1 unchanged sentence

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, a performance obligation is satisfied.

In accordance with this guidance, revenue attributable to our stream interests and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers.

The amount of revenue we recognize further reflects the consideration to which we are entitled under the respective stream or royalty agreement.

A more detailed summary of our revenue recognition policies for our stream and royalty interests is discussed below.

In accordance with this guidance, revenue attributable to our stream interests and royalty interests is generally recognized at the point in

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

time that control of the related metal production transfers to our customers.

The amount of revenue we recognize further reflects the consideration to which we are entitled under the respective stream or royalty agreement.

A more detailed summary of our revenue recognition policies for our stream and royalty interests is discussed below.

Stream Interests

18 unchanged sentences

Please also refer to our “Use of Estimates” accounting policy discussed in our Fiscal 2020 10-K.

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

For the three and nine months ended March 31, 2021, royalty revenue that was estimated or was attributable to metal production for a period prior to March 31, 2021, was not material.

Disaggregation of Revenue

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Stream revenue:

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Stream revenue:

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(Amounts in thousands)

8 unchanged sentences

Notes to Consolidated Financial Statements

During the six months ended December 31, 2020 and 2019, we granted the following stock-based compensation awards (note that no awards were granted during the three months ended December 31, 2020 and 2019):

Six Months Ended

During the three and nine months ended March 31, 2021 and 2020, we granted the following stock-based compensation awards:

Three Months Ended

Nine Months Ended

(Number of shares)

Stock options

3 unchanged sentences

Total equity awards granted

As of December 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:

As of March 31, 2021, 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

13 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net income attributable to Royal Gold common stockholders

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(Amounts in thousands, except rate)

2 unchanged sentences

Effective tax rate

The effective tax rate for the six months ended December 31, 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, both of which were recorded during the three months ended September 30, 2020.

The effective tax rate for the six months ended December 31, 2019, included discrete benefits ($ 32.3 million) 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 three months ended March 31, 2021, included an income tax expense attributable to an increase in valuation allowance on certain deferred tax assets.

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

The effective tax rate for the nine months ended March 31, 2021, included discrete tax benefits ($ 21.8 million) primarily 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 nine months ended March 31, 2020, included discrete benefits ($ 32.3 million) 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).

SEGMENT INFORMATION

1 unchanged sentence

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 December 31, 2020

As of March 31, 2021

As of June 30, 2020

7 unchanged sentences

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

Three Months Ended December 31, 2020

Three Months Ended March 31, 2021

Cost of sales (1)

4 unchanged sentences

Royalty interests

Three Months Ended December 31, 2019

Three Months Ended March 31, 2020

Cost of sales (1)

4 unchanged sentences

Royalty interests

Six Months Ended December 31, 2020

Nine Months Ended March 31, 2021

Cost of sales (1)

4 unchanged sentences

Royalty interests

Six Months Ended December 31, 2019

Nine Months Ended March 31, 2020

Cost of sales (1)

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Total segment gross profit

11 unchanged sentences

Notes to Consolidated Financial Statements

Our revenue by reportable segment for the three and six months ended December 31, 2020 and 2019 is geographically distributed as shown in the following table (amounts in thousands):

Our revenue by reportable segment for the three and nine months ended March 31, 2021 and 2020 is geographically distributed as shown in the following table (amounts in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Stream interests:

16 unchanged sentences

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 December 31, 2020

As of March 31, 2021

Carrying Amount

3 unchanged sentences

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 December 31, 2020.

The TriStar Gold Inc.

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.

The carrying value of our revolving credit facility (Note 5) approximates fair value as of March 31, 2021.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

As of December 31, 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.

As of March 31, 2021, 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.

2 unchanged sentences

Khoemac a u Silver Stream Acquisition

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

Our Khoemac a u silver stream transaction closed in February 2019.

Between November 2019 and January 2021, we completed a total of $ 212 million in advanced payments required to earn the base silver stream of 80 % of payable silver under our conditional funding schedule:

● $ 65.8 million – November 5, 2019

4 unchanged sentences

● $ 32.6 million – January 6, 2021

Including the sixth advance payment made on January 6, 2021, we have made total contributions of $ 212 million which completes the advance payments for the Base Silver Stream.

We are further committed to up to $ 53.0 million in additional contributions should Khoemacau Copper Mining (Pty.) Limited elect to fully exercise the Option Silver Stream.

Any further payments under the Option Silver Stream are subject to certain conditions and are scheduled to be made 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.

On April 7, 2021, we made a seventh advance payment of $ 10.6 million toward the option silver stream which increased our right to receive payable silver produced from Khoemac a u from a rate of 80 % to 84 % until the delivery of approximately 33.6 million silver ounces, and 42 % (from 40 %) thereafter.

Additionally, on April 7, 2021, Khoemac a u Copper Mining (Pty.) Limited (“KCM”) drew $ 18.0 million on a $ 25.0 million subordinated debt facility provided by Royal Gold.

The subordinated debt facility has a term of seven years , carries interest at a rate of LIBOR + 11 % and requires mandatory repayment upon certain events.

Royal Gold has remaining committed funding of $ 49.4 million to KCM in the form of $ 42.4 million of additional stream financing and $ 7.0 million of debt, both of which may be drawn at the election of KCM prior to the completion of construction.

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

Ilovica Gold Stream Acquisition

As of December 31, 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.

As of March 31, 2021, our conditional funding schedule of $ 163.75 million, as part of the Ilovica gold stream acquisition entered into in October 2014, remains subject to certain conditions.

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