What changed in this filing

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Item 1. Business

2021-08-12 compared with 2020-08-06 · 86 added, 66 removed, 70 unchanged (68% of the section changed)

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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.

Please refer to Item 2, Properties, for a discussion of the development at our principal properties.

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 June 30, 2020, we owned seven stream interests, which are on six producing properties and two development stage properties.

Our stream interests accounted for approximately 72% of our total revenue for each of the fiscal years ended June 30, 2020 and 2019.

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 a percentage of revenue or metals produced from the project after deducting specified costs, if any.

As of June 30, 2020, we owned royalty interests on 35 producing properties, 14 development stage properties and 130 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 approximately 28% of our total revenue for each of the fiscal years ended June 30, 2020 and 2019.

We do not conduct mining operations on the properties in which we hold stream and royalty interests.

Except for our interest in the Peak Gold JV, we 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 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.

As discussed in further detail throughout this report, some highlights of our business during fiscal year 2020 were as follows:

● Our revenue increased 18% to $498.8 million, compared to $423.1 million during fiscal 2019.

● We made several key leadership changes due to retirements and used our management succession planning to fill those roles.

We do not conduct mining operations on the properties in which we hold stream and royalty interests and are not required to contribute to capital costs, environmental costs, or other operating costs on the properties.

Please refer to Item 2, Properties, for a discussion of the developments at our principal 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 stream and royalty interests 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.

As discussed in further detail throughout this report, some key takeaways and developments for our business since the beginning of fiscal year 2021 were as follows:

● We had record revenue of $615.9 million during fiscal year 2021, compared to $498.8 million during fiscal year 2020.

This was a 23% increase year over year.

● We increased our calendar year dividend to $1.20 per basic share, which is paid in quarterly installments throughout calendar year 2021.

This represents a 7% increase compared with the dividend paid during calendar year 2020.

● On September 30, 2020, we announced we had entered into an agreement with Kinross Gold Corporation to sell our interest in the Manh Choh Project (formerly known as the Peak Gold Project) and our common share position in Contango Ore, Inc., our partner in Peak Gold, LLC, the owner of the Manh Choh Project.

Consideration received for the sale of these interests included cash of $61.3 million and certain net smelter return royalties.

● 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.

For more information, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

● On January 6, 2021, we made the sixth advance payment of $32.6 million toward the Khoemac a u Project silver stream.

With this payment, we have completed the total $212 million advance payment required to earn the base silver stream of 80% of payable silver from Khoemac a u until the delivery of 32.0 million ounces, and 40% thereafter.

A seventh advance payment of $10.6 million was made toward the option silver stream on April 7, 2021, and as of that date, we hold the right to purchase 84% of the payable silver from Khoemac a u until the delivery of approximately 33.6 million ounces of silver, and 42% thereafter.

● On June 7, 2021, we acquired a 1.0% net smelter return royalty on production from mining claims that comprise a portion of the Côté Gold open pit project located in Ontario, Canada from a third-party for $75 million in cash consideration.

● On June 30, 2021, we announced we had entered into a precious metals purchase agreement with Ero Gold Corp, a wholly-owned subsidiary of Ero Copper Corp.

(together “Ero”), to acquire a gold stream interest in their NX Gold mine in Brazil for $100 million in cash consideration, with further payments of up to $10 million in cash depending on defined success-based targets.

This transaction closed on August 6, 2021.

● On August 9, 2021, our board of directors approved a change in our fiscal year end from June 30 to December 31 effective as of December 31, 2021.

As a result, we expect to file a Transitional Report on Form 10-KT in early 2022 for the six-month stub period from July 1, 2021, to December 31, 2021.

● On August 11, 2021, we acquired a 1.0% net smelter return royalty covering approximately 5,100 hectares which include the currently known mineralization and prospective exploration areas of the Red Chris Mine in British Columbia, Canada.

We paid $165 million in cash consideration for the royalty to Glencore Canada Corporation, a wholly owned subsidiary of Glencore International AG.

The Red Chris Mine is an operating open pit mine producing gold, copper and silver, and is located on the northern edge of the Skeena Mountains.

● Throughout fiscal year 2021, several of our operating counterparties 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 were not materially impacted by these measures.

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, including the emergence of variant strains of the virus, 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.

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.

Certain Definitions

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A unit of weight equal to 2,204.6 pounds or 1,000 kilograms.

Fiscal 2020 Business Developments

Please refer to Item 7, MD&A, for discussion on recent liquidity and capital resource developments.

Alturas royalty acquisition

On January 29, 2020, we entered into an agreement with various private individuals for the acquisition of an 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 Compañia Minera Salitrales Limitada, a subsidiary of Barrick Gold Corporation (“Barrick”).

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 conditioned 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 upon first production from the mining concessions.

Castelo de Sonhos royalty acquisition

In August 2019, we 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 was $7.5 million, of which $4.5 million was paid in August 2019, $1.5 million was paid in November 2019, and $1.5 million was paid in March 2020.

Aggregate funds we invested with TriStar will be used 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 gold grade of approximately 1.0 gram per tonne.

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

Refer to Note 3 of our notes to consolidated financial statements for further discussion.

Covid-19 and current economic environment

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

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

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

Leadership changes

We 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.

Our Operational Information

Reportable Segments and Financial Information

We manage our business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests.

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

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 June 30, 2021, we owned eight stream interests, which are on six producing properties and two development stage properties.

Our stream interests accounted for approximately 69% and 72% of our total revenue for each of the fiscal years ended June 30, 2021, and 2020, respectively.

We expect stream interests to represent 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 a percentage of revenue or metals produced from the project after deducting specified costs, if any.

As of June 30, 2021, we owned royalty interests on 35 producing properties, 15 development stage properties and 129 exploration stage properties, of which we consider 50 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 approximately 31% and 28% of our total revenue for each of the fiscal years ended June 30, 2021, and 2020, respectively.

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

As of June 30, 2021

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Our reportable segments for purposes of assessing performance for our fiscal years ended June 30, 2021, and 2020 are shown below (amounts are in thousands):

Year Ended June 30, 2020

Fiscal Year Ended June 30, 2021

Cost of sales (1)

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Stream interests

Dominican Republic

Total stream interests

Royalty interests

Year Ended June 30, 2019

United States

Rest of world

Total royalty interests

Fiscal Year Ended June 30, 2020

Cost of sales (1)

Production taxes

Depletion (2)

Segment gross profit (3)

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(1) Excludes depreciation, depletion and amortization.

(2) Depletion amounts are included within Depreciation, depletion and amortization on our consolidated statements of operations and comprehensive income (loss).

(3) Refer to Note 14 to consolidated financial statements for a reconciliation of total segment gross profit to consolidated income (loss) before income taxes.

(2) Depletion amounts are included within Depreciation, depletion and amortization on our consolidated statements of operations and comprehensive income.

(3) Refer to Note 15 of our notes to consolidated financial statements for a reconciliation of total segment gross profit to consolidated income before income taxes.

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

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Significant declines in the prices of gold, silver, or copper could have a material adverse effect on our results of operations and financial condition.

The mining industry in general, and streaming and royalty segments in particular, are very competitive.

We compete with other streaming and royalty companies, mine operators, and financial buyers in efforts to acquire existing streaming and royalty interests.

We also compete with the lenders, investors, and streaming and royalty companies providing financing to operators of mineral properties in our efforts to create new streaming and royalty interests.

The mining industry in general, and stream and royalty segments in particular, are very competitive.

We compete with other stream and royalty companies, mine operators, and financial buyers in efforts to acquire existing stream and royalty interests.

We also compete with the lenders, investors, and streaming and royalty companies providing financing to operators of mineral properties in our efforts to create new stream and royalty interests.

Our competitors may be larger than we are and may have greater resources and access to capital than we have.

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Operators of the mines that are subject to our stream and royalty interests must comply with numerous environmental, mine safety, land use, waste disposal, remediation and public health laws and regulations promulgated by federal, state, provincial and local governments in the United States, Canada, Chile, the Dominican Republic, Ghana, Mexico, Botswana, Australia and other countries where we hold interests.

Although we, as a stream or royalty interest owner, are not responsible for ensuring compliance with these laws and regulations, failure by the operators to comply with applicable laws, regulations and permits can result in injunctive action, orders to suspend or cease operations, damages, and civil and criminal penalties on the operators, which could have a material adverse effect on our results of operations and financial condition.

Corporate Information

We were incorporated under the laws of the State of Delaware on January 5, 1981.

Our executive offices are located at 1144 15 th Street, Suite 2500, Denver, Colorado 80202.

Our telephone number is (303) 573-1660.

Although we, as a stream or royalty interest owner, are not

responsible for ensuring compliance with these laws and regulations, failure by the operators to comply with applicable laws, regulations and permits can result in injunctive action, orders to suspend or cease operations, damages, and civil and criminal penalties on the operators, which could have a material adverse effect on our results of operations and financial condition.

Human Capital Resources

We currently have 28 employees, 19 of whom work out of our headquarters in Denver, Colorado.

The remainder work out of our offices in Lucerne, Switzerland, Vancouver, Canada, and Toronto, Canada.

Our employees are not subject to a labor contract or collective bargaining agreement.

The continued growth and success of our business depends on our people, and our people are our most important resource.

Management is responsible for ensuring that our policies and practices support our desired corporate culture and employee development.

Our human capital management strategy is built on attracting the best talent and developing and retaining talent.

Diversity and Inclusion

We believe that diversity can enhance creativity, productivity, and organizational strength.

We strive to maintain an environment where the perspectives and experiences of all personnel are respected and valued.

We seek to identify potential future candidates for employment and membership on our Board using a wide range of criteria that, depending on the position, may include diversity, experience in the mining industry, integrity, perspective, broad business judgment and leadership skills, personal qualities and reputation in the business community, and relevant technical, management, political, legal, governance, finance and other experience.

We are committed to an inclusive work environment where individuals are treated with fairness and respect and are given equal opportunity to develop and advance without regard age, race, sex, gender identity or characteristics, color, religion, national origin, disability, sexual orientation, marital status, military status, pregnancy, genetic information, or any other status protected by state or local law.

We are committed to providing equal opportunities for promotion, compensation, training and development to all qualified individuals.

We maintain a Diversity Policy that outlines our values, commitment to a diverse Board, management team and workforce, and procedures for carrying out the policy.

We are committed to the wellbeing of all our employees.

We promote a safe and healthy workplace and require strict adherence to legal and ethical standards in our business practices.

For each of the past five years, we have recorded a total recordable injury frequency rate of zero for our employees.

We maintain a People Policy that outlines our approach to maintaining safe work conditions for our employees.

We are committed to respecting human rights in the jurisdictions where we operate and affirm our commitment to comply with all applicable laws concerning human rights through our Human Rights Policy.

Compensation and Benefits

We offer competitive compensation and benefits to attract and retain top talent.

We provide competitive medical and other insurance coverage for employees and eligible dependents and provide for sick leave in the case of illness or absence due to the sickness of the employee or an immediate family member.

We support the continued professional development of our employees by underwriting or subsidizing education and professional development programs for our employees.

Host Community Commitment

We actively seek opportunities to advance sustainability initiatives with the goal of supporting communities that host the operations in which we hold stream and royalty interests during and following our operators’ mining operations.

Many of our operators also actively and positively impact the communities where they mine.

We encourage their efforts and often make our own financial contributions in support of their programs.

Local Community Support

We also believe in giving back at home, supporting the communities where we live and work.

Our annual charitable giving is administered by a committee of employees that selects donation targets and recipients in our local communities.

We are proud to partner with leading charities in Denver, Luzern, Toronto, and Vancouver that are actively responding to community needs with respect to medical supplies, homelessness, food security, elder care, and education.

We file periodic and current reports, proxy statements, and other information with the SEC.

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The information on our website is not part of this or any other report filed with or furnished to the SEC.

We currently have 27 employees, 18 of which work out of our office in Denver, Colorado.

The remainder work out of our offices in Lucerne, Switzerland, Vancouver, Canada, and Toronto, Canada.

Our employees are not subject to a labor contract or collective bargaining agreement.

We consider our overall employee relations to be good.

Our global offices are adhering by the guidelines provided to the local health authorities during the COVID-19 pandemic.

The adoption of a remote work environment has not caused any material interruptions to the day-to-day activities of the Company.

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-K

Item 1. Business