What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-08-12 compared with 2020-08-06 · 267 added, 278 removed, 577 unchanged (49% of the section changed)

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CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Royal Gold, Inc.

To the Stockholders and the Board of Directors of Royal Gold, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Royal Gold, Inc.

(the Company) as of June 30, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended June 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of June 30, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for each of the three years in the period ended June 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021, in conformity with U.S.

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Management evaluates various qualitative factors in determining whether or not events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable.

The factors considered include, among others, significant changes in estimates of forecasted gold, silver, copper and other metal prices, significant changes in operators’ estimates of proven and probable reserves and other relevant information received from the operators, which

may include operational or legal information that indicates production from mineral interests will not likely occur or may be significantly reduced in the future.

The factors considered include, among others, significant changes in estimates of forecasted gold, silver, copper and other metal prices, significant changes in operators’ estimates

of proven and probable reserves and other relevant information received from the operators, which may include operational or legal information that indicates production from mineral interests will not likely occur or may be significantly reduced in the future.

Auditing the Company’s impairment assessment involved our subjective judgment because, in determining whether a triggering event occurred, management uses estimates that include, among others, assumptions about forecasted gold, silver, copper and other metal prices and total future production using reserve or other relevant information reported by the operators.

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Uncertain tax positions

Other long-term liabilities

Other liabilities

Total liabilities

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Additional paid-in capital

Accumulated earnings (losses)

Accumulated earnings

Total Royal Gold stockholders’ equity

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ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive Income

For the Years Ended June 30,

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Total costs and expenses

Operating income (loss)

Gain on sale of Peak Gold JV interest

Operating income

Fair value changes in equity securities

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Interest and other expense

Income (loss) before income taxes

Income tax benefit (expense)

Net income (loss)

Net loss attributable to non-controlling interests

Net income (loss) attributable to Royal Gold common stockholders

Net income (loss)

Adjustments to comprehensive income (loss), net of tax

Unrealized change in market value of available-for-sale securities

Comprehensive income (loss)

Comprehensive loss attributable to non-controlling interests

Comprehensive income (loss) attributable to Royal Gold stockholders

Net income (loss) per share attributable to Royal Gold common stockholders:

Basic earnings (loss) per share

Income before income taxes

Income tax (expense) benefit

Net income and comprehensive income

Net (income) loss and comprehensive (income) loss attributable to non-controlling interests

Net income and comprehensive income attributable to Royal Gold common stockholders

Net income per share attributable to Royal Gold common stockholders:

Basic earnings per share

Basic weighted average shares outstanding

Diluted earnings (loss) per share

Diluted earnings per share

Diluted weighted average shares outstanding

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Stock-based compensation and related share issuances

Distributions from non-controlling interests

Other comprehensive loss

Dividends declared

Balance at June 30, 2018

Stock-based compensation and related share issuances

Distributions from (to) non-controlling interests

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Balance at June 30, 2020

Stock-based compensation and related share issuances

Sale of Peak Gold JV interest

Distributions to non-controlling interests

Dividends declared

Balance at June 30, 2021

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

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Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income and comprehensive income

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

Depreciation, depletion and amortization

Amortization of debt discount and issuance costs

Amortization of debt issuance costs

Gain on sale of Peak Gold JV interest

Non-cash employee stock compensation expense

Fair value changes in equity securities

Deferred tax benefit

Deferred tax expense (benefit)

Impairment of royalty interests

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Acquisition of stream and royalty interests

Repayment of Golden Star term loan

Purchase of equity securities

Khoemac a u subordinated debt facility

Proceeds from sale of Peak Gold JV interest

Proceeds from sale of Contango shares

Proceeds from sale of equity securities

Net cash used in investing activities

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Common stock dividends

Contributions from non-controlling interest

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and equivalents

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and equivalents

Cash and equivalents at beginning of period

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Basis of Consolidation

The consolidated financial statements include the accounts of Royal Gold, Inc., its wholly owned subsidiaries and an entity over which control is achieved through means other than voting rights.

The consolidated financial statements include the accounts of Royal Gold, Inc., its wholly owned subsidiaries.

All intercompany accounts, transactions, income and expenses, and profits or losses have been eliminated on consolidation.

Royal Gold, through its wholly owned subsidiary, Royal Alaska, LLC (“Royal Alaska”), and Contango ORE, Inc., through its wholly owned subsidiary CORE Alaska, LLC, entered into a limited liability company agreement for the Peak Gold JV, a joint venture for exploration and advancement of the Peak Gold Project located near Tok, Alaska.

We have identified the Peak Gold JV as a Variable Interest Entity, with Royal Alaska as the primary beneficiary, due to the legal structure and certain related factors of the limited liability company agreement for the Peak Gold JV.

We previously identified the Peak Gold JV as a Variable Interest Entity, with Royal Alaska as the primary beneficiary, due to the legal structure and certain related factors of the limited liability company agreement for the Peak Gold JV.

We determined that the Peak Gold JV should be fully consolidated at fair value initially.

The fair value of our non-controlling interest is $ 45.7 million and is based on the underlying value of the mineral property assigned to the Peak Gold JV, which is recorded as an exploration stage property within Stream and royalty interests, net on our consolidated balance sheets.

As of June 30, 2020, and 2019, Royal Alaska held a 40 % membership interest in the Peak Gold JV.

Royal Alaska acts as the manager of the Peak Gold JV and will be responsible for managing, directing and controlling the overall operations

As of June 30, 2020, Royal Alaska held a 40 % membership interest in the Peak Gold JV.

The fair value of our non-controlling interest was $ 45.7 million and was based on the underlying value of the mineral property assigned to the Peak Gold JV, which was recorded as an exploration stage property within Stream and royalty interests, net on our consolidated balance sheets as of June 30, 2020.

On September 30, 2020, we sold our Peak Gold JV interest which is discussed in Note 3 of our notes to consolidated financial statements.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

unless Royal Alaska is unanimously removed or resigns that position in the manner provided in the Peak Gold JV limited liability company agreement.

Cash and Equivalents

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Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties.

The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset under U.S.

The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset.

Production stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as stream sales occur or royalty payments are recognized), which are estimated using proven and probable reserves as provided by the operator.

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Refer to Note 4 for discussion and the results of our impairment assessments for the fiscal years ended June 30, 2021, 2020 and 2019.

GAAP, a performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer.

A performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer.

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

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 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 in Note 8.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 in Note 7.

Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts.

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Certain royalty payments are subject to production taxes (or mining proceeds taxes), which are recognized at the time of revenue recognition.

Production taxes are not income taxes and are included within the costs and expenses section in our consolidated statements of operations and comprehensive income (loss).

Exploration Costs

Exploration costs are specific to the Peak Gold JV for the exploration and advancement of the Peak Gold Project, as discussed further above under Basis of Consolidation .

Costs associated with the Peak Gold JV for the exploration and advancement of the Peak Gold Project are expensed when incurred.

Production taxes are not income taxes and are included within the costs and expenses section in our consolidated statements of operations and comprehensive income.

Stock-Based Compensation

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Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate or unpredicted results from the final determination of each year’s liability by taxing authorities.

We treat global intangible low-taxed income (“GILTI”) as a period cost and therefore do not record deferred tax impacts of GILTI in our consolidated financial statements.

Our deferred income taxes reflect the impact of temporary differences between the reported amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations.

In evaluating the realizability of the deferred tax assets, management considers both positive and negative evidence that may exist, such as earnings history, reversal of taxable temporary differences, forecasted operating earnings and available tax planning

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

strategies in each tax jurisdiction.

A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning strategies.

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The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits.

We recognize potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due.

We recognize potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

based on our estimate of whether, and the extent to which, additional taxes will be due.

We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit;

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Earnings per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to Royal Gold common stockholders by the weighted average number of outstanding common shares for the period, considering the effect of participating securities.

Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts that may require issuance of common shares were converted.

Diluted earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the diluted weighted average number of common shares outstanding during each fiscal year.

Recently Adopted and Recently Issued Accounting Standards

Basic earnings per share is computed by dividing net income available to Royal Gold common stockholders by the weighted average number of outstanding common shares for the period, considering the effect of participating securities.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts that may require issuance of common shares were converted.

Diluted earnings per share is computed by dividing net income available to common stockholders by the diluted weighted average number of common shares outstanding during each fiscal year.

Recently Adopted Accounting Standards

Recently Adopted

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

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

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

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

2018-11, Leases (Topic 842):

Targeted Improvements (“ASU 2018-11”).

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

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

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

Comparative reporting periods were not adjusted upon adoption.

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

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

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

Our significant lease arrangements relate to our corporate office spaces and office equipment.

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

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 June 30, 2020 (amounts in thousands):

Classification

June 30, 2020

Operating Leases

Right-of-use assets - current

Prepaid expenses and other

Right-of-use assets - non-current

Total right-of-use assets

Lease liabilities - current

Other current liabilities

Lease liabilities - non-current

Other long-term liabilities

Total operating lease liabilities

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

Fiscal Years:

Operating Leases

Total lease payments

Less imputed interest

Other information pertaining to leases consist of the following:

June 30, 2020

Operating Lease Term and Discount Rate

Weighted average remaining lease term in years

Weighted average discount rate

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

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Issued

In June 2016, the FASB issued ASU No.

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

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

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

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

We are currently undergoing our assessment of the new guidance and the impact it will have on our consolidated financial statements and related disclosures.

Based on procedures performed as of June 30, 2020, the adoption of the new guidance effective July 1, 2020 is not expected to have a material impact on the Company’s consolidated financial statements.

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

ACQUISITIONS AND DISPOSITIONS

Côté Royalty Acquisition

On June 7, 2021, we acquired a 1.0 % net smelter return royalty (“NSR”) on certain claims covering the Côté Gold Project in Northern Ontario, Canada.

The Côté Gold Project is owned 92.5 % by the Côté Gold Joint Venture (a joint venture owned 70 % by IAMGOLD Corporation and 30 % by Sumitomo Metal Mining Co., Ltd.), and 7.5 % by a third party.

The royalty covers the Chester 3 claims, which in turn cover approximately 70 % of the current reserves of the Côté Gold Project, as well as other areas outside the current project area.

We acquired the royalty from a third-party royalty holder for $ 75 million in cash consideration.

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

The $ 75 million paid, plus direct acquisition costs, have been recorded and allocated between development and exploration stage royalty interest (Note 4) within Stream and royalty interest, net on our consolidated balance sheets.

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 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:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

● An incremental 28 % NSR 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 % NSR 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 are recorded as exploration stage royalty interests in Stream and royalty interests, net in our consolidated balance sheet as of June 30, 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 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.

Alturas Royalty Acquisition

On January 29, 2020, we 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 Compañia Minera Salitrales Limitada, a subsidiary of Barrick Gold Corporation (“Barrick”).

On January 29, 2020, we entered into an agreement with various private individuals for the acquisition of a 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.

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The warrants have been recorded within Other assets on our consolidated balance sheets and have a carrying value of approximately $ 3.1 million as of June 30, 2021.

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

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

As of June 30, 2020, the Company holds 19,640,000 warrants at an exercise price of C$ 0.25 per common share with a term of approximately five years .

The warrants have been classified as a financial asset instrument and are recorded at fair value at each reporting date using the Black-Scholes model (see Note 13).

As of June 30, 2021, we hold 19,640,000 warrants at an exercise price of C$ 0.25 per common share with a remaining term of approximately three years .

Acquisition of Silver Stream on Khoemac a u Copper Project

On February 25, 2019, our wholly owned subsidiary, RGLD Gold AG (“RGLD Gold”), entered into a life of mine purchase and sale agreement 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 and owned by KCM.

Under the purchase and sale agreement, subject to the satisfaction of certain conditions, RGLD Gold will make advance payments totaling $ 212

On February 25, 2019, we 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”).

Between November 2019 and January 2021, we completed a total of $ 212 million in advanced payments required to earn the base silver stream (“Silver Stream”) of 80 % of payable silver produced from Khoemac a u, until the delivery of 32.0 million ounces, and 40 % thereafter.

On April 7, 2021, we made a seventh advance payment of $ 10.6 million toward the option silver stream (“Option 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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

million toward the purchase of 80 % of the silver produced from Khoemac a u until certain delivery thresholds are met (the “Base Silver Stream”).

At KCM’s option and subject to various conditions, RGLD Gold will make up to an additional $ 53 million in advance payments for up to the remaining 20 % of the silver produced from Khoemac a u (the “Option Silver Stream”).

The stream rate will drop to 40 % of silver produced from Khoemac a u following delivery to RGLD Gold of 32 million silver ounces under the Base Silver Stream, or to 50 % of the silver produced from Khoemac a u following delivery of 40 million silver ounces to RGLD Gold should KCM exercise the entire Option Silver Stream.

RGLD Gold will pay a cash price equal to 20 % of the spot silver price for each ounce delivered under the Base Silver Stream and Option Silver Stream;

however, if KCM achieves mill expansion throughput levels above 13,000 tonnes per day ( 30 % above current mill design capacity), RGLD Gold will pay a higher ongoing cash price under the Base Silver Stream and Option Silver Stream for silver ounces delivered in excess of specific annual thresholds.

RGLD Gold made its first advance payment of $ 65.8 million on November 5, 2019, its second advance payment of $ 22.0 million on February 2, 2020, and its third advance payment of $ 47.9 million on April 3, 2020.

On July 5, 2020, RGLD Gold made its fourth advance payment of $ 11.1 million, which brings the total contribution under the Base Silver Stream to $ 146.8 million.

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.

Separate from the Base Silver Stream and Option Silver Stream, and subject to various conditions, RGLD Gold will make up to $ 25 million available to KCM toward the end of development of Khoemac a u under a subordinated debt facility.

approximately 33.6 million silver ounces, and 42 % thereafter.

We will pay a cash price equal to 20 % of the spot silver price for each ounce delivered;

however, if KCM achieves mill expansion throughput levels above 13,000 tonnes per day ( 30 % above current mill design capacity), we will pay a higher ongoing cash price for silver ounces delivered in excess of specific annual thresholds.

We have accounted for the base Silver Stream and initial funding towards the Option Stream as an asset acquisition, consistent with the treatment of our other acquired streams.

The $ 212 million in advance payments for the base Silver Stream made during our fiscal year 2021 and 2020 and the $ 10.6 million toward the Option Stream, plus direct transaction costs, have been recorded as a development stage stream interest within Stream and royalty interests, net on our consolidated balance sheets as of June 30, 2021.

Any further advance payments made under the Option Stream (if exercised by KCM) will be recorded as a development stage interest within Stream and royalty interests, net on our consolidated balance sheets during the period the advance payment occurs.

Separate from the Silver Stream and Option Stream, and subject to various conditions, we will make up to $ 25 million available to KCM toward the end of development of Khoemac a u under a subordinated debt facility.

Any amounts drawn by KCM under the debt facility will carry interest at LIBOR + 11 % and have a term of seven years .

RGLD Gold will have the right to force repayment of the debt facility upon certain events.

We have accounted for the Silver Stream and Option Stream (if exercised by KCM) as an asset acquisition, consistent with the treatment of our other acquired streams.

The $ 135.7 million in advance payments for the Base Silver Stream made during our fiscal year 2020, plus direct transaction costs, have been recorded as a development stage stream interest within Stream and royalty interests, net on our consolidated balance sheets as of June 30, 2020.

Further advance payments made under the Silver Stream or Option Stream (if exercised by KCM) will be recorded as a development stage interest within Stream and royalty interests, net on our consolidated balance sheets during the period the advance payment occurs.

We will have the right to force repayment of the debt facility upon certain events.

On April 7, 2021, KCM drew $ 18.0 million on the $ 25.0 million subordinated debt facility which is recorded under Other Assets on our consolidated balance sheets.

As of June 30, 2021, we had remaining committed funding of $ 49.4 million to KCM in the form of $ 42.4 million of additional advance payments under the Option Stream and $ 7.0 million of debt, both of which may be drawn at the election of KCM prior to completion of construction.

On July 7, 2021, KCM drew the remaining $ 7.0 million amount on the subordinated debt facility, reducing our remaining committed funding to $ 42.4 million of additional advance payments under the Option Stream.

KCM has indicated that it does not expect to draw any material amounts from the remaining committed funding as part of the Option Stream.

ROYAL GOLD, INC.

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Total production stage stream interests

Total production stage stream and royalty interests

Production stage royalty interests:

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Development stage royalty interests:

Total development stage royalty interests

Total development stage stream and royalty interests

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( 1,233,696 )

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 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 June 30, 2021, approximately 112,000 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 $ 67.6 million as of June 30, 2021.

The Prestea and Bogoso stream has a carrying value of $ 0 as of June 30, 2021.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mount Milligan

RGLD Gold owns the right to purchase 35 % of the payable gold and 18.75 % of the payable copper produced from the Mount Milligan copper-gold mine in British Columbia, Canada, which is operated by an indirect subsidiary of Centerra Gold Inc.

We own the right to purchase 35 % of the payable gold and 18.75 % of the payable copper produced from the Mount Milligan copper-gold mine in British Columbia, Canada, which is operated by an indirect subsidiary of Centerra Gold Inc.

(“Centerra”).

The Company’s carrying value for its stream interest at Mount Milligan is $ 554.3 million as of June 30, 2020.

Our carrying value for the stream interest at Mount Milligan is $ 490.3 million as of June 30, 2021.

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

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

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

As part of our regular asset impairment analysis during the quarter ended March

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

31, 2020, we determined that an impairment of our stream interest at Mount Milligan was not necessary as (i) the financial impairment taken by Centerra does not impact the mine operating performance, and (ii) the reduction in reserves and mineralized material at Mount Milligan resulted in updated gold and copper depletion rates that remain well below current and long-term consensus gold and copper prices.

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

As part of our regular asset impairment analysis during the quarter ended March 31, 2020, we determined that an impairment of our stream interest at Mount Milligan was not necessary as (i) the financial impairment taken by Centerra does not impact the mine operating performance, and (ii) the reduction in reserves and mineralized material at Mount Milligan resulted in updated gold and copper depletion rates that remain well below current and long-term consensus gold and copper prices.

As of June 30, 2021, the gold and copper depletion rates at our Mount Milligan stream interest are $ 712 per ounce of gold and $ 1.53 per pound of copper.

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

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

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 and thus we concluded no impairment indicators were present as of June 30, 2021.

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

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

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

As of June 30, 2020, approximately 38,700 ounces of gold and approximately 410,500 ounces of silver have been delivered to RGLD Gold.

The Company’s carrying value for its stream interest at Rainy River is $ 148.5 million as of June 30, 2020.

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

As of June 30, 2021, approximately 54,000 ounces of gold and approximately 699,400 ounces of silver have been delivered to us.

Our carrying value for the stream interest at Rainy River is $ 134.0 million as of June 30, 2021.

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

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

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

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

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

As of June 30, 2021, the gold and silver depletion rates at our Rainy River stream interest are $ 779 per ounce of gold and $ 9.07 per ounce of silver.

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

COVID-19 and current economic environment

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

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

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.

Impairment of royalty interests

In accordance with our impairment accounting policy discussed in Note 1, impairments in the carrying value of each royalty interests are measured and recorded to the extent that the carrying value in each royalty interest exceeds its estimated fair value, which is generally calculated using estimated future discounted cash-flows.

For our regular asset impairment analysis, we did not identify the presence of any impairment indicators and did not record any impairment

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

charges for the fiscal year ended of June 30, 2019.

We identified impairment indicators and recorded impairment charges for the fiscal year ended June 30, 2020, and 2018 as summarized in the following table and discussed in detail below:

Fiscal Year Ended June 30,

(Amounts in thousands)

Total impairment of royalty interests

COVID-19 Pandemic

Throughout calendar year 2020 and into calendar year 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 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.

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.

Impairment of Royalty Interests

In accordance with our impairment accounting policy discussed in Note 2, impairments in the carrying value of each royalty interests are measured and recorded to the extent that the carrying value in each royalty interest exceeds its estimated fair value, which is generally calculated using estimated future discounted cash-flows.

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

During the quarter ended June 30, 2020, we obtained new information regarding the insolvency proceedings and determined our carrying value for El Toqui was not recoverable and an impairment of $ 1.3 million was necessary.

Our carrying value for El Toqui is zero as of June 30, 2020.

We own a 0.78 % to 5.45 % sliding-scale NSR royalty on gold and silver production from the Chilean portion of the Pascua-Lama project, which straddles the border between Argentina and Chile, and is owned by Barrick.

We own an additional royalty equivalent to 1.09 % of proceeds from copper produced from the Chilean portion of the project, net of allowable deductions, sold on or after January 1, 2017.

On January 18, 2018, Barrick reported that it is analyzing a revised sanction related to the Pascua-Lama project issued by Chile’s Superintendencia del Medio Ambiente (“SMA”) on January 17, 2018.

The sanction is part of a re-evaluation process ordered by Chile’s Environmental Court in 2014 and relates to historical compliance matters at the Pascua-Lama project.

According to Barrick, the SMA has not revoked Pascua-Lama’s environmental permit, but has ordered the closure of existing facilities on the Chilean side of the project, in addition to certain monitoring activities.

On February 6, 2018, in light of the SMA order to close surface facilities in Chile, and earlier plans to evaluate an underground mine, Barrick announced it reclassified Pascua-Lama’s proven and probable reserves, which are based on an open pit mine plan, as mineralized material.

Barrick reported further details in its year-end results on February 14, 2018 and an update on the Pascua-Lama project at its February 22, 2018 Investor Day.

A significant reduction in reserves or mineralized material are indicators of impairment.

On April 23, 2018, Barrick announced that work performed to-date on the prefeasibility study for a potential underground project has been suspended, and they will focus on adjusting the project closure plan for surface infrastructure on the Chilean side of the project.

Barrick will continue to evaluate opportunities to de-risk the project while maintaining Pascua-Lama as an option for development in the future if economics improve and related risks can be mitigated.

As part of the impairment determination, the fair value for Pascua-Lama was estimated by calculating the net present value of the estimated future cash-flows, subject to our royalty interest, expected to be generated by the mining of the Pascua-Lama deposits.

We applied a probability factor to our fair value calculation that Barrick will either proceed with an open-pit mine or an underground mine at Pascua.

The estimates of future cash flows were derived from open-pit and underground mine models we developed using various information reported by Barrick.

The metal price assumptions we used in the model were supported by consensus price estimates obtained by a number of industry analysts.

The future cash flows were discounted using a discount rate which reflects specific market risk factors we associate with the Pascua-Lama royalty

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Following the impairment charge ($ 239.1 million) during the three months ended March 31, 2018, the Pascua-Lama royalty interest has a remaining carrying value of $ 177.7 million as of June 30, 2020.

As a result of Barrick’s reclassification of Pascua-Lama’s reserves to mineralized material, our Pascua-Lama royalty interest was reclassified to exploration stage from development stage during our fiscal year ended June 30, 2018.

At June 30, 2020 and 2021, our carrying value for El Toqui was zero .

MARKETABLE EQUITY SECURITIES

As of June 30, 2020, our marketable equity securities include 809,744 common shares of Contango Ore, Inc., 3,949,575 common shares of Battle North Gold Corporation (formerly Rubicon Minerals Corporation), and warrants to purchase up to 19,640,000 common shares of TriStar.

As of June 30, 2021, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc.

Our marketable equity securities are measured at fair value (Note 13) each reporting period with any changes in fair value recognized in net income.

The fair value of our marketable equity securities increased $ 1.4 million and decreased $ 6.8 million for the years ended June 30, 2020 and 2019, respectively, and these changes are included in Fair value changes in equity securities on our consolidated statements of operation and comprehensive income (loss).

The carrying value of our marketable equity securities as of June 30, 2020 and June 30, 2019 was $ 17.9 million and $ 16.0 million, respectively, and is included in Other assets on our consolidated balance sheets.

As a result of the announcement on March 15, 2021, by Evolution Mining Limited to acquire all of the issued and outstanding shares of Battle North Gold Corporation (“Battle North Gold”) at a price of $ 2.65 Canadian dollars per share, we voted all 3,949,575 of our Battle North Gold common shares in favor of the transaction that completed on May 20, 2021, and received cash consideration of $ 8.6 million.

As discussed in Note 3, 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 fiscal year ended June 30, 2021.

The fair value of our marketable equity securities increased $ 6.0 million and $ 1.4 million for the years ended June 30, 2021, and 2020, respectively, and these changes are included in Fair value changes in equity securities on our consolidated statements of operation and comprehensive income.

The carrying value of our marketable equity securities as of June 30, 2021 and 2020 was $ 3.1 million and $ 17.9 million, respectively, and is included in Other assets on our consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s debt as of June 30, 2021 and 2020 consists of the following:

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Revolving credit facility

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

Revolving Credit Facility

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

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

As of June 30, 2020, we had $ 305 million outstanding and $ 695 million available under our revolving credit facility.

As of June 30, 2020, the interest rate on borrowings under the revolving credit facility was LIBOR plus 1.10 % for an all-in rate of 1.29 %.

As of June 30, 2021, we had no amounts outstanding under our revolving credit facility and $ 1 billion available.

Interest expense recognized on the revolving credit facility for the fiscal years ended June 30, 2021, 2020 and 2019 was approximately $ 3.3 million, $ 7.0 million and $ 1.7 million, respectively, and included interest on the outstanding borrowings and the amortization of the debt issuance costs.

We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under the revolving credit facility as of June 30, 2021.

On July 7, 2021, we entered into a fourth amendment to our revolving credit facility dated as of June 2, 2017.

The amendment extends the maturity date from June 3, 2024, to July 7, 2026, adds provisions to provide for the eventual replacement of LIBOR and makes certain changes to the lenders under the agreement.

In August 2021, we borrowed $ 100 million under our revolving credit facility for business development activities and have $ 900 million available.

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

The Company’s revolving credit facility matures on June 3, 2024.

Our significant lease arrangements relate to our office spaces.

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

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

The following amounts were recorded in the consolidated balance sheets at June 30, 2021 (amounts in thousands):

Classification

June 30, 2021

Operating Leases

Right-of-use assets - current

Prepaid expenses and other

Right-of-use assets - non-current

Total right-of-use assets

Lease liabilities - current

Other current liabilities

Lease liabilities - non-current

Other long-term liabilities

Total operating lease liabilities

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Maturities of operating lease liabilities at June 30, 2021 were as follows (amounts in thousands):

Fiscal Years:

Operating Leases

Total lease payments

Less imputed interest

Other information pertaining to leases consists of the following:

June 30, 2021

Operating Lease Term and Discount Rate

Weighted average remaining lease term in years

Weighted average discount rate

We did not have any finance leases as of June 30, 2021.

Revenue Recognition

GAAP, a performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer.

A performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer.

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

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Accordingly, revenue from our metal sales is recognized on the date of settlement, which is the date that control, custody and title to the metal transfer to the purchaser.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Royalty Interests

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If adequate information is not available from the operator or from other public sources before we issue our financial statements, we will recognize royalty revenue during the period in which the necessary payment information is received.

Differences between estimates and actual amounts could differ significantly

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and are recorded in the period that the actual amounts are known.

Differences between estimates and actual amounts could differ significantly and are recorded in the period that the actual amounts are known.

Please also refer to our “Use of Estimates” accounting policy discussed in Note 2.

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Revenue by metal type attributable to each of our revenue sources is disaggregated as follows (amounts in thousands):

Fiscal Year Ended

Stream revenue:

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Total revenue

Revenue by metal type attributable to each of our revenue sources is disaggregated as follows (amounts in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue by metal type attributable to each of our principal property revenue sources is disaggregated as follows (amounts in thousands):

Fiscal Year Ended

Stream revenue:

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STOCK-BASED COMPENSATION

In November 2015, our shareholders approved the 2015 Omnibus Long-Term Incentive Plan (“2015 LTIP”).

In November 2015, our stockholders approved the 2015 Omnibus Long-Term Incentive Plan (“2015 LTIP”).

Under the 2015 LTIP, 2,500,000 shares of common stock have been authorized for future grants to officers, directors, key employees and other persons.

The 2015 LTIP provides for the grant of stock options, unrestricted stock, restricted stock, dividend

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

equivalent rights, SSARs and cash awards.

The 2015 LTIP provides for the grant of stock options, unrestricted stock, restricted stock, dividend equivalent rights, SSARs and cash awards.

Any of these awards may, but need not, be made as performance incentives.

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Total stock-based compensation expense

Stock-based compensation expense is included within General and administrative expense on the consolidated statements of operations and comprehensive income (loss).

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

Stock Options and Stock Appreciation Rights

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Stock option and SSARs awards have 10-year contractual terms.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

To determine stock-based compensation expense for stock options and SSARs, the fair value of each stock option and SSAR is estimated on the date of grant using the Black-Scholes-Merton (“Black-Scholes”) option pricing model for all periods presented.

The Black-Scholes model requires key assumptions in order to determine fair value.

The Black-Scholes model requires key assumptions to determine fair value.

Those key assumptions during the fiscal year 2021, 2020 and 2019 grants are noted in the following table:

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Treasury bond at the time of grant with a term approximate to the expected option term.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options

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The weighted-average grant date fair value of options granted during the fiscal years ended June 30, 2021, 2020 and 2019, was $ 41.92 , $ 17.42 and $ 24.12 , respectively.

The total intrinsic value of options exercised during the fiscal years ended June 30, 2020, 2019 and 2018, were $ 1.3 million, $ 0.7 million, and $ 1.4 million, respectively.

The total intrinsic value of options exercised during the fiscal years ended June 30, 2021, 2020 and 2019, was $ 0 , $ 1.3 million, and $ 0.7 million, respectively.

As of June 30, 2021, there was approximately $ 0.1 million of total unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.0 years.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of SSARs activity for the fiscal year ended June 30, 2021, is presented below:

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Performance Shares

During fiscal 2020, officers and certain employees were granted shares of restricted common stock that can only be earned upon the achievement of certain pre-defined performance measures.

Specifically, for performance shares granted in fiscal

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2020, one-half of the shares awarded may vest upon our achievement of annual growth in Net Gold Equivalent Ounces (“Net GEOs”) (“GEO Shares”).

The second one-half of performance shares granted in fiscal 2020 may vest based on our total shareholder return (“TSR”) compared to the TSRs of other members of the Market Vectors Gold Miners ETF (GDX) (“TSR Shares”).

During fiscal year 2021, officers and certain employees were granted shares of restricted common stock that can only be earned upon the achievement of certain pre-defined performance measures.

Specifically, for performance shares granted in fiscal year 2021, one-half of the shares awarded may vest upon our achievement of annual growth in Net Gold Equivalent Ounces (“Net GEOs”) (“GEO Shares”).

The second one-half of performance shares granted in fiscal year 2021 may vest based on our total shareholder return (“TSR”) compared to the TSRs of other members of the VanEck Vectors Gold Miners ETF (GDX) (“TSR Shares”).

GEO Shares and TSR Shares may vest by linear interpolation in a range between zero shares if neither threshold Net GEO and TSR metric is met;

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Interim recognition of compensation expense will be made at such time as management can reasonably estimate the number of shares that will be earned.

We measured the grant date fair value using a Monte Carlo valuation model.

We measured the grant date fair value of the TSR Shares using a Monte Carlo valuation model.

The fair value of the TSR Shares ($ 82.30 per share) is multiplied by the target number ( 100 %) of TSR Shares granted to determine total stock-based compensation expense.

Total stock-based compensation expense of the TSR Shares is amortized on a straight-line basis over the requisite service period, or three years .

Total stock-based compensation expense of the TSR Shares is amortized on a straight-line basis

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

over the requisite service period, or three years .

Stock-based compensation expense for the TSR Shares is recognized provided the requisite service period is rendered, regardless of when, if ever, the TSR market condition is satisfied.

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Officers, non-executive directors and certain employees may be granted shares of restricted stock that vest on continued service alone (“Restricted Stock”).

During fiscal 2020, officers and certain employees were granted 17,710 shares of Restricted Stock.

During fiscal year 2021, officers and certain employees were granted 19,630 shares of Restricted Stock.

Restricted Stock granted to officers and certain employees vest over three years beginning after a two-year holding period from the date of grant with one -third of the shares vesting in years three, four and five, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Also, our non-executive directors were granted 6,744 shares of Restricted Stock during fiscal year 2021.

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As of June 30, 2021, total unrecognized stock-based compensation expense related to Restricted Stock was approximately $ 4.1 million, which is expected to be recognized over the weighted-average vesting period of 3.2 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

EARNINGS PER SHARE (“EPS”)

Basic earnings (loss) per common share were computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities.

Basic earnings per common share were computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities.

Unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings per share pursuant to the two-class method.

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Our unexercised stock options, unexercised SSARs and unvested performance stock do not contain rights to dividends.

Under the two-class method, the earnings (loss) used to determine basic earnings (loss) per common share are reduced by an amount allocated to participating securities.

Use of the two-class method has an immaterial impact on the calculation of basic and diluted earnings (loss) per common share.

Under the two-class method, the earnings used to determine basic earnings per common share are reduced by an amount allocated to participating securities.

Use of the two-class method has an immaterial impact on the calculation of basic and diluted earnings per common share.

The following table summarizes the effects of dilutive securities on diluted EPS for the period (amounts in thousands, except share data):

Fiscal Year Ended June 30,

Net income (loss) attributable to Royal Gold common stockholders

Fiscal Year Ended

Net income attributable to Royal Gold common stockholders

Weighted-average shares for basic EPS

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Weighted-average shares for diluted EPS

Basic earnings (loss) per share

Diluted earnings (loss) per share

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For financial reporting purposes, Income (loss) before income taxes includes the following components:

For financial reporting purposes, Income before income taxes includes the following components:

Fiscal Year Ended June 30,

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United States

Our Income tax (benefit) expense consisted of:

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our Income tax expense (benefit) consisted of:

Fiscal Year Ended June 30,

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Deferred and others:

Total income tax (benefit) expense

Total income tax expense (benefit)

The provision for income taxes for the fiscal years ended June 30, 2021, 2020 and 2019, differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre-tax income (net of non-controlling interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences:

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Effect of foreign earnings

Effect of foreign earnings indefinitely reinvested

Realized foreign exchange gains

Unrealized foreign exchange gains

Effects of US income tax reform

Effects of Swiss income tax reform

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Valuation allowance

Total income tax (benefit) expense

Total income tax expense (benefit)

The effective tax rate for the fiscal year ended June 30, 2021, includes the release of uncertain tax positions resulting from settlement agreements with foreign tax authorities.

The effective tax rate for the fiscal year ended June 30, 2020, was primarily impacted by the Federal Act on Tax Reform and AHV Financing in Switzerland and the release of an uncertain tax position resulting from a settlement agreement with a foreign tax authority.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The current year effective tax rate includes the impact of the Federal Act on Tax Reform and AHV Financing in Switzerland and the release of an uncertain tax position resulting from a settlement agreement with a foreign tax authority.

The tax effects of temporary differences and carryforwards, which give rise to our deferred tax assets and liabilities at June 30, 2021 and 2020, are as follows:

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As of June 30, 2021, and 2020, we recorded a valuation allowance of $ 61.9 million and $ 60.6 million, respectively.

The valuation allowance remaining at June 30, 2020 is attributable to US foreign tax credits, Swiss amortizable tax goodwill, capital loss and other tax attribute carryforwards in non-US subsidiaries.

At June 30, 2020 and 2019, we had $ 0.4 million and $ 0.2 million of net operating loss carry forwards, respectively.

The valuation allowance remaining at June 30, 2021 is attributable to US foreign tax credits, Swiss amortizable tax goodwill, and capital loss and other tax attribute carryforwards in non-US subsidiaries.

At June 30, 2021 and 2020, we had $ 0.1 million of net operating loss carry forwards.

The majority of the tax loss carry forwards are in jurisdictions that allow a twenty-year carry forward period.

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If recognized, these unrecognized tax benefits would positively impact our effective income tax rate.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the fiscal years ended June 30, 2021, 2020 and 2019 is as follows:

(Amounts in thousands)

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Federal, state and local, and non-U.S.

income tax examinations by tax authorities

income tax examinations by tax authorities for fiscal years before 2017.

As a result of possible settlements with taxing authorities in various jurisdictions, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits may decrease to $ 0 in the next 12 months.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

for fiscal years before 2014.

Our continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as part of our income tax expense.

At June 30, 2020 and 2019, the amount of accrued income-tax-related interest and penalties was $ 12.6 million.

The gross unrecognized tax benefits reflected in the tabular reconciliation do not include interest and penalties and are not reduced by advanced deposits of $ 12.6 million made to taxing authorities.

At June 30, 2021 and 2020, the amount of accrued income-tax-related interest and penalties was $ 0.3 million and $ 12.6 million, respectively.

The gross unrecognized tax benefits reflected in the tabular reconciliation do not include interest and penalties.

SUPPLEMENTAL CASH FLOW INFORMATION

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(Amounts in thousands)

Cash paid (received) during the period for:

Cash paid during the period for:

Income taxes, net of refunds

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

Our marketable equity securities classified within Level 1 of the fair value hierarchy are valued using quoted market prices in active markets multiplied by the quantity of shares held.

The carrying value of our revolving credit facility (Note 6) approximates fair value as of June 30, 2021.

The warrants issued by TriStar (Note 5) classified within Level 2 of the fair

The warrants issued by TriStar (Note 5) classified within Level 2 of the fair value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets.

As of June 30, 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets.

As of June 30, 2020, we had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with stream and royalty interests, intangible assets and other long-lived assets.

For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if any of these assets are determined to be impaired.

assets are determined to be impaired.

If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs.

Refer to Note 4 for discussion of inputs used to develop fair value for those stream and royalty interests that were determined to be impaired during the fiscal years ended June 30, 2020.

MAJOR SOURCES OF REVENUE

Operators that contributed greater than 10% of our total revenue for any of fiscal years 2020, 2019 or 2018 were as follows (revenue amounts in thousands):

Fiscal Year Ended June 30, 2020

Fiscal Year Ended June 30, 2019

Fiscal Year Ended June 30, 2018

Operators that contributed greater than 10% of our total revenue for any of fiscal years ended June 30 2021, 2020 or 2019 were as follows (revenue amounts in thousands):

Percentage of

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Rest of world

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Year Ended June 30, 2020

Fiscal Year Ended June 30, 2021

Cost of sales

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Royalty interests

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended June 30, 2019

Fiscal Year Ended June 30, 2020

Cost of sales

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Royalty interests

Year Ended June 30, 2018

Fiscal Year Ended June 30, 2019

Cost of sales

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Royalty interests

A reconciliation of total segment gross profit to the consolidated Income (loss) before income taxes is shown below (amounts in thousands):

Year Ended June 30,

A reconciliation of total segment gross profit to the consolidated Income before income taxes is shown below (amounts in thousands):

Fiscal Year Ended June 30

Total segment gross profit

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Impairment of royalty interests

Operating income (loss)

Total costs and expenses

Gain on sale of Peak Gold JV interest

Operating income

Fair value changes in equity securities

1 unchanged sentence

Interest and other expense

Income (loss) before income taxes

Income before income taxes

ROYAL GOLD, INC.

12 unchanged sentences

Khoemac a u Silver Stream Acquisition

Pursuant to its Khoemac a u silver stream transaction in February 2019, RGLD Gold made its first advance payment of $ 65.8 million on November 5, 2019, its second advance payment of $ 22.0 million on February 2, 2020, and its third advance payment of $ 47.9 million on April 3, 2020.

As of June 30, 2020, our conditional funding schedule for $ 76.3 million up to $ 129.3 million pursuant to our Khoemac a u silver stream acquisition remains subject to certain conditions.

On July 5, 2020, RGLD Gold made its fourth advance payment of $ 11.1 million.

Ilovica Gold Stream Acquisition

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

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

● $ 22.0 million – February 2, 2020

● $ 47.9 million – April 3, 2020

● $ 11.1 million – July 5, 2020

● $ 32.5 million – October 5, 2020

● $ 32.6 million – January 6, 2021

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, KCM drew $ 18.0 million on a $ 25.0 million subordinated debt facility we provided.

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.

As of June 30, 2021, we have 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.

On July 7, 2021, KCM drew the remaining $ 7.0 million amount on the subordinated debt facility, reducing our remaining committed funding to $ 42.4 million of additional advance payments.

KCM has indicated that it does not expect to draw any material amounts from this remaining committed funding.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of selected quarterly financial information (unaudited).

Some amounts in the below table may not sum-up in total as a result of rounding.

attributable to

Basic earnings

Diluted earnings

(Amounts in thousands except per share data)

Fiscal year 2020 quarter-ended:

September 30,

Fiscal year 2019 quarter-ended:

(Amounts in thousands except per share data)

September 30,

Ilovica Gold Stream Acquisition

As of June 30, 2021, our conditional funding schedule of $ 163.75 million, as part of the Ilovica gold stream acquisition in October 2014, remains subject to certain conditions.

SUBSEQUENT EVENTS

NX Gold Mine Gold Stream Acquisition

On June 30, 2021, we announced that we entered into a precious metals purchase agreement for gold produced from the NX Gold Mine in Brazil (“NX Gold Stream”) with Ero Gold Corporation, a wholly-owned subsidiary of Ero Copper Corporation, and certain of its affiliates (together, “Ero”).

On August 6, 2021, we made an advance payment of $ 100 million upon closing of the transaction.

We will make up to an additional $ 10 million of further payments from the beginning of calendar year 2022 through the end of calendar year 2024 depending on meeting success-based targets related to regional exploration and resource additions.

In return, we will receive 25 % of the gold produced from the NX Gold Mine until the delivery of 93,000 ounces, and 10 % thereafter.

We will pay 20 % of the spot gold price for each ounce delivered until the delivery of 49,000 ounces, and 40 % of the spot gold price thereafter.

A delivery of approximately 2,500 ounces of gold based on mine production through to closing is expected to be received from Ero within five business days of closing the transaction.

Red Chris Royalty Acquisition

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.

The mine is owned and operated by the Red Chris JV, which is owned 70 % by Newcrest Mining Ltd.

( “ Newcrest ” ) and 30 % by Imperial Metals Corporation, in which Newcrest is the operator.

Fiscal year end change

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.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data