What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 81 added, 156 removed, 295 unchanged (45% of the section changed)

3 unchanged sentences

(Unaudited, amounts in thousands except share data)

September 30,

Cash and equivalents

10 unchanged sentences

Total current liabilities

Debt (Note 5)

Deferred tax liabilities

Uncertain tax positions

Other liabilities

15 unchanged sentences

Three Months Ended

September 30,

Revenue (Note 6)

3 unchanged sentences

Production taxes

Exploration costs

Depreciation, depletion and amortization

Total costs and expenses

Gain on sale of Peak Gold JV interest

Operating income

3 unchanged sentences

Income before income taxes

Income tax (expense) benefit

Income tax expense

Net income and comprehensive income

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

Net income and comprehensive income attributable to non-controlling interests

Net income and comprehensive income attributable to Royal Gold common stockholders

8 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended September 30, 2021 and 2020

Three months ended March 31, 2022, and 2021

(unaudited, amounts in thousands except share data)

2 unchanged sentences

Non-controlling

Balance at June 30, 2021

Balance at December 31, 2021

Stock-based compensation and related share issuances

2 unchanged sentences

Dividends declared

Balance at September 30, 2021

Balance at March 31, 2022

Royal Gold Stockholders

1 unchanged sentence

Non-controlling

Balance at June 30, 2020

Balance at December 31, 2020

Stock-based compensation and related share issuances

Sale of Peak Gold JV interest

Distributions to non-controlling interests

Net income (loss) and comprehensive income (loss)

Net income and comprehensive income

Dividends declared

Balance at September 30, 2020

Balance at March 31, 2021

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

3 unchanged sentences

Three Months Ended

September 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation, depletion and amortization

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)

Changes in assets and liabilities:

10 unchanged sentences

Acquisition of stream and royalty interests

Khoemac a u subordinated debt facility

Proceeds from sale of Peak Gold JV interest

Proceeds from sale of Contango shares

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities:

Repayment of debt

Borrowings from revolving credit facility

Net payments from issuance of common stock

Common stock dividends

Net provided by (used in) financing activities

Net (decrease) increase in cash and equivalents

Net cash used in financing activities

Net increase (decrease) in cash and equivalents

Cash and equivalents at beginning of period

4 unchanged sentences

OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS

Royal Gold is engaged in the business of acquiring and managing precious metals streams, royalties and similar interests.

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

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

1 unchanged sentence

Royalties are non-operating interests in a mining project that provide the right to revenue or metals produced from the project after deducting contractually specified costs, if any.

Change in Fiscal Year End

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 transition period from July 1, 2021, to December 31, 2021.

Summary of Significant Accounting Policies

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In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this Form 10-Q.

Operating results for the three months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the six-month transition period ending December 31, 2021.

These interim unaudited consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 filed with the Securities and Exchange Commission on August 12, 2021 (“Fiscal 2021 10-K”).

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2022.

These interim unaudited consolidated financial statements should be read in conjunction with our Transition Report on Form 10-K for the six months ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on February 17, 2022 (“Transition Report”).

Recent Accounting Standards

We have evaluated all the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of these unaudited consolidated financial statements and do not believe the future adoption of any such standards will have a material impact on our consolidated financial statements.

ACQUISITIONS AND DISPOSITIONS

Red Chris Royalty Acquisition

On August 11, 2021, we acquired a 1.0 % net smelter return royalty covering approximately 5,100 hectares, which includes 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 a joint venture (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.

The Red Chris royalty acquisition has been accounted for as an asset acquisition.

The $ 165 million cash consideration, plus direct acquisition costs, have been recorded and allocated between production and exploration stage royalty interests (Note 3) within Stream and royalty interests, net on our consolidated balance sheets.

Approximately $ 116.1 million and $ 48.9 million was allocated to production stage and exploration stage royalty interest, respectively, as of September 30,

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

The acquisition cost of the production stage Red Chris royalty will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Newcrest.

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 operating underground 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 the transaction.

In exchange for the consideration provided, 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.

Per the purchase agreement, we may make up to an additional $ 10 million of advance payments from the beginning of calendar 2022 through the end of calendar 2024 based on Ero meeting success-based targets related to regional exploration and resource additions.

The NX Gold Stream has been accounted for as an asset acquisition.

The $ 100 million advance payment, plus direct acquisition costs, have been recorded and allocated between production and exploration stage stream interests (Note 3) within Stream and royalty interests, net on our consolidated balance sheets.

Approximately $ 54.9 million and $ 45.1 million was allocated to production stage and exploration stage stream interest, respectively, as of September 30, 2021.The acquisition cost of the production stage NX Gold Stream will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Ero.

Lawyers Royalty Acquisition

On March 24, 2022, we acquired a 0.5 % net smelter returns royalty (“NSR”) on production from the Lawyers Project, currently operated by Benchmark Metals Inc., which is located in British Columbia, Canada.

As part of this transaction, we also acquired a right of first offer (“ROFO”) for an existing 2.0 % NSR royalty over the Ranch Project that is located adjacent to the Lawyers Project.

We paid $ 8.0 million in cash consideration for the royalty and ROFO to Guardsmen Resources Inc.

The Lawyers Project acquisition has been accounted for as an asset acquisition.

The $ 8.0 million cash consideration, plus direct acquisition costs, have been recorded as an exploration stage royalty interest (Note 3) within Stream and royalty interests, net on our consolidated balance sheets.

Khoemac a u Silver Stream

On February 23, 2022, we made an advance payment of $ 10.0 million toward the option stream which increased our right to receive payable silver produced from Khoemac a u from 90 % to 93 %, and on March 14, 2022, we made our final advance payment of $ 16.5 million toward the option stream which increased our right to receive payable silver produced from 93 % to 100 %.

The $ 265 million of advance payments, plus direct acquisition costs, have been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets.

As of March 31, 2022, $ 25.0 million of the subordinated debt facility, and $ 2.6 million of accrued interest remains outstanding on the Khoemac a u subordinated debt facility, and these amounts are included in Other assets in our

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

consolidated balance sheets.

Refer to our Transition Report for further details on the Khoemac a u silver stream acquisition and subordinated debt facility.

STREAM AND ROYALTY INTERESTS, NET

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

As of September 30, 2021 (Amounts in thousands):

The following tables summarize our stream and royalty interests, net as of March 31, 2022 and December 31, 2021.

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As of March 31, 2022 (Amounts in thousands):

Accumulated Depletion

16 unchanged sentences

Notes to Consolidated Financial Statements

As of June 30, 2021 (Amounts in thousands):

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

Accumulated Depletion

9 unchanged sentences

Total development stage stream and royalty interests

Exploration stage stream interests:

Exploration stage royalty interests:

2 unchanged sentences

( 1,456,115 )

COVID-19 Pandemic

At times since early 2020, 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.

MARKETABLE EQUITY SECURITIES

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

As of March 31, 2022, 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 11) each reporting period with any changes in fair value recognized in net income.

The fair value of our marketable equity securities increased $ 0.2 million and $ 2.5 million for the three months ended September 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

The fair value of our marketable equity securities increased $ 0.6 million and $ 1.9 million for the three months ended March 31, 2022, and 2021, respectively, and these changes are included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income.

The carrying value of our marketable equity securities as of March 31, 2022 and December 31, 2021, was $ 2.3 million and $ 1.7 million, respectively, and is included in Other assets on our consolidated balance sheets.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

securities as of September 30, 2021, and June 30, 2021, was $ 3.3 million and $ 3.1 million, respectively, and is included in Other assets on our consolidated balance sheets.

Our debt as of September 30, 2021, and June 30, 2021, consists of the following:

As of September 30, 2021

As of June 30, 2021

Debt Issuance Costs

Debt Issuance Costs 1

(Amounts in thousands)

Revolving credit facility

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

Revolving credit facility

As of September 30, 2021, we had $ 100 million outstanding and $ 900 million available under our revolving credit facility.

The interest rate on borrowings under our revolving credit facility as of September 30, 2021, was LIBOR plus 1.10 % for an all-in rate of 1.21 %.

Interest expense recognized on the revolving credit facility for the three months ended September 30, 2021, and 2020, was approximately $ 1.0 million and $ 1.3 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 September 30, 2021.

On July 7, 2021, we entered into a fourth amendment to our revolving credit facility dated 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.

On October 8, 2021, we repaid $ 50 million of the outstanding borrowings under our revolving credit facility.

This increased the amount available under our revolving credit facility to $ 950 million and decreased the amount outstanding to $ 50 million.

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

As of March 31, 2022, we had no amounts outstanding under our revolving credit facility dated June 2, 2017, and as amended.

Interest expense recognized on the revolving credit facility for the three months ended March 31, 2022, and 2021, was approximately $ 0.2 million and $ 0.8 million, respectively, and included the amortization of the debt issuance costs and interest on the outstanding borrowings.

We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under the revolving credit facility as of March 31, 2022.

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

Revenue Recognition

7 unchanged sentences

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

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

receipt and purchase of the metal.

We settle our forward sales contracts via physical delivery of the metal to the purchaser (our customer) on the settlement date specified in the contract.

7 unchanged sentences

We have further determined that the transfer of each unit of metal production comprising our royalty interest to the operator represents a separate performance obligation under the contract, and each performance obligation is satisfied at the point in time of metal production by the operator.

Accordingly, we recognize revenue attributable to our royalty interests in the period in which metal production occurs at the specified commodity price per the agreement, net of any contractually allowable offsite treatment, refining, transportation and, if applicable, mining costs.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Royalty Revenue Estimates

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

Please also refer to our “Use of Estimates” accounting policy discussed in our Fiscal 2021 10-K.

For the three months ended September 30, 2021, royalty revenue that was estimated or was attributable to metal production for a period prior to September 30, 2021, was not material.

Please also refer to our “Use of Estimates” accounting policy discussed in our Transition Report.

For the three months ended March 31, 2022, royalty revenue that was estimated or was attributable to metal production for a period prior to March 31, 2022, was not material.

Disaggregation of Revenue

2 unchanged sentences

These identified revenue sources are consistent with our reportable segments as discussed in Note 10.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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

Three Months Ended

September 30,

Stream revenue:

5 unchanged sentences

Three Months Ended

September 30,

Stream revenue:

9 unchanged sentences

Please refer to Note 10 for the geographical distribution of our revenue by reportable segment.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

STOCK-BASED COMPENSATION

We recognized stock-based compensation expense as follows:

We recognized stock-based compensation expense as follows (amounts in thousands):

Three Months Ended

September 30,

(Amounts in thousands)

Stock options

Stock appreciation rights

Restricted stock

Performance stock

Stock appreciation rights

Stock options

Total stock-based compensation expense

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

During the three months ended September 30, 2021, and 2020, we granted the following stock-based compensation awards:

During the three months ended March 31, 2022 and 2021, we granted the following stock-based compensation awards:

Three Months Ended

September 30,

(Number of shares)

Stock options

Stock appreciation rights

Restricted stock

Performance stock (at maximum 200 % attainment)

Restricted stock

Total equity awards granted

As of September 30, 2021, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:

As of March 31, 2022, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:

average vesting

period (years)

Stock options

Stock appreciation rights

Restricted stock

Performance stock

Stock appreciation rights

Stock options

EARNINGS PER SHARE (“EPS”)

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Use of the two-class method has an immaterial impact on the calculation of basic and diluted EPS.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

The following tables summarize the effects of dilutive securities on diluted EPS for the periods shown below (amounts in thousands, except share data):

Three Months Ended

September 30,

Net income attributable to Royal Gold common stockholders

2 unchanged sentences

Weighted-average shares for diluted EPS

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Three Months Ended

September 30,

(Amounts in thousands, except rate)

Income tax expense (benefit)

Income tax expense

Effective tax rate

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

The effective tax rate for the three months ended March 31, 2021, included an income tax expense attributable to an increase in valuation allowance on certain deferred tax assets.

SEGMENT INFORMATION

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

As of September 30, 2021

As of June 30, 2021

As of March 31, 2022

As of December 31, 2021

interests, net

3 unchanged sentences

Rest of world

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Cost of sales (1)

4 unchanged sentences

Royalty interests

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Cost of sales (1)

6 unchanged sentences

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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

Three Months Ended

September 30,

Total segment gross profit

1 unchanged sentence

General and administrative expenses

Exploration costs

Depreciation and amortization

Gain on sale of Peak Gold JV interest

Operating income

3 unchanged sentences

Income before income taxes

Our revenue by reportable segment for the three months ended September 30, 2021, and 2020, is geographically distributed as shown in the following table (amounts in thousands):

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Our revenue by reportable segment for the three months ended March 31, 2022 and 2021 is geographically distributed as shown in the following table (amounts in thousands):

Three Months Ended

September 30,

Stream interests:

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Quoted prices for identical instruments in active markets;

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Quoted prices for similar instruments in active markets;

3 unchanged sentences

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

As of September 30, 2021

Carrying Amount

As of March 31, 2022

Carrying Value

Assets (amounts in thousands):

2 unchanged sentences

The TriStar Gold Inc.

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

The carrying value of our revolving credit facility (Note 5) approximates fair value as of September 30, 2021.

As of September 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.

warrants (Note 4) classified within Level 2 of the fair value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets.

The carrying value of our revolving credit facility (Note 5) approximates fair value as of March 31, 2022.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

As of March 31, 2022, 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.

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES

Khoemac a u Silver Stream Acquisition

Option Silver Stream

As of September 30, 2021, Royal Gold has remaining committed funding of $ 42.4 million as part of our Khoemac a u silver stream acquisition, which may be drawn at the election of Khoemac a u Copper Mining (Pty.) Limited (“KCM”) prior to the completion of construction.

Refer to our Fiscal 2021 10-K for further details on the Khoemac a u silver stream acquisition and subordinated debt facility.

Additionally, on October 8, 2021 we made an advance payment of $ 15.9 million toward the option stream which increased our right to receive payable silver produced from Khoemac a u from a rate of 84 % to 90 % until delivery of approximately 36.0 million silver ounces, and 45 % (from 42 %) thereafter.

Subordinated Debt Facility

On July 7, 2021, KCM drew the remaining $ 7.0 million on the $ 25.0 million subordinated debt facility provided by Royal Gold.

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

As of September 30, 2021, $ 25.0 million was outstanding on the subordinated debt facility and is included in Other assets in our consolidated balance sheets.

NX Gold Exploration Payment

On March 22, 2022, we made a payment of $ 3.2 million to a subsidiary of Ero Copper Corporation (“Ero”) as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions.

This payment has been recorded to exploration stage stream interests (Note 3) within Stream and royalty interests, net on our consolidated balance sheets.

As of March 31, 2022, $ 6.8 million of additional exploration and mineral resource addition payments remain if Ero meets certain success-based targets through calendar 2024.

Refer to our Transition Report for further information on the NX Gold stream acquisition.

Ilovica Gold Stream Acquisition

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

As of March 31, 2022, our conditional funding schedule of $ 163.75 million, as part of the Ilovica gold stream acquisition entered into in October 2014, remains subject to certain conditions.

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

What changed 10-Q

Item 1. Financial Statements