What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 114 added, 36 removed, 340 unchanged (31% of the section changed)

33 unchanged sentences

Three Months Ended

Six Months Ended

Revenue (Note 6)

10 unchanged sentences

Income before income taxes

Income tax expense

Income tax benefit (expense)

Net income and comprehensive income

10 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended March 31, 2022, and 2021

Three months ended June 30, 2022, and 2021

(unaudited, amounts in thousands except share data)

2 unchanged sentences

Non-controlling

Balance at December 31, 2021

Balance at March 31, 2022

Stock-based compensation and related share issuances

2 unchanged sentences

Dividends declared

Balance at June 30, 2022

Royal Gold Stockholders

Common Shares

Non-controlling

Balance at March 31, 2021

Stock-based compensation and related share issuances

Distributions to non-controlling interests

Net income and comprehensive income

Dividends declared

Balance at June 30, 2021

ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Six Months ended June 30, 2022, and 2021

(unaudited, amounts in thousands except share data)

Royal Gold Stockholders

6 unchanged sentences

Dividends declared

Balance at March 31, 2021

Balance at June 30, 2022

Royal Gold Stockholders

Common Shares

Non-controlling

Balance at December 31, 2020

Stock-based compensation and related share issuances

Distributions to non-controlling interests

Net income and comprehensive income

Dividends declared

Balance at June 30, 2021

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

2 unchanged sentences

(Unaudited, amounts in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

4 unchanged sentences

Fair value changes in equity securities

Deferred tax expense (benefit)

Deferred tax (benefit) expense

Changes in assets and liabilities:

10 unchanged sentences

Acquisition of stream and royalty interests

Khoemac a u subordinated debt facility

Proceeds from sale of equity securities

Net cash used in investing activities

22 unchanged sentences

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

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

Operating results for the three and six months ended June 30, 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”).

3 unchanged sentences

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.

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 owned by Thesis Gold, Inc.

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.

3 unchanged sentences

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

Cumulative advance payments of $ 265 million, 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 June 30, 2022, $ 25.0 million of the subordinated debt facility, and $ 3.5 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.

3 unchanged sentences

STREAM AND ROYALTY INTERESTS, NET

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):

The following tables summarize our stream and royalty interests, net as of June 30, 2022 and December 31, 2021.

As of June 30, 2022 (Amounts in thousands):

Accumulated Depletion

30 unchanged sentences

Exploration stage royalty interests:

Total exploration stage royalty interests

Total exploration stage stream and royalty interests

Total stream and royalty interests, net

1 unchanged sentence

MARKETABLE EQUITY SECURITIES

As of March 31, 2022, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc.

As of June 30, 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 $ 0.6 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.

The fair value of our marketable equity securities decreased $ 2.2 million and $ 1.6 million for the three and six months ended June 30, 2022, respectively, and increased $ 2.0 million and $ 3.9 million for the three and six months ended June 30, 2021, respectively.

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 June 30, 2022 and December 31, 2021, was $ 0.2 million and $ 1.7 million, respectively, and is included in Other assets on our consolidated balance sheets.

ROYAL GOLD, INC.

1 unchanged sentence

Revolving credit facility

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.

As of June 30, 2022, we had no amounts outstanding under our revolving credit facility dated June 2, 2017, and as amended.

Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2022, respectively, and $ 0.3 million and $ 1.1 million for the three and six months ended June 30, 2021, respectively.

We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under the revolving credit facility as of June 30, 2022.

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

27 unchanged sentences

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.

For the three months ended June 30, 2022, royalty revenue that was estimated or was attributable to metal production for a period prior to June 30, 2022, was not material.

Disaggregation of Revenue

4 unchanged sentences

Three Months Ended

Six Months Ended

Stream revenue:

5 unchanged sentences

Three Months Ended

Six Months Ended

Stream revenue:

14 unchanged sentences

Three Months Ended

Six Months Ended

Restricted stock

4 unchanged sentences

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

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

Three Months Ended

There were no awards granted during the three months ended June 30, 2022 and 2021.

During the six months ended June 30, 2022 and 2021, we granted the following stock-based compensation awards:

Six Months Ended

(Number of shares)

2 unchanged sentences

Total equity awards granted

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:

As of June 30, 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

5 unchanged sentences

EARNINGS PER SHARE (“EPS”)

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

Basic EPS was 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 EPS pursuant to the two-class method.

7 unchanged sentences

Three Months Ended

Six Months Ended

Net income attributable to Royal Gold common stockholders

3 unchanged sentences

Three Months Ended

Income tax expense

Six Months Ended

Income tax benefit (expense)

Effective tax rate

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

The effective tax rate for the three and six months ended June 30, 2022, included a discrete income tax benefit of $ 18.8 million attributable to the release of a valuation allowance on certain deferred tax assets.

The effective tax rate for the three and six months ended June 30, 2021, included a discrete tax benefit of $ 11.5 million attributable to the settlement of an uncertain tax position with a foreign jurisdiction.

SEGMENT INFORMATION

1 unchanged sentence

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

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

7 unchanged sentences

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Cost of sales (1)

4 unchanged sentences

Royalty interests

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Cost of sales (1)

4 unchanged sentences

Royalty interests

Six Months Ended June 30, 2022

Cost of sales (1)

Production taxes

Depletion (2)

Segment gross profit

Stream interests

Royalty interests

Six Months Ended June 30, 2021

Cost of sales (1)

Production taxes

Depletion (2)

Segment gross profit

Stream interests

Royalty interests

(1) Excludes depreciation, depletion and amortization

2 unchanged sentences

Three Months Ended

Six Months Ended

Total segment gross profit

9 unchanged sentences

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):

Our revenue by reportable segment for the three and six months ended June 30, 2022 and 2021 is geographically distributed as shown in the following table (amounts in thousands):

Three Months Ended

Six Months Ended

Stream interests:

17 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 March 31, 2022

As of June 30, 2022

Carrying Value

4 unchanged sentences

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.

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

As of June 30, 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.

4 unchanged sentences

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.

As of June 30, 2022, $ 6.8 million of advance payments remain if Ero meets certain success-based targets related to regional exploration and mineral resource additions through calendar 2024.

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

Ilovica Gold Stream Acquisition

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.

As of June 30, 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.

SUBSEQUENT EVENTS

Acquisition of Additional Royalty Interest on Cortez Complex

On August 2, 2022, we announced that we acquired a sliding-scale gross royalty (the “Cortez Royalty”) on an area including the Cortez mine operational area and the Fourmile development project in Nevada (the “Cortez Complex”).

We paid $ 525 million in cash consideration for the Cortez Royalty to Kennecott Royalty Company, a wholly owned subsidiary of Rio Tinto European Holdings Limited.

The area within the Cortez Complex is owned or controlled by Nevada Gold Mines LLC (“NGM”), a joint venture between Barrick Gold Corporation (“Barrick”) ( 61.5 % owner and operator) and Newmont Corporation ( 38.5 % owner), with the exception of the Fourmile project which is 100 % owned and operated by Barrick.

The Cortez Royalty is a life of mine sliding scale gross royalty payable at a rate of 0 % at a gold price less than $ 400 per ounce, increasing to 3 % at a gold price above $ 900 per ounce, and is payable on 40 % of all production from the Cortez Complex.

The Cortez Royalty does not cover the existing deposits within the Robertson property.

At current gold prices the Cortez Royalty is an effective 1.2 % gross royalty on the Cortez Complex and is not subject to any stepdowns or caps.

The Cortez Royalty is payable after cumulative production from the Cortez Complex of 15 million gold equivalent ounces from January 1, 2008 onwards.

According to Barrick public disclosure, cumulative production from January 1, 2008, was approximately 14.8 million ounces as of June 30, 2022.

The purchase price was funded with debt and available cash on hand.

In anticipation of this acquisition, we borrowed $ 500 million under our revolving credit facility in July 2022, leaving $ 500 million available.

Per our credit facility dated June 2, 2017, as amended, the borrowing was under a Base Rate loan option with an all-in interest rate of approximately 5.6 %.

We anticipate converting the Base Rate loan into a LIBOR loan on or around August 5, 2022.

Agreement to Acquire Great Bear Royalties Corporation

On July 11, 2022, we announced that we had entered into a definitive agreement with Great Bear Royalties Corporation (“GBR”) to acquire all of the issued and outstanding common shares of GBR for cash consideration of C $ 6.65 per common share, which values GBR at approximately C $ 199.5 million (approximately US $ 155 million) on a fully diluted basis.

GBR’s sole material asset is a 2.0 % NSR royalty (the “Royalty”) that includes the entire 9,140 hectares of the Great Bear Project in the Red Lake district of Ontario, Canada, indirectly owned and operated by Kinross Gold Corporation (“Kinross”).

We plan to fund the purchase price with available cash on hand.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

As part of our due diligence, we entered into a co-operation agreement with Kinross to obtain access to Kinross personnel and certain information pertaining to the Great Bear Project.

In exchange, we agreed to amend certain terms of the royalty agreement upon closing of the acquisition, including providing an option to Kinross to purchase a 25 % interest in the Royalty for an amount equal to 25 % of our purchase price of GBR, adjusted for inflation, at any time from the transaction closing date until the earlier of a construction decision for the Great Bear Project and 10 years after the transaction closing date.

The acquisition has been unanimously approved by the boards of directors of both Royal Gold and GBR, and the board of directors of GBR has resolved to recommend that the shareholders of GBR approve the acquisition.

All directors and officers of GBR have entered into support agreements to vote their shares in support of the acquisition representing, in aggregate, approximately 10.5 % of the outstanding common shares of GBR.

The arrangement agreement provides us a customary right to match any superior proposal and includes customary non-solicitation covenants.

In addition, the arrangement agreement requires GBR to pay a termination fee of C $ 7.0 million (approximately US $ 6 million) to us if GBR terminates the arrangement agreement in certain circumstances.

The transaction is subject to approval by the shareholders of GBR, and regulatory and court approvals.

GBR expects to hold a special meeting of shareholders to approve the transaction on August 31, 2022, and subject to approval by shareholders, GBR will shortly thereafter seek approval by the Supreme Court of British Columbia of a plan of arrangement under the provisions of the Business Corporations Act (British Columbia).

We expect the transaction to close during the quarter ending September 30, 2022.

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