What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 207 added, 130 removed, 161 unchanged (68% of the section changed)

13 unchanged sentences

● Acquisition and Management of Stream Interests — A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement.

As of March 31, 2022, we owned nine stream interests, which are on eight producing properties and one development stage property.

Stream interests accounted for approximately 65% of our total revenue for the three months ended March 31, 2022, and 67% for the three months ended March 31, 2021.

As of June 30, 2022, we owned nine stream interests, which are on eight producing properties and one development stage property.

Stream interests accounted for approximately 72% and 68% of our total revenue for the three and six months ended June 30, 2022, respectfully, and 68% for each of the three and six months ended June 30, 2021, respectfully.

We expect stream interests to continue representing a significant portion of our total revenue.

● Acquisition and Management of Royalty Interests — Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any.

As of March 31, 2022, we owned royalty interests on 35 producing properties, 17 development stage properties and 126 exploration stage properties, of which we consider 51 to be evaluation stage projects.

As of June 30, 2022, we owned royalty interests on 33 producing properties, 18 development stage properties and 125 exploration stage properties, of which we consider 53 to be evaluation stage projects.

We use “evaluation stage” to describe exploration stage properties that contain mineral resources and on which operators are engaged in the search for mineral reserves.

Royalty interests accounted for 35% of our total revenue for the three months ended March 31, 2022, and 33% for the three months ended March 31, 2021.

Royalty interests accounted for 28% and 32% of our total revenue for the three and six months ended June 30, 2022, respectfully, and 32% for each of the three and six months ended June 30, 2021, respectfully.

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

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analysis of technical, financial, legal, and other confidential information of an opportunity;

submission of indications of interest and term sheets;

submission of

indications of interest and term sheets;

participation in preliminary discussions and negotiations;

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The marketability and price of metals are influenced by numerous factors beyond our control, and significant changes in metal prices can have a material effect on our revenue.

For the three months ended March 31, 2022 and 2021, average metal prices and percentages of revenue by metal were as follows:

For the three and six months ended June 30, 2022, and 2021, average metal prices and percentages of revenue by metal were as follows:

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Gold ($/ounce)

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Copper ($/pound)

Acquisition of Additional Royalty Interest on Cortez Complex

On August 1, 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.

Refer to Note 13 of our notes to consolidated financial statements for further discussion on the Cortez Royalty.

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 (the “Great Bear Acquisition”).

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.

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

Subject to the receipt of all necessary approvals, we expect the transaction to close during the quarter ending September 30, 2022.

Refer to Note 13 of our notes to consolidated financial statements for further discussion on the Great Bear Acquisition.

Lawyers Royalty Acquisition

On March 24, 2022, we acquired a 0.5% net smelter returns royalty (“NSR”) on production from the Lawyers Project, an exploration stage 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.

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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 achievement of success-based targets related to regional exploration and mineral resource additions.

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, up to $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.

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Operators’ Production Estimates by Stream and Royalty Interest for Calendar 2022

We generally receive annual production estimates from many of the operators of our producing mines during the first quarter of each calendar year.

We generally receive annual production estimates from many of the operators of the producing mines in which we own a stream or royalty interest during the first quarter of each calendar year.

In some instances, an operator may revise its original calendar year guidance throughout the year.

The following table shows current production estimates for calendar 2022, as well as actual production through March 31, 2022, for our principal properties as reported to us by the operators.

The following table shows current production estimates for calendar 2022, as well as actual production through June 30, 2022, for our principal properties as reported to us by the operators.

Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 2022

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Please also refer to our cautionary language regarding forward-looking statements, as well as the Risk Factors identified in Part I, Item 1A, of our Transition Report for information regarding factors that could affect actual results.

(2) Actual production figures shown are from the operators and cover the period from January 1, 2022, through March 31, 2022, unless otherwise noted in footnotes to this table.

Such amounts may differ from our reported revenue and production.

(2) Actual production figures shown are from the operators and cover the period from January 1, 2022, through June 30, 2022, unless otherwise noted in footnotes to this table.

Such amounts may differ from our reported revenue and production and are not reduced to show the production attributable to our interests.

(3) The actual production figure shown for Andacollo is contained gold in concentrate.

(4) The estimated production figures shown for Mount Milligan are payable gold and copper in concentrate.

Actual figures reflect production through March 31, 2022.

(5) The estimated and actual production figures shown for Pueblo Viejo are payable gold in doré and represent the 60% interest in Pueblo Viejo held by Barrick Gold Corporation (“Barrick”).

The operator did not provide estimated or actual silver production.

(6) The estimated production figure shown for Wassa is payable gold in doré.

(7) The estimated and actual production figures for Khoemac a u are not available through the ramp-up period.

(8) Production from Cortez subject to our royalty interests.

(6) The estimated production figure shown for Wassa is payable gold in doré poured in the period.

(7) The estimated production figures for Khoemac a u are not available through the ramp-up period, which the operator expects to be completed by the fourth quarter of 2022.

(8) The estimated and actual production figures for Cortez represent the areas subject to our royalty interests.

(9) The estimated and actual gold and silver production figures shown for Peñasquito are payable gold and silver in concentrate and doré.

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Stream Interests

Gold stream deliveries from Andacollo were approximately 6,100 ounces for the three months ended March 31, 2022, compared to approximately 10,700 ounces for the three months ended March 31, 2021.

Gold stream deliveries from Andacollo were approximately 9,900 ounces for the three months ended June 30, 2022, compared to approximately 11,300 ounces for the three months ended June 30, 2021.

The decrease in deliveries resulted primarily from Andacollo experiencing lower gold grades and lower gold recoveries, in line with the expected downward trend of gold grades, as well as differences in the timing of shipments and settlements during the periods.

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Khoemac a u Project

Silver stream deliveries from Khoemac a u were approximately 115,210 ounces for the three months ended March 31, 2022.

First concentrate was shipped in mid-July 2021 from Khoemac a u and we received our first silver stream deliveries during the quarter ended September 30, 2021.

According to Khoemac a u Copper Mining (Pty.) Limited (“KCM”), average monthly underground production increased consistently during the quarter ended March 31, 2022, from approximately 3,900 tons per day in January to approximately 6,300 tons per day in March.

KCM reported that issues experienced in the quarter ended December 31, 2021, related to stope ore production and workforce availability associated with COVID-19 were largely resolved during the quarter ended March 31, 2022.

Silver stream deliveries from Khoemac a u were approximately 246,800 ounces for the three months ended June 30, 2022.

First concentrate was shipped from Khoemac a u in mid-July 2021 and we received our first silver stream deliveries during the quarter ended September 30, 2021.

According to Khoemac a u Copper Mining (Pty.) Limited (“KCM”), ramp-up of operations continued and average monthly underground production increased consistently during the quarter ended June 30, 2022, from approximately 6,300 tons per day (5,700 tonnes per day) in March to approximately 8,000 tons per day (7,300 tonnes per day) in June.

KCM reported an accident in the underground mine and two fatalities on May 11, 2022, which resulted in short-term production disruptions immediately after the accident.

Investigations into the cause of the accident remain ongoing.

KCM expects that the mining rate will continue to increase steadily from current levels and reach full sustained production by the fourth quarter of 2022, absent further COVID-19 impacts.

With the results experienced so far during the ramp-up period, KCM continues to expect that at full production Khoemac a u will produce 171,000 to 182,000 tons of high-grade copper and silver concentrate a year, containing approximately 66,000 to 72,000 tons of payable copper and 1.8 to 2.0 million ounces of payable silver, over an approximate 20-year mine life from Zone 5.

During the quarter ended March 31, 2022, our interest in the payable silver from Khoemac a u increased from 90% to 100% upon the draw by KCM of the remaining $26.5 million stream advance payments.

After the final draw on March 14, 2022, we hold the right to receive 100% of the payable silver produced from Khoemac a u until the delivery of 40.0 million silver ounces, and 50% 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 14,300 tons 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.

With the results experienced so far during the ramp-up period, KCM continues to expect that at full production Khoemac a u will produce 171,000 to 182,000 tons (155,000 to 165,000 tonnes) of high-grade copper and silver concentrate a year, containing approximately 66,000 to 72,000 tons (60,000 to 65,000 tonnes) of payable copper and 1.8 to 2.0 million ounces of payable silver, over an approximate 20-year mine life from Zone 5.

Mount Milligan

Gold stream deliveries from Mount Milligan were approximately 10,000 ounces for the three months ended March 31, 2022, compared to approximately 12,200 ounces for the three months ended March 31, 2021.

Decreased gold deliveries resulted from differences in the timing of shipments and settlements during the periods.

Copper stream deliveries from Mount Milligan were approximately 2.7 million pounds during the three months ended March 31, 2022, compared to approximately 3.4 million pounds during the three months ended March 31, 2021.

Gold stream deliveries from Mount Milligan were approximately 23,800 ounces for the three months ended June 30, 2022, compared to approximately 20,800 ounces for the three months ended June 30, 2021.

Increased gold deliveries resulted from differences in the timing of shipments and settlements during the periods and gold grade variability in the concentrate shipments.

Copper stream deliveries from Mount Milligan were approximately 4.0 million pounds during the three months ended June 30, 2022, compared to approximately 5.1 million pounds during the three months ended June 30, 2021.

Decreased copper deliveries resulted from differences in the timing of shipments and settlements during the periods.

On January 18, 2022, Centerra Gold Inc.

(“Centerra”) reported updated guidance for Mount Milligan.

Centerra expects gold production at Mount Milligan during calendar 2022 of between 190,000 and 210,000 ounces of gold, compared to the previously issued guidance range of 170,000 to 190,000 ounces and actual calendar 2021 production of 196,400 ounces.

Centerra also expects copper production in calendar 2022 to be in the range of 70 to 80 million pounds compared to the previous guidance range of 90 to 100 million pounds and actual calendar 2021 production of 73.3 million pounds.

Centerra expects gold and copper production for calendar 2022 to be back-end weighted, with the first half of the calendar year representing approximately 40% of the metal production total while the second half of the calendar year representing up to approximately 60% of the metal production total.

Centerra reported that the changes to expected gold and copper production at the Mount Milligan mine are due to planned mine sequence changes.

Centerra also reported that a new National Instrument 43-101 (“NI 43-101”) technical report for Mount Milligan is expected to be issued in the second quarter of calendar 2022.

Centerra also reported that it obtained an amendment to the Mount Milligan mine environmental assessment certificate in January 2022, which will allow access to long-term surface water sources for the life of the project, subject to the receipt of ordinary course permits.

In addition, according to Centerra, water inventory in the tailings storage facility as of March 31, 2022, combined with the incoming freshet in the second quarter of calendar 2022, is expected to secure continued operations for a period of 12 months or longer.

Further, Centerra reported mineral reserves and mineral resources for Mount Milligan for the year ended December 31, 2021.

Centerra disclosed that compared to the year ended December 31, 2020, proven and probable mineral reserves decreased by 310,000 ounces of contained gold and 101 million pounds of contained copper, primarily due to mining

depletion, while measured and indicated mineral resources increased by 1.4 million ounces of contained gold and 453 million pounds of contained copper, due to an updated mineral resource estimate after completion of the 2021 infill drilling program.

Additionally, over the same period, inferred mineral resources increased by 125,000 ounces of contained gold and 19 million pounds of contained copper.

Gold stream deliveries from Pueblo Viejo were approximately 7,100 ounces for the three months ended March 31, 2022, compared to approximately 11,100 ounces for the three months ended March 31, 2021.

Decreased deliveries resulted from processing lower grade gold stockpile material.

Silver stream deliveries were approximately 274,500 ounces for the three months ended March 31, 2022, compared to approximately 247,500 ounces for the three months ended March 31, 2021.

Deliveries during the first quarter included approximately 20,000 ounces of deferred silver.

Gold stream deliveries from Pueblo Viejo were approximately 8,600 ounces for the three months ended June 30, 2022, compared to approximately 9,800 ounces for the three months ended June 30, 2021.

Decreased deliveries resulted from processing lower grade stockpile ore.

Silver stream deliveries were approximately 307,100 ounces for the three months ended June 30, 2022, compared to approximately 386,500 ounces for the three months ended June 30, 2021.

During the second quarter an additional 45,000 ounces of silver deliveries were deferred.

The deferred ounces are the result of a mechanism in the stream agreement that allows for the deferral of deliveries in a period if Barrick’s share of silver production is insufficient to cover its stream delivery obligations.

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If actual recovery rates fall below the contractual 70% recovery rate, ounces may be deferred with deferred ounces to be delivered in future periods as silver recovery allows.

As of March 31, 2022, approximately 439,000 ounces remain deferred, and the timing for the delivery of the entire deferred amount is uncertain.

On February 16, 2022, Barrick reported that its share of Pueblo Viejo gold production for calendar 2022 is expected to range between 400,000 and 440,000 ounces compared to actual calendar 2021 gold production of 488,000, with maintenance planned in the first quarter of calendar 2022.

Also on February 16, 2022, Barrick reported continued progress on the plant expansion and mine life extension project to increase throughput and allow the mine to maintain minimum average annual gold production of approximately 800,000 ounces after calendar 2022 and beyond calendar 2040 (100% basis).

With respect to the plant expansion, on May 4, 2022, Barrick reported that as of March 31, 2022, construction was 39% complete, with completion expected by the end of calendar 2022.

With respect to the mine life extension, Barrick also disclosed that social, environmental and technical studies for additional tailings capacity continued to advance.

On April 8, 2022, Barrick further reported that the Government of the Dominican Republic had completed its strategic review of alternative sites for the location of the new tailings storage facility (“TSF”).

Barrick reported that the final location and construction of the TSF would be subject to the completion of an Environmental and Social Impact Assessment (“ESIA”) in accordance with Dominican Republic legislation and international standards.

As of June 30, 2022, approximately 484,000 ounces remain deferred, and the timing for the delivery of the entire deferred amount is uncertain.

On May 4, 2022, Barrick reported continued progress on the plant expansion and mine life extension project to increase throughput and allow the mine to maintain minimum average annual gold production of approximately 800,000 ounces after calendar 2022 and beyond calendar 2040 (100% basis).

With respect to the plant expansion, Barrick reported that as of March 31, 2022, construction was 39% complete, with completion expected by the end of calendar 2022.

With respect to the mine life extension, Barrick also disclosed that social, environmental and technical studies for additional tailings capacity continued to advance, and that the final location and construction of the tailings storage facility would be subject to the completion of an Environmental and Social Impact Assessment (“ESIA”) in accordance with Dominican Republic legislation and international standards.

Once completed, the ESIA would be submitted to the Government of the Dominican Republic for evaluation and final decision.

Gold stream deliveries from Wassa were approximately 4,500 ounces for the three months ended March 31, 2022, compared to approximately 4,400 ounces for the three months ended March 31, 2021.

Royalty Interests

Gold production attributable to our royalty interest at Cortez was approximately 102,000 ounces for the three months ended March 31, 2022, compared to approximately 51,900 ounces for the three months ended March 31, 2021.

The increase was due to increased production from the Pipeline pit, offset by a reduction in production from Crossroads.

Nevada Gold Mines LLC (“NGM”) recently provided an updated mineral reserve and life of mine plan for our royalty areas at Cortez.

As of December 31, 2021, at a gold price of $1,200 per ounce, proven and probable mineral reserves on the areas subject to our royalties contained 4.1 million ounces of gold (62.4 million tons of ore at a gold grade of 0.048 ounces per ton), compared to 3.5 million ounces of gold (81.5 million tons of ore at a gold grade of 0.043 ounces per ton) as of December 31, 2020 at the same gold price.

Reserves for December 31, 2021, include approximately 3.0 million ounces of gold for the royalty areas covering the Crossroads and Pipeline deposits, as well as 1.1 million ounces of gold for the Goldrush project that fall within our royalty area.

NGM expects gold production subject to our royalty interests covering the Crossroads and Pipeline areas of approximately 280,000 ounces in calendar 2022, and average annual gold production for calendar 2022 through calendar 2026 to be approximately 332,000 ounces.

NGM’s forecast for future gold production is lower than NGM’s previous forecast provided in calendar 2021 primarily due to the overall optimization of production and revenue at the Cortez mine complex.

Our interest in this production is approximately equivalent to an 8% gross smelter return royalty.

We own a 1% net value royalty on a portion of the Goldrush project.

Production attributable to our royalty interest at Peñasquito was approximately 133,400 ounces of gold, 7.65 million ounces of silver, 41.9 million pounds of lead and 120 million pounds of zinc for the three months ended March 31, 2022.

This compares to approximately 180,400 ounces of gold, 8.12 million ounces of silver, 50.1 million pounds of lead and 119 million pounds of zinc for the three months ended March 31, 2021.

Gold production was lower compared to the prior year quarter due to lower grade ore milled and lower mill recovery.

Newmont Corporation (“Newmont”) expects Peñasquito to deliver lower gold production in calendar 2022 of 475,000 ounces compared to actual calendar 2021 gold production of 660,000 ounces, due to lower-grade, harder ore mined from the Chile Colorado pit and stripping of the next phases of the Peñasco and Chile Colorado pits continuing through calendar 2023.

Newmont expects co-product production at Peñasquito in calendar 2022 to be 29 million ounces of silver, 150 million pounds of lead and 350 million pounds of zinc, which is consistent with calendar 2021 production levels, with increased production starting in calendar 2023 due to higher silver, lead and zinc content delivered from the Chile Colorado pit.

Gold production attributable to our existing royalty interest at Cortez was approximately 52,000 ounces for the three months ended June 30, 2022, compared to approximately 89,800 ounces for the three months ended June 30, 2021.

On July 14, 2022, Barrick reported lower production at Cortez for the quarter ended June 30, 2022 due to mine sequencing as it transitions from the end of open pit mining at Pipeline to a new phase at Crossroads, which is expected to underpin stronger performance for Cortez in the December quarter of 2022.

Production attributable to our royalty interest at Peñasquito was approximately 130,600 ounces of gold, 8.07 million ounces of silver, 35.0 million pounds of lead and 84.9 million pounds of zinc for the three months ended June 30, 2022.

This compares to approximately 179,800 ounces of gold, 7.61 million ounces of silver, 41.8 million pounds of lead and 101.7 million pounds of zinc for the three months ended June 30, 2021.

Gold production was lower compared to the prior year quarter due to lower ore grade milled and lower mill recovery.

Results of Operations

Quarter Ended March 31, 2022, Compared to Quarter Ended March 31, 2021

For the quarter ended March 31, 2022, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $65.7 million, or $1.00 per basic and diluted share, as compared to net income of $54.0 million, or $0.82 per basic and diluted share, for the quarter ended March 31, 2021 .

The increase in net income was primarily attributable to an increase in revenue, as discussed below.

For the quarter ended March 31, 2022, we recognized total revenue of $162.4 million, comprised of stream revenue of $105.3 million and royalty revenue of $57.1 million at an average gold price of $1,877 per ounce, an average silver price of $24.01 per ounce and an average copper price of $4.53 per pound.

This is compared to total revenue of $142.6 million for the three months ended March 31, 2021, comprised of stream revenue of $95.3 million and royalty revenue of $47.3 million, at an average gold price of $1,794 per ounce, an average silver price of $26.26 per ounce and an average copper price of $3.86 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended March 31, 2022, compared to the quarter ended March 31, 2021, are as follows:

Quarter Ended June 30, 2022, Compared to Quarter Ended June 30, 2021

For the quarter ended June 30, 2022, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $71.1 million, or $1.08 per basic and diluted share, as compared to net income of $81.7 million, or $1.24 per basic and diluted share, for the quarter ended June 30, 2021 .

The decrease in net income was primarily attributable to a decrease in revenue, as discussed below.

For the quarter ended June 30, 2022, we recognized total revenue of $146.4 million, comprised of stream revenue of $104.9 million and royalty revenue of $41.6 million at an average gold price of $1,871 per ounce, an average silver price of $22.60 per ounce and an average copper price of $4.31 per pound.

This is compared to total revenue of $168.0 million for the

three months ended June 30, 2021, comprised of stream revenue of $114.4 million and royalty revenue of $53.6 million, at an average gold price of $1,816 per ounce, an average silver price of $26.69 per ounce and an average copper price of $4.40 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021, are as follows:

Revenue and Reported Production Subject to Our Stream and Royalty Interests

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Three Months Ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

Stream/Royalty

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Total Revenue

(1) Reported production relates to the amount of metal sales subject to our stream and royalty interests for the three months ended March 31, 2022, and 2021, and may differ from the operators’ public reporting.

(1) Reported production relates to the amount of metal sales subject to our stream and royalty interests for the three months ended June 30, 2022, and 2021, and may differ from the operators’ public reporting.

(2) Refer to “Property Developments” above for a discussion of recent developments at principal properties.

(3) Individually, except for our stream interest at Rainy River, which contributed 6% of total revenue for the three months ended March 31, 2022 and 2021, no stream or royalty included within the “Other” category contributed greater than 5% of our total revenue for either period.

The increase in our total revenue resulted primarily from higher gold sales at Mount Milligan and Andacollo, an increase in the average gold and copper prices, higher gold production at Cortez and $4.0 million of revenue from the newly acquired NX Gold stream, offset by a decrease in gold and silver sales from Pueblo Viejo compared to the prior period.

Gold and silver ounces and copper pounds purchased and sold during the three months ended March 31, 2022 and 2021,

and gold and silver ounces and copper pounds in inventory as of March 31, 2022, and December 31, 2021, for our streaming interests were as follows:

(3) Individually, except for our stream interest at Rainy River, which contributed 6% of total revenue for the three months ended June 30, 2022 and 2021, no stream or royalty included within the “Other” category contributed greater than 5% of our total revenue for either period.

The decrease in our total revenue resulted primarily from lower gold sales at Andacollo and Pueblo Viejo and lower gold production at Cortez and Peñasquito.

The decrease was offset by $9.4 million of new revenue from the NX Gold and Khoemac a u streams which were not in production during the prior year quarter.

Gold and silver ounces and copper pounds purchased and sold during the three months ended June 30, 2022 and 2021, and gold and silver ounces and copper pounds in inventory as of June 30, 2022, and December 31, 2021, for our streaming interests were as follows:

Three Months Ended

March 31, 2022

March 31, 2021

March 31, 2022

June 30, 2022

June 30, 2021

June 30, 2022

December 31, 2021

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Three Months Ended

March 31, 2022

March 31, 2021

March 31, 2022

June 30, 2022

June 30, 2021

June 30, 2022

December 31, 2021

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Three Months Ended

March 31, 2022

March 31, 2021

March 31, 2022

June 30, 2022

June 30, 2021

June 30, 2022

December 31, 2021

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Mount Milligan

Cost of sales, which excludes depreciation, depletion and amortization, increased to $22.6 million for the three months ended March 31, 2022, from $21.5 million for the three months ended March 31, 2021.

The increase, when compared to the prior period, was primarily due to an increase in gold sales from Mount Milligan, offset by a decrease in gold sales at Pueblo Viejo.

Cost of sales, which excludes depreciation, depletion and amortization, decreased to $23.8 million for the three months ended June 30, 2022, from $24.7 million for the three months ended June 30, 2021.

The decrease, when compared to the prior period, was primarily due to a decrease in gold sales at Andacollo and Pueblo Viejo, offset by gold sales at NX Gold and silver sales at Khoemac a u.

Stream deliveries from the NX Gold and Khoemac a u streams were not due to us during the prior year comparable quarter.

Cost of sales is specific to our stream agreements and is the result of our purchase of gold, silver and copper for a cash payment.

The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper (Mount Milligan) spot price near the date of metal delivery.

General and administrative costs increased to $8.9 million for the three months ended March 31, 2022, from $6.9 million for the three months ended March 31, 2021.

General and administrative costs increased to $9.3 million for the three months ended June 30, 2022, from $7.2 million for the three months ended June 30, 2021.

The increase was primarily due to an increase in employee-related costs including non-cash compensation expense, as well as higher costs associated with environmental, social and governance (“ESG”) initiatives.

Depreciation, depletion and amortization increased to $48.0 million for the three months ended March 31, 2022, from $41.3 million for the three months ended March 31, 2021.

The increase was primarily due to higher gold sales from Mount Milligan, higher gold production at Cortez and additional depletion from the newly acquired Khoemac a u and NX Gold streams when compared to the prior period.

The increase was partially offset by lower gold and silver sales from Pueblo Viejo.

For the three months ended March 31, 2022, we recorded income tax expense totaling $15.3 million, compared with income tax expense of $17.7 million for the three months ended March 31, 2021.

The income tax expense resulted in an effective tax rate of 18.8% in the current period, compared with 24.6% for the three months ended March 31, 2021.

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

Depreciation, depletion and amortization decreased to $44.0 million for the three months ended June 30, 2022, from $48.0 million for the three months ended June 30, 2021.

The decrease was primarily due to lower gold sales at Andacollo and Pueblo Viejo compared to the prior period.

The decrease was partially offset by additional depletion from the newly producing Khoemac a u and the newly acquired NX Gold streams when compared to the prior year comparable quarter.

For the three months ended June 30, 2022, we recorded an income tax benefit of $5.9 million, compared with income tax expense of $5.5 million for the three months ended June 30, 2021.

The income tax benefit resulted in an effective tax rate of (9.0%) in the current period, compared with 6.3% for the three months ended June 30, 2021.

The three months ended June 30, 2022, included a discrete tax benefit attributable to a release of a valuation allowance while the three months ended June 30, 2021, included a discrete tax benefit attributable to the settlement of an uncertain tax position in a foreign jurisdiction.

Six Months Ended June 30, 2022, Compared to Six Months Ended June 30, 2021

For the six months ended June 30, 2022, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $136.8 million, or $2.08 per basic and diluted share, as compared to net income of $135.7 million, or $2.07 per basic and diluted share, for the six months ended June 30, 2021 .

For the six months ended June 30, 2022, we recognized total revenue of $308.8 million, comprised of stream revenue of $210.1 million and royalty revenue of $98.7 million at an average gold price of $1,874 per ounce, an average silver price of $23.32 per ounce and an average copper price of $4.43 per pound.

This is compared to total revenue of $310.6 million for the six months ended June 30, 2021, comprised of stream revenue of $209.8 million and royalty revenue of $100.8 million, at an average gold price of $1,805 per ounce, an average silver price of $26.47 per ounce and an average copper price of $4.12 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, are as follows:

Revenue and Reported Production Subject to Our Stream and Royalty Interests

(Amounts in thousands, except reported production oz.

Six Months Ended

June 30, 2022

June 30, 2021

Stream/Royalty

Production (1)

Mount Milligan

Total stream revenue

Royalty (2) :

Total royalty revenue

Total revenue

Reported production relates to the amount of metal sales subject to our stream and royalty interests for the six months ended June 30, 2022, and 2021, and may differ from the operators’ public reporting.

Refer to “Property Developments” above for a discussion of recent developments at principal properties.

Individually, except for our stream interest at Rainy River, which contributed 6% of total revenue for the six months ended June 30, 2022 and 2021, no stream or royalty included within the “Other” category contributed greater than 5% of our total revenue for either period.

The decrease in our total revenue resulted primarily from lower gold sales at Andacollo and Pueblo Viejo and lower gold production at Peñasquito.

The decrease was offset by $15.8 million of new revenue from the NX Gold and Khoemac a u streams which were not in production during the prior year comparable period.

Gold and silver ounces and copper pounds purchased and sold during the six months ended June 30, 2022 and 2021, and gold and silver ounces and copper pounds in inventory as of June 30, 2022, and December 31, 2021, for our streaming interests were as follows:

Revenue and Reported Production Subject to Our Stream and Royalty Interests

(Amounts in thousands, except reported production oz.

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

December 31, 2021

Purchases (oz.)

Inventory (oz.)

Mount Milligan

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

December 31, 2021

Silver Stream

Purchases (oz.)

Inventory (oz.)

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

December 31, 2021

Copper Stream

Purchases (Mlbs.)

Sales (Mlbs.)

Purchases (Mlbs.)

Sales (Mlbs.)

Inventory (Mlbs.)

Mount Milligan

General and administrative costs increased to $19.9 million for the six months ended June 30, 2022, from $14.1 million for the six months ended June 30, 2021.

The increase was primarily due to an increase in employee-related costs including non-cash compensation expense, as well as higher costs associated with ESG initiatives.

Depreciation, depletion and amortization increased to $92.0 million for the six months ended June 30, 2022, from $89.3 million for the six months ended June 30, 2021.

The increase was primarily due to higher gold sales at Mount Milligan, higher gold production at Cortez and additional depletion from the newly acquired Khoemac a u and NX Gold streams when compared to the prior year period.

The increase was partially offset by lower gold and silver sales at Pueblo Viejo and lower gold sales at Andacollo.

For the six months ended June 30, 2022, we recorded income tax expense totaling $9.4 million, compared with income tax expense of $23.2 million for the six months ended June 30, 2021.

The income tax expense resulted in an effective tax rate of 6.4% in the current period, compared with 14.6% for the six months ended June 30, 2021.

The six months ended June 30, 2022, included a discrete income tax benefit attributable to the release of a valuation allowance on certain deferred tax assets.

The six months ended June 30, 2021, included a discrete tax benefit attributable to the settlement of an uncertain tax position with a foreign jurisdiction.

Liquidity and Capital Resources

At March 31, 2022, we had current assets of $258.6 million compared to current liabilities of $49.5 million, which resulted in working capital of $209.1 million and a current ratio of 5 to 1.

At June 30, 2022, we had current assets of $340.3 million compared to current liabilities of $64.0 million, which resulted in working capital of $276.3 million and a current ratio of 5 to 1.

This compares to current assets of $216.0 million and current liabilities of $61.4 million at December 31, 2021, resulting in working capital of $154.6 million and a current ratio of approximately 4 to 1.

The increase in working capital was primarily due to an increase in our available cash, resulting from increased revenue during the current period.

During the three months ended March 31, 2022, liquidity needs were met from $101.1 million in net cash provided by operating activities and our available cash resources.

As of March 31, 2022, we had $1 billion available under our revolving credit facility.

Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $1.2 billion of total liquidity at March 31, 2022.

We were in compliance with each financial covenant under the revolving credit facility as of March 31, 2022.

Refer to Note 5 of our notes to consolidated financial statements for further discussion on our debt.

The increase in working capital was primarily due to an increase in our available cash.

During the six months ended June 30, 2022, liquidity needs were met from $221.3 million in net cash provided by operating activities and our available cash resources.

As of June 30, 2022, we had $1 billion available under our revolving credit facility.

Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $1.3 billion of total liquidity at June 30, 2022.

We were in compliance with each financial covenant under the revolving credit facility as of June 30, 2022.

Refer to Note 13 of our notes to consolidated financial statements and below (“Recent Liquidity Developments”) for further discussion on our debt.

We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for debt service, general and administrative expense costs and capital expenditures for the foreseeable future.

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Please refer to our risk factors included in Part 1, Item 1A of our Transition Report for a discussion of certain risks that may impact our liquidity and capital resources.

Recent Liquidity Developments

Revolving Credit Facility Draw

In July 2022, we borrowed $500 million under our revolving credit facility for business development activities and have $500 million available.

Business Development Activities

Refer to Note 13 of our notes to consolidated financial statements for further discussion on the liquidity needs for the proposed Great Bear Acquisition and the Cortez Royalty acquisition.

Operating Activities

Net cash provided by operating activities totaled $101.1 million for the three months ended March 31, 2022, compared to $92.2 million for the three months ended March 31, 2021.

The increase was primarily due to an increase in cash proceeds received from our stream and royalty interests, net of cost of sales and production taxes, of approximately $9.1 million.

Net cash provided by operating activities totaled $221.3 million for the six months ended June 30, 2022, compared to $213.1 million for the six months ended June 30, 2021.

The increase was primarily due to an increase in cash proceeds received from our stream and royalty interests, net of cost of sales and production taxes, of approximately $20.2 million compared to the prior year period.

This increase was partially offset by an increase in income taxes paid of $6.1 million compared to the prior year period.

Investing Activities

Net cash used in investing activities totaled $37.8 million for the three months ended March 31, 2022, compared to $33.7 million for the three months ended March 31, 2021.

The increase was primarily due to the acquisition of stream and royalty interests.

Net cash used in investing activities totaled $37.9 million for the six months ended June 30, 2022, compared to $128.8 million for the six months ended June 30, 2021.

The decrease was primarily due to lower acquisitions of stream and royalty interests compared to the prior year period.

Financing Activities

Net cash used in financing activities totaled $23.2 million for the three months ended March 31, 2022, compared to net cash used in financing activities of $70.1 million for the three months ended March 31, 2021.

The decrease was primarily due to a repayment of $50 million on our revolving credit facility during the prior year quarter.

Net cash used in financing activities totaled $46.4 million for the six months ended June 30, 2022, compared to net cash used in financing activities of $240.2 million for the six months ended June 30, 2021.

The decrease was primarily due to a repayment of $200 million on our revolving credit facility during the prior year period.

Recently Adopted Accounting Standards and Critical Accounting Policies

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Forward-looking statements are often identified by words like “will,” “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” or negatives of these words or similar expressions.

Forward-looking statements include, among others, the following:

statements about our expected financial performance and outlook, including sales volume, revenue, expenses, tax rates, earnings or cash flow;

operators’ expected operating and financial performance, including production, deliveries, mine plans, mineral resources

and reserves, access to and adequacy of water sources, development, cash flows and capital expenditures;

liquidity, financing and stockholder returns;

our overall investment portfolio;

macroeconomic and market conditions including the impacts of COVID-19;

prices for gold, silver, copper, nickel and other metals;

Forward-looking statements include, among others, statement regarding the following:

funding of the purchase price for the Great Bear Acquisition;

timing of the receipt of approvals for and closing of the Great Bear Acquisition;

our due diligence review process;

volatility of metal prices and factors impacting same;

our expected financial performance and outlook, including sales volume, revenue, expenses, tax rates, earnings or cash flow;

operators’ expected operating and financial performance, including production, deliveries, mine plans, facilities, mineral resources and reserves, access to and adequacy of water sources, development, cash flows, capital expenditures, and permitting and environmental impact studies;

effects of the pandemic;

estimates of fair value and potential impairments;

and tax changes.

Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the following:

a lower-price environment for gold, silver, copper, nickel or other metals;

operating activities or financial performance of properties on which we hold stream or royalty interests, including inaccuracies in operators’ disclosures, variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, operators’ changes to mine plans, and mineral resources and reserves, liquidity needs, mining and environmental hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, contractual issues involving our stream or royalty agreements, or operational disruptions due to COVID-19, including due to variant strains of the virus;

risks associated with doing business in foreign countries;

increased competition for stream and royalty interests;

timing for the delivery of deferred silver ounces from Pueblo Viejo;

stronger performance at Cortez for the fourth quarter of 2022;

adequacy of our current financial resources and funds from operations to cover anticipated expenditures for the foreseeable future;

seeking additional debt or equity financing as necessary;

borrowing and repaying amounts under our revolving credit facility;

and disclosure controls and procedures and internal controls over financial reporting.

The risks and uncertainties that could cause actual results to differ materially from those in forward looking statements include, without limitation, a lower-price environment for gold, silver, copper, nickel or other metals;

operating activities or financial performance of operators, including inaccuracies in the operator’s disclosures, variations between actual and forecasted performance, the operator’s ability to complete projects on schedule and as planned, the operator’s changes to mine plans and reserves and resources, the operator’s liquidity needs, mining hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, contractual issues involving our royalty agreement, or operational disruptions due to public health crises;

environmental risks, including those caused by climate change;

potential cyber-attacks, including ransomware;

our ability to identify, finance, value and complete acquisitions;

risks associated with doing business in foreign countries;

increased competition for stream and royalty interests;

adverse economic and market conditions;

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changes in management and key employees;

and other factors described in Item 1A.

Risk Factors of our Transition Report and this Form 10-Q.

the ability to obtain, or delays in obtaining, stockholder and court approval of the Great Bear Acquisition;

the risk that an event, change or other circumstance could give rise to the termination of the arrangement agreement with GBR;

the risk that a condition to closing of the Great Bear Acquisition may not be satisfied;

the risk that any announcement relating to an acquisition could have adverse effects on the market price of Royal Gold’s common stock;

the risk of litigation related to acquisitions;

and the diversion of management time from ongoing business operations due to acquisition-related issues;

and other factors described in our reports filed with the Securities and Exchange Commission, including our Transition Report.

Most of these factors are beyond our ability to predict or control.

Other unpredictable or unknown factors not discussed in this presentation could also have material adverse effects on forward looking statements.

Forward-looking statements speak only as of the date on which they are made.

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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 2. Management’s Discussion and Analysis