What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-16 compared with 2021-08-12 · 220 added, 189 removed, 160 unchanged (72% of the section changed)

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General Presentation

A discussion of the changes in our financial condition and results of operations for the fiscal years ended June 30, 2020, and 2019, has been omitted from this report, but may be found in Item 7, MD&A, of our Annual Report on Form 10-K for the year ended June 30, 2020, filed with the SEC on August 6, 2020, which is available free of charge on the SEC’s website at www.sec.gov and our website at www.royalgold.com.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) generally discusses year-to-year comparisons between the year ended December 31, 2022 and the comparative year ended December 31, 2021.

Due to our change in fiscal year from June 30 to December 31, the comparative year ended December 31, 2021 was unaudited.

A discussion of the changes in our financial condition and results of operations for the six months ended December 31, 2021 transition period and fiscal years ended June 30, 2021 and 2020 have been omitted from this report, but may be found in Item 7.

MD&A, of our Annual Reports on Form 10-K for the six month transition period ended December 31, 2021 and for the years ended June 30, 2021 and 2020, filed with the SEC on February 17, 2022, August 12, 2021 and August 6, 2020, respectively, which are available free of charge on the SEC’s website at www.sec.gov and our website at www.royalgold.com.

Overview of Our Business

We acquire and manage precious metal streams, royalties, and similar interests.

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

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

We manage our business under two segments:

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

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

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

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

Stream interests accounted for 69% and 67% of our total revenue for the years ended December 31, 2022 and 2021, respectively.

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 June 30, 2021, we owned royalty interests on 35 producing properties, 15 development stage properties and 129 exploration stage properties, of which we consider 50 to be evaluation stage projects.

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

Royalty interests accounted for 31% and 28% of our total revenue for the fiscal years ended June 30, 2021, and 2020, respectively.

As of December 31, 2022, we owned royalty interests on 32 production stage properties, 18 development stage properties and 123 exploration stage properties, of which we consider 52 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 31% and 33% of our total revenue for the years ended December 31, 2022 and 2021, respectively.

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, exploration costs, environmental costs or other operating costs on those properties.

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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 fiscal years ended June 30, 2021 and 2020, average metal prices and percentages of revenue by metal were as follows:

June 30, 2021

June 30, 2020

For the years ended December 31, 2022, and 2021, the average prices and percentages of revenue by metal were as follows:

December 31, 2022

December 31, 2021

Gold ($/ounce) (1)

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Copper ($/pound) (2)

COVID-19 Pandemic

Throughout calendar year 2020 and into calendar year 2021, several of our operating counterparties have instituted temporary operational curtailments due to the ongoing COVID-19 pandemic.

In addition, the pandemic and resulting economic and societal impacts have made it difficult for operators to forecast expected production amounts and, at times, operators have had to withdraw or revise previously disclosed guidance.

For the most part, our results of operations and financial condition have not been materially impacted by these measures to date.

However, the effects of the pandemic will ultimately depend on many factors that are outside of our control, including the severity and duration of the pandemic, including the emergence of variant strains of the virus, government and operator actions in response to the pandemic, and the development, availability, and public acceptance of effective treatments and vaccines.

As a result, we are currently unable to predict the nature or extent of any future impact on our results of operations and financial condition.

We continue to monitor the impact of developments associated with the pandemic on stream and royalty interests as part of our regular asset impairment analysis.

Sale of Peak Gold JV Interest

On September 30, 2020, we announced an agreement with Kinross to sell our interest in the Manh Choh Project (formerly known as the Peak Gold Project) and our common share position in Contango Ore, Inc.

(“Contango”), our partner in Peak Gold, LLC and owner of the Manh Choh Project.

Consideration received for the sale of these interests included cash of $61.3 million, an incremental 28% net smelter return royalty on silver produced from an area of interest which includes the current Manh Choh Project resource area, and an incremental 1% net smelter return royalty on certain State of Alaska mining claims acquired by a wholly owned subsidiary of Contango in the transaction.

Peak Gold, LLC retains the right to acquire 50% of the incremental 28% net smelter return royalty on silver for $4 million.

After this transaction, our interests in the Manh Choh Project and State of Alaska mining claim property owned by Contango consist solely of net smelter return royalties.

Refer to Note 3 of our notes to the consolidated financial statements for further discussion on the sale of the Peak Gold JV interest.

Separation of the Wassa and Prestea and Bogoso Stream Agreement

On October 1, 2020, we announced the separation of the Wassa gold stream and the Prestea and Bogoso gold streams into two separate stream agreements effective September 30, 2020.

This separation was completed to facilitate the sale by Golden Star Resources Ltd.

(“Golden Star”) of the Prestea and Bogoso mines to Future Global Resources Limited (“FGR”).

Refer to Note 4 of our notes to the consolidated financial statements for further discussion on the separation of the Wassa and Prestea and Bogoso stream agreement.

Completion of Base Silver Stream at Khoemac a u Project

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

With this payment, we have completed the total $212 million advance payment required to earn the base silver stream of 80% of payable silver.

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

Côté Royalty Acquisition

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

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

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

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

NX Gold Mine Gold Stream Acquisition

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

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

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

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

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

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

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 February 2022 for the six-month stub period from July 1, 2021, to December 31, 2021.

Operators’ Production Estimates by Stream and Royalty Interest for Calendar Year 2021

(1) Based on the average LBMA Price for the period.

(2) Based on the average LME Price for the period.

Acquisition of Additional Royalty Interests on Cortez Complex

On December 29, 2022, we acquired two portions of a gross smelter return royalty (the “Idaho Royalty”) that together cover a large area including the Cortez mine operational area and the entirety of the Fourmile development project in Nevada (the “Cortez Complex”) from certain holders who are successors in interest to Idaho Mining Corporation for cash consideration of $204.1 million.

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

The Idaho Royalty comprises a 0.24% gross royalty that covers areas including the Pipeline and Crossroads deposits and a 0.45% gross royalty that covers areas including the Cortez Hills, Goldrush, Fourmile and Robertson deposits.

The Idaho Royalty is life of mine, not subject to any stepdowns or caps, and has no applicable deductions.

The purchase price was funded with amounts available under the revolving credit facility and cash on hand.

The economic effective date for the transaction was December 1, 2022, and revenue of $0.7 million on production of approximately 116,000 ounces attributable to the royalty was recognized in the fourth quarter of 2022.

Acquisition of Great Bear Royalties Corp.

On September 9, 2022 we completed the acquisition of all of the issued and outstanding shares of Great Bear Royalties Corporation (“GBR”) for cash consideration of approximately C$199.6 million (US$151.7 million) (the “Acquisition Price”).

GBR’s sole material asset is a 2.0% net smelter return royalty (“Great Bear Royalty”) that covers the entirety of the Great Bear Project in the Red Lake district of Ontario, Canada, owned and operated by a subsidiary of Kinross Gold Corporation (“Kinross”).

The Great Bear Royalty includes all metals produced from contiguous claims covering 9,140 hectares.

Royalty payments will be made quarterly with applicable standard deductions.

Refer to Note 3 of our notes to consolidated financial statements for further discussion on the GBR acquisition.

The purchase price was funded with available cash on hand.

As part of the acquisition and in exchange for information and access to the project provided by Kinross, we granted an option to Kinross to purchase a 25% interest in the Great Bear Royalty (0.5% of the 2.0% royalty rate) for an amount equal to 25% of the Acquisition Price, 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.

On February 13, 2023, Kinross announced an initial mineral resource of 5 million ounces of gold (2.7 million ounces Indicated, 2.3 million ounces Inferred) at the Great Bear Project based on drilling to an approximate depth of 500 meters.

Kinross expects 2023 activity to include drilling of 180,000 meters at depth, along strike and on parallel structures to support engineering studies and permitting activities.

Acquisition of Gross Royalty on Cortez Complex

On August 2, 2022, we acquired a sliding scale gross royalty (the “Rio Tinto Royalty”) on production from an area within the Cortez Complex for cash consideration of $525 million.

The area within the Cortez Complex is owned or controlled by NGM, with the exception of the Fourmile development project which is 100% owned and operated by Barrick.

The 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 except for the existing deposits within the Robertson property.

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

For the year ended December 31, 2022, we received revenue of $4.5 million on production of approximately 227,000 ounces attributable to the Rio Tinto Royalty.

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 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.

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

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%.

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

We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2022.

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

The following table shows these production estimates for our principal producing properties for calendar year 2021 as well as the actual production reported to us by the various operators through June 30, 2021.

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

The estimates and production reports are prepared by the operators.

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

Principal Producing Properties

Principal Production Stage Properties

Calendar Year 2022 Operator’s Production

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400,000 - 440,000

145,000 - 155,000

350,000 - 375,000

Khoemac a u (6)

Peñasquito (8)

(1) Production estimates received from our operators are for calendar year 2022.

There can be no assurance that production estimates received from our operators will be achieved.

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

(2) Actual production figures shown are from our operators and cover the period January 1, 2021, through June 30, 2021, unless otherwise noted in footnotes to this table.

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

The estimated production figure was not available on the date of this report.

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

(3) The estimated and actual production figures shown for Andacollo are contained gold in concentrate.

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

(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.

The operator did not provide estimated or actual silver production.

(6) The estimated and actual production figures shown for Wassa is payable gold in doré.

(7) Production from Cortez subject to Royal Gold’s interests.

Barrick did not provide estimated or actual silver production.

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

(7) The estimated and actual production figures for Cortez represent the Cortez Legacy Zone area only.

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

The estimated and actual lead and zinc production figures shown are payable lead and zinc in concentrate.

Historical Production

The following table discloses historical production for the past two fiscal years for the principal producing properties that are subject to our stream and royalty interests, as reported to us by the operators of the mines.

We do not participate in the

preparation or calculation of the operators’ production reports and have not independently assessed or verified, and disclaim all responsibility for, the accuracy of such information.

Historical Production (1) by Stream and Royalty Interest

Principal Producing Properties

For the Fiscal Years Ended June 30, 2021 and 2020

Stream/Royalty

Mount Milligan

(1) Historical production for our stream interests relates to the amount of stream metal sales for each fiscal year presented and may differ from stream deliveries discussed in Item 2, Properties, or from the operators’ public reporting.

For our royalty interests, historical production relates to the payable metal amounts as reported to us by the operators of the mines subject to our royalty rate for each fiscal year presented.

The actual production figure is for the period January 1, 2022 through September 30, 2022.

Results of Operations

Fiscal Year Ended June 30, 2021, Compared with Fiscal Year Ended June 30, 2020

For the fiscal year ended June 30, 2021, we recorded net income attributable to Royal Gold stockholders of $302.5 million, or $4.61 per basic share and $4.60 per diluted share, as compared to net income attributable to Royal Gold stockholders of $199.3 million, or $3.04 per basic share and $3.03 per diluted share, for the fiscal year ended June 30, 2020.

The increase in our earnings per share was primarily attributable to (i) an increase in revenue, (ii) a one-time gain attributable to the sale of our Peak Gold JV interest during the September 2020 quarter and (iii) various discrete income tax benefits recognized during the September 2020 and June 2021 quarters.

These increases were partially offset by increases in our cost of sales and depreciation, depletion and amortization expense, each discussed further below.

For the fiscal year ended June 30, 2021, we recognized total revenue of $615.9 million, which is comprised of stream revenue of $424.0 million and royalty revenue of $191.9 million, at an average gold price of $1,849 per ounce, an average silver price of $25.38 per ounce and an average copper price of $3.60 per pound, compared to total revenue of $498.8 million, which is comprised of stream revenue of $359.9 million and royalty revenue of $138.9 million, at an average gold price of $1,560 per ounce, an average silver price of $16.90 per ounce and an average copper price of $2.57 per pound, for the fiscal year ended June 30, 2020.

Revenue and the corresponding production, attributable to our stream and royalty interests, for the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020 is as follows:

Year Ended December 31, 2022, Compared with Year Ended December 31, 2021 (In thousands, except share data)

Costs and expenses

Cost of sales (excludes depreciation, depletion and amortization)

General and administrative

Production taxes

Depreciation, depletion and amortization

Impairment of royalty interests

Total costs and expenses

Operating income

Fair value changes in equity securities

Interest and other income

Interest and other expense

Income before income taxes

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 Royal Gold common stockholders

Basic earnings per share

Basic weighted average shares outstanding

Diluted earnings per share

Diluted weighted average shares outstanding

Cash dividends declared per common share

For the year ended December 31, 2022, we recorded net income attributable to Royal Gold stockholders of $239.0 million, or $3.64 per basic share and $3.63 per diluted share, as compared to net income attributable to Royal Gold stockholders of $274.0 million, or $4.17 per basic and diluted share, for the year ended December 31, 2021.

The decrease in net income was primarily due to lower revenue and higher interest expense as a result of higher amounts outstanding under our revolving credit facility compared to the prior period.

This decrease was partially offset by a decrease in income tax expense as discussed in further detail below.

For the year ended December 31, 2022, we recognized total revenue of $603.2 million, which is comprised of stream revenue of $417.8 million and royalty revenue of $185.4 million, at an average gold price of $1,800 per ounce, an average silver price of $21.73 per ounce and an average copper price of $3.99 per pound, compared to total revenue of $653.6 million, which is comprised of stream revenue of $436.3 million and royalty revenue of $217.3 million, at an average gold price of $1,799 per ounce, an average silver price of $25.14 per ounce and an average copper price of $4.23 per pound, for the year ended December 31, 2021.

Revenue and the corresponding production attributable to our stream and royalty interests, for the year ended December 31, 2022 compared to the year ended December 31, 2021 is as follows:

Revenue and Reported Production Subject to our Stream and Royalty Interests

Fiscal Years Ended June 30, 2021 and 2020

(In thousands, except reported production in ozs.

June 30, 2021

June 30, 2020

Year Ended December 31, 2022 and 2021

(In thousands, except reported production in oz.

December 31, 2022

December 31, 2021

Stream/Royalty

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Royalty (2) :

Cortez Legacy Zone

Cortez CC Zone

Total royalty revenue

Total Revenue

(1) Reported production relates to the amount of metal sales, subject to our stream and royalty interests, for the fiscal years ended June 30, 2021 and 2020, 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 year ended December 31, 2022 and 2021, and may differ from the operators’ public reporting.

(2) Refer to Item 2, Properties, for further discussion on our principal stream and royalty interests.

(3) Individually, with the exception of the Rainy River stream (5.5% in fiscal year 2021 and 2020), 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 for the fiscal year ended June 30, 2021, compared with the fiscal year ended June 30, 2020, resulted primarily from an increase in the average gold, silver and copper prices compared to the prior period and an increase in production within the royalty segment.

Gold and silver ounces and copper pounds purchased and sold during the fiscal years ended June 30, 2021 and 2020, as well as gold, silver and copper in inventory as of June 30, 2021 and 2020, for our stream interests were as follows:

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

(3) Individually, with the exception of the Rainy River stream (5.3% for the year ended December 31, 2022 and 5.7% for the year ended December 31, 2021) and Wassa (5.2% for the year ended December 31, 2022), 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 for the year ended December 31, 2022, compared with year ended December 31, 2021, resulted primarily from lower gold sales at Andacollo, lower gold and silver sales at Pueblo Viejo and lower gold production at Cortez and Peñasquito.

These decreases were partially offset by an increase in gold sales at Mount Milligan and Xavantina, higher silver sales at Khoemac a u and $5.2 million of revenue from the newly acquired royalties at Cortez compared to the prior period.

Gold and silver ounces and copper pounds purchased and sold during the year ended December 31, 2022 and 2021, as well as gold, silver and copper in inventory as of December 31, 2022 and 2021, for our stream interests were as follows:

December 31, 2022

December 31, 2021

December 31, 2022

December 31, 2021

Purchases (oz.)

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Mount Milligan

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

December 31, 2022

December 31, 2021

December 31, 2022

December 31, 2021

Silver Stream

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Inventory (oz.)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

December 31, 2022

December 31, 2021

December 31, 2022

December 31, 2021

Copper Stream

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Mount Milligan

Cost of sales increased to $92.9 million for the fiscal year ended June 30, 2021, from $83.9 million for the fiscal year ended June 30, 2020.

The increase was primarily due to an increase in the gold, silver and copper prices and an increase in copper sales at Mount Milligan when compared to the prior period.

This increase was partially offset by a decrease in gold sales at Mount Milligan and Andacollo when compared to the prior period.

Cost of sales decreased to $94.6 million for the year ended December 31, 2022, from $98.5 million for the year ended December 31, 2021.

The decrease was primarily due to a decrease in gold sales at Andacollo and a decrease in gold and silver sales at Pueblo Viejo when compared to the prior period.

This decrease was partially offset by an increase in gold sales at Mount Milligan when compared to the prior period.

Cost of sales, which excludes depreciation, depletion and amortization, 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 decreased to $28.4 million for the fiscal year ended June 30, 2021, from $30.2 million for the fiscal year ended June 30, 2020.

The decrease was primarily due to additional non-cash stock compensation expense of approximately $3.3 million recognized in the prior year period due to the accelerated vesting of certain equity awards in connection with the retirement of our former President and Chief Executive Officer and our former Vice President and General Counsel in January 2020.

Exploration costs decreased to $0.6 million for the fiscal year ended June 30, 2021, from $5.2 million for the fiscal year ended June 30, 2020.

Exploration costs were specific to the exploration and advancement of the Peak Gold JV.

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

Depreciation, depletion and amortization increased to $183.6 million for the fiscal year ended June 30, 2021, from $175.4 million for the fiscal year ended June 30, 2020.

The increase was primarily due to higher copper sales at Mount Milligan and an increase in depletion rates at Mount Milligan through the six months ended December 31, 2020, as previously discussed in our Annual Report on Form 10-K for the year ended June 30, 2020.

The increase in depreciation, depletion and amortization was offset by a decrease in gold sales at Mount Milligan and Andacollo.

We recognized a gain in fair value changes in equity securities of $6.0 million for the fiscal year ended June 30, 2021, compared to a gain in fair value changes in equity securities of $1.4 million for the fiscal year ended June 30, 2020.

The change was primarily due to an increase in the fair value of marketable equity securities as discussed further in Note 5 of our notes to consolidated financial statements.

Interest and other expense decreased to $6.4 million for the fiscal year ended June 30, 2021, from $9.8 million for the fiscal year ended June 30, 2020.

The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding during the current period when compared to the prior period.

General and administrative costs increased to $34.6 million for year ended December 31, 2022, from $29.3 million for the year ended December 31, 2021.

The increase was primarily due to higher employee related costs and non-cash stock compensation expense.

Depreciation, depletion and amortization decreased to $178.9 million for the year ended December 31, 2022, from $189.0 million for the year ended December 31, 2021.

The decrease was primarily due to lower depletion rates at Mount Milligan compared to the prior period.

Refer to Note 4 of our notes to consolidated financial statements for further discussion on the decrease in depletion rates at Mount Milligan.

This decrease was partially offset by additional depletion from Khoemac a u which produced first deliveries in the September 30, 2021 quarter.

During the year ended December 31, 2022, we recognized an impairment loss of $4.3 million on the carrying value of a non-principal exploration stage royalty due to new legal information received.

Refer to Note 4 of our notes to consolidated financial statements for further discussion on the impairment.

We recognized a loss in fair value changes in equity securities of $1.5 million for the year ended December 31, 2022, compared to a gain in fair value changes in equity securities of $2.5 million for the year ended December 31, 2021.

The change was primarily due to a decrease in the fair value of marketable equity securities as discussed further in Note 5 of our notes to consolidated financial statements.

Interest and other expense increased to $17.2 million for the year ended December 31, 2022, from $5.8 million for the year ended December 31, 2021.

The increase in the current period was primarily attributable to higher interest expense as a

result of higher average amounts outstanding under our revolving credit facility and higher interest rates when compared to the prior period.

Refer to Note 6 of our notes to consolidated financial statements for further discussion on our debt.

During the fiscal year ended June 30, 2021, we recognized income tax expense totaling $36.9 million, compared with an income tax benefit of $3.7 million during the fiscal year ended June 30, 2020.

This resulted in an effective tax rate of 10.9% during the current period, compared with (1.9%) in the prior period.

The effective tax rate for the fiscal year ended June 30, 2021, was primarily impacted by the release of uncertain tax liabilities resulting from settlement agreements with foreign tax authorities in various jurisdictions.

The effective tax rate for the fiscal year ended June 30, 2020, was primarily impacted by a net step-up of tax assets due to the enactment of the Federal Act on Tax Reform and AHV Financing in Switzerland (Swiss Tax Reform) and the release of an uncertain tax liability resulting from a settlement agreement with a foreign tax authority.

Income tax expense was $32.9 million for the year ended December 31, 2022, as compared to $53.2 million for the year ended December 31, 2021, which resulted in an effective tax rate of 12.1% in the current period and 16.2% in the prior period.

The effective tax rate for the year ended December 31, 2022, was primarily impacted by the release of a valuation allowance on certain foreign deferred tax assets.

The effective tax rate for the year ended December 31, 2021, was impacted by the release of uncertain tax positions resulting from a settlement agreement with a foreign tax authority and a change in estimates, partially offset by a foreign tax rate adjustment resulting in a revaluation of certain deferred tax assets.

Liquidity and Capital Resources

At June 30, 2021, we had current assets of $297.1 million compared to current liabilities of $52.1 million resulting in working capital of $245.0 million and a current ratio of 6 to 1.

This compares to current assets of $362.2 million and current liabilities of $43.6 million at June 30, 2020, resulting in working capital of $318.6 million and a current ratio of approximately 8 to 1.

The decrease in our working capital was primarily attributable to the repayment of our outstanding debt, which is discussed further below under “Summary of Cash Flows.”

During the fiscal year ended June 30, 2021, liquidity needs were met from $407.2 million in net cash provided by operating activities and our available cash resources.

As of June 30, 2021, we had $1 billion available and no amounts outstanding 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 June 30, 2021.

Refer to Note 6 of our notes to consolidated financial statements and below (“Recent Liquidity and Capital Resource Developments”) for further discussion on our debt.

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

We believe that our current financial resources and operating cash flows will be adequate to cover our operating needs for the foreseeable future.

Our current financial resources are also available to fund dividends and for acquisitions of stream and royalty interests, including any conditional funding schedules.

Our long-term capital requirements are primarily affected by our ongoing acquisition activities.

We use our liquidity and capital resources to fund dividends and for the acquisition of stream and royalty interests, including any conditional funding schedules.

Our short-term and long-term capital requirements are primarily affected by our ongoing acquisition activities.

We currently, and generally at any time, have acquisition opportunities in various stages of active review.

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We occasionally borrow and repay amounts under our revolving credit facility and may do so in the future.

We believe that our current liquidity and capital resources will be adequate to cover our operating needs for the foreseeable future.

At December 31, 2022, we had working capital of $122.2 million, including $118.6 million of cash and equivalents.

This compares to working capital of $154.6 million, including $143.6 million of cash and equivalents at December 31, 2021.

The decrease in our working capital was primarily attributable to the acquisition of royalty and stream interests during the year ended December 31, 2022, which is discussed further below under “Summary of Cash Flows.”

During the year ended December 31, 2022, liquidity needs were met from $417.3 million in net cash provided by operating activities and our available cash resources.

Working capital, combined with the $425 million of available capacity under our revolving credit facility, resulted in approximately $547.2 million of total liquidity at December 31, 2022.

Refer to Note 6 of our notes to consolidated financial statements and below (“Recent Liquidity and Capital Resource Developments”) for further discussion on our debt.

At year ended December 31, 2022, our contractual cash obligations are solely comprised of operating leases.

We believe we will be able to fund all current cash obligations from net cash provided by operating activities.

For additional information on our operating leases, see Note 7 of our notes to consolidated financial statements.

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

Recent Liquidity and Capital Resource Developments

Revolving Credit Facility Amendment

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

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

Revolving Credit Facility Drawdown

On July 2, 2022, we borrowed $500 million under our revolving credit facility for the acquisition of the Rio Tinto Royalty, and on September 6, 2022, we repaid $50 million of the outstanding borrowings.

Refer to Note 3 of our notes to consolidated financial statements for further discussion on the Rio Tinto Royalty acquisition.

On December 6, 2022, we repaid $75 million of outstanding borrowings on our revolving credit facility, and on December 28, 2022 we borrowed $200 million for the acquisition of the Idaho Royalty.

Refer to Note 3 of our notes to consolidated financial statements for further discussion on the acquisition of the Idaho Royalty.

As of December 31, 2022, we had $575 million outstanding under our revolving credit facility.

Dividend Increase

On November 17, 2020, we announced an increase in our annual dividend for calendar year 2021 from $1.12 to $1.20, payable on a quarterly basis of $0.30 per share.

On November 15, 2022, we announced an increase in our annual dividend for calendar year 2023 from $1.40 to $1.50 per share, payable on a quarterly basis of $0.375 per share.

The newly declared dividend is 7% higher than the dividend paid during calendar year 2022.

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We expect to pay our annual dividend using cash on hand.

Summary of Cash Flows

Summary of Cash Flows (In thousands)

Cash flows from operating activities:

Net income and comprehensive income

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

Depreciation, depletion and amortization

Non-cash employee stock compensation expense

Fair value changes in equity securities

Deferred tax (benefit) expense

Impairment of royalty interests

Changes in assets and liabilities:

Royalty receivables

Stream inventory

Income tax receivable

Prepaid expenses and other assets

Accounts payable

Income tax payable

Uncertain tax positions

Other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Acquisition of stream and royalty interests

Khoemac a u subordinated debt facility

Proceeds from sale of equity securities

Net cash used in by 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 cash provided by (used in) financing activities

Net decrease in cash and equivalents

Cash and equivalents at beginning of period

Cash and equivalents at end of period

Operating Activities

Net cash provided by operating activities totaled $407.2 million for the fiscal year ended June 30, 2021, compared to $340.8 million for the fiscal year ended June 30, 2020.

The change was primarily due to an increase in proceeds received from our stream and royalty interests, net of cost of sales and production taxes, of approximately $86.1 million over the fiscal year ended June 30, 2020.

This increase was offset by $27.4 million of higher cash taxes paid, net of refunds over the fiscal year ended June 30, 2020.

The increase in cash taxes paid during the current period is primarily attributable to an increase in required estimated tax payments due to increased taxable income and payments that were deferred due to COVID-19.

Net cash provided by operating activities totaled $417.3 million for the year ended December 31, 2022, compared to $461.9 million for the year ended December 31, 2021.

The change was primarily due to a $35.9 million decrease in cash proceeds received from our stream and royalty interests, net of cost of sales, compared to the prior period.

Investing Activities

Net cash used in investing activities totaled $116.7 million for the fiscal year ended June 30, 2021, compared to net cash used in investing activities of $152.9 million for the fiscal year ended June 30, 2020.

The decrease in net cash used in investing activities was primarily due to $49.2 million received for the sale of our Peak Gold JV investment and $21.3 million for the sale of equity securities.

This decrease was partially offset by the $18.0 million KCM drew against the subordinated debt facility.

Net cash used in investing activities totaled $922.9 million for the year ended December 31, 2022, compared to net cash used in investing activities of $417.0 million for the year ended December 31, 2021.

The increase over the prior period was primarily due to the GBR, Rio Tinto Royalty and Idaho Royalty acquisitions.

Financing Activities

Net cash used in financing activities totaled $383.6 million for the fiscal year ended June 30, 2021, compared to net cash provided by financing activities of $11.8 million for the fiscal year ended June 30, 2020.

The increase in net cash used in financing activities was primarily due to an increase in repayments on our revolving credit facility.

We repaid $305.0 million on our revolving credit facility during the fiscal year ended June 30, 2021, compared to $115.0 million during the fiscal year ended June 30, 2020.

Contractual Obligations

Our contractual obligations as of June 30, 2021, were as follows:

Payments Due by Period (in thousands)

Contractual Obligations

Operating leases

The above table does not include stream commitments as discussed in Note 15 of our notes to consolidated financial statements.

We believe we will be able to fund all current obligations from net cash provided by operating activities.

Off - Balance-Sheet Arrangements

We do not have any off-balance-sheet arrangements.

Critical Accounting Policies

Listed below are the accounting policies we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.

Please also refer to Note 2 of our notes to consolidated financial statements for a discussion on recently adopted and issued accounting pronouncements.

Net cash provided by financing activities totaled $480.6 million for the year ended December 31, 2022, compared to net cash used in financing activities of $283.2 million for the year ended December 31, 2021.

The change was primarily due to an increase in the debt outstanding for the year ended December 31, 2022 that was used to fund acquisitions of our new royalty interests at Cortez and the Great Bear Project compared to the prior period.

Critical Accounting Estimates

Use of Estimates

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GAAP”), requires management to make estimates and assumptions.

These estimates and assumptions affect the reported amounts of assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

We rely on reserve estimates reported by the operators of the properties on which we hold stream and royalty interests.

These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain.

We rely on mineral reserve and mineral resource estimates reported by the operators of the properties on which we hold stream and royalty interests.

These estimates and the underlying assumptions affect the potential impairments of long-lived assets and the ability to realize income tax benefits associated with deferred tax assets.

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

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

Development stage mineral properties, which are not yet in production, are not depleted until the property begins production.

Exploration stage mineral properties, where there are no proven and probable reserves, are not depleted.

At such time as the associated exploration stage mineral interests are converted to proven and probable reserves, the mineral property is depleted over its life, using proven and probable reserves.

Exploration stage mineral properties, where there are no proven and probable mineral reserves, are not depleted.

When the associated exploration stage mineral interests are converted to proven and probable mineral reserves, the mineral property becomes a development stage mineral property.

Asset Impairment

We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts of an asset or group of assets may not be recoverable.

The recoverability of the carrying value of stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest using estimates of proven and probable reserves and other relevant information received from the operators.

The recoverability of the carrying value of stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest using estimates of proven and probable mineral reserves, mineral resources and other relevant information received from the operators.

We evaluate the recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in the price of gold, silver, copper and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur or may be reduced in the future, thus potentially affecting the future recoverability of our stream or royalty interests.

Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows.

Estimates of gold, silver, copper, and other metal prices, and operators’ estimates of proven and probable reserves or mineralized material related to our stream or royalty properties are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties.

It is possible that

changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests.

Refer to Note 4 of our notes to consolidated financial statements for a discussion of the impairment assessment results for the fiscal year ended June 30, 2021.

Estimates of gold, silver, copper, and other metal prices, and operators’ estimates of proven and probable mineral reserves or mineral resources related to our stream or royalty properties are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties.

It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests.

Refer to Note 4 of our notes to consolidated financial statements for a discussion of the impairment assessment results for the year ended December 31, 2022.

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

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

In accordance with this guidance, revenue attributable to our stream and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers.

The amount of revenue we recognize further reflects the consideration to which we are entitled under the respective stream or royalty agreement.

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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 of the metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement.

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 receipt and purchase of the metal.

Gold, silver and copper received under our metal stream 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 stream agreement and our sales policy in effect at the time) commencing shortly after 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.

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As a royalty holder, we act as a passive entity in the production and operations of the mining project, and the third-party operator of the mining project is responsible for all mining activities, including subsequent marketing and delivery of all metal production to their ultimate customer.

In all of our material royalty interest arrangements, we have concluded that we transfer control of our interest in the metal production to the operator at the point at which production occurs, and thus, the operator is our customer.

In all of our material

royalty interest arrangements, we have concluded that we transfer control of our interest in the metal production to the operator at the point at which production occurs, and thus, the operator is our customer.

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.

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 10 days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales activity in effect at the time) commencing shortly after receipt and purchase of the metal.

Temporary modifications may be made to our metal sales guidelines from time to time as required

to meet our needs.

Revenue from gold, silver and copper sales is recognized on the date of the settlement, which is also the date that title to the metal passes to the purchaser.

Cost of Sales

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

Exploration Costs

Exploration costs were specific to our Peak Gold JV for exploration and advancement of the Peak Gold project as discussed further in Note 3 of our notes to consolidated financial statements.

Exploration costs associated with the exploration and advancement of Peak Gold were expensed when incurred.

As a result of the sale of our Peak Gold project as discussed further in this MD&A and in Note 3 to our consolidated financial statements, we do not expect to incur exploration costs in the future.

Our annual tax rate is based on income, statutory tax rates in effect and tax planning opportunities available to us in the various jurisdictions in which the Company operates.

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

operators’ expected operating and financial performance, including production, deliveries, mine plans and reserves, development, cash flows and capital expenditures;

planned and potential acquisitions or dispositions, including funding schedules and conditions;

liquidity, financing and stockholder returns;

our overall investment portfolio;

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

operators’ expected operating and financial performance, including production, deliveries, mine plans, estimates of mineral resources and mineral reserves, development, cash flows and liquidity, capital requirements and capital expenditures;

influence on our operators’ operations;

benefits from acquisitions;

receipt of metal deliveries;

liquidity, capital resources, financing and stockholder returns;

borrowings and repayments under our revolving credit facility;

growing our portfolio of assets;

the materiality of properties within our portfolio;

impact of inadequately assessing new acquisitions;

macroeconomic and market conditions;

impacts of climate-change;

diversity and inclusion efforts;

returns on investments;

sufficiency of contractual protections;

adoption of new accounting standards;

valuation allowances;

assumptions related to fair value of equity awards;

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

potential impairments;

or tax changes.

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 variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, changes to mine plans 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;

operating activities or financial performance of properties on which we hold stream or royalty interests, including variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, operators’ changes to mine plans and mineral reserves and mineral resources (including updated mineral reserve and mineral resource information), 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;

risks associated with doing business in foreign countries;

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adverse economic and market conditions;

impact of health epidemics and pandemics;

changes in laws or regulations governing us, operators or operating properties;

changes in management and key employees;

and other factors described elsewhere in this report.

and other factors described elsewhere in this report, including in Item 1A – Risk Factors.

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

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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-K

Item 7. Management’s Discussion and Analysis