What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 63 added, 199 removed, 326 unchanged (45% of the section changed)

3 unchanged sentences

(Unaudited, amounts in thousands except share data)

September 30,

Cash and equivalents

29 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Revenue (Note 5)

23 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended September 30, 2022, and 2021

(unaudited, amounts in thousands except share data)

Royal Gold Stockholders

Common Shares

Non-controlling

Balance at June 30, 2022

Stock-based compensation and related share issuances

Distributions to non-controlling interests

Net income and comprehensive income

Dividends declared

Balance at September 30, 2022

Royal Gold Stockholders

Common Shares

Non-controlling

Balance at June 30, 2021

Stock-based compensation and related share issuances

Distributions to non-controlling interests

Net income and comprehensive income

Dividends declared

Balance at September 30, 2021

ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Nine Months ended September 30, 2022, and 2021

Three months ended March 31, 2023, and 2022

(unaudited, amounts in thousands except share data)

7 unchanged sentences

Dividends declared

Balance at September 30, 2022

Balance at March 31, 2023

Royal Gold Stockholders

6 unchanged sentences

Dividends declared

Balance at September 30, 2021

Balance at March 31, 2022

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

2 unchanged sentences

(Unaudited, amounts in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

4 unchanged sentences

Fair value changes in equity securities

Deferred tax (benefit) expense

Deferred tax expense

Changes in assets and liabilities:

5 unchanged sentences

Income tax payable

Uncertain tax positions

Other liabilities

2 unchanged sentences

Acquisition of stream and royalty interests

Khoemac a u subordinated debt facility

Proceeds from sale of equity securities

Net cash used in investing activities

1 unchanged sentence

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

Net cash used in financing activities

Net increase in cash and equivalents

Cash and equivalents at beginning of period

15 unchanged sentences

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

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2022.

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

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2023.

These interim unaudited consolidated financial statements should be read in conjunction with our Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 16, 2023 (“2022 10-K”).

Recent Accounting Standards

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

Acquisition of Great Bear Royalties Corporation

On September 9, 2022, we completed the previously announced 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 and will be registered on title to the relevant claims.

Royalty payments will be made quarterly with applicable standard deductions.

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.

The Great Bear Royalty is the sole material asset of GBR and represents substantially all the fair value of GBR’s gross assets.

As a result, the GBR acquisition has been accounted for as an asset acquisition and the fair values of the GBR assets acquired are shown below:

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(in thousands)

Purchase Price

Royalty interests in mineral property (Great Bear royalty)

Total allocated purchase price

The $ 151.1 million allocated fair value of the Great Bear Royalty, plus $ 2.3 million of direct transaction costs and deferred tax of $ 53.6 million have been capitalized with the Great Bear Royalty interest and allocated to exploration stage royalty interests within Stream and royalty interests, net on our consolidated balance sheets.

The deferred tax was recorded as a gross-up to the Great Bear Royalty mineral interest as prescribed by the applicable guidance.

Acquisition of Additional Royalty Interest on Cortez Complex

On August 2, 2022, we acquired a sliding scale gross royalty (“Cortez Complex Royalty”) on production from an area including the Cortez mine operational area and the Fourmile development project (the “Cortez Complex”) for cash consideration of $ 525 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, 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.

Based on information available, the royalty would not cover the existing deposits within the Robertson property.

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

Deductions from the Cortez Complex Royalty payments are limited to third-party royalties that existed prior to the creation of the royalty in 2008, which include the existing Crossroads and Pipeline royalties owned by Royal Gold.

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

The acquisition has been accounted for as an asset acquisition and the $ 525 million cash consideration, plus direct acquisition costs, have been recorded and allocated between production and exploration stage royalty interests (Note 3) within Stream and royalty interests, net on our consolidated balance sheets.

On the date of acquisition, approximately $ 199 million and $ 326 million was allocated to production stage and exploration stage royalty interests, respectively.

The acquisition cost of the production stage Cortez Complex Royalty will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by NGM.

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

During the quarter ended September 30, 2022, the production threshold was reached and approximately 3,300 ounces of gold production was attributable to the royalty.

We expect all production from the Cortez Complex in the fourth quarter of 2022 to be subject to the royalty.

The royalty is payable within forty-five days after the end of each calendar quarter.

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.

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

Khoemac a u Silver Stream

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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

As of September 30, 2022, $ 25.0 million of the subordinated debt facility, and $ 4.4 million of accrued interest remains outstanding on the Khoemac a u subordinated debt facility, and these amounts are included in Other assets in our consolidated balance sheets.

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

STREAM AND ROYALTY INTERESTS, NET

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

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

The following tables summarize our stream and royalty interests, net as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 (Amounts in thousands):

Accumulated Depletion

2 unchanged sentences

Total production stage stream interests

( 1,056,180 )

Production stage royalty interests:

Cortez (Legacy Zone and CC Zone)

Total production stage royalty interests

6 unchanged sentences

Exploration stage royalty interests:

Cortez (Legacy Zone and CC Zone)

Total exploration stage stream and royalty interests

8 unchanged sentences

Total production stage stream interests

( 1,022,428 )

Production stage royalty interests:

Cortez (Legacy Zone and CC Zone)

Total production stage royalty interests

6 unchanged sentences

Exploration stage royalty interests:

Cortez (Legacy Zone and CC Zone)

Total exploration stage royalty interests

1 unchanged sentence

( 1,634,113 )

Mount Milligan

On October 4, 2022, Centerra Gold, Inc.

(“Centerra”) announced the highlights of an updated life of mine plan for Mount Milligan which provided, among other things, a four-year extension of the mine life to 2033 and increases to the proven and probable reserves.

As a result of the increase in proven and probable reserves, the gold and copper depletion rates on our Mount Milligan stream decreased to $ 416 per ounce of gold and $ 1.06 per pound of copper as of September 30, 2022 from $ 703 per ounce of gold and $ 1.53 per pound of copper.

Centerra reported that it expects to file a new technical report detailing the life of mine plan within 45 days of October 4, 2022.

MARKETABLE EQUITY SECURITIES

As of September 30, 2022, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc, 250,000 common shares of Goldon Resources Ltd.

As of March 31, 2023, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc, 250,000 common shares of Goldon Resources Ltd.

and 1,242,500 common shares of Mountain Boy Minerals Ltd.

The common shares of Goldon Resources Ltd.

and Mountain Boy Minerals Ltd.

were acquired as part of the GBR acquisition.

Our marketable equity securities are measured at fair value (Note 11) each reporting period with any changes in fair value recognized in net income.

Our marketable equity securities are measured at fair value (Note 10) each reporting period with any changes in fair value recognized in net income (amounts in thousands).

Carrying value of marketable securities (1)

Change in fair value of marketable securities

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

The fair value of our marketable equity securities increased $ 0.4 million for the three months ended September 30, 2022, and decreased $ 1.2 million for nine months ended September 30, 2022, and increased $ 0.2 million and $ 4.0 million for the three and nine months ended September 30, 2021, respectively.

These changes are included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income.

The carrying value of our marketable equity securities as of September 30, 2022 and December 31, 2021, was $ 0.7 million and $ 1.7 million, respectively, and is included in Other assets on our consolidated balance sheets.

Our debt as of September 30, 2022 and December 31, 2021 consists of the following (amounts in thousands):

As of September 30, 2022

Our debt as of March 31, 2023 and December 31, 2022 consists of the following (amounts in thousands):

As of March 31, 2023

As of December 31, 2022

4 unchanged sentences

Revolving credit facility

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

Revolving credit facility

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

Refer to Note 2 of our notes to consolidated financial statements for further discussion on the Cortez Complex Royalty acquisition.

As of September 30, 2022, we had $ 450 million outstanding and $ 550 million available under our revolving credit facility dated June 2, 2017, and as amended.

The interest rate on borrowings under our revolving credit facility as of September 30, 2022, was LIBOR plus 1.10 % for an all-in rate of 4.2 %.

Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $ 3.9 million and $ 4.4 million for the three and nine months ended September 30, 2022, respectively, and $ 1.0 million and $ 2.1 million for the three and nine months ended September 30, 2021, respectively.

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

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

On March 6, 2023, we repaid $ 75 million of outstanding borrowings on our revolving credit facility.

As of March 31, 2023, we had $ 500 million outstanding and $ 500 million available under our revolving credit facility dated June 2, 2017, and as amended.

The interest rate on borrowings under our revolving credit facility as of March 31, 2023, was LIBOR plus 1.20 % for an all-in rate of 6.2 %.

Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $ 8.5 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively.

We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under our revolving credit facility as of March 31, 2023.

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

Revenue Recognition

7 unchanged sentences

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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.

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.

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.

3 unchanged sentences

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

We are entitled to payment for our royalty interest in a mining project based on a contractually specified commodity price (for example, a monthly or quarterly average spot price) for the period in which metal production occurs.

We are entitled to payment for our royalty interest in a mining project based on a contractually specified commodity price (for example, a monthly or quarterly average spot price) for

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

the period in which metal production occurs.

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.

7 unchanged sentences

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

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

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

Please also refer to our “Use of Estimates” accounting policy discussed in our 2022 10-K.

For the three months ended March 31, 2023, royalty revenue that was estimated or was attributable to metal production for a period prior to March 31, 2023, was not material.

Disaggregation of Revenue

2 unchanged sentences

These identified revenue sources are consistent with our reportable segments as discussed in Note 9.

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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

Three Months Ended

Nine Months Ended

September 30,

Stream revenue:

3 unchanged sentences

Total revenue

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Revenue attributable to our principal stream and royalty interests is disaggregated as follows (amounts in thousands):

Three Months Ended

Nine Months Ended

September 30,

Stream revenue:

5 unchanged sentences

Royalty revenue:

Cortez Legacy Zone

Cortez CC Zone

Gold, Silver, Lead & Zinc

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Restricted stock

4 unchanged sentences

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

During the three and nine months ended September 30, 2022 and 2021, we granted the following stock-based compensation awards:

During the three months ended March 31, 2023 and 2022, we granted the following stock-based compensation awards:

Three Months Ended

Nine Months Ended

September 30,

(Number of shares)

Performance stock (at maximum 200 % attainment)

1 unchanged sentence

Total equity awards granted

As of September 30, 2022, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

As of March 31, 2023, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:

average vesting

11 unchanged sentences

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

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

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

Three Months Ended

Nine Months Ended

September 30,

Net income attributable to Royal Gold common stockholders

2 unchanged sentences

Weighted-average shares for diluted EPS

The following table provides the income tax expense (amounts in thousands) and effective tax rates for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

Income tax expense

2 unchanged sentences

Notes to Consolidated Financial Statements

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

The effective tax rate for the nine months ended September 30, 2021, included a discrete tax benefit of $ 12.0 million attributable to the settlement of an uncertain tax position with a foreign jurisdiction.

SEGMENT INFORMATION

1 unchanged sentence

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

As of September 30, 2022

As of March 31, 2023

As of December 31, 2022

5 unchanged sentences

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

Three Months Ended September 30, 2022

Cost of sales (1)

Production taxes

Depletion (2)

Segment gross profit

Stream interests

Royalty interests

Three Months Ended September 30, 2021

Cost of sales (1)

Production taxes

Depletion (2)

Segment gross profit

Stream interests

Royalty interests

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Cost of sales (1)

4 unchanged sentences

Royalty interests

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Cost of sales (1)

5 unchanged sentences

(1) Excludes depreciation, depletion and amortization.

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

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

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

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

Three Months Ended

Nine Months Ended

September 30,

Total segment gross profit

7 unchanged sentences

Income before income taxes

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

Our revenue by reportable segment for the three months ended March 31, 2023 and 2022 is geographically distributed as shown in the following table (amounts in thousands):

Three Months Ended

Nine Months Ended

September 30,

Stream interests:

12 unchanged sentences

Quoted prices for identical instruments in active markets;

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Quoted prices for similar instruments in active markets;

1 unchanged sentence

and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets;

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

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

As of September 30, 2022

As of March 31, 2023

Carrying Value

9 unchanged sentences

warrants (Note 3) classified within Level 2 of the fair value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets.

The carrying value of our revolving credit facility (Note 5) approximates fair value as of September 30, 2022.

As of September 30, 2022, we had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with stream and royalty interests, intangible assets and other long-lived assets.

The carrying value of our revolving credit facility (Note 4) approximates fair value as of March 31, 2023.

As of March 31, 2023, we had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with stream and royalty interests, intangible assets and other long-lived assets.

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

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES

NX Gold Exploration Payment

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

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

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

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

Xavantina Exploration Payment

On April 20, 2023, we made a $ 2.4 million advance payment to a subsidiary of Ero Gold Corporation as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions.

This payment will be recorded to exploration stage stream interests within Stream and royalty interests, net on our consolidated balance sheets during the second quarter of 2023.

Advance payments of $ 4.4 million remain if Ero meets certain success-based targets related to regional exploration and mineral resource additions through calendar 2024.

Refer to Note 3 of our 2022 10-K for further information on the Xavantina (formerly referred to as NX Gold) Gold Stream Acquisition.

Ilovica Gold Stream Acquisition

As of September 30, 2022, our conditional funding schedule of $ 163.75 million, as part of the Ilovica gold stream acquisition entered into in October 2014, remains subject to certain conditions.

As of March 31, 2023, our conditional funding schedule of $ 163.75 million, as part of the Ilovica gold stream acquisition entered into in October 2014, remains subject to certain conditions.

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

What changed 10-Q

Item 1. Financial Statements