Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Presentation
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating the financial condition and results of operations of Royal Gold. You should read this MD&A in conjunction with our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements included in 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”).
This MD&A contains forward-looking information. You should review our important note about forward-looking statements following this MD&A.
We do not own, develop, or mine the properties on which we hold stream or royalty interests. Certain information provided in this Quarterly Report on Form 10-Q about operating properties in which we hold interests, including information about mineral resources and reserves, historical production, production estimates, property descriptions, and property developments, was provided to us by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the SEC. We have not verified, and are not in a position to verify, and expressly disclaim any responsibility for the accuracy, completeness, or fairness of, this third-party information and refer the reader to the public reports filed by the operators for information regarding those properties.
Unless the context otherwise requires, references to “Royal Gold,” the “Company,” “we,” “us,” and “our” refer to Royal Gold, Inc. and its consolidated subsidiaries.
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 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 March 31, 2023, we owned nine stream interests, which are on eight producing properties and one development stage property. Stream interests accounted for approximately 67% and 65% of our total revenue for the three months ended March 31, 2023 and 2022, 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 March 31, 2023, we owned royalty interests on 32 producing 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 33% and 35% of our total revenue for the three months ended March 31, 2023 and 2022, 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.
We are continually reviewing opportunities to grow our portfolio, whether through the creation or acquisition of new or existing stream or royalty interests or other acquisition activity. We generally have acquisition opportunities in various
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stages of review. Our review process may include, for example, engaging consultants and advisors to analyze an opportunity; analysis of technical, financial, legal, environmental, social, governance and other confidential information regarding an opportunity; submission of indications of interest and term sheets; participation in preliminary discussions and negotiations; and involvement as a bidder in competitive processes.
Business Trends and Uncertainties
Metal Prices
Our financial results are primarily tied to the price of gold, silver, copper, and other metals. Metal prices have fluctuated widely in recent years and we expect this volatility to continue. 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, 2023 and 2022, average metal prices and percentages of revenue by metal were as follows:
Three Months Ended
March 31, 2023
March 31, 2022
Metal
Average
Price
Percentage
of Revenue
Average
Price
Percentage
of Revenue
Gold ($/ounce) (1)
$
1,890
71%
$
1,877
71%
Silver ($/ounce) (1)
$
22.55
12%
$
24.01
10%
Copper ($/pound) (2)
$
4.05
14%
$
4.53
14%
Other
N/A
3%
N/A
5%
(1) Based on the average U.S. dollars London Bullion Market Association PM fixing price for gold and daily fixing price for silver, as applicable.
(2) Based on the average U.S. dollars London Metals Exchange settlement price for copper.
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. 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.
Operators’ Production Estimates by Stream and Royalty Interest for Calendar 2023
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 2023, as well as actual production through March 31, 2023 (except as otherwise noted), for our principal properties as reported to us by the operators.
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Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 2023
Principal Producing Properties
Calendar Year 2023 Operator’s Production
Calendar Year 2023 Operator’s Production
Estimate (1)
Actual (2)
Gold
Silver
Base Metals
Gold
Silver
Base Metals
Stream/Royalty
(oz.)
(oz.)
(lbs.)
(oz.)
(oz.)
(lbs.)
Stream:
Andacollo (3)
22,000 - 27,000
5,500
Mount Milligan (4)
160,000 - 170,000
N/A
Copper
60 - 70 Million
N/A
Pueblo Viejo (5)
470,000 - 520,000
N/A
89,000
N/A
Khoemac a u (6)
1.5 - 1.7 Million
0.4 Million
Royalty:
Cortez (7)
940,000 - 1,060,000
228,000
Peñasquito (8)
330,000 - 370,000
31 - 35 Million
85,000
7.5 Million
Lead
170 - 190 Million
41 Million
Zinc
420 - 460 Million
102 Million
(1) Production estimates received from our operators are for calendar 2023. There can be no assurance that production estimates received from the operators will be achieved. Our stream interests can be affected by several factors that make it difficult to calculate our revenue for a period from the operator’s actual or estimated production for that same period. These factors include the timing of the operator’s concentrate shipments, the delivery of metal to us and the subsequent sale of the delivered metal. These factors do not typically affect our stream interests on operations that produce doré or our royalty interests. Please also refer to our cautionary language regarding forward-looking statements included herein, as well as the Risk Factors identified in Part I, Item 1A, of our 2022 10-K 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, 2023, through March 31, 2023, 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. Deliveries to us are determined using a fixed gold payability factor of 89%.
(4) The estimated production figures shown for Mount Milligan are payable gold and copper in concentrate. Actual figures reflect production through March 31, 2023.
(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 and actual production figures for Khoemac a u are payable silver in concentrate.
(7) The estimated and actual production figures for Cortez include the entirety of the Cortez Complex. Barrick reports total production from the Cortez Complex and does not report production separately for the Legacy Zone and CC Zone. Production estimates for the Legacy Zone are provided to us by Barrick and production estimates for 100% of the Cortez Complex are publicly disclosed by Barrick.
(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.
Property Developments
This section provides recent updates for our principal properties as reported by the operators, either directly to us or in their publicly available documents.
Stream Interests
Andacollo
Gold stream deliveries from Andacollo were approximately 5,200 ounces for the three months ended March 31, 2023, compared to approximately 6,100 ounces for the three months ended March 31, 2022. The decrease in deliveries resulted primarily from Andacollo experiencing lower gold grades, lower gold recoveries and lower tonnage milled. Teck Resources Limited (“Teck”) reported a significant rainfall event in July 2022 which caused operations to shut down for
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five days. As expected, the impact of this shutdown and unplanned maintenance in the third quarter of 2022 affected stream deliveries during the three months ended March 31, 2023.
Gold production at Andacollo has trended lower since the beginning of 2021 due to lower ore grades, as anticipated in the mine plan. According to Teck, the period of lower grades is expected to last through 2023, and the mine plan then anticipates a transition to higher grade ore as the next phase of mining is developed over the following years. Teck has reported that the current life of mine for Andacollo is expected to continue until 2035 and that additional permits or permit amendments will be required to execute the life of mine plan.
Khoemac a u Project
Silver stream deliveries from Khoemac a u were 427,500 ounces for the three months ended March 31, 2023, compared to approximately 115,210 ounces for the three months ended March 31, 2022. Increased stream deliveries resulted from the ramp-up of Khoemac a u.
According to Khoemac a u Copper Mining (Pty.) Limited (“KCM”), operations at Khoemac a u continued at nameplate capacity through the quarter ended March 31, 2023, after the target production rate of 3.65 million tonnes per year (10,000 tonnes per day) was achieved in December 2022. As projected in the mine plan, KCM expects payable silver production in 2023 to range between 1.5 to 1.7 million ounces, which is slightly below the life of mine average due to lower silver grades in the upper portion of the Zone 5 deposit and the top-down mining sequence.
Mount Milligan
Gold stream deliveries from Mount Milligan were approximately 13,900 ounces for the three months ended March 31, 2023, compared to approximately 10,000 ounces for the three months ended March 31, 2022. Increased gold deliveries resulted from differences in the timing of shipments and settlements during the periods.
Copper stream deliveries from Mount Milligan were approximately 3.56 million pounds during the three months ended March 31, 2023, compared to approximately 2.69 million pounds during the three months ended March 31, 2022. Increased copper deliveries resulted from differences in the timing of shipments and settlements during the periods.
In 2023, Centerra Gold Inc. (“Centerra”) expects production of between 160,000 and 170,000 ounces of gold and 60 million to 70 million pounds of copper from Mount Milligan. Centerra expects gold and copper production to be higher in the second half of 2023 with approximately 30% to 35% of concentrate sales expected to occur in the fourth quarter of 2023. The lower production compared to 2022 is due to mine sequencing. Centerra continues to optimize the life of mine plan for Mount Milligan and anticipates increases in both gold and copper production for 2024 and 2025 when compared to the annual figures included in the most recent Technical Report, dated November 7, 2022.
Pueblo Viejo
Gold stream deliveries from Pueblo Viejo were approximately 7,400 ounces for the three months ended March 31, 2023, compared to approximately 7,100 ounces for the three months ended March 31, 2022.
Silver stream deliveries were approximately 362,200 ounces for the three months ended March 31, 2023, compared to approximately 274,500 ounces for the three months ended March 31, 2022. During the current quarter, an additional 5,700 ounces of silver 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. The stream agreement terms include a fixed 70% silver recovery rate. If actual recovery rates fall below the contractual 70% recovery rate, ounces may be deferred and delivered in future periods as silver recovery allows. As of March 31, 2023, approximately 518,400 ounces remain deferred. We expect that silver recoveries could remain highly variable until the plant expansion project is complete and is running at full production levels. We do not expect material deliveries of deferred silver ounces while the plant ramps up to full production levels during 2023, and timing for the delivery of the entire deferred amount is uncertain.
On March 17, 2023, Barrick issued an updated Technical Report on the Pueblo Viejo mine to support the previously disclosed Mineral Resources and Mineral Reserves estimates for the mine as of December 31, 2022. According to Barrick, mining of the open pit is expected to continue to 2041 and processing of ore is expected to continue to 2044, with life of
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mine production from 2023 through 2044 of approximately 11.1 million ounces of gold and 49.9 million ounces of silver (Barrick’s 60% interest).
On May 3, 2023, Barrick provided an update on the plant expansion and mine life extension project at Pueblo Viejo in the Dominican Republic. With respect to the plant expansion, Barrick reported that the first ore has been processed through the crusher and it expects to substantially complete the commissioning of the new plant infrastructure and commence the ramp-up phase during the second quarter of 2023. With respect to the mine life extension, Barrick disclosed that technical and social studies for additional tailings storage capacity continued to advance, and a decision by the Government of the Dominican Republic on the Environmental and Social Impact Assessment for the proposed new Naranjo tailings storage facility (“TSF”) is expected during the first half of 2023. Barrick further reported that geotechnical drilling and site investigation are ongoing to support a feasibility study on the TSF, which is due for completion in the second quarter of 2024.
Barrick continues to expect gold production of 470,000 to 520,000 ounces in 2023 from its 60% interest in Pueblo Viejo. Our stream interests are applicable to production from Barrick’s interest at Pueblo Viejo.
Royalty Interests
Cortez
Production attributable to our royalty interest at the Cortez Complex was approximately 223,800 ounces of gold for the three months ended March 31, 2023, compared to approximately 102,000 ounces of gold for the three months ended March 31, 2022. The increase was primarily due to the addition of new royalties, the Rio Tinto Royalty, and the Idaho Royalty, covering the Cortez property.
As disclosed by Barrick on November 18, 2022, total gold production from the Cortez Complex is expected to be approximately 1.0 million ounces in 2023, and then increase from approximately 900,000 ounces in 2024 to approximately 1.3 million ounces in 2027. Royal Gold owns multiple royalty interests at the Cortez Complex, which for purposes of simplified disclosure have been divided into the Legacy Zone, consisting of the Crossroads and Pipeline deposits, and Cortez Complex Zone (“CC Zone”), consisting of the remaining deposits in the Cortez Complex.
For 2023, gold production from the Legacy Zone is expected to range from 450,000 to 480,000 ounces with a midpoint of approximately 465,000 ounces. 2023 gold production for the CC Zone is expected to be approximately 535,000 ounces.
For the period 2023 through 2027, gold production from the Legacy Zone is expected to average approximately 360,000 ounces per year. Production during this period is expected to vary around this average, with lower production expected in 2024 and 2025 and higher production expected in 2026 and 2027. All other production from the Cortez Complex during this period is expected to be sourced from the CC Zone.
The gross royalty rate applicable to the Legacy Zone is approximately 9.4%, and the gross rate applicable to the CC Zone is approximately 1.6%. At the Robertson project, Barrick expects first production in 2027 subject to the successful completion of feasibility and permitting activities, among other things. The gross royalty rate applicable to Robertson is approximately 0.45%.
Proven and probable mineral reserves for December 31, 2022, at the Cortez Complex include approximately 2.7 million ounces of gold for the Legacy Zone, which includes the Crossroads (47 million tonnes at a gold grade of 1.69 grams per tonne) and Pipeline deposits (7.6 million tonnes of ore at a gold grade of 0.63 grams per tonne), and assuming a gold price of $1,300 per ounce.
On May 3, 2023, Barrick reported that the timeline for the Goldrush Record of Decision (“ROD”) on the Goldrush project, which is located within the CC Zone, has been extended from the first half of 2023 and is now expected in the second half of 2023. Barrick also reported that mine development and test stoping in the Redhill zone is continuing and a minor permit modification has been approved that will allow underground development to continue until the ROD on the Goldrush Plan of Operations is received. According to Barrick, the extension to the permitting timeline is not expected to have a significant impact on the 2023 outlook and the potential impact, if any, on the outlook from 2024 onwards is currently being reviewed.
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Peñasquito
Production attributable to our royalty interest at Peñasquito was approximately 55,600 ounces of gold; 6.1 million ounces of silver; 36.4 million pounds of lead; and 99.2 million pounds of zinc for the three months ended March 31, 2023. Compared to approximately 133,400 ounces of gold; 7.7 million ounces of silver; 41.9 million pounds of lead; and 120 million pounds of zinc for the three months ended March 31, 2022. The site experienced lower production due to lower gold grades and lower recoveries for gold and other metals. Newmont Corporation (“Newmont”) stated that metal sales, which drive our royalty payments, were impacted by the build-up of concentrate inventory and the timing of concentrate shipments.
In 2023, Newmont expects lower gold grades and higher silver, lead and zinc grades, as a result of ore production being predominately from the Chile Colorado pit, with gold equivalent ounce (“GEO”) production expected to be similar to 2022 GEO production.
Results of Operations
Quarter Ended March 31, 2023, Compared to Quarter Ended March 31, 2022
For the quarter ended March 31, 2023, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $63.9 million, or $0.97 per basic and diluted share, as compared to net income of $65.7 million, or $1.00 per basic and diluted share, for the quarter ended March 31, 2022. The decrease in net income was primarily attributable to higher debt-related interest expense, as discussed below.
For the quarter ended March 31, 2023, we recognized total revenue of $170.4 million, comprised of stream revenue of $115.0 million and royalty revenue of $55.4 million at an average gold price of $1,890 per ounce, an average silver price of $22.55 per ounce and an average copper price of $4.05 per pound. This is compared to total revenue of $162.4 million for the three months ended March 31, 2022, 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. Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, are as follows:
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Revenue and Reported Production Subject to Our Stream and Royalty Interests
(Amounts in thousands, except reported production oz. and lbs.)
Three Months Ended
Three Months Ended
March 31, 2023
March 31, 2022
Reported
Reported
Stream/Royalty
Metal(s)
Revenue
Production (1)
Revenue
Production (1)
Stream (2) :
Mount Milligan
$
46,656
$
42,416
Gold
15,200
oz.
13,900
oz.
Copper
4.5
Mlbs.
3.6
Mlbs.
Pueblo Viejo
$
22,358
$
23,264
Gold
7,900
oz.
8,600
oz.
Silver
337,900
oz.
316,000
oz.
Andacollo
Gold
$
12,934
7,000
oz.
$
15,674
8,400
oz.
Khoemac a u
Silver
$
9,153
404,100
oz.
$
2,389
102,700
oz.
Other (3)
$
23,889
$
21,508
Gold
12,000
oz.
10,700
oz.
Silver
66,200
oz.
70,500
oz.
Total stream revenue
$
114,990
$
105,251
.
Royalty (2) :
Cortez Legacy Zone
Gold
$
23,087
117,200
oz.
$
16,714
102,000
oz.
Cortez CC Zone
Gold
$
3,206
106,600
oz.
N/A
Peñasquito
$
7,433
$
13,094
Gold
55,600
oz.
133,400
oz.
Silver
6.1
Moz.
7.7
Moz.
Lead
36.4
Mlbs.
41.9
Mlbs.
Zinc
99.2
Mlbs.
120.1
Mlbs.
Other (3)
Various
$
21,676
N/A
$
27,296
N/A
Total royalty revenue
$
55,402
$
57,104
Total Revenue
$
170,392
$
162,355
(1) Reported production relates to the amount of stream metal sales and the metal sales attributable to our royalty interests for the three months ended March 31, 2023, and 2022, 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, 2023, and 6% for the three months ended March 31, 2022, 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 and copper sales at Mount Milligan, higher gold production attributable to our interest at Cortez as a result of the newly acquired royalties, and higher silver sales at Khoemac a u due to the ramp-up. The increase was offset by lower gold sales at Andacollo and lower gold and silver production at Peñasquito compared to the prior year period.
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Gold and silver ounces and copper pounds purchased and sold during the three months ended March 31, 2023 and 2022, and gold and silver ounces and copper pounds in inventory as of March 31, 2023, and December 31, 2022, for our streaming interests were as follows:
Three Months Ended
Three Months Ended
As of
As of
March 31, 2023
March 31, 2022
March 31, 2023
December 31, 2022
Gold Stream
Purchases (oz.)
Sales (oz.)
Purchases (oz.)
Sales (oz.)
Inventory (oz.)
Inventory (oz.)
Mount Milligan
13,900
15,200
10,000
13,900
3,900
5,200
Pueblo Viejo
7,400
7,900
7,100
8,600
7,400
7,900
Andacollo
5,200
7,000
6,100
8,400
2,000
3,800
Other
13,200
12,000
11,100
10,700
5,300
4,100
Total
39,700
42,100
34,300
41,600
18,600
21,000
Three Months Ended
Three Months Ended
As of
As of
March 31, 2023
March 31, 2022
March 31, 2023
December 31, 2022
Silver Stream
Purchases (oz.)
Sales (oz.)
Purchases (oz.)
Sales (oz.)
Inventory (oz.)
Inventory (oz.)
Khoemac a u
427,500
404,100
115,200
102,700
129,300
105,900
Pueblo Viejo
362,300
337,900
274,500
316,000
362,200
337,800
Other
69,400
66,200
51,100
70,500
20,700
17,500
Total
859,200
808,200
440,800
489,200
512,200
461,200
Three Months Ended
Three Months Ended
As of
As of
March 31, 2023
March 31, 2022
March 31, 2023
December 31, 2022
Copper Stream
Purchases (Mlbs.)
Sales (Mlbs.)
Purchases (Mlbs.)
Sales (Mlbs.)
Inventory (Mlbs.)
Inventory (Mlbs.)
Mount Milligan
3.6
4.5
2.7
3.6
-
0.9
Cost of sales, which excludes depreciation, depletion and amortization, increased to $25.0 million for the three months ended March 31, 2023, from $22.6 million for the three months ended March 31, 2022. The increase, when compared to the prior year quarter, was primarily due to an increase in gold and copper sales at Mount Milligan and higher silver sales at Khoemac a u, offset by lower gold sales at Andacollo. 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 $11.0 million for the three months ended March 31, 2023, from $8.9 million for the three months ended March 31, 2022. The increase was primarily due to an increase in employee-related costs, including non-cash stock-based compensation expense.
Depreciation, depletion and amortization decreased to $46.3 million for the three months ended March 31, 2023, from $48.0 million for the three months ended March 31, 2022. The decrease was primarily due to lower depletion rates at Mount Milligan and Pueblo Viejo as a result of proven and probable mineral reserve increases compared to the prior year quarter. The decrease was partially offset by higher depletion due to higher silver sales at Khoemac a u compared to the prior year quarter.
Interest and other expense increased to $9.2 million for the three months ended March 31, 2023 from $0.9 million for the three months ended March 31, 2022. The increase was primarily due to higher interest expense as a result of higher average amounts outstanding under our revolving credit facility compared to the prior year quarter. We had $500 million outstanding under our revolving credit facility as of March 31, 2023, compared to zero outstanding as of March 31, 2022. The current all-in borrowing rate under our revolving credit facility was 6.2% as of March 31, 2023.
For the three months ended March 31, 2023, we recorded income tax expense of $15.9 million, compared with income tax expense of $15.3 million for the three months ended March 31, 2022. The income tax expense resulted in an effective tax rate of 19.9% in the current period, compared with 18.8% for the three months ended March 31, 2022.
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Liquidity and Capital Resources
Overview
At March 31, 2023, we had current assets of $189.2 million compared to current liabilities of $55.0 million, which resulted in working capital of $134.2 million and a current ratio of approximately 3 to 1. This compares to current assets of $185.8 million and current liabilities of $63.6 million at December 31, 2022, resulting in working capital of $122.2 million and a current ratio of approximately 3 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, 2023, liquidity needs were met from $108.7 million in net cash provided by operating activities and our available cash resources. As of March 31, 2023, we had $500 million available and $500 million outstanding under our revolving credit facility. Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $634 million of total liquidity at March 31, 2023. We were in compliance with each financial covenant under the revolving credit facility as of March 31, 2023. Refer to Note 4 of our notes to consolidated financial statements and below under 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 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 currently, and generally at any time, have acquisition opportunities in various stages of active review. In the event of one or more substantial stream or royalty interest or other acquisitions, we may seek additional debt or equity financing as necessary. We occasionally borrow and repay amounts under our revolving credit facility and may do so in the future.
Please refer to our risk factors included in Part 1, Item 1A of our 2022 10-K for a discussion of certain risks that may impact our liquidity and capital resources.
Recent Liquidity Developments
Revolving Credit Facility Repayment
On March 6, 2023, we made a $75 million principal payment towards the outstanding balance on the revolving credit facility leaving $500 million available as of March 31, 2023.
Cash Flows
Operating Activities
Net cash provided by operating activities totaled $108.7 million for the three months ended March 31, 2023, compared to $101.1 million for the three months ended March 31, 2022. The increase was primarily due to an increase in cash proceeds received from our stream and royalty interests, net of cost of sales, compared to the prior year quarter. Higher interest payments on amounts outstanding under the revolving credit facility offset the increase.
Investing Activities
Net cash used in investing activities totaled $0.2 million for the three months ended March 31, 2023, compared to $37.8 million for the three months ended March 31, 2022. The decrease from the prior year quarter was primarily due to lower acquisitions of royalty and stream interests.
Financing Activities
Net cash used in financing activities totaled $100 million for the three months ended March 31, 2023, compared to $23.2 million for the three months ended March 31, 2022. The increase was primarily due to a repayment of $75 million on our revolving credit facility during the current year quarter.
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Recently Adopted Accounting Standards and Critical Accounting Policies
Refer to Note 1 of our notes to consolidated financial statements for further discussion on any recently adopted accounting standards. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 10-K for discussion on our critical accounting policies.
Forward-Looking Statements
This report and our other public communications include “forward-looking statements” within the meaning of U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from these statements.
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, statements regarding the following: statements about our expected financial performance and outlook, including sales volume, revenue, expenses, and tax rates; 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, capital expenditures and completion of feasibility studies and permitting activities; receipt of metal deliveries; anticipated liquidity, capital resources, financing and stockholder returns; borrowings and repayments under our revolving credit facility; deliveries of deferred silver ounces from Pueblo Viejo; and prices for gold, silver, copper, nickel and other metals.
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, 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; the timing of deliveries of metals from operators; risks associated with doing business in foreign countries; the impact of inadequately assessing new acquisitions; increased competition for stream and royalty interests; environmental risks, included those caused by climate change; delays in the completion of the plant expansion at Pueblo Viejo; potential cyber-attacks, including ransomware; our ability to identify, finance, value and complete acquisitions; 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 risk factors described in our reports filed with the Securities and Exchange Commission, including our 2022 10-K. Most of these factors are beyond our ability to predict or control.
Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any
forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.
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Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.