What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 219 added, 130 removed, 183 unchanged (66% of the section changed)

15 unchanged sentences

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

As of March 31, 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.

As of June 30, 2023, we owned nine stream interests, which are on eight producing properties and one development stage property.

Stream interests accounted for approximately 74% and 70% of our total revenue for the three and six months ended June 30, 2023, respectively, and 72% and 68% for the three and six months ended June 30, 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.

As of June 30, 2023, we owned royalty interests on 32 producing properties, 19 development stage properties and 121 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.

Royalty interests accounted for 26% and 30% of our total revenue for the three and six months ended June 30, 2023, respectively, and 28% and 32% for the three and six months ended June 30, 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

stages of review.

We generally have acquisition opportunities in various stages of review.

Our review process may include, for example, engaging consultants and advisors to analyze an opportunity;

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

For the three months ended March 31, 2023 and 2022, average metal prices and percentages of revenue by metal were as follows:

For the three and six months ended June 30, 2023 and 2022, average metal prices and percentages of revenue by metal were as follows:

Three Months Ended

March 31, 2023

March 31, 2022

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Gold ($/ounce) (1)

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dollars London Metals Exchange settlement price for copper.

Agreement to Acquire Royalty Interests on the Producing Santa Rita and Serrote Mines

On June 12, 2023, we announced that we entered into a binding commitment letter with ACG Acquisition Company to acquire new royalty interests on the producing Serrote and Santa Rita mines in Brazil for total cash consideration of $250 million, subject to satisfaction of certain conditions, including negotiation and execution of definitive documentation.

Based on current metal prices, we expect to fund the $250 million purchase price with approximately $50 million of available cash resources and approximately $200 million from a draw on our revolving credit facility.

Gold/Platinum/Palladium Royalties

At closing, we expect to pay cash consideration of $215 million in return for:

● A gross smelter return royalty of 85% of the payable gold from the Serrote mine until the achievement of a royalty revenue threshold of $250 million from this royalty, and 45% thereafter;

● A gross smelter return royalty of 64 ounces of gold, 135 ounces of platinum and 100 ounces of palladium for each 1 million pounds of payable nickel produced from the Santa Rita mine until the achievement of a royalty revenue threshold of $100 million from this royalty, at which point the royalty on gold will continue and the royalty on platinum and palladium will terminate.

Royalty revenue will be determined using fixed payabilities of 93% for gold at the Serrote mine and 86% for nickel at the Santa Rita mine.

The royalties will have an economic effective date of May 1, 2023, and there will be no deductions applicable to the royalty payments.

Copper/Nickel Royalty

At closing, we expect to pay cash consideration of $35 million in return for a gross smelter return royalty on total payable copper and nickel production from the Serrote and Santa Rita mines at a rate of 0.50% during 2023 and 2024, 0.75% during 2025 and 1.10% thereafter until the achievement of a royalty revenue threshold of $90 million from this royalty, and 0.55% thereafter.

Royalty revenue will be determined using fixed payabilities of 97% for copper at the Serrote mine, and 86% for nickel and 72% for copper at the Santa Rita mine.

The royalty will have an economic effective date of May 1, 2023, and there will be no deductions applicable to the royalty payments.

ESG Contribution

We will make a financial commitment of 0.25% of the annual royalty payments received to support programs benefiting the communities within the area of influence of each of the Serrote and Santa Rita mines.

Conditions to Closing

Closing of the proposed acquisition of the royalties will be conditional on the successful completion of the ACG transaction with Appian, a minimum working capital position for ACG at closing, and other closing conditions that are standard for transactions of this nature, including the negotiation and execution of definitive royalty and security agreements with ACG and an intercreditor agreement with the senior lenders.

Closing of the proposed acquisition of the royalties could occur within the coming weeks after completion of all conditions to closing.

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.

On April 20, 2023, we made a $2.4 million advance payment to a subsidiary of Ero Gold Corporation (“Ero”) 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.

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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.

The following table shows current production estimates for calendar 2023, as well as actual production through June 30, 2023 (except as otherwise noted), for our principal properties as reported to us by the operators.

Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 2023

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Peñasquito (8)

330,000 - 370,000

31 - 35 Million

170 - 190 Million

420 - 460 Million

(1) Production estimates received from our operators are for calendar 2023.

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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.

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 June 30, 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.

(3) The estimated and actual production figures shown for Andacollo are 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.

(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 Gold Corporation (“Barrick”).

The operator did not provide estimated or actual silver production.

Barrick did not provide estimated or actual silver production.

(6) The estimated and actual production figures for Khoemac a u are payable silver in concentrate.

Deliveries to us are determined using a fixed silver payability factor of 90%.

(7) The estimated and actual production figures for Cortez include the entirety of the Cortez Complex.

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

Actual figures are for the period January 1, 2023 through June 30, 2023.

Estimated production figures are not available as 2023 production guidance was withdrawn by Newmont Corporation (“Newmont”) on July 20, 2023.

Property Developments

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Stream Interests

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

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 stream deliveries from Andacollo were approximately 3,700 ounces for the three months ended June 30, 2023, compared to approximately 9,900 ounces for the three months ended June 30, 2022.

The decrease in deliveries resulted

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

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.

According to Teck Resources Limited (“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.

Silver stream deliveries from Khoemac a u were approximately 398,700 ounces for the three months ended June 30, 2023, compared to approximately 246,800 ounces for the three months ended June 30, 2022.

Increased stream deliveries resulted from operations running at full capacity in the current period compared to the prior year period.

Deliveries in the prior year period were lower due to the ramp-up of mining and processing operations throughout 2022 after completion of project construction in 2021.

According to Khoemac a u Copper Mining (Pty.) Limited (“KCM”), operations at Khoemac a u continued at nameplate capacity through the quarter ended June 30, 2023, after the target production rate of 3.7 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.

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.

Gold stream deliveries from Mount Milligan were approximately 17,300 ounces for the three months ended June 30, 2023, compared to approximately 23,800 ounces for the three months ended June 30, 2022.

Copper stream deliveries from Mount Milligan were approximately 2.5 million pounds during the three months ended June 30, 2023, compared to approximately 4.0 million pounds during the three months ended June 30, 2022.

Gold and copper stream deliveries for the three months ended June 30, 2023, relate to mine production during the approximate period November 2022 to January 2023.

During this period Centerra Gold Inc.

(“Centerra”) reported negative variances to copper head grade, gold head grade and recovery, as compared to the previous year period.

On July 31, 2023, Centerra reported that gold and copper production for the three months ended June 30, 2023, was impacted by lower grades and recoveries due to mine sequencing, although process plant throughput for the period averaged 61,482 tonnes per day and record tonnes were processed in the months of May and June.

Centerra also reported that Mount Milligan remains on track to access higher-grade copper and gold ore from phase 7 and phase 9 in the second half of the year.

Centerra continues to expect that full year 2023 production at Mount Milligan will be back-end weighted, with gold production at the low end of the guidance range of 160,000 to 170,000 ounces, and copper production tracking towards the mid-point of the guidance range of 60 to 70 million pounds.

Centerra also expects to make four concentrate shipments in the third quarter and another four shipments in the fourth quarter, although the timing of shipments may be affected by logistical delays resulting from labor disruptions in the Port of Vancouver.

Gold stream deliveries from Pueblo Viejo were approximately 6,800 ounces for the three months ended June 30, 2023, compared to approximately 8,600 ounces for the three months ended June 30, 2022.

Decreased deliveries resulted from processing lower grade gold stockpile material.

Silver stream deliveries were approximately 150,700 ounces for the three months ended June 30, 2023, compared to approximately 307,100 ounces for the three months ended June 30, 2022.

Decreased silver deliveries resulted from lower silver recovery during the current period, and an additional 89,300 ounces of silver deliveries were deferred.

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

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.

If actual recovery rates fall below the contractual 70% recovery rate, ounces may

be deferred with deferred ounces to be delivered in future periods as silver recovery allows.

As of June 30, 2023, approximately 607,700 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

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.

On May 3 and May 10, 2023, Barrick provided updates on the plant expansion and mine life extension project at Pueblo Viejo.

With respect to the plant expansion, Barrick reported that construction was 93% complete as of March 31, 2023, and commissioning and operations handover of new equipment was underway.

With respect to the mine life extension, Barrick further disclosed on July 27, 2023, that the engineering design for the El Naranjo tailings storage facility (“TSF”) project continues to advance and that the environmental license for the new TSF was recently received.

Barrick has also 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.

Royalty Interests

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.

Production attributable to our royalty interest at the Cortez Complex was approximately 179,900 ounces of gold for the three months ended June 30, 2023, compared to approximately 52,000 ounces of gold for the three months ended June 30, 2022.

The increase was primarily due to the addition of new royalties in 2022 that increased royalty coverage over producing areas within the Cortez Complex.

On May 3, 2023, Barrick reported that the Record of Decision (“ROD”) on the Goldrush project, which is located within the CC Zone, is 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.

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.

Production attributable to our royalty interest at Peñasquito was approximately 48,100 ounces of gold, 6.0 million ounces of silver, 35.6 million pounds of lead and 89.7 million pounds of zinc for the three months ended June 30, 2023.

This compares to approximately 130,600 ounces of gold, 8.1 million ounces of silver, 35.0 million pounds of lead and 84.9 million pounds of zinc for the three months ended June 30, 2022.

Newmont reported that production was lower in the current period due to a labor strike, and gold production was further impacted by lower mill recovery and ore grade mined.

On June 8, 2023, Newmont reported that operations at Peñasquito were suspended on June 7, 2023, following a strike action by the National Union of Mine and Metal Workers of the Mexican Republic.

The suspension remains in effect as of the filing of this report and on July 20, 2023, Newmont announced the withdrawal of its full-year 2023 guidance for Peñasquito.

Newmont further stated that it cannot estimate when the strike will be resolved, and it will reassess Peñasquito’s full year 2023 guidance once a resolution has been reached.

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:

Quarter Ended June 30, 2023, Compared to Quarter Ended June 30, 2022

For the quarter ended June 30, 2023, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $63.4 million, or $0.97 per basic and diluted share, as compared to net income of $71.1 million, or $1.08 per basic and diluted share, for the quarter ended June 30, 2022.

The decrease in net income was primarily attributable to higher debt-related interest expense and income tax expense, as discussed below.

For the quarter ended June 30, 2023, we recognized total revenue of $144.0 million, comprised of stream revenue of $106.0 million and royalty revenue of $38.0 million at an average gold price of $1,976 per ounce, an average silver price of $24.13 per ounce and an average copper price of $3.84 per pound.

This is compared to total revenue of $146.4 million for the three months ended June 30, 2022, comprised of stream revenue of $104.9 million and royalty revenue of $41.6 million,

at an average gold price of $1,871 per ounce, an average silver price of $22.60 per ounce and an average copper price of $4.31 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022, are as follows:

Revenue and Reported Production Subject to Our Stream and Royalty Interests

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Three Months Ended

March 31, 2023

March 31, 2022

June 30, 2023

June 30, 2022

Stream/Royalty

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Total Revenue

(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.

(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 June 30, 2023, and 2022, and may differ from the operators’ public reporting due to a number of factors, including the timing of the operator’s concentrate shipments, the delivery of metal to us and our subsequent sale of the delivered metal.

Refer to Note 5 to the notes to consolidated financial statements.

(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.

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:

(3) Individually, except for our stream interest at Rainy River, which contributed 7% of total revenue for the three months ended June 30, 2023, and 6% for the three months ended June 30, 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 resulted primarily from lower gold sales at Andacollo, lower copper sales at Mount Milligan and lower gold and silver production attributable to our interest at Peñasquito.

The decrease was offset by higher gold production attributable to our interest at Cortez as a result of the newly acquired royalties and higher gold and silver prices when compared to the prior year period.

Gold and silver ounces and copper pounds purchased and sold during the three months ended June 30, 2023 and 2022, and gold and silver ounces and copper pounds in inventory as of June 30, 2023, and December 31, 2022, for our streaming interests were as follows:

Three Months Ended

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March 31, 2022

March 31, 2023

June 30, 2023

June 30, 2022

June 30, 2023

December 31, 2022

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Three Months Ended

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March 31, 2022

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June 30, 2023

June 30, 2022

June 30, 2023

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Mount Milligan

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, which excludes depreciation, depletion and amortization, decreased to $23.4 million for the three months ended June 30, 2023, from $23.8 million for the three months ended June 30, 2022.

The decrease, when compared to the prior year quarter, was primarily due to a decrease in copper sales at Mount Milligan and lower gold sales at Andacollo, offset by higher silver sales at Khoemac a u.

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.

General and administrative costs decreased to $9.1 million for the three months ended June 30, 2023, from $9.3 million for the three months ended June 30, 2022.

The decrease was primarily due to lower consulting costs and lower non-cash stock compensation expense during the current period.

Depreciation, depletion and amortization decreased to $38.4 million for the three months ended June 30, 2023, from $44.0 million for the three months ended June 30, 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 when compared to the prior year quarter.

The decrease was partially offset by higher depletion expense at Khoemac a u due to the ramp-up of production and additional depletion expense from the newly acquired royalties at Cortez when compared to the prior year quarter.

Interest and other expense increased to $8.4 million for the three months ended June 30, 2023, from $1.4 million for the three months ended June 30, 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.

We had $400 million outstanding under our revolving credit facility as of June 30, 2023, compared to zero outstanding as of June 30, 2022.

The current all-in borrowing rate under our revolving credit facility was 6.7% as of June 30, 2023.

For the three months ended June 30, 2023, we recorded income tax expense of $2.0 million, compared with income tax benefit of $5.9 million for the three months ended June 30, 2022.

The income tax expense resulted in an effective tax rate of 3.1% in the current period, compared with (9.0%) for the three months ended June 30, 2022.

The three months ended June 30, 2023 and 2022, both included discrete tax benefits attributable to the release of a valuation allowance on certain deferred tax assets.

Six Months Ended June 30, 2023, Compared to Six Months Ended June 30, 2022

For the six months ended June 30, 2023, we recorded net income of $127.3 million, or $1.94 per basic and $1.93 per diluted share, as compared to net income of $136.8 million, or $2.08 per basic and diluted share, for the six months ended

June 30, 2022.

The decrease in net income was primarily attributable to higher debt-related interest expense and income tax expense, as discussed below.

For the six months ended June 30, 2023, we recognized total revenue of $314.4 million, comprised of stream revenue of $221.0 million and royalty revenue of $93.4 million at an average gold price of $1,932 per ounce, an average silver price of $23.31 per ounce and an average copper price of $3.95 per pound.

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

Revenue and the corresponding production attributable to our stream and royalty interests for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, are as follows:

Revenue and Reported Production Subject to Our Stream and Royalty Interests

(Amounts in thousands, except reported production oz.

Six Months Ended

June 30, 2023

June 30, 2022

Stream/Royalty

Production (1)

Mount Milligan

Total stream revenue

Royalty (2) :

Cortez Legacy Zone

Cortez CC Zone

Total royalty revenue

Total revenue

(1) Reported production relates to the amount of stream metal sales and the metal sales attributable to our royalty interests for the six

months ended June 30, 2023, and 2022, and may differ from the operators’ public reporting due to a number of factors, including the timing of the operator’s concentrate shipments, the delivery of metal to us and our subsequent sale of the delivered metal.

Refer to Note 5 to the notes to consolidated financial statements.

(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 six months ended June 30, 2023 and June 30, 2022, respectively, 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 silver sales at Khoemac a u due to the ramp-up and higher gold production attributable to our interests at Cortez as a result of the newly acquired royalties.

The increase was partially offset by lower gold sales at Andacollo and lower gold and silver production at Peñasquito when compared to the prior year period.

Gold and silver ounces and copper pounds purchased and sold during the six months ended June 30, 2023, and 2022, and gold and silver ounces and copper pounds in inventory as of June 30, 2023, and December 31, 2022, for our streaming interests were as follows:

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

December 31, 2022

Purchases (oz.)

Inventory (oz.)

Mount Milligan

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

December 31, 2022

Silver Stream

Purchases (oz.)

Inventory (oz.)

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

December 31, 2022

Copper Stream

Purchases (Mlbs.)

Sales (Mlbs.)

Purchases (Mlbs.)

Sales (Mlbs.)

Inventory (Mlbs.)

Mount Milligan

Cost of sales, which excludes depreciation, depletion and amortization, increased to $48.4 million for the six months ended June 30, 2023, from $46.5 million for the six months ended June 30, 2022.

The increase, when compared to the prior year was primarily due to 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.

General and administrative costs increased to $20.1 million for the six months ended June 30, 2023, from $18.2 million for the six months ended June 30, 2022.

The increase was primarily due to an increase in employee-related costs.

Depreciation, depletion and amortization decreased to $84.7 million for the six months ended June 30, 2023, from $92.0 million for the six months ended June 30, 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 when compared to the prior year period.

The decrease was partially offset by higher depletion expense at Khoemac a u due to the ramp-up of production and additional depletion from the newly acquired royalties at Cortez when compared to the prior year quarter.

Interest and other expense increased to $17.6 million for the six months ended June 30, 2023, from $2.3 million for the six months ended June 30, 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 period.

We had $400 million outstanding under our revolving credit facility as of June 30, 2023, compared to zero outstanding as of June 30, 2022.

The current all-in borrowing rate under our revolving credit facility was 6.7% as of June 30, 2023.

For the six months ended June 30, 2023, we recorded income tax expense of $17.9 million, compared with income tax expense of $9.4 million for the six months ended June 30, 2022.

The income tax expense resulted in an effective tax rate of 12.3% in the current period, compared with 6.4% for the six months ended June 30, 2022.

The six months ended June 30, 2023 and June 30, 2022, included discrete tax benefits attributable to the release of a valuation allowance on certain deferred tax assets.

Liquidity and Capital Resources

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.

At June 30, 2023, we had current assets of $165.3 million compared to current liabilities of $63.1 million, which resulted in working capital of $102.2 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.

The decrease in working capital was primarily due to a decrease in our available cash, which resulted from increased debt repayments during the current period.

During the six months ended June 30, 2023, liquidity needs were met from $216.6 million in net cash provided by operating activities and our available cash resources.

As of June 30, 2023, we had $600 million available and $400 million outstanding under our revolving credit facility.

Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $702 million of total liquidity at June 30, 2023.

We were in compliance with each financial covenant under the revolving credit facility as of June 30, 2023.

Refer to Note 4 of our notes to consolidated financial statements and below under Recent Liquidity Developments for further discussion on our debt.

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Recent Liquidity Developments

Revolving Credit Facility Amendment

On June 28, 2023, we entered into a fifth amendment to our revolving credit facility dated as of June 2, 2017.

The fifth amendment extended the scheduled maturity date from July 7, 2026 to June 28, 2028, replaced LIBOR with Secured Overnight Financing Rate (“Term SOFR”) as a benchmark interest rate and made certain other administrative changes to the existing revolving credit facility.

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.

On June 6, 2023, we made a $100 million principal payment towards the outstanding balance on the revolving credit facility leaving $600 million available as of June 30, 2023.

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.

Net cash provided by operating activities totaled $216.6 million for the six months ended June 30, 2023, compared to $221.3 million for the six months ended June 30, 2022.

The decrease was primarily due to higher interest payments on

amounts outstanding under our revolving credit facility during the current period.

The decrease was partially offset by an increase in cash proceeds received from our stream interests, net of cost of sales, when compared to the prior year period.

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.

Net cash used in investing activities totaled $2.8 million for the six months ended June 30, 2023, compared to $37.9 million for the six months ended June 30, 2022.

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

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.

Net cash used in financing activities totaled $226.2 million for the six months ended June 30, 2023, compared to $46.4 million for the six months ended June 30, 2022.

The increase was primarily due to repayments of $175 million on our revolving credit facility during the current year period.

Recently Adopted Accounting Standards and Critical Accounting Policies

8 unchanged sentences

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;

the proposed acquisition of new royalty interests on the producing Serrote and Santa Rita mines in Brazil, including the details of the anticipated royalties thereon and funding of the purchase price;

our expected financial performance and outlook, including sales volume, revenue, expenses, and tax rates;

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;

8 unchanged sentences

environmental risks, included those caused by climate change;

the risk that the conditions to closing for the potential acquisition of royalties on the Serrote and Santa Rita mines may not be satisfied;

delays in the completion of the plant expansion at Pueblo Viejo;

8 unchanged sentences

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.

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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis