What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 158 added, 186 removed, 216 unchanged (61% 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 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.

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

Stream interests accounted for approximately 71% of our total revenue for both the three and nine months ended September 30, 2023, and 75% and 70% for the three and nine months ended September 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 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.

As of September 30, 2023, we owned royalty interests on 31 producing properties, 21 development stage properties and 120 exploration stage properties, of which we consider 51 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 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.

Royalty interests accounted for 29% of our total revenue for both the three and nine months ended September 30, 2023, and 25% and 30% for the three and nine months ended September 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.

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

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

Three Months Ended

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 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.

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

On September 28, 2023, ACG Acquisition Company Ltd.

(“ACG”) announced that the transaction for the acquisition by ACG of the entities that own the Serrote and Santa Rita mines in Brazil from funds advised by Appian Capital Advisory LLP (“Appian”) was terminated.

Completion of the now terminated transaction between ACG and Appian was a condition to our earlier announced acquisition of royalty interests on the Serrote and Santa Rita mines and the acquisition of royalty interests will not proceed.

Xavantina Exploration Payment

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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 June 30, 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 September 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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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.

(2) Actual production figures shown are from the operators and cover the period from January 1, 2023, through September 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.

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

Deliveries to us are determined using a fixed payability factor of 97% for gold and a minimum payability factor of 95% for copper.

(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”).

Barrick did not provide estimated or actual silver production.

Deliveries to us are determined using fixed payability factors of 99.9% for gold and 99% for silver.

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

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(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.

Barrick reports production from the entirety of 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.

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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.

Actual figures are for the period January 1, 2023 through September 30, 2023, and no production occurred during the third quarter of 2023 due to the suspension of operations resulting from a strike action on June 7, 2023.

Estimated production figures are not available as 2023 production guidance was withdrawn by Newmont Corporation (“Newmont”) on July 20, 2023 due to the suspension of operations.

Property Developments

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Stream Interests

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 stream deliveries from Andacollo were approximately 9,300 ounces for the three months ended September 30, 2023, compared to approximately 3,200 ounces for the three months ended September 30, 2022.

The increase in deliveries resulted primarily from the timing of shipments and settlements during the periods.

Teck Resources Limited (“Teck”) reported that production at Andacollo in the quarter ended September 30, 2023, was impacted by a 14-day unplanned shutdown in August 2023, due to a conveyor belt failure.

Any impact to Royal Gold on gold stream deliveries and sales is expected to be realized in the quarter ended March 31, 2024, as a result of the typical lag at Andacollo between production at the mine, and stream deliveries and sales.

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 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.

According to Teck, the period of lower grades is expected to last through the remainder of 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 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.

Silver stream deliveries from Khoemac a u were approximately 315,000 ounces for the three months ended September 30, 2023, compared to approximately 290,700 ounces for the three months ended September 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.

According to Khoemac a u Copper Mining (Pty.) Limited (“KCM”), operations at Khoemac a u continued at nameplate capacity through the quarter ended September 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 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 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 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.

Gold stream deliveries from Mount Milligan were approximately 13,000 ounces for the three months ended September 30, 2023, compared to approximately 18,400 ounces for the three months ended September 30, 2022.

Copper stream deliveries from Mount Milligan were approximately 2.4 million pounds during the three months ended September 30, 2023, compared to approximately 4.5 million pounds during the three months ended September 30, 2022.

Gold and copper stream deliveries for the three months ended September 30, 2023, relate to mine production during the approximate period February 2023 to April 2023.

On October 31, 2023, Centerra Gold Inc.

(“Centerra”) reported that a full asset optimization review of the Mount Milligan mine has been launched, which includes assessments of productivity and cost efficiency opportunities in concert with mine plan optimization.

Centerra expects this review to identify and drive incremental operational improvements and is expected to be completed in 2024.

Centerra also reported that production during the third quarter was impacted by mine sequencing and lower recoveries caused by blending of ores mined from different phases of the pit.

Centerra expects that medium-term recoveries for gold and copper will be similar to those achieved in 2023, and metallurgical reviews to increase recoveries from current levels are underway.

Centerra now expects full year 2023 gold production at Mount Milligan to be 150,000 to 160,000 ounces, down from the previous guidance range of 160,000 to 170,000 ounces, and copper production to be near the low end of the previously

provided guidance range of 60 to 70 million pounds.

Centerra also expects higher levels of gold production and similar levels of copper production in 2024 compared to 2023 production guidance levels.

Gold stream deliveries from Pueblo Viejo were approximately 5,000 ounces for the three months ended September 30, 2023, compared to approximately 8,900 ounces for the three months ended September 30, 2022.

On October 12, 2023, Barrick provided a brief update on production at Pueblo Viejo in the Dominican Republic.

According to Barrick, ramp-up of the expansion project was delayed due to equipment design deficiencies, and Barrick’s share of gold production at Pueblo Viejo was approximately 79,000 ounces in the third quarter.

Gold production in the third quarter was impacted by lower ore grades processed due to mine sequencing, as well as lower mill throughput and lower mill recovery associated with the commissioning of the mill expansion.

Silver stream deliveries were approximately 171,100 ounces for the three months ended September 30, 2023, compared to 319,100 ounces for the three months ended September 30, 2022 and an additional 80,600 ounces of silver were deferred.

As of September 30, 2023, approximately 688,300 ounces remain deferred, and the timing for the delivery of the entire deferred amount is uncertain.

We expect that silver recoveries could remain highly variable and material deliveries of deferred silver ounces are not expected until the plant expansion is complete and is running at full production levels.

Royalty Interests

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.

Production attributable to our royalty interests at Cortez was approximately 218,800 ounces of gold for the three months ended September 30, 2023, compared to approximately 36,600 ounces of gold for the three months ended September 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 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.

On October 12, 2023, Barrick reported that production in the September quarter was higher at Cortez as a result of higher oxide production from the Crossroads open pit and Cortez Hills underground.

Additionally, on September 12, 2023, Barrick provided an update on its 100%-owned Fourmile Project within the Cortez Complex, which is covered by royalty interests held by Royal Gold.

According to Barrick, ongoing drilling demonstrates the significant potential to increase the grade and size of the Fourmile Project, and work is underway to assess options for an independent exploration decline access in support of a pre-feasibility study.

Barrick expects this decline would also be used for development and production complementing the current development at the Goldrush Project.

Barrick’s preliminary economic assessment indicates that the Fourmile Project could support a potential gold production profile of 300,000 to 400,000 ounces per year in addition to the existing Cortez Complex production profile of 950,000 to 1,200,000 ounces per year over 10 years.

During the three months ended September 30, 2023, no royalty production from Peñasquito was reported due to the suspension of operations resulting from a strike action on June 7, 2023 by the National Union of Mine and Metal Workers of the Mexican Republic ("the Union").

According to Newmont, on October 13, 2023, a definitive agreement was reached between Newmont and the Union that also received approval from the Mexican Labor Court, ramp-up of operations has since commenced, and operations at Peñasquito are expected to reach full operating capacity by the end of the fourth quarter of 2023.

Results of Operations

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:

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

For the three months ended September 30, 2023, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $49.3 million, or $0.75 per basic and diluted share, as compared to net income of $45.8 million, or $0.70 per basic and diluted share, for the three months ended September 30, 2022.

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

For the three months ended September 30, 2023, we recognized total revenue of $138.6 million, comprised of stream revenue of $99.0 million and royalty revenue of $39.6 million at an average gold price of $1,928 per ounce, an average silver price of $23.57 per ounce and an average copper price of $3.79 per pound.

This is compared to total revenue of $131.4 million for the three months ended September 30, 2022, comprised of stream revenue of $98.7 million and royalty revenue of $32.7 million, at an average gold price of $1,729 per ounce, an average silver price of $19.23 per ounce and an average copper price of $3.51 per pound.

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

Revenue and Reported Production Subject to Our Stream and Royalty Interests

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Three Months Ended

June 30, 2023

June 30, 2022

September 30, 2023

September 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 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.

(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 September 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 4 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 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:

(3) Individually, except for our stream interest at Wassa, which contributed 6% of total revenue for each of the three months ended September 30, 2023 and 2022, and our stream interest at Rainy River which contributed 6% of total revenue for the three months ended September 30, 2023, 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 production at the Cortez Legacy Zone, the new Cortez royalties acquired in 2022 and higher gold, silver and copper prices when compared to the prior year period.

This increase was partially offset by the suspension of operations at Peñasquito on June 7, 2023 due to a strike by the Union which resulted in no royalty revenue recognized for the three months ended September 30, 2023.

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

Three Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

September 30, 2023

September 30, 2022

September 30, 2023

December 31, 2022

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Three Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

September 30, 2023

September 30, 2022

September 30, 2023

December 31, 2022

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Three Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

September 30, 2023

September 30, 2022

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December 31, 2022

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Mount Milligan

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, which excludes depreciation, depletion and amortization, decreased to $21.4 million for the three months ended September 30, 2023, from $23.2 million for the three months ended September 30, 2022.

The decrease, when compared to the prior year quarter, was primarily due to lower gold sales at Mount Milligan and lower gold and silver sales at Pueblo Viejo, partially 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 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 $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:

General and administrative costs increased to $9.9 million for the three months ended September 30, 2023, from $7.6 million for the three months ended September 30, 2022.

The increase was primarily due to higher corporate costs and an increase in non-cash stock compensation expense.

Depreciation, depletion and amortization increased to $40.1 million for the three months ended September 30, 2023, from $37.8 million for the three months ended September 30, 2022.

The increase was primarily due to higher depletion expense at Khoemac a u due to the ramp-up of production and additional depletion expense from the new royalties acquired at Cortez in 2022, when compared to the prior year quarter.

The increase was partially offset by lower depletion expense at Mount Milligan and Pueblo Viejo, which was due to lower depletion rates as a result of proven and probable mineral reserve increases when compared to the prior year period.

Interest and other expense decreased to $7.3 million for the three months ended September 30, 2023, from $8.8 million for the three months ended September 30, 2022.

The decrease was primarily due to lower interest expense as a result of lower average amounts outstanding under our revolving credit facility compared to the prior year quarter.

We had $325 million outstanding under our revolving credit facility as of September 30, 2023, compared to $450 million outstanding as of September 30, 2022.

The current all-in borrowing rate under our revolving credit facility was 6.7% as of September 30, 2023, compared to 4.2% in the prior year period.

For the three months ended September 30, 2023, we recorded income tax expense of $10.8 million, compared with income tax expense of $11.0 million for the three months ended September 30, 2022.

The income tax expense resulted in an effective tax rate of 17.8% in the current period, compared with 19.3% for the three months ended September 30, 2022.

Nine Months Ended September 30, 2023, Compared to Nine Months Ended September 30, 2022

For the nine months ended September 30, 2023, we recorded net income of $176.7 million, or $2.69 per basic and $2.68 per diluted share, as compared to net income of $182.6 million, or $2.78 per basic and diluted share, for the nine months ended September 30, 2022.

The decrease in net income was primarily attributable to higher debt-related interest expense, which was partially offset by an increase in revenue, each as discussed below.

For the nine months ended September 30, 2023, we recognized total revenue of $453.1 million, comprised of stream revenue of $320.0 million and royalty revenue of $133.1 million at an average gold price of $1,931 per ounce, an average silver price of $23.40 per ounce and an average copper price of $3.89 per pound.

This is compared to total revenue of $440.2 million for the nine months ended September 30, 2022, comprised of stream revenue of $308.9 million and royalty revenue of $131.3 million, at an average gold price of $1,824 per ounce, an average silver price of $21.92 per ounce and an average copper price of $4.11 per pound.

Revenue and the corresponding production attributable to our stream and royalty interests for the nine months ended September 30, 2023, compared to the nine months ended September 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

Nine Months Ended

September 30, 2023

September 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 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.

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

months ended September 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 4 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

(3) Individually, except for our stream interest at Wassa, which contributed 5% and 6% of the total revenue for the nine months ended September 30, 2023 and 2022, respectively, and our stream interest at Rainy River, which contributed 6% of the total revenue for each of the nine months ended September 30, 2023 and 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 silver sales at Khoemac a u due to the ramp-up, higher gold production from the Cortez Legacy Zone and additional revenue from the Cortez royalties acquired in 2022.

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

Peñasquito gold production was lower for the current year period primarily due to the suspension of operations on June 7, 2023 due to a strike by the Union.

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

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

December 31, 2022

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Mount Milligan

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

December 31, 2022

4 unchanged sentences

Inventory (oz.)

Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

December 31, 2022

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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, which excludes depreciation, depletion and amortization, remained flat at $69.7 million for the nine months ended September 30, 2023, and 2022.

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.

General and administrative costs increased to $30.0 million for the nine months ended September 30, 2023, from $25.8 million for the nine months ended September 30, 2022.

The increase was primarily due to higher corporate costs and an increase in non-cash stock compensation expense.

Depreciation, depletion and amortization decreased to $124.8 million for the nine months ended September 30, 2023, from $129.7 million for the nine months ended September 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.

Interest and other expense increased to $24.9 million for the nine months ended September 30, 2023, from $11.1 million for the nine months ended September 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.

For the nine months ended September 30, 2023, amounts outstanding under our revolving credit facility averaged $421 million at an average all-in borrowing rate of 5.1%, compared to average amounts outstanding of $165 million at an average all-in borrowing rate of 3.0% for the prior year period.

For the nine months ended September 30, 2023, we recorded income tax expense of $28.7 million, compared with income tax expense of $20.3 million for the nine months ended September 30, 2022.

The income tax expense resulted in an effective tax rate of 13.9% for the nine months ended September 30, 2023, compared with 10.0% for the nine months ended September 30, 2022.

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

Liquidity and Capital Resources

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.

At September 30, 2023, we had current assets of $163.8 million compared to current liabilities of $70.9 million, which resulted in working capital of $92.9 million and a current ratio of 2 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 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.

During the nine months ended September 30, 2023, liquidity needs were met from $314.7 million in net cash provided by operating activities and our available cash resources.

As of September 30, 2023, we had $675 million available and $325 million outstanding under our revolving credit facility.

Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $768 million of total liquidity at September 30, 2023.

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

Refer to Note 3 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.

We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for debt service and 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.

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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 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.

On September 6, 2023, we made a $75 million principal payment towards the outstanding balance on the revolving credit facility leaving $675 million available as of September 30, 2023.

Operating Activities

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.

Net cash provided by operating activities totaled $314.7 million for the nine months ended September 30, 2023, compared to $316.3 million for the nine months ended September 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 $2.8 million for the six months ended June 30, 2023, compared to $37.9 million for the six months ended June 30, 2022.

Net cash used in investing activities totaled $2.8 million for the nine months ended September 30, 2023, compared to $716.5 million for the nine months ended September 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 $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.

Net cash used in financing activities totaled $327.6 million for the nine months ended September 30, 2023, compared to net cash provided by financing activities of $378.9 million for the nine months ended September 30, 2022.

The decrease was primarily due to repayments of $250 million on our revolving credit facility during the current year period.

Recently Adopted Accounting Standards and Critical Accounting Policies

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

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 acquisition strategy;

our due diligence process;

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, permitting activities and resolution of labor strikes;

receipt of metal deliveries;

operators’ expected operating and financial performance, including production, deliveries, mine plans, environmental and feasibility studies, technical reports, mine facilities, estimates of mineral resources and mineral reserves, development, and asset assessments (including Centerra’s full asset optimization review of Mount Milligan and Barrick’s preliminary economic assessment at the Fourmile Project), and permitting activities;

receipt of metal deliveries, including deferred amounts at Pueblo Viejo;

anticipated liquidity, capital resources, financing and stockholder returns;

deliveries of deferred silver ounces from Pueblo Viejo;

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

and prices for gold, silver, copper, 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;

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

operating activities or financial performance of properties on which we hold stream or royalty interests, including inaccuracies in operators’ disclosures, variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, operators’ changes to mine plans and mineral reserves and mineral resources (including updated mineral reserve and mineral resource information), liquidity needs, mining and environmental hazards and risks (including from climate change), labor disputes, distribution and supply chain disruptions, permitting and licensing issues, or operational disruptions;

contractual issues involving our stream or royalty agreements;

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

adverse results of Centerra’s Mount Milligan asset optimization studies and Barrick’s assessment of the Four Mile project;

contractual issues involving our stream or royalty agreements;

the timing of deliveries of metals from operators and our subsequent sales of metal;

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;

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;

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;

our ability to identify, finance, and complete acquisitions;

adverse economic and market conditions, including as a result of government policies, war, natural disasters, and public health issues;

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

changes in management and key employees;

pandemics and epidemics, and any related government policies and actions;

and other risk factors described in our reports filed with the Securities and Exchange Commission, including our 2022 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis