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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-16 · 130 added, 247 removed, 685 unchanged (35% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB 00 42 )

Bookmark not defined.

CONSOLIDATED BALANCE SHEETS

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We have audited the accompanying consolidated balance sheets of Royal Gold, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for the year ended December 31, 2022, the six-month period ended December 31, 2021 and each of the two years in the period ended June 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the year ended December 31, 2022, the six-month period ended December 31, 2021 and each of the two years in the period ended June 30, 2021, in conformity with U.S.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for the years ended December 31, 2023 and 2022, the six-month period ended December 31, 2021, and the year ended June 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31, 2023 and 2022, the six-month period ended December 31, 2021, and the year ended June 30, 2021, in conformity with U.S.

generally accepted accounting principles.

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At December 31, 2023, the Company’s stream and royalty interest balance totaled $3.1 billion.

As more fully described in Note 4 to the consolidated financial statements, the Company evaluates its stream and royalty interests for impairment whenever events or changes in circumstances indicate that the carrying amounts of the asset or group of assets may not be recoverable (“triggering events”).

As more fully described in Note 4 to the consolidated financial statements, the Company evaluates its stream and royalty interests for impairment whenever events or changes in circumstances indicate

that the carrying amounts of the asset or group of assets may not be recoverable (“triggering events”).

Management evaluates various qualitative factors in determining whether or not events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable.

The factors considered include, among others, significant changes in estimates of forecasted gold, silver, copper and other metal prices, significant changes in operators’ estimates of proven and probable reserves and other relevant information received from the operators, which may include operational or legal information that indicates production from mineral interests may not occur or may be significantly reduced in the future or otherwise that the Company’s stream and royalty interest balance may not be recoverable.

The factors considered include, among others, significant changes in estimates of forecasted gold, silver, copper and other metal prices, significant changes in operators’ estimates of proven and probable reserves and/or mineral resources and other relevant information received from the operators, which may include operational or legal information that indicates production from mineral interests may not occur or may be significantly reduced in the future or otherwise that the Company's stream and royalty interest balance may not be recoverable.

Auditing the Company’s impairment assessment involved our subjective judgment because, in determining whether a triggering event occurred, management uses estimates that include, among others, assumptions about forecasted gold, silver, copper and other metal prices and total future production using reserve or other relevant information reported by the operators.

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Common stock, $ .01 par value, 200,000,000 shares authorized;

and 65,592,597 and 65,564,364 shares outstanding, respectfully

and 65,631,760 and 65,592,597 shares outstanding, respectively

Additional paid-in capital

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Revenue (Note 7)

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Income before income taxes

Income tax (expense) benefit

Income tax expense

Net income and comprehensive income

Net (income) loss and comprehensive (income) loss attributable to non-controlling interests

Net income and comprehensive income attributable to non-controlling interests

Net income and comprehensive income attributable to Royal Gold common stockholders

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Non-controlling

(Losses) Earnings

Balance at June 30, 2020

Stock-based compensation and related share issuances

Distributions from (to) non-controlling interests

Net income (loss)

Sale of Peak Gold JV interest

Distributions to non-controlling interests

Dividends declared

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Stock-based compensation and related share issuances

Sale of Peak Gold JV interest

Distributions to non-controlling interests

Dividends declared

Balance at June 30, 2021

Balance at December 31, 2021

Stock-based compensation and related share issuances

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Cash flows from operating activities:

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Common stock dividends

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and equivalents

Net cash (used in) provided by financing activities

Net decrease in cash and equivalents

Cash and equivalents at beginning of period

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Basis of Consolidation

The consolidated financial statements include the accounts of Royal Gold, Inc., its majority owned or controlled subsidiaries.

The consolidated financial statements include the accounts of Royal Gold, Inc.

and its majority owned or controlled subsidiaries.

All intercompany accounts, transactions, income and expenses, and profits or losses have been eliminated on consolidation.

Royal Gold, through its wholly owned subsidiary, Royal Alaska, LLC (“Royal Alaska”), previously identified the Peak Gold JV as Variable Interest Entity, with Royal Alaska as the primary beneficiary, and we determined that the Peak Gold JV should be fully consolidated.

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

Cash and Equivalents

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

Exploration stage mineral properties, where there are no proven and probable

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

reserves, are not depleted.

At such time as the associated exploration stage mineral interests are converted to proven and probable reserves, and there is no production, the mineral property becomes a development stage mineral property.

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

Refer to Note 4 for discussion and the results of our impairment assessments for the year ended December 31, 2022, six months ended December 31, 2021, and fiscal years ended June 30, 2021, and 2020.

Refer to Note 4 for discussion and the results of our impairment assessments for the years ended December 31, 2023, December 31, 2022, six months ended December 31, 2021, and fiscal year ended June 30, 2021.

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

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cost of Sales

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

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 spot price near the date of metal delivery.

The cash payment for gold from Mount Milligan is

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 spot price near the date of metal delivery.

Production Taxes

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Basic earnings per share is computed by dividing net income available to Royal Gold common stockholders by the weighted average number of outstanding common shares for the period, considering the effect of participating securities.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts that may require issuance of common shares were converted.

Diluted earnings per share is computed by dividing net income available to common stockholders by the diluted weighted average number of common shares outstanding during each period.

Recently Adopted Accounting Standards

Recently Adopted

We have evaluated all the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of this Annual Report on Form 10-K and do not believe the future adoption of any such standards will have a material impact on our consolidated financial statements.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recent Accounting Pronouncements

In December 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 “Income Taxes (Topics 740):

Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

ACQUISITIONS AND DISPOSITIONS

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The purchase price was funded with our available revolving credit facility (Note 5) and cash on hand.

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

The acquisition has been accounted for as an asset acquisition and the $ 204.1 million cash consideration, plus direct acquisition costs, have been recorded and allocated between production and exploration stage royalty interests (Note 4) within Stream and royalty interests, net on our consolidated balance sheets.

On the date of acquisition, $ 73.4 million and $ 130.7 million was allocated to production stage and exploration stage royalty interests, respectively.

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

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

Acquisition of Great Bear Royalties Corp.

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The purchase price was funded with available cash on hand.

As part of the acquisition and in exchange for information and access to the project provided by Kinross, we granted an option (“Buyback Option”) to Kinross to purchase a 25 % interest in the Great Bear Royalty ( 0.5 % of the 2.0 % royalty rate) for an amount equal to 25 % of the Acquisition Price, adjusted for inflation, at any time from the transaction closing

The fair value of the Buyback Option on the transaction date using a Black-Scholes model was $ 2.1 million.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

date until the earlier of a construction decision for the Great Bear Project and 10 years after the transaction closing date.

The fair value of the Buyback Option on the transaction date using a Black-Scholes model was $ 2.1 million.

The Buyback Option has been capitalized as a direct transaction cost with the Great Bear Royalty mineral interest and will not be subsequently remeasured until the Buyback Option is either exercised or it expires.

Option has been capitalized as a direct transaction cost with the Great Bear Royalty mineral interest and will not be subsequently remeasured until the Buyback Option is either exercised or it expires.

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

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

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

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

The royalty became payable during the quarter ended September 30, 2022, after cumulative production of 15 million gold equivalent ounces from the Cortez Complex from a starting date of January 1, 2008.

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that is located adjacent to the Lawyers Project.

We paid $ 8.0 million in cash consideration for the royalty and

We paid $ 8.0 million in cash consideration for the royalty and ROFO to Guardsmen Resources Inc.

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ROFO to Guardsmen Resources Inc.

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

The $ 8.0 million cash consideration, plus direct acquisition costs, have been recorded as an exploration stage royalty interest (Note 4) within Stream and royalty interests, net on our consolidated balance sheets.

$ 8.0 million cash consideration, plus direct acquisition costs, have been recorded as an exploration stage royalty interest (Note 4) within Stream and royalty interests, net on our consolidated balance sheets.

Khoemac a u Silver Stream

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As of December 31, 2023, $ 25.0 million of the subordinated debt facility, and $ 10.7 million of accrued interest remains outstanding on the Khoemac a u subordinated debt facility, and these amounts are included in Other assets in our consolidated balance sheets.

Red Chris Royalty Acquisition

On August 11, 2021, we acquired a 1.0 % NSR royalty covering approximately 5,100 hectares, which includes the currently known mineralization and prospective exploration areas of the Red Chris Mine in British Columbia, Canada.

We paid $ 165 million in cash consideration for the royalty to Glencore Canada Corporation, a wholly owned subsidiary of Glencore International AG.

The Red Chris Mine is an operating open pit mine producing gold, copper and silver, and is located on the northern edge of the Skeena Mountains.

The mine is owned and operated by a joint venture, which is owned 70 % by Newcrest Mining Ltd.

(“Newcrest”) and 30 % by Imperial Metals Corporation, in which Newcrest is the operator.

The Red Chris royalty acquisition has been accounted for as an asset acquisition.

The $ 165 million cash consideration, plus direct acquisition costs, have been recorded and allocated between production and exploration stage royalty interests (Note 4) within Stream and royalty interests, net on our consolidated balance sheets.

On the date of acquisition, $ 116.2 million and $ 48.9 million was allocated to production stage and exploration stage royalty interests, respectively.

The acquisition cost of the production stage Red Chris royalty will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Newcrest.

Xavantina (formerly “NX Gold Mine”) Gold Stream Acquisition

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

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

In exchange for the consideration provided, we will receive 25 % of the gold produced from the Xavantina mine until the delivery of 93,000 ounces, and 10 % thereafter.

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

Per the purchase agreement, we may make up to an additional $ 10 million of advance payments from the beginning of calendar 2022 through the end of calendar 2024 based on Ero meeting success-based targets related to regional exploration and mineral resource additions.

As of December 31, 2022, we have made $ 3.2 million of additional advance payments to Ero and $ 6.8 million of additional advance payments remain.

The Xavantina Stream has been accounted for as an asset acquisition.

The $ 100 million advance payment, plus direct acquisition costs, have been recorded and allocated between production and exploration stage stream interests (Note 4) within Stream and royalty interests, net on our consolidated balance sheets.

On the date of acquisition, $ 54.9 million and

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 45.1 million was allocated to production stage and exploration stage royalty interests, respectively.

The acquisition cost of the production stage Xavantina Gold Stream will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Ero.

Côté Royalty Acquisition

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

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

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

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

The Côté royalty acquisition has been accounted for as an asset acquisition.

The $ 75 million paid, plus direct acquisition costs, have been recorded and allocated between development and exploration stage royalty interest (Note 4) within Stream and royalty interest, net on our consolidated balance sheets.

Sale of Peak Gold JV Interest

On September 30, 2020, we entered into an agreement with an affiliate of Kinross Gold Corporation to sell our 40 % membership interest in the Manh Choh Project (formerly known as the Peak Gold Project) for cash consideration of $ 49.2 million and to sell our 809,744 common shares in Contango Ore, Inc.

(“Contango”), our partner in Peak Gold, LLC, the owner of the Manh Choh Project, for cash consideration of $ 12.1 million.

In addition to the total cash consideration of $ 61.3 million, we received the following royalty interests:

● An incremental 28 % NSR royalty on silver produced from an area of interest which includes the current Manh Choh Project resource area.

Peak Gold, LLC retains the right to acquire 50 % of this royalty for consideration of $ 4.0 million;

● An incremental 1 % NSR royalty on certain State of Alaska mining claims acquired by a wholly owned subsidiary of Contango in the transaction, increasing our royalty on this area from 2 % to 3 %.

The royalties are recorded as development and exploration stage royalty interests in Stream and royalty interests, net in our consolidated balance sheet as of December 31, 2022 and have a combined value of approximately $ 4.4 million.

We recorded a gain of $ 33.9 million on the sale of our 40 % membership interest in the Manh Choh Project during the three months ended September 30, 2020.

The mark-to-market increase of $ 3.6 million on the sale of our 809,744 common shares in Contango is included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income and was recognized during the three months ended September 30, 2020.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STREAM AND ROYALTY INTERESTS, NET

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Total production stage stream interests

( 1,022,428 )

Production stage royalty interests:

Cortez (Legacy Zone and CC Zone)

Total production stage royalty interests

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Exploration stage royalty interests:

Cortez (Legacy Zone and CC Zone)

Total exploration stage royalty interests

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( 1,634,113 )

Mount Milligan

On October 4, 2022, Centerra Gold, Inc.

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

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

In accordance with our impairment accounting policy discussed in Note 2, impairment in the carrying value of each stream and royalty interest is measured and recorded to the extent that the carrying value in each stream and royalty interest exceeds its estimated fair value, which is generally calculated using estimated future discounted cash-flows.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the quarter ended December 31, 2022, an indicator of impairment was identified on one of our non-principal exploration stage royalty interests due to new legal information received.

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At December 31, 2022, our carrying value for the non-principal exploration stage royalty interest was zero.

During the quarter ended June 30, 2020, we obtained new information regarding the insolvency proceedings and determined the carrying value for the non-principal production stage royalty interest was not recoverable and an impairment of $ 1.3 million was necessary.

There were no impairment charges on any of our stream and royalty interests for the transition period ended December 31, 2021 or for the fiscal year ended June 30, 2021.

MARKETABLE EQUITY SECURITIES

As of December 31, 2022, our marketable equity securities include warrants to purchase up to 19,640,000 common shares of TriStar Gold Inc.

250,000 common shares of Goldon Resources Ltd.

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

The common shares of Goldon Resources Ltd.

and Mountain Boy Minerals Ltd.

were acquired as part of the GBR acquisition.

Our marketable equity securities are measured at fair value (Note 13) each reporting period with any changes in fair value recognized in net income (amounts in thousands).

Carrying value of marketable securities

Change in fair value of marketable securities (1)

(1) Period ended December 31, 2021 is for six months ended.

The Company’s debt as of December 31, 2022 and 2021 consists of the following:

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There were no impairment charges on any of our stream and royalty interests for the year ended December 31, 2023.

The Company’s debt for the years ended December 31, 2023 and 2022, consists of the following:

As of December 31, 2023

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Revolving credit facility

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revolving Credit Facility

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

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

On December 6, 2022, we repaid $ 75 million of outstanding borrowings on our revolving credit facility, and on December 28, 2022 we borrowed $ 200 million for the acquisition of additional royalty interests on the Cortez Complex.

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

On March 6, June 6, September 6, and December 6, 2023, we repaid $ 75 million, $ 100 million, $ 75 million, and $ 75 million, respectively, on our revolving credit facility.

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

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.

As of December 31, 2023, we had $ 250 million of debt outstanding with an all-in rate interest rate on borrowings of 6.56 % and $ 750 million available under our revolving credit facility.

Interest expense recognized on the revolving credit facility for the year ended December 31, 2022, six months ended December 31, 2021 and fiscal years ended June 30, 2021 and 2020 was approximately $ 10.0 million, $ 1.4 million, $ 3.3 million and $ 7.0 million, respectively, and included interest on the outstanding borrowings and the amortization of the debt issuance costs.

Interest expense recognized on the revolving credit facility for the years ended December 31, 2023 and 2022, six months ended December 31, 2021 and fiscal year ended June 30, 2021 was approximately $ 28.4 million, $ 10.0 million, $ 1.4 million and $ 3.3 million, respectively, and included interest on the outstanding borrowings and the amortization of the debt issuance costs.

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

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

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

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

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Stream revenue:

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Stream revenue:

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Restricted stock

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Stock option and SSARs awards have 10-year contractual terms.

There were no stock options or SSARs awards granted during the year ended December 31, 2022 or the six months ended December 31, 2021.

There were no stock

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

options or SSARs awards granted during the years ended December 31, 2023 and 2022, or the six months ended December 31, 2021.

To determine stock-based compensation expense for stock options and SSARs, the fair value of each stock option and SSAR is estimated on the date of grant using the Black-Scholes-Merton (“Black-Scholes”) option pricing model for all periods presented.

The Black-Scholes model requires key assumptions to determine fair value.

Those key assumptions for the fiscal years June 30, 2021, and 2020 grants are noted in the following table:

Those key assumptions for the fiscal year June 30, 2021 grant is noted in the following tables:

Stock Options

Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Weighted-average expected volatility

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Weighted-average expected volatility

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Exercisable at December 31, 2023

There were no stock options granted during the year ended December 31, 2022 or the six months ended December 31, 2021.

The weighted-average grant date fair value of options granted during the fiscal years ended June 30, 2021 and 2020, was $ 41.92 and $ 17.42 , respectively.

The total intrinsic value of options exercised during the years ended December 31, 2022 and June 30, 2020 was $ 0.2 million and $ 1.3 million, respectively.

There were no options exercised during the six months ended December 31, 2021 or fiscal year ended June 30, 2021.

As of December 31, 2022, there was no unrecognized stock-based compensation expense related to unvested stock options.

There were no stock options granted during the years ended December 31, 2023 and 2022 or the six months ended December 31, 2021.

The weighted-average grant date fair value of options granted during the fiscal year ended June 30, 2021 was $ 41.92 .

The total intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 0.5 million and $ 0.2 million, respectively.

There were no options exercised during the six months ended December 31, 2021 or fiscal year ended June 30, 2021.

As of December 31, 2023, there was no unrecognized stock-based compensation expense related to unvested stock options.

A summary of SSARs activity for the year ended December 31, 2023, is presented below:

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Exercisable at December 31, 2023

There were no SSARs granted during the year ended December 31, 2022 and six months ended December 31, 2021.

The weighted-average grant date fair value of SSARs granted during the fiscal years ended June 30, 2021 and 2020 was $ 40.92 and $ 32.33 .

The total intrinsic value of SSARs exercised during the years ended December 31, 2022, June 30, 2021 and 2020 was $ 0.2 million, $ 0.1 million and $ 4.6 million, respectively.

There were no SSARs granted during the years ended December 31, 2023 and 2022 or the six months ended December 31, 2021.

The weighted-average grant date fair value of SSARs granted during the fiscal year ended June 30, 2021 was $ 40.92 .

The total intrinsic value of SSARs exercised during the years ended December 31, 2023 and 2022, and fiscal year ended June 30, 2021 was $ 0.7 million, $ 0.2 million and $ 0.1 million, respectively.

There were no SSARs exercised during the six months ended December 31, 2021.

As of December 31, 2022, there was approximately $ 0.5 million of total unrecognized stock-based compensation expense related to unvested SSARs, which is expected to be recognized over a weighted-average period of 0.6 years.

As of December 31, 2023, there was no unrecognized stock-based compensation expense related to unvested SSARs.

Other Stock-based Compensation

Performance Shares

During the year ended December 31, 2022 and six months ended December 31, 2021, officers and certain employees were granted shares of restricted common stock that may vest based on our total shareholder return (“TSR”) compared to the TSRs of certain defined members of the Van Eck Vectors Gold Miners ETF (“GDX”) (“Granted TSRs”).

During the years ended December 31, 2023 and 2022 and the six months ended December 31, 2021, officers and certain employees were granted shares of restricted common stock that may vest based on our total shareholder return (“TSR”) compared to the TSRs of certain defined members of the Van Eck Vectors Gold Miners ETF (“GDX”) (“Granted TSRs”).

The Granted TSRs may vest by linear interpolation in a range between zero shares if neither threshold TSR metric is met;

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The Granted TSRs will expire in three years from the date of grant if the TSR market condition is met and a three-year service condition is met.

During the fiscal years ended June 30, 2021 and 2020, officers and certain employees were granted shares of restricted common stock that can only be earned upon the achievement of certain pre-defined performance measures.

Specifically, for performance shares granted during the fiscal years ended June 30, 2021 and 2020, one-half of the shares awarded may vest upon our achievement of annual growth in Net Gold Equivalent Ounces (“Net GEOs”) (“GEO Shares”).

The second one-half of performance shares granted during the fiscal years ended June 30, 2021 and 2020 may vest based on our TSR compared to the TSRs of all members of the GDX (“Prior TSR Shares”).

During the fiscal year ended June 30, 2021, officers and certain employees were granted shares of restricted common stock that can only be earned upon the achievement of certain pre-defined performance measures.

Specifically, for performance shares granted during the fiscal year ended June 30, 2021, one-half of the shares awarded may vest upon our achievement of annual growth in Net Gold Equivalent Ounces (“Net GEOs”) (“GEO Shares”).

The second half of performance shares granted during the fiscal year ended June 30, 2021 may vest based on our TSR compared to the TSRs of all members of the GDX (“Prior TSR Shares”).

GEO Shares and Prior TSR Shares may vest by linear interpolation in a range between zero shares if neither threshold Net GEO and TSR metric is met;

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to 200 % of the Net GEO and Prior TSR Shares awarded if both the maximum Net GEO and TSR metrics are met.

The GEO Shares will expire in five years from the date of grant if the performance measure is not met, while the Prior TSR Shares will expire in three years from the date of grant if the TSR market condition and three year service condition are not met.

The GEO Shares will expire in five years from the date of grant if the

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

performance measure is not met, while the Prior TSR Shares will expire in three years from the date of grant if the TSR market condition and three-year service condition are not met.

We measured the fair value of the GEO Shares based upon the market price of our common stock as of the date of grant.

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During the year ended December 31, 2023, officers and certain employees were granted 49,480 shares of Restricted Stock.

Restricted Stock granted to officers and certain employees during the year ended December 31, 2022, and six months ended December 31, 2021, vest ratably over three years from the date of grant, while Restricted Stock granted to officers and certain employees during the fiscal years ended June 30, 2021 and 2020 vest over three years beginning after a two-year holding period from the date of grant with one-third of the shares vesting in years three, four and five, respectively.

Restricted Stock granted to officers and certain employees during the years ended December 31, 2023 and December 31, 2022 and the six months ended December 31, 2021, vest ratably over three years from the date of grant, while Restricted Stock granted to officers and certain employees during the fiscal year ended June 30, 2021 vest over three years beginning after a two-year holding period from the date of grant with one-third of the shares vesting in years three, four and five, respectively.

Also, our non-executive directors were granted 7,230 shares of Restricted Stock during the year ended December 31, 2023.

The non-executive directors’ shares of Restricted Stock vest 50 % immediately and 50 % one year after the date of grant.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We measure the fair value of the Restricted Stock based upon the market price of our common stock as of the date of grant.

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Unvested shares of Restricted Stock are subject to forfeiture upon termination of employment or service.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the status of our unvested Restricted Stock for the year ended December 31, 2023, is presented below:

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Net income attributable to Royal Gold common stockholders

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Weighted-average shares for diluted EPS

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For financial reporting purposes, Income before income taxes includes the following components (amounts in thousands):

Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

United States

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our Income tax expense (benefit) consisted of (amounts in thousands):

Our Income tax expense consisted of (amounts in thousands):

Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Deferred and others:

Total income tax expense (benefit)

The provision for income taxes for the year ended December 31, 2022, six months ended December 31, 2021, and fiscal years ended June 30, 2021, and 2020 differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre-tax income (net of non-controlling interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences (amounts in thousands):

Total income tax expense

The provision for income taxes for the years ended December 31, 2023 and 2022, six months ended December 31, 2021, and fiscal year ended June 30, 2021 differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre-tax income (net of non-controlling interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences (amounts in thousands):

Six Months Ended

Fiscal Years Ended

Total expense (benefit) computed by applying federal rates

Fiscal Year Ended

Total expense computed by applying federal rates

State and provincial income taxes, net of federal benefit

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Unrealized foreign exchange gains

Effects of Swiss income tax reform

Rate adjustment

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Valuation allowance

Total income tax expense (benefit)

The effective tax rate for the year ended December 31, 2022, was 12.1 % which includes the release of a valuation allowance on certain foreign deferred tax assets.

The effective tax rate for six months ended December 31, 2021, was 17.8 % which includes the release of an uncertain tax position resulting from settlement agreements with foreign tax authorities and a change in estimates, partially offset by a foreign tax rate adjustment resulting in the revaluation of certain deferred tax assets.

The effective tax rate for the fiscal year ended June 30, 2021, was 10.9 %, primarily impacted by the release of uncertain tax positions resulting from settlement agreements with foreign tax authorities.

The effective tax rate for the fiscal year ended June 30, 2020, was primarily impacted by the Federal Act on Tax Reform and AHV Financing in Switzerland and the release of an uncertain tax position resulting from a settlement agreement with a foreign tax authority.

Total income tax expense

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The effective tax rate for the year ended December 31, 2023, was 14.9 % which included the release of a valuation allowance on certain foreign deferred tax assets.

The effective tax rate for the year ended December 31, 2022, was 12.1 %, which included the release of a valuation allowance on certain foreign deferred tax assets.

The effective tax rate for six months ended December 31, 2021, was 17.8 % which included the release of an uncertain tax position resulting from settlement agreements with foreign tax authorities and a change in estimates, partially offset by a foreign tax rate adjustment resulting in the revaluation of certain deferred tax assets.

The tax effects of temporary differences and carryforwards, which give rise to our deferred tax assets and liabilities on December 31, 2023 and 2022 are as follows (amounts in thousands):

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As of December 31, 2023 and 2022, we recorded a valuation allowance of $ 40.8 million and $ 46.8 million, respectively.

The valuation allowance remaining at December 31, 2022 is attributable to US foreign tax credits, Swiss amortizable tax goodwill, and capital loss and other tax attribute carryforwards in non-US subsidiaries.

As of December 31, 2022 and 2021, we had a deferred tax liability for mineral property basis of $ 124.4 million and $ 70.9 million, respectively.

The increase in the deferred tax liability for mineral property was primarily attributable to book over-tax basis differences related to the acquisition of GBR (Note 3).

The valuation allowance remaining at December 31, 2023 is attributable to US foreign tax credits of $ 35.8 million and capital losses of $ 1.9 million and other tax attribute carryforwards of $ 3.2 million in non-US subsidiaries.

As of December 31, 2023 and 2022, we had $ 4.7 million and $ 3.2 million of net operating loss carryforwards.

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As a result, these losses do not begin to expire until the 2038 tax year, and the Company anticipates the losses will be fully utilized.

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2023 and 2022, we had zero unrecognized tax benefits.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the year ended December 31, 2022, six months ended December 31, 2021, and fiscal years ended June 30, 2021 and 2020 is as follows (amounts in thousands):

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the years ended December 31, 2023 and 2022, six months ended December 31, 2021, and fiscal year ended June 30, 2021 is as follows (amounts in thousands):

Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Total gross unrecognized tax benefits at beginning of year

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Total amount of gross unrecognized tax benefits at end of year

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We file income tax returns in the U.S.

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Our continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as part of our income tax expense.

As of December 31, 2022 and 2021, the amount of accrued income-tax-related interest and penalties was zero .

For the years ended December 31, 2023 and 2022, and the six months ended December 31, 2021, the amount of accrued income-tax-related interest and penalties was zero .

For the fiscal year ended June 30, 2021, the accrued income-tax-related interest and penalties was $ 0.3 million.

The gross unrecognized tax benefits reflected in the tabular reconciliation do not include interest and penalties.

SUPPLEMENTAL CASH FLOW INFORMATION

Our supplemental cash flow information for the year ended December 31, 2022, six months ended December 31, 2021, and fiscal years ended June 30, 2021, and 2020 is as follows (amounts in thousands):

Our supplemental cash flow information for the years ended December 31, 2023 and 2022, six months ended December 31, 2021, and fiscal year ended June 30, 2021 is as follows (amounts in thousands):

Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Cash paid during the period for:

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

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

As of December 31, 2022

Carrying Value

Assets (amounts in thousands):

Marketable equity securities (1)

As of December 31, 2021

Carrying Value

Assets (amounts in thousands):

Marketable equity securities (1)

Included in Other assets on our consolidated balance sheets.

Our marketable securities classified within Level 1 of the fair value hierarchy are valued using quoted market prices in active markets multiplied by the quantity of shares held.

The warrants issued by TriStar (Note 5) classified within Level 2 of the fair value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets.

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

As of December 31, 2023 and December 31, 2022, we had financial assets in the form of marketable securities which are measured at fair value on a recurring basis;

however, the carrying value of such financial assets is not material.

The carrying value of our revolving credit facility (Note 5) approximates fair value as of December 31, 2023.

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MAJOR SOURCES OF REVENUE

Operators that contributed greater than 10% of our total revenue for the year ended December 31, 2022, six months ended December 31, 2021, and the fiscal years ended June 30, 2022 and 2021 were as follows (revenue amounts in thousands):

Operators that contributed greater than 10% of our total revenue for the years ended December 31, 2023 and 2022, the six months ended December 31, 2021, and the fiscal year ended June 30, 2021 were as follows (revenue amounts in thousands):

Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Percentage of total revenue

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Percentage of total revenue

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nevada Gold Mines

SEGMENT INFORMATION

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Rest of world

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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Royalty interests

Six Months Ended December 31, 2021

Year Ended December 31, 2022

Cost of sales (1)

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Royalty interests

Fiscal Year Ended June 30, 2021

Six Months Ended December 31, 2021

Cost of sales (1)

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Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Total segment gross profit

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Income before income taxes

Our revenue by reportable segment for the year ended December 31, 2022, six months ended December 31, 2021 and fiscal years ended June 30, 2021 and 2020 is geographically distributed as shown in the following table (amounts in thousands):

Our revenue by reportable segment for the years ended December 31, 2023 and 2022, six months ended December 31, 2021 and fiscal year ended June 30, 2021 is geographically distributed as shown in the following table (amounts in thousands):

Six Months Ended

Fiscal Years Ended

Fiscal Year Ended

Stream interests:

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Xavantina Exploration Payment

On March 22, 2022, we made a payment of $ 3.2 million of additional advance payments to a subsidiary of Ero as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions.

This payment has been recorded to exploration stage stream interests (Note 4) within Stream and royalty interests, net on our consolidated balance sheets.

On April 20, 2023, we made a $ 2.4 million advance payment to a subsidiary of Ero Copper Corp.

(“Ero”) as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions.

This payment was recorded to exploration-stage stream interests within Stream and royalty interests, net on our consolidated balance sheets.

As of December 31, 2023, $ 4.4 million of additional advance payments remain if Ero meets certain success-based targets related to regional exploration and mineral resource additions through calendar 2024.

Refer to Note 3 for further information on the Xavantina Gold Stream acquisition.

Ilovica Gold Stream Acquisition

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

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

TRANSITION PERIOD COMPARATIVE DATA

The following table presents certain comparative financial information for the year ended December 31, 2022 and 2021, respectfully (amounts in thousands, except share data).

Costs and expenses

Cost of sales (excludes depreciation, depletion and amortization)

General and administrative

Production taxes

Depreciation, depletion and amortization

Impairment of royalty interests

Total costs and expenses

Operating income

Fair value changes in equity securities

Interest and other income

Interest and other expense

Income before income taxes

Income tax expense

Net income and comprehensive income

Net (income) loss and comprehensive (income) loss attributable to non-controlling interests

Net income and comprehensive income attributable to Royal Gold common stockholders

Basic earnings per share

Basic weighted average shares outstanding

Diluted earnings per share

Diluted weighted average shares outstanding

Cash dividends declared per common share

ROYAL GOLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash flows from operating activities:

Net income and comprehensive income

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

Depreciation, depletion and amortization

Non-cash employee stock compensation expense

Fair value changes in equity securities

Deferred tax (benefit) expense

Impairment of royalty interests

Changes in assets and liabilities:

Royalty receivables

Stream inventory

Income tax receivable

Prepaid expenses and other assets

Accounts payable

Income tax payable

Uncertain tax positions

Other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Acquisition of stream and royalty interests

Khoemac a u subordinated debt facility

Proceeds from sale of equity securities

Net cash used in by investing activities

Cash flows from financing activities:

Repayment of debt

Borrowings from revolving credit facility

Net payments from issuance of common stock

Common stock dividends

Net cash provided by (used in) financing activities

Net decrease in cash and equivalents

Cash and equivalents at beginning of period

Cash and equivalents at end of period

SUBSEQUENT EVENTS

On February 13, 2024, RGLD Gold AG, a subsidiary of the Company, entered into a Processing Cost Support Agreement (the “Agreement”) with Centerra Gold Inc.

(“Centerra”) with respect to the Mount Milligan Mine (“Mount Milligan”) for cash consideration of $ 24.5 million, 50,000 ounces of gold to be delivered in the future and a free cash flow interest.

The cost support to Centerra is expected to allow for a reserve increase and extend the mine life at Mount Milligan to 2035.

Our existing stream agreement on Mount Milligan remains in place and is unaffected by the additional Agreement.

We are currently evaluating the accounting for the Agreement with Centerra and expect it will be completed during the quarter ending March 31, 2024.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data