Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Presentation
This Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) generally discusses year-to-year comparisons between the year ended December 31, 2023 and the year ended December 31, 2022. Due to our change in fiscal year from June 30 to December 31, the comparative year ended December 31, 2021 was unaudited. A discussion of the changes in our financial condition and results of operations for the year ended December 31, 2022, the six month transition period ended December 31, 2021 and fiscal year ended June 30, 2021 has been omitted from this report, but may be found in Item 7. MD&A, of our Annual Reports on Form 10-K for the year ended December 31, 2022, the six month transition period ended December 31, 2021 and the year ended June 30, 2021, filed with the SEC on February 16, 2023, February 17, 2022 and August 12, 2021, respectively, which are available free of charge on the SEC’s website at www.sec.gov and our website at www.royalgold.com.
Overview of Our Business
We acquire and manage precious metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or finance projects that are in production, development or exploration stage in exchange for stream or royalty interests.
We manage our business under two segments:
● Acquisition and Management of Stream Interests — A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. As of December 31, 2023, we owned nine stream interests, which are on eight production stage properties and one development stage property. Stream interests accounted for 69% of our total revenue for the years ended December 31, 2023 and 2022. 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 December 31, 2023, we owned royalty interests on 29 production stage properties, 21 development stage properties and 119 exploration stage properties, of which we consider 52 to be evaluation stage properties. 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 31% of our total revenue for the years ended December 31, 2023 and 2022 .
We do not conduct mining operations on the properties in which we hold stream and royalty interests, and we generally are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties.
We are continually reviewing opportunities to grow our portfolio, whether through the creation or acquisition of new or existing stream or royalty interests or other acquisition activity. We generally have acquisition opportunities in various stages of review. Our review process may include, for example, engaging consultants and advisors to analyze an opportunity; analysis of technical, financial, legal, and other confidential information of an opportunity; submission of indications of interest and term sheets; participation in preliminary discussions and negotiations; and involvement as a bidder in competitive processes.
70
Table of Contents
Business Trends and Uncertainties
Metal Prices
Our financial results are primarily tied to the price of gold, silver, copper, and other metals. Metal prices have fluctuated widely in recent years, and we expect this volatility to continue. The marketability and price of metals are influenced by numerous factors beyond our control, and significant changes in metal prices can have a material effect on our revenue.
For the years ended December 31, 2023, and 2022, the average prices and percentages of revenue by metal were as follows:
Year Ended
December 31, 2023
December 31, 2022
Metal
Average
Price
Percentage
of Revenue
Average
Price
Percentage
of Revenue
Gold ($/ounce) (1)
$
1,941
76%
$
1,800
73%
Silver ($/ounce) (1)
$
23.35
12%
$
21.73
11%
Copper ($/pound) (2)
$
3.85
9%
$
3.99
12%
Other
N/A
3%
N/A
4%
(1) Based on the average LBMA Price for the period.
(2) Based on the average LME Price for the period.
Cost Support Agreement for Mount Milligan
On February 13, 2024, we entered into a Cost Support Agreement with Centerra to incentivize Centerra to continue to invest and maximize the value of the large mineral endowment at Mount Milligan. The Cost Support Agreement is expected to provide a basis for a reserve increase and extension of the Mount Milligan mine life to 2035. Please refer to Part I, Item 2, Properties, of this report for additional information regarding the Cost Support Agreement.
Operators’ Production Estimates by Stream and Royalty Interest for Calendar 2023
We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2023. In some instances, an operator may revise its original calendar year guidance throughout the year. The following table shows these production estimates for our principal producing properties for calendar 2023 as well as the actual production reported to us by the various operators through December 31, 2023. The estimates and production reports are prepared by the operators. We do not participate in the preparation or calculation of the operators’ estimates or production reports and have not independently assessed or verified, and disclaim all responsibility for, the accuracy of this information. Please refer to Part I, Item 2, Properties, of this report for further discussion on any updates at our principal producing properties.
71
Table of Contents
Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar Year 2023
Principal Production Stage Properties
Calendar Year 2023 Operator’s Production
Calendar Year 2023 Operator’s Production
Estimate (1)
Actual (2)
Gold
Silver
Base Metals
Gold
Silver
Base Metals
Stream/Royalty
(oz.)
(oz.)
(lbs.)
(oz.)
(oz.)
(lbs.)
Stream:
Andacollo (3)
22,000 - 27,000
23,400
Mount Milligan (4)
150,000 - 160,000
154,400
Copper
60 - 70 Million
62 Million
Pueblo Viejo (5)
470,000 - 520,000
N/A
335,000
N/A
Khoemac a u (6)
1.5 - 1.7 Million
1.5 Million
Royalty:
Cortez (7)
940,000 - 1,060,000
893,000
Peñasquito (8)
N/A
N/A
123,000
13.8 Million
Lead
N/A
86 Million
Zinc
N/A
180 Million
(1) Production estimates received from our operators are for calendar year 2023. Please also refer to our cautionary language regarding forward-looking statements following this MD&A, as well as the Risk Factors identified in Part I, Item 1A, of this report for information regarding factors that could affect actual results.
(2) Actual production figures shown are from our operators and cover the period January 1, 2023, through December 31, 2023, unless otherwise noted in footnotes to this table. Such amounts may differ from our reported revenue and production and are not reduced to show the production attributable to our interests.
(3) The estimated and actual production figures shown for Andacollo are contained gold in concentrate. Deliveries to Royal Gold are determined using a fixed gold payability factor of 89%.
(4) The estimated and actual production figures shown for Mount Milligan are payable gold and copper in concentrate. Deliveries to Royal Gold are determined using a fixed payability factor of 97% for gold and a minimum payability factor of 95% for copper. Actual production figures are for the period January 1, 2023, through September 30, 2023.
(5) The estimated and actual production figures shown for Pueblo Viejo are payable gold in doré and represent the 60% interest in Pueblo Viejo held by Barrick. Barrick did not provide estimated or actual silver production. Deliveries to Royal Gold are determined using a 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. Deliveries to Royal Gold are determined using a fixed silver payability factor of 90%.
(7) The estimated and actual production figures for Cortez include the entirety of the Cortez Complex. 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.
(8) The gold and silver production figures shown for Peñasquito are payable gold and silver in concentrate and doré. The lead and zinc production figures shown are payable lead and zinc in concentrate. Actual production 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 on July 20, 2023, due to the suspension of operations
Results of Operations
Year Ended December 31, 2023, Compared with Year Ended December 31, 2022 (In thousands, except share data)
For the year ended December 31, 2023, we recorded net income attributable to Royal Gold stockholders of $239.4 million, or $3.64 per basic share and $3.63 per diluted share, as compared to net income attributable to Royal Gold stockholders of $239.0 million, or $3.64 per basic and $3.63 per diluted share, for the year ended December 31, 2022.
For the year ended December 31, 2023, we recognized total revenue of $605.7 million, which is comprised of stream revenue of $418.3 million and royalty revenue of $187.4 million, at an average gold price of $1,941 per ounce, an average
72
Table of Contents
silver price of $23.35 per ounce and an average copper price of $3.85 per pound, compared to total revenue of $603.2 million, which is comprised of stream revenue of $417.8 million and royalty revenue of $185.4 million, at an average gold price of $1,800 per ounce, an average silver price of $21.73 per ounce and an average copper price of $3.99 per pound, for the year ended December 31, 2022.
Revenue and the corresponding production attributable to our stream and royalty interests, for the year ended December 31, 2023, compared to the year ended December 31, 2022, is as follows:
Revenue and Reported Production Subject to our Stream and Royalty Interests
Year Ended December 31, 2023 and 2022
(In thousands, except reported production in oz. and lbs.)
Year Ended
Year Ended
December 31, 2023
December 31, 2022
Reported
Reported
Stream/Royalty
Metal(s)
Revenue
Production (1)
Revenue
Production (1)
Stream (2) :
Mount Milligan
$
158,167
$
180,543
Gold
58,000
oz.
67,800
oz.
Copper
11.8
Mlbs.
14.8
Mlbs.
Pueblo Viejo
$
76,247
$
85,863
Gold
27,100
oz.
33,200
oz.
Silver
1.0
Moz.
1.2
Moz.
Andacollo
Gold
$
48,920
25,500
oz.
$
47,347
26,200
oz.
Khoemac a u
Silver
$
34,602
1.5
Moz.
$
18,786
887,700
oz.
Other (3)
$
100,344
$
85,254
Gold
48,500
oz.
44,300
oz.
Silver
270,100
oz.
225,400
oz.
Total stream revenue
$
418,280
$
417,793
Royalty (2) :
Cortez Legacy Zone
Gold
$
79,920
396,000
oz.
$
47,769
299,800
oz.
Cortez CC Zone
Gold
14,626
494,700
oz.
2,790
114,400
oz.
Peñasquito
$
17,772
$
43,165
Gold
129,600
oz.
572,600
oz.
Silver
16.7
Moz.
29.7
Moz.
Lead
106.9
Mlbs.
146.8
Mlbs.
Zinc
222.4
Mlbs.
373.1
Mlbs.
Other (3)
Various
$
75,119
N/A
$
91,689
N/A
Total royalty revenue
$
187,437
$
185,413
Total revenue
$
605,717
$
603,206
(1) Reported production relates to the amount of stream metal sales and the metal sales attributable to our royalty interests for the years ended December 31, 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.
(2) Refer to Item 2, Properties, for further discussion on our principal stream and royalty interests.
(3) Individually, with the exception of the Rainy River stream (6.4% for the year ended December 31, 2023 and 5.3% for the year ended December 31, 2022) and Wassa (5.4% for the year ended December 31, 2023 and 5.2% for the year ended December 31, 2022), no stream or royalty included within the “Other” category contributed greater than 5% of our total revenue for either period.
The increase in our total revenue for the year ended December 31, 2023, compared with the year ended December 31, 2022, resulted primarily from higher gold production at the Cortez Legacy Zone, the new Cortez royalties acquired in 2022 and higher gold and silver prices when compared to the prior year. These increases were partially offset by an approximate 4 month suspension of operations at Peñasquito commencing in June 2023 due to a strike by the Union and lower gold and copper sales at Mount Milligan compared to the prior year.
73
Table of Contents
Gold and silver ounces and copper pounds purchased and sold during the year ended December 31, 2023 and 2022, as well as gold, silver and copper in inventory as of December 31, 2023 and 2022, for our stream interests were as follows:
Year Ended
Year Ended
As of
As of
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Gold Stream
Purchases (oz.)
Sales (oz.)
Purchases (oz.)
Sales (oz.)
Inventory (oz.)
Inventory (oz.)
Mount Milligan
56,800
58,000
68,900
67,800
4,000
5,200
Pueblo Viejo
25,400
27,100
32,500
33,200
6,200
7,900
Andacollo
22,500
25,500
27,700
26,200
800
3,800
Other
48,600
48,500
44,600
44,300
4,200
4,100
Total
153,300
159,100
173,700
171,500
15,200
21,000
Year Ended
Year Ended
As of
As of
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Silver Stream
Purchases (oz.)
Sales (oz.)
Purchases (oz.)
Sales (oz.)
Inventory (oz.)
Inventory (oz.)
Khoemacau
1,516,400
1,487,000
951,500
887,700
135,300
105,900
Pueblo Viejo
907,000
1,021,900
1,238,600
1,216,700
223,000
337,800
Other
277,500
270,100
238,600
225,400
24,800
17,500
Total
2,700,900
2,779,000
2,428,700
2,329,800
383,100
461,200
Year Ended
Year Ended
As of
As of
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Copper Stream
Purchases (Mlbs.)
Sales (Mlbs.)
Purchases (Mlbs.)
Sales (Mlbs.)
Inventory (Mlbs.)
Inventory (Mlbs.)
Mount Milligan
10.9
11.8
14.8
14.8
—
0.9
Cost of sales decreased to $90.5 million for the year ended December 31, 2023, from $94.6 million for the year ended December 31, 2022. The decrease was primarily due to lower gold and copper sales at Mount Milligan and lower gold and silver sales at Pueblo Viejo when compared to the prior year. This decrease was partially offset by higher silver sales at Khoemac a u when compared to the prior year. 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 (Mount Milligan) spot price near the date of metal delivery.
General and administrative costs increased to $39.8 million for the year ended December 31, 2023, from $34.6 million for the year ended December 31, 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 $164.9 million for the year ended December 31, 2023, from $178.9 million for the year ended December 31, 2022. The decrease was primarily due to lower depletion rates at Pueblo Viejo as a result of proven and probable mineral reserve increases when compared to the prior year. The decrease was partially offset by higher depletion expense at Khoemac a u due to the ramp-up of production in 2023 and additional depletion from the newly acquired royalties at Cortez in 2022.
There were no impairment charges on any of our stream or royalty interests for the year ended December 31, 2023. During the year ended December 31, 2022, we recognized an impairment loss of $4.3 million on the carrying value of a non-principal exploration stage royalty due to new legal information received. Refer to Note 4 of our notes to consolidated financial statements for further discussion on the impairment.
Interest and other expense increased to $30.9 million for the year ended December 31, 2023, from $17.2 million for the year ended December 31, 2022. The increase in the current period was primarily attributable to higher interest expense as a result of higher interest rates when compared to the prior period. The all-in interest rates as of December 31, 2023 and 2022, were 6.56% and 5.93%, respectively. Refer to Note 5 of our notes to consolidated financial statements for further discussion on our debt.
Income tax expense was $42.0 million for the year ended December 31, 2023, as compared to $32.9 million for the year ended December 31, 2022, which resulted in an effective tax rate of 14.9% in the current period and 12.1% in the prior
74
Table of Contents
period. The effective tax rates for the years ended December 31, 2023 and 2022, were primarily impacted by the release of valuation allowances on certain foreign deferred tax assets.
Liquidity and Capital Resources
We use our liquidity and capital resources to fund dividends and for the acquisition of stream and royalty interests, including any conditional funding schedules. Our short-term and long-term capital requirements are primarily affected by our ongoing acquisition activities. We currently, and generally at any time, have acquisition opportunities in various stages of active review. In the event of one or more substantial stream or royalty interest or other acquisitions, we may seek additional debt or equity financing as necessary. We occasionally borrow and repay amounts under our revolving credit facility and may do so in the future. We believe that our current liquidity and capital resources will be adequate to cover our operating needs for the foreseeable future.
At December 31, 2023, we had working capital of $95 million, including $104.2 million of cash and equivalents. This compares to working capital of $122.2 million, including $118.6 million of cash and equivalents at December 31, 2022. The decrease in our working capital was primarily due to a decrease in our available cash, which resulted from increased debt repayments during the current period.
During the year ended December 31, 2023, liquidity needs were met from $415.8 million in net cash provided by operating activities and our available cash resources. Working capital, combined with the $750 million of available capacity under our revolving credit facility, resulted in approximately $845 million of total liquidity at December 31, 2023. Refer to Note 5 of our notes to consolidated financial statements and below (“Recent Liquidity and Capital Resource Developments”) for further discussion on our debt.
At December 31, 2023, our contractual cash obligations are solely comprised of operating leases. We believe we will be able to fund all current cash obligations from net cash provided by operating activities. For additional information on our operating leases, see Note 6 of our notes to consolidated financial statements.
Please refer to our risk factors included in Part I, Item 1A of this report for a discussion of certain risks that may impact our liquidity and capital resources.
Recent Liquidity and Capital Resource Developments
Revolving Credit Facility Repayment
On December 6, 2023, we made a $75 million principal payment towards the outstanding balance on the revolving credit facility leaving $750 million available as of December 31, 2023.
Dividend Increase
On November 14, 2023, we announced an increase in our annual dividend for calendar year 2024 from $1.50 to $1.60 per share, payable on a quarterly basis of $0.40 per share. The newly declared dividend is 7% higher than the dividend paid during calendar year 2023. We have steadily increased our annual dividend for 23 years, or since calendar year 2001. We expect to pay our annual dividend using cash on hand.
Summary of Cash Flows
Operating Activities
Net cash provided by operating activities totaled $415.8 million for the year ended December 31, 2023, compared to $417.3 million for the year ended December 31, 2022. The decrease was primarily due to higher interest paid on the outstanding revolving credit facility compared to the prior period. This decrease was partially offset by higher proceeds received from our stream and royalty interests, net of cost of sales, compared to the prior period.
75
Table of Contents
Investing Activities
Net cash used in investing activities totaled $2.8 million for the year ended December 31, 2023, compared to net cash used in investing activities of $922.9 million for the year ended December 31, 2022. The decrease over the prior period was primarily due to the new royalty acquisitions during the year ended December 31, 2022.
Financing Activities
Net cash used in financing activities totaled $427.4 million for the year ended December 31, 2023, compared to net cash provided by financing activities of $480.6 million for the year ended December 31, 2022. The change was primarily due to an increase in the debt outstanding for the year ended December 31, 2022 of $575 million that was used to fund acquisitions of our new royalty interests at Cortez and the Great Bear Project, and the repayment of $325 million of debt outstanding during the current period.
Critical Accounting Estimates
Use of Estimates
The preparation of our financial statements, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), requires management to make estimates and assumptions. These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain.
We rely on mineral reserve and mineral resource estimates reported by the operators of the properties on which we hold stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long-lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts are adjusted and recorded in the period that the actual amounts are known.
Stream and Royalty Interests in Mineral Properties and Related Depletion
Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. 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.
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 mineral 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 mineral reserves, are not depleted. When the associated exploration stage mineral interests are converted to proven and probable mineral reserves, the mineral property becomes a development stage mineral property.
Asset Impairment
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts of an asset or group of assets may not be recoverable. The recoverability of the carrying value of stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest using estimates of proven and probable mineral reserves, mineral resources and other relevant information received from the operators. We evaluate the recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in the price of gold, silver, copper and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur or may be reduced in the future, thus potentially affecting the
76
Table of Contents
future recoverability of our stream or royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows.
Estimates of gold, silver, copper, and other metal prices, and operators’ estimates of proven and probable mineral reserves or mineral resources related to our stream or royalty properties are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties. 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 of our notes to consolidated financial statements for a discussion of the impairment assessment results for the years ended December 31, 2023 and 2022.
Revenue
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. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, a performance obligation is satisfied. In accordance with this guidance, revenue attributable to our stream and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers, as described below. The amount of revenue we recognize further reflects the consideration to which we are entitled under the respective stream or royalty agreement. A more detailed summary of our revenue recognition policies for our stream and royalty interests is discussed below.
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 of the metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Gold, silver and copper received under our metal stream agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between ten days and three months (depending on the frequency of deliveries under the respective stream agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. We settle our forward sales contracts via physical delivery of the metal to the purchaser (our customer) on the settlement date specified in the contract. Under our forward sales contracts, there is a single performance obligation to sell a contractually specified volume of metal to the purchaser, and we satisfy this obligation at the point in time of physical delivery. Accordingly, revenue from our metal sales is recognized on the date of settlement, which is the date that control, custody and title to the metal transfer to the purchaser.
Royalty Interests
Royalties are non-operating interests in mining projects that provide the right to a percentage of revenue or metals produced from the project after deducting specified costs, if any. We are entitled to payment for our royalty interest in a mining project based on a contractually specified commodity price (for example, a monthly or quarterly average spot price) for the period in which metal production occurred. As a royalty holder, we act as a passive entity in the production and operations of the mining project, and the third-party operator of the mining project is responsible for all mining activities, including subsequent marketing and delivery of all metal production to their ultimate customer. In all of our material royalty interest arrangements, we have concluded that we transfer control of our interest in the metal production to the operator at the point at which production occurs, and thus, the operator is our customer. We have further determined that the transfer of each unit of metal production, comprising our royalty interest, to the operator represents a separate performance obligation under the contract, and each performance obligation is satisfied at the point in time of metal production by the operator. Accordingly, we recognize revenue attributable to our royalty interests in the period in which metal production occurs at the specified commodity price per the agreement, net of any contractually allowable offsite treatment, refining, transportation and, if applicable, other contractually permitted costs.
77
Table of Contents
Income Taxes
Our annual tax rate is based on income, statutory tax rates in effect and tax planning opportunities available to us in the various jurisdictions in which the Company operates. Significant judgment is required in determining the annual tax expense, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate or unpredicted results from the final determination of each year’s liability by taxing authorities.
We treat global intangible low-taxed income (“GILTI”) as a period cost and therefore do not record deferred tax impacts of GILTI in our consolidated financial statements. Our deferred income taxes reflect the impact of temporary differences between the reported amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. In evaluating the realizability of the deferred tax assets, management considers both positive and negative evidence that may exist, such as earnings history, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies in each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning strategies.
Our operations may involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit; however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period which they are determined. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Forward-Looking Statements
This report and our other public communications include “forward-looking statements” within the meaning of U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from these statements.
Forward-looking statements are often identified by words like “will,” “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” or negatives of these words or similar expressions. Forward-looking statements include, among others, the following: statements about our expected financial performance and outlook, including sale volume, revenue, expenses, tax rates, earnings or cash flow; operators’ expected operating and financial performance, including production, deliveries, mine plans, environmental and feasibility studies, technical reports, estimates of mineral resources and mineral reserves, development, cash flows and liquidity, capital requirements and capital expenditures; influence on our operators’ operations; benefits from acquisitions; receipt and timing of metal deliveries; liquidity, capital resources, financing and stockholder returns; borrowings and repayments under our revolving credit facility; growing our portfolio of assets; the materiality of properties within our portfolio; impact of inadequately assessing new acquisitions; macroeconomic and market conditions; impacts of climate change; diversity and inclusion efforts; returns on investments; sufficiency of contractual protections; adoption of new accounting standards; valuation allowances; assumptions related to fair value of equity awards; prices for gold, silver, copper, nickel and other metals; potential impairments; and tax changes.
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 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
78
Table of Contents
needs, mining and environmental hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, or operational disruptions; 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; increased competition for stream and royalty interests; environmental risks, including those caused by climate change; potential cyber-attacks, including ransomware; our ability to identify, finance, value and complete acquisitions; adverse economic and market conditions; impact of health epidemics and pandemics; changes in laws or regulations governing us, operators or operating properties; changes in management and key employees; and other factors described elsewhere in this report, including in Item 1A – Risk Factors. Most of these factors are beyond our ability to predict or control. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements.
Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any
forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.