Table of Contents
UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-13357
Royal Gold, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
84-0835164
(State or Other Jurisdiction of
(I.R.S. Employer
Incorporation)
Identification No.)
1144 15th Street, Suite 2500
Denver, Colorado
80202
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code (303) 573-1660
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of the Exchange on which Registered
Common Stock, $0.01 par value
RGLD
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 65,678,346 shares of Royal Gold common stock outstanding as of April 27, 2023.
In this Quarterly Report on Form 10-Q, Royal Gold, Inc., together with its subsidiaries, is collectively referred to as “Royal Gold,” “we,” “us,” or “our.”
INDEX
PAGE
PART I
FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
Consolidated Balance Sheets
3
Consolidated Statements of Operations and Comprehensive Income
4
Consolidated Statements of Changes in Stockholders’ Equity
5
Consolidated Statements of Cash Flows
6
Notes to Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
17
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
27
Item 4.
Controls and Procedures
PART II
OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
28
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
29
SIGNATURES
31
2
ITEM 1. FINANCIAL STATEMENTS
ROYAL GOLD, INC.
(Unaudited, amounts in thousands except share data)
March 31,
December 31,
2023
2022
ASSETS
Cash and equivalents
$
126,816
118,586
Royalty receivables
46,934
49,405
Income tax receivable
1,724
3,066
Stream inventory
11,599
12,656
Prepaid expenses and other
2,091
2,120
Total current assets
189,164
185,833
Stream and royalty interests, net (Note 2)
3,191,385
3,237,402
Other assets
110,483
111,287
Total assets
3,491,032
3,534,522
LIABILITIES
Accounts payable
7,852
6,686
Dividends payable
24,642
24,627
Income tax payable
8,225
16,065
Other current liabilities
14,279
16,209
Total current liabilities
54,998
63,587
Debt (Note 4)
496,817
571,572
Deferred tax liabilities
136,784
138,156
Other liabilities
7,501
7,738
Total liabilities
696,100
781,053
Commitments and contingencies (Note 11)
EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued
—
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,599,348 and 65,592,597 shares outstanding, respectively
656
Additional paid-in capital
2,215,362
2,213,123
Accumulated earnings
566,545
527,314
Total Royal Gold stockholders’ equity
2,782,563
2,741,093
Non-controlling interests
12,369
12,376
Total equity
2,794,932
2,753,469
Total liabilities and equity
The accompanying notes are an integral part of these consolidated financial statements.
Three Months Ended
Revenue (Note 5)
170,392
162,355
Costs and expenses
Cost of sales (excludes depreciation, depletion and amortization)
25,020
22,639
General and administrative
11,000
8,931
Production taxes
1,989
2,221
Depreciation, depletion and amortization
46,328
47,988
Total costs and expenses
84,337
81,779
Operating income
86,055
80,576
Fair value changes in equity securities
799
613
Interest and other income
2,263
975
Interest and other expense
(9,175)
(898)
Income before income taxes
79,942
81,266
Income tax expense
(15,871)
(15,304)
Net income and comprehensive income
64,071
65,962
Net income and comprehensive income attributable to non-controlling interests
(196)
(287)
Net income and comprehensive income attributable to Royal Gold common stockholders
63,875
65,675
Net income per share attributable to Royal Gold common stockholders:
Basic earnings per share
0.97
1.00
Basic weighted average shares outstanding
65,594,977
65,565,735
Diluted earnings per share
Diluted weighted average shares outstanding
65,709,095
65,644,668
Cash dividends declared per common share
0.375
0.35
Three months ended March 31, 2023, and 2022
(unaudited, amounts in thousands except share data)
Royal Gold Stockholders
Additional
Common Shares
Paid-In
Accumulated
Non-controlling
Total
Shares
Amount
Capital
Earnings
Interests
Equity
Balance at December 31, 2022
65,592,597
Stock-based compensation and related share issuances
6,751
2,239
Distributions to non-controlling interests
(203)
196
Dividends declared
(24,644)
Balance at March 31, 2023
65,599,348
Balance at December 31, 2021
65,564,364
2,206,159
381,929
12,467
2,601,211
4,435
2,266
(329)
287
(22,996)
Balance at March 31, 2022
65,568,799
2,208,425
424,608
12,425
2,646,114
(Unaudited, amounts in thousands)
Cash flows from operating activities:
Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities:
Non-cash employee stock compensation expense
2,636
2,124
(799)
(613)
Deferred tax expense
1,092
688
Other
214
245
Changes in assets and liabilities:
2,471
569
1,056
3,118
1,342
518
Prepaid expenses and other assets
(914)
(7,309)
1,166
(208)
(7,840)
(10,910)
(2,168)
(1,039)
Net cash provided by operating activities
108,655
101,133
Cash flows from investing activities:
Acquisition of stream and royalty interests
(37,800)
(197)
(11)
Net cash used in investing activities
(37,811)
Cash flows from financing activities:
Repayment of debt
(75,000)
Net payments from issuance of common stock
(397)
141
Common stock dividends
(24,629)
(22,978)
(202)
Net cash used in financing activities
(100,228)
(23,166)
Net increase in cash and equivalents
8,230
40,156
Cash and equivalents at beginning of period
143,551
Cash and equivalents at end of period
183,707
(Unaudited)
1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS
Royal Gold Inc., together with its subsidiaries (“Royal Gold,” the “Company,” “we,” “us,” or “our”), is engaged in the business of acquiring and managing precious metals streams, royalties and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty 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. Royalties are non-operating interests in a mining project that provide the right to revenue or metals produced from the project after deducting contractually specified costs, if any.
Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this Form 10-Q. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2023. These interim unaudited consolidated financial statements should be read in conjunction with our Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 16, 2023 (“2022 10-K”).
Recent Accounting Standards
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 these unaudited consolidated financial statements and do not believe the future adoption of any such standards will have a material impact on our consolidated financial statements.
2. STREAM AND ROYALTY INTERESTS, NET
The following tables summarize our stream and royalty interests, net as of March 31, 2023 and December 31, 2022.
As of March 31, 2023 (Amounts in thousands):
Cost
Accumulated Depletion
Net
Production stage stream interests:
Mount Milligan
790,635
(404,090)
386,545
Pueblo Viejo
610,404
(292,501)
317,903
Andacollo
388,182
(155,619)
232,563
Khoemacau
265,911
(22,782)
243,129
Rainy River
175,727
(65,262)
110,465
232,703
(115,926)
116,777
Total production stage stream interests
2,463,562
(1,056,180)
1,407,382
Production stage royalty interests:
Cortez (Legacy Zone and CC Zone)
353,844
(41,853)
311,991
Voisey's Bay
205,724
(118,985)
86,739
Red Chris
116,187
(3,758)
112,429
Peñasquito
99,172
(58,620)
40,552
447,688
(400,934)
46,754
Total production stage royalty interests
1,222,615
(624,150)
598,465
Total production stage stream and royalty interests
3,686,177
(1,680,330)
2,005,847
Development stage stream interests:
12,038
Development stage royalty interests:
Côté
45,421
81,510
Total development stage stream and royalty interests
138,969
Exploration stage stream interests:
Xavantina
17,126
Exploration stage royalty interests:
456,444
Great Bear
209,106
Pascua-Lama
177,690
48,895
29,610
107,698
Total exploration stage stream and royalty interests
1,046,569
Total stream and royalty interests, net
4,871,715
8
As of December 31, 2022 (Amounts in thousands):
Impairments
(392,804)
397,831
(289,537)
320,867
(151,870)
236,312
(15,905)
250,006
(61,601)
114,126
215,576
(110,711)
104,865
2,446,435
(1,022,428)
1,424,007
353,772
(35,276)
318,496
(118,327)
87,397
(1,797)
114,390
(57,772)
41,400
447,535
(398,513)
49,022
1,222,390
(611,685)
610,705
3,668,825
(1,634,113)
2,034,712
74,225
131,684
34,253
456,318
119,421
(4,287)
115,134
Total exploration stage royalty interests
1,075,293
1,071,006
4,875,802
3. MARKETABLE EQUITY SECURITIES
As of March 31, 2023, 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. Our marketable equity securities are measured at fair value (Note 10) each reporting period with any changes in fair value recognized in net income (amounts in thousands).
Carrying value of marketable securities(1)
1,172
373
Change in fair value of marketable securities
(1,503)
(1) Included in Other Assets on our consolidated balance sheets.
9
4. DEBT
Our debt as of March 31, 2023 and December 31, 2022 consists of the following (amounts in thousands):
As of March 31, 2023
As of December 31, 2022
Principal
Debt Issuance Costs
(Amounts in thousands)
Revolving credit facility
500,000
(3,183)
575,000
(3,428)
Total debt
On March 6, 2023, we repaid $75 million of outstanding borrowings on our revolving credit facility.
As of March 31, 2023, we had $500 million outstanding and $500 million available under our revolving credit facility dated June 2, 2017, and as amended. The interest rate on borrowings under our revolving credit facility as of March 31, 2023, was LIBOR plus 1.20% for an all-in rate of 6.2%. Interest expense, which includes interest on outstanding borrowings and amortization of debt issuance costs, was $8.5 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively. We were in compliance with each financial covenant (leverage ratio and interest coverage ratio) under our revolving credit facility as of March 31, 2023.
We may repay any borrowings under our revolving credit facility at any time without premium or penalty.
5. REVENUE
Revenue Recognition
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 interests and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers. 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 streaming 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 streaming 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
10
the period in which metal production occurs. 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 costs.
Royalty Revenue Estimates
For a small number of our royalty interests, we may not receive, or be entitled to receive, payment information, including production information from the operator, for the period in which metal production occurred prior to issuance of our financial statements for that period. As a result, we may estimate revenue for these royalties based on available information, including public information, from the operator. If adequate information is not available from the operator or from other public sources before we issue our financial statements, we will recognize royalty revenue during the period in which the necessary payment information is received. Differences between estimates and actual amounts could differ significantly and are recorded in the period that the actual amounts are known. Please also refer to our “Use of Estimates” accounting policy discussed in our 2022 10-K. For the three months ended March 31, 2023, royalty revenue that was estimated or was attributable to metal production for a period prior to March 31, 2023, was not material.
Disaggregation of Revenue
We have identified two material revenue sources in our business: stream interests and royalty interests. These identified revenue sources are consistent with our reportable segments as discussed in Note 9.
Revenue by metal type attributable to each of our revenue sources is disaggregated as follows (amounts in thousands):
Stream revenue:
Gold
78,629
77,502
Silver
18,308
11,439
Copper
18,053
16,310
Total stream revenue
114,990
105,251
Royalty revenue:
42,868
37,917
2,946
4,317
5,058
6,705
4,530
8,165
Total royalty revenue
55,402
57,104
Total revenue
11
Revenue attributable to our principal stream and royalty interests is disaggregated as follows (amounts in thousands):
Metal(s)
Gold & Copper
46,656
42,416
Gold & Silver
22,358
23,264
12,934
15,674
9,153
2,389
23,889
21,508
Cortez Legacy Zone
23,087
16,714
Cortez CC Zone
3,206
N/A
Gold, Silver, Lead & Zinc
7,433
13,094
Various
21,676
27,296
Please refer to Note 9 for the geographical distribution of our revenue by reportable segment.
6. STOCK-BASED COMPENSATION
We recognized stock-based compensation expense as follows (amounts in thousands):
Restricted stock
1,614
1,155
Performance stock
810
631
Stock appreciation rights
205
332
Stock options
Total stock-based compensation expense
Stock-based compensation expense is included within General and administrative expense in the consolidated statements of operations and comprehensive income.
During the three months ended March 31, 2023 and 2022, we granted the following stock-based compensation awards:
(Number of shares)
Performance stock (at maximum 200% attainment)
82,360
39,380
56,530
28,220
Total equity awards granted
138,890
67,600
12
As of March 31, 2023, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:
Unrecognized
Weighted-
compensation
average vesting
expense
period (years)
11,230
2.3
8,893
312
0.4
7. EARNINGS PER SHARE (“EPS”)
Basic EPS was computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of EPS pursuant to the two-class method. Our unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. Our unexercised stock option awards, unexercised stock-settled stock appreciation rights and unvested performance stock do not contain rights to dividends. Under the two-class method, the earnings used to determine basic EPS are reduced by an amount allocated to participating securities. Use of the two-class method has an immaterial impact on the calculation of basic and diluted EPS.
The following table summarizes the effects of dilutive securities on diluted EPS for the periods shown below (amounts in thousands, except share data):
Net income attributable to Royal Gold common stockholders
Weighted-average shares for basic EPS
Effect of other dilutive securities
114,118
78,933
Weighted-average shares for diluted EPS
Basic EPS
Diluted EPS
8. INCOME TAXES
The following table provides the income tax expense (amounts in thousands) and effective tax rates for the periods indicated:
15,871
15,304
Effective tax rate
19.9%
18.8%
13
9. SEGMENT INFORMATION
We manage our business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Our long-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table (amounts in thousands):
Total stream
Stream
Royalty
and royalty
interest
interests, net
Canada
497,010
617,542
1,114,552
511,957
620,549
1,132,506
Dominican Republic
Africa
290,125
321
290,446
299,722
300,043
Chile
224,116
456,679
460,428
United States
816,336
823,203
Mexico
47,936
50,156
Australia
21,949
22,120
Rest of world
98,945
26,639
125,584
101,440
128,079
1,436,546
1,754,839
1,470,298
1,767,104
Our reportable segments for purposes of assessing performance are shown below (amounts in thousands):
Three Months Ended March 31, 2023
Revenue
Cost of sales (1)
Depletion (2)
Segment gross profit
Stream interests
33,752
56,218
Royalty interests
12,462
40,951
46,214
97,169
Three Months Ended March 31, 2022
36,378
46,234
11,485
43,398
47,863
89,632
14
A reconciliation of total segment gross profit to the consolidated Income before income taxes is shown below (amounts in thousands):
Total segment gross profit
General and administrative expenses
Depreciation and amortization
114
125
Our revenue by reportable segment for the three months ended March 31, 2023 and 2022 is geographically distributed as shown in the following table (amounts in thousands):
Stream interests:
56,981
51,485
17,539
8,446
5,178
6,382
Total stream interests
Royalty interests:
33,581
24,358
9,295
15,881
6,591
10,778
4,099
4,046
316
1,836
1,725
Total royalty interests
10. FAIR VALUE MEASUREMENTS
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, we utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Quoted prices for identical instruments in active markets;
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
15
Level 3: Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
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.
Fair Value
Carrying Value
Level 1
Level 2
Level 3
Assets (amounts in thousands):
Marketable equity securities(1)
149
1,023
121
252
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 TriStar Gold Inc. warrants (Note 3) 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. The carrying value of our revolving credit facility (Note 4) approximates fair value as of March 31, 2023.
As of March 31, 2023, we had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with stream and royalty interests, intangible assets and other long-lived assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if any of these assets are determined to be impaired. If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs.
11. COMMITMENTS AND CONTINGENCIES
Xavantina Exploration Payment
On April 20, 2023, we made a $2.4 million advance payment to a subsidiary of Ero Gold Corporation as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions. This payment will be recorded to exploration stage stream interests within Stream and royalty interests, net on our consolidated balance sheets during the second quarter of 2023. Advance payments of $4.4 million remain if Ero meets certain success-based targets related to regional exploration and mineral resource additions through calendar 2024. Refer to Note 3 of our 2022 10-K for further information on the Xavantina (formerly referred to as NX Gold) Gold Stream Acquisition.
Ilovica Gold Stream Acquisition
As of March 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.
16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Presentation
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating the financial condition and results of operations of Royal Gold. You should read this MD&A in conjunction with our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements included in our Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 16, 2023 (“2022 10-K”).
This MD&A contains forward-looking information. You should review our important note about forward-looking statements following this MD&A.
We do not own, develop, or mine the properties on which we hold stream or royalty interests. Certain information provided in this Quarterly Report on Form 10-Q about operating properties in which we hold interests, including information about mineral resources and reserves, historical production, production estimates, property descriptions, and property developments, was provided to us by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the SEC. We have not verified, and are not in a position to verify, and expressly disclaim any responsibility for the accuracy, completeness, or fairness of, this third-party information and refer the reader to the public reports filed by the operators for information regarding those properties.
Unless the context otherwise requires, references to “Royal Gold,” the “Company,” “we,” “us,” and “our” refer to Royal Gold, Inc. and its consolidated subsidiaries.
Overview of Our Business
We acquire and manage precious metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or finance projects that are in production or in the development stage in exchange for stream or royalty interests.
We manage our business under two segments:
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, environmental, social, governance and other confidential information regarding an opportunity; submission of indications of interest and term sheets; participation in preliminary discussions and negotiations; and involvement as a bidder in competitive processes.
Business Trends and Uncertainties
Metal Prices
Our financial results are primarily tied to the price of gold, silver, copper, and other metals. Metal prices have fluctuated widely in recent years and we expect this volatility to continue. The marketability and price of metals are influenced by numerous factors beyond our control, and significant changes in metal prices can have a material effect on our revenue.
For the three months ended March 31, 2023 and 2022, average metal prices and percentages of revenue by metal were as follows:
March 31, 2023
March 31, 2022
Metal
AveragePrice
Percentageof Revenue
Gold ($/ounce)(1)
1,890
71%
1,877
Silver ($/ounce)(1)
22.55
12%
24.01
10%
Copper ($/pound)(2)
4.05
14%
4.53
3%
5%
(1) Based on the average U.S. dollars London Bullion Market Association PM fixing price for gold and daily fixing price for silver, as applicable.
(2) Based on the average U.S. dollars London Metals Exchange settlement price for copper.
On April 20, 2023, we made a $2.4 million advance payment to a subsidiary of Ero Gold Corporation as part of our commitment to support the achievement of success-based targets related to regional exploration and mineral resource additions. Advance payments of $4.4 million remain if Ero meets certain success-based targets related to regional exploration and mineral resource additions through calendar 2024. Refer to Note 3 of our 2022 10-K for further information on the Xavantina (formerly referred to as NX Gold) Gold Stream Acquisition.
Operators’ Production Estimates by Stream and Royalty Interest for Calendar 2023
We generally receive annual production estimates from many of the operators of the producing mines in which we own a stream or royalty interest during the first quarter of each calendar year. In some instances, an operator may revise its original calendar year guidance throughout the year. The following table shows current production estimates for calendar 2023, as well as actual production through March 31, 2023 (except as otherwise noted), for our principal properties as reported to us by the operators.
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Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 2023
Principal Producing Properties
Calendar Year 2023 Operator’s Production
Estimate(1)
Actual(2)
Base Metals
Stream/Royalty
(oz.)
(lbs.)
Stream:
Andacollo(3)
22,000 - 27,000
5,500
Mount Milligan(4)
160,000 - 170,000
60 - 70 Million
Pueblo Viejo(5)
470,000 - 520,000
89,000
Khoemacau(6)
1.5 - 1.7 Million
0.4 Million
Royalty:
Cortez(7)
940,000 - 1,060,000
228,000
Peñasquito(8)
330,000 - 370,000
31 - 35 Million
85,000
7.5 Million
Lead
170 - 190 Million
41 Million
Zinc
420 - 460 Million
102 Million
Property Developments
This section provides recent updates for our principal properties as reported by the operators, either directly to us or in their publicly available documents.
Gold stream deliveries from Andacollo were approximately 5,200 ounces for the three months ended March 31, 2023, compared to approximately 6,100 ounces for the three months ended March 31, 2022. The decrease in deliveries resulted primarily from Andacollo experiencing lower gold grades, lower gold recoveries and lower tonnage milled. Teck Resources Limited (“Teck”) reported a significant rainfall event in July 2022 which caused operations to shut down for
19
five days. As expected, the impact of this shutdown and unplanned maintenance in the third quarter of 2022 affected stream deliveries during the three months ended March 31, 2023.
Gold production at Andacollo has trended lower since the beginning of 2021 due to lower ore grades, as anticipated in the mine plan. According to Teck, the period of lower grades is expected to last through 2023, and the mine plan then anticipates a transition to higher grade ore as the next phase of mining is developed over the following years. Teck has reported that the current life of mine for Andacollo is expected to continue until 2035 and that additional permits or permit amendments will be required to execute the life of mine plan.
Khoemacau Project
Silver stream deliveries from Khoemacau were 427,500 ounces for the three months ended March 31, 2023, compared to approximately 115,210 ounces for the three months ended March 31, 2022. Increased stream deliveries resulted from the ramp-up of Khoemacau.
According to Khoemacau Copper Mining (Pty.) Limited (“KCM”), operations at Khoemacau continued at nameplate capacity through the quarter ended March 31, 2023, after the target production rate of 3.65 million tonnes per year (10,000 tonnes per day) was achieved in December 2022. As projected in the mine plan, KCM expects payable silver production in 2023 to range between 1.5 to 1.7 million ounces, which is slightly below the life of mine average due to lower silver grades in the upper portion of the Zone 5 deposit and the top-down mining sequence.
Gold stream deliveries from Mount Milligan were approximately 13,900 ounces for the three months ended March 31, 2023, compared to approximately 10,000 ounces for the three months ended March 31, 2022. Increased gold deliveries resulted from differences in the timing of shipments and settlements during the periods.
Copper stream deliveries from Mount Milligan were approximately 3.56 million pounds during the three months ended March 31, 2023, compared to approximately 2.69 million pounds during the three months ended March 31, 2022. Increased copper deliveries resulted from differences in the timing of shipments and settlements during the periods.
In 2023, Centerra Gold Inc. (“Centerra”) expects production of between 160,000 and 170,000 ounces of gold and 60 million to 70 million pounds of copper from Mount Milligan. Centerra expects gold and copper production to be higher in the second half of 2023 with approximately 30% to 35% of concentrate sales expected to occur in the fourth quarter of 2023. The lower production compared to 2022 is due to mine sequencing. Centerra continues to optimize the life of mine plan for Mount Milligan and anticipates increases in both gold and copper production for 2024 and 2025 when compared to the annual figures included in the most recent Technical Report, dated November 7, 2022.
Gold stream deliveries from Pueblo Viejo were approximately 7,400 ounces for the three months ended March 31, 2023, compared to approximately 7,100 ounces for the three months ended March 31, 2022.
Silver stream deliveries were approximately 362,200 ounces for the three months ended March 31, 2023, compared to approximately 274,500 ounces for the three months ended March 31, 2022. During the current quarter, an additional 5,700 ounces of silver were deferred. The deferred ounces are the result of a mechanism in the stream agreement that allows for the deferral of deliveries in a period if Barrick’s share of silver production is insufficient to cover its stream delivery obligations. The stream agreement terms include a fixed 70% silver recovery rate. If actual recovery rates fall below the contractual 70% recovery rate, ounces may be deferred and delivered in future periods as silver recovery allows. As of March 31, 2023, approximately 518,400 ounces remain deferred. We expect that silver recoveries could remain highly variable until the plant expansion project is complete and is running at full production levels. We do not expect material deliveries of deferred silver ounces while the plant ramps up to full production levels during 2023, and timing for the delivery of the entire deferred amount is uncertain.
On March 17, 2023, Barrick issued an updated Technical Report on the Pueblo Viejo mine to support the previously disclosed Mineral Resources and Mineral Reserves estimates for the mine as of December 31, 2022. According to Barrick, mining of the open pit is expected to continue to 2041 and processing of ore is expected to continue to 2044, with life of
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mine production from 2023 through 2044 of approximately 11.1 million ounces of gold and 49.9 million ounces of silver (Barrick’s 60% interest).
On May 3, 2023, Barrick provided an update on the plant expansion and mine life extension project at Pueblo Viejo in the Dominican Republic. With respect to the plant expansion, Barrick reported that the first ore has been processed through the crusher and it expects to substantially complete the commissioning of the new plant infrastructure and commence the ramp-up phase during the second quarter of 2023. With respect to the mine life extension, Barrick disclosed that technical and social studies for additional tailings storage capacity continued to advance, and a decision by the Government of the Dominican Republic on the Environmental and Social Impact Assessment for the proposed new Naranjo tailings storage facility (“TSF”) is expected during the first half of 2023. Barrick further reported that geotechnical drilling and site investigation are ongoing to support a feasibility study on the TSF, which is due for completion in the second quarter of 2024.
Barrick continues to expect gold production of 470,000 to 520,000 ounces in 2023 from its 60% interest in Pueblo Viejo. Our stream interests are applicable to production from Barrick’s interest at Pueblo Viejo.
Cortez
Production attributable to our royalty interest at the Cortez Complex was approximately 223,800 ounces of gold for the three months ended March 31, 2023, compared to approximately 102,000 ounces of gold for the three months ended March 31, 2022. The increase was primarily due to the addition of new royalties, the Rio Tinto Royalty, and the Idaho Royalty, covering the Cortez property.
As disclosed by Barrick on November 18, 2022, total gold production from the Cortez Complex is expected to be approximately 1.0 million ounces in 2023, and then increase from approximately 900,000 ounces in 2024 to approximately 1.3 million ounces in 2027. Royal Gold owns multiple royalty interests at the Cortez Complex, which for purposes of simplified disclosure have been divided into the Legacy Zone, consisting of the Crossroads and Pipeline deposits, and Cortez Complex Zone (“CC Zone”), consisting of the remaining deposits in the Cortez Complex.
For 2023, gold production from the Legacy Zone is expected to range from 450,000 to 480,000 ounces with a midpoint of approximately 465,000 ounces. 2023 gold production for the CC Zone is expected to be approximately 535,000 ounces.
For the period 2023 through 2027, gold production from the Legacy Zone is expected to average approximately 360,000 ounces per year. Production during this period is expected to vary around this average, with lower production expected in 2024 and 2025 and higher production expected in 2026 and 2027. All other production from the Cortez Complex during this period is expected to be sourced from the CC Zone.
The gross royalty rate applicable to the Legacy Zone is approximately 9.4%, and the gross rate applicable to the CC Zone is approximately 1.6%. At the Robertson project, Barrick expects first production in 2027 subject to the successful completion of feasibility and permitting activities, among other things. The gross royalty rate applicable to Robertson is approximately 0.45%.
Proven and probable mineral reserves for December 31, 2022, at the Cortez Complex include approximately 2.7 million ounces of gold for the Legacy Zone, which includes the Crossroads (47 million tonnes at a gold grade of 1.69 grams per tonne) and Pipeline deposits (7.6 million tonnes of ore at a gold grade of 0.63 grams per tonne), and assuming a gold price of $1,300 per ounce.
On May 3, 2023, Barrick reported that the timeline for the Goldrush Record of Decision (“ROD”) on the Goldrush project, which is located within the CC Zone, has been extended from the first half of 2023 and is now expected in the second half of 2023. Barrick also reported that mine development and test stoping in the Redhill zone is continuing and a minor permit modification has been approved that will allow underground development to continue until the ROD on the Goldrush Plan of Operations is received. According to Barrick, the extension to the permitting timeline is not expected to have a significant impact on the 2023 outlook and the potential impact, if any, on the outlook from 2024 onwards is currently being reviewed.
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Production attributable to our royalty interest at Peñasquito was approximately 55,600 ounces of gold; 6.1 million ounces of silver; 36.4 million pounds of lead; and 99.2 million pounds of zinc for the three months ended March 31, 2023. Compared to approximately 133,400 ounces of gold; 7.7 million ounces of silver; 41.9 million pounds of lead; and 120 million pounds of zinc for the three months ended March 31, 2022. The site experienced lower production due to lower gold grades and lower recoveries for gold and other metals. Newmont Corporation (“Newmont”) stated that metal sales, which drive our royalty payments, were impacted by the build-up of concentrate inventory and the timing of concentrate shipments.
In 2023, Newmont expects lower gold grades and higher silver, lead and zinc grades, as a result of ore production being predominately from the Chile Colorado pit, with gold equivalent ounce (“GEO”) production expected to be similar to 2022 GEO production.
Results of Operations
Quarter Ended March 31, 2023, Compared to Quarter Ended March 31, 2022
For the quarter ended March 31, 2023, we recorded net income and comprehensive income attributable to Royal Gold stockholders (“net income”) of $63.9 million, or $0.97 per basic and diluted share, as compared to net income of $65.7 million, or $1.00 per basic and diluted share, for the quarter ended March 31, 2022. The decrease in net income was primarily attributable to higher debt-related interest expense, as discussed below.
For the quarter ended March 31, 2023, we recognized total revenue of $170.4 million, comprised of stream revenue of $115.0 million and royalty revenue of $55.4 million at an average gold price of $1,890 per ounce, an average silver price of $22.55 per ounce and an average copper price of $4.05 per pound. This is compared to total revenue of $162.4 million for the three months ended March 31, 2022, comprised of stream revenue of $105.3 million and royalty revenue of $57.1 million, at an average gold price of $1,877 per ounce, an average silver price of $24.01 per ounce and an average copper price of $4.53 per pound. Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, are as follows:
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Revenue and Reported Production Subject to Our Stream and Royalty Interests
(Amounts in thousands, except reported production oz. and lbs.)
Reported
Production(1)
Stream(2):
15,200
oz.
13,900
4.5
Mlbs.
3.6
7,900
8,600
337,900
316,000
7,000
8,400
404,100
102,700
Other(3)
12,000
10,700
66,200
70,500
.
Royalty(2):
117,200
102,000
106,600
55,600
133,400
6.1
Moz.
7.7
36.4
41.9
99.2
120.1
Total Revenue
The increase in our total revenue resulted primarily from higher gold and copper sales at Mount Milligan, higher gold production attributable to our interest at Cortez as a result of the newly acquired royalties, and higher silver sales at Khoemacau due to the ramp-up. The increase was offset by lower gold sales at Andacollo and lower gold and silver production at Peñasquito compared to the prior year period.
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Gold and silver ounces and copper pounds purchased and sold during the three months ended March 31, 2023 and 2022, and gold and silver ounces and copper pounds in inventory as of March 31, 2023, and December 31, 2022, for our streaming interests were as follows:
As of
December 31, 2022
Gold Stream
Purchases (oz.)
Sales (oz.)
Inventory (oz.)
10,000
3,900
5,200
7,400
7,100
6,100
2,000
3,800
13,200
11,100
5,300
4,100
39,700
42,100
34,300
41,600
18,600
21,000
Silver Stream
427,500
115,200
129,300
105,900
362,300
274,500
362,200
337,800
69,400
51,100
20,700
17,500
859,200
808,200
440,800
489,200
512,200
461,200
Copper Stream
Purchases (Mlbs.)
Sales (Mlbs.)
Inventory (Mlbs.)
2.7
-
0.9
Cost of sales, which excludes depreciation, depletion and amortization, increased to $25.0 million for the three months ended March 31, 2023, from $22.6 million for the three months ended March 31, 2022. The increase, when compared to the prior year quarter, was primarily due to an increase in gold and copper sales at Mount Milligan and higher silver sales at Khoemacau, offset by lower gold sales at Andacollo. Cost of sales is specific to our stream agreements and is the result of our purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper (Mount Milligan) spot price near the date of metal delivery.
General and administrative costs increased to $11.0 million for the three months ended March 31, 2023, from $8.9 million for the three months ended March 31, 2022. The increase was primarily due to an increase in employee-related costs, including non-cash stock-based compensation expense.
Depreciation, depletion and amortization decreased to $46.3 million for the three months ended March 31, 2023, from $48.0 million for the three months ended March 31, 2022. The decrease was primarily due to lower depletion rates at Mount Milligan and Pueblo Viejo as a result of proven and probable mineral reserve increases compared to the prior year quarter. The decrease was partially offset by higher depletion due to higher silver sales at Khoemacau compared to the prior year quarter.
Interest and other expense increased to $9.2 million for the three months ended March 31, 2023 from $0.9 million for the three months ended March 31, 2022. The increase was primarily due to higher interest expense as a result of higher average amounts outstanding under our revolving credit facility compared to the prior year quarter. We had $500 million outstanding under our revolving credit facility as of March 31, 2023, compared to zero outstanding as of March 31, 2022. The current all-in borrowing rate under our revolving credit facility was 6.2% as of March 31, 2023.
For the three months ended March 31, 2023, we recorded income tax expense of $15.9 million, compared with income tax expense of $15.3 million for the three months ended March 31, 2022. The income tax expense resulted in an effective tax rate of 19.9% in the current period, compared with 18.8% for the three months ended March 31, 2022.
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Liquidity and Capital Resources
Overview
At March 31, 2023, we had current assets of $189.2 million compared to current liabilities of $55.0 million, which resulted in working capital of $134.2 million and a current ratio of approximately 3 to 1. This compares to current assets of $185.8 million and current liabilities of $63.6 million at December 31, 2022, resulting in working capital of $122.2 million and a current ratio of approximately 3 to 1. The increase in working capital was primarily due to an increase in our available cash, resulting from increased revenue during the current period.
During the three months ended March 31, 2023, liquidity needs were met from $108.7 million in net cash provided by operating activities and our available cash resources. As of March 31, 2023, we had $500 million available and $500 million outstanding under our revolving credit facility. Working capital, combined with available capacity under our revolving credit facility, resulted in approximately $634 million of total liquidity at March 31, 2023. We were in compliance with each financial covenant under the revolving credit facility as of March 31, 2023. Refer to Note 4 of our notes to consolidated financial statements and below under Recent Liquidity Developments for further discussion on our debt.
We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for debt service, general and administrative expense costs for the foreseeable future. Our current financial resources are also available to fund dividends and for acquisitions of stream and royalty interests, including any conditional funding schedules. Our long-term capital requirements are primarily affected by our ongoing acquisition activities. We currently, and generally at any time, have acquisition opportunities in various stages of active review. In the event of one or more substantial stream or royalty interest or other acquisitions, we may seek additional debt or equity financing as necessary. We occasionally borrow and repay amounts under our revolving credit facility and may do so in the future.
Please refer to our risk factors included in Part 1, Item 1A of our 2022 10-K for a discussion of certain risks that may impact our liquidity and capital resources.
Recent Liquidity Developments
Revolving Credit Facility Repayment
On March 6, 2023, we made a $75 million principal payment towards the outstanding balance on the revolving credit facility leaving $500 million available as of March 31, 2023.
Cash Flows
Operating Activities
Net cash provided by operating activities totaled $108.7 million for the three months ended March 31, 2023, compared to $101.1 million for the three months ended March 31, 2022. The increase was primarily due to an increase in cash proceeds received from our stream and royalty interests, net of cost of sales, compared to the prior year quarter. Higher interest payments on amounts outstanding under the revolving credit facility offset the increase.
Investing Activities
Net cash used in investing activities totaled $0.2 million for the three months ended March 31, 2023, compared to $37.8 million for the three months ended March 31, 2022. The decrease from the prior year quarter was primarily due to lower acquisitions of royalty and stream interests.
Financing Activities
Net cash used in financing activities totaled $100 million for the three months ended March 31, 2023, compared to $23.2 million for the three months ended March 31, 2022. The increase was primarily due to a repayment of $75 million on our revolving credit facility during the current year quarter.
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Recently Adopted Accounting Standards and Critical Accounting Policies
Refer to Note 1 of our notes to consolidated financial statements for further discussion on any recently adopted accounting standards. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 10-K for discussion on our critical accounting policies.
Forward-Looking Statements
This report and our other public communications include “forward-looking statements” within the meaning of U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from these statements.
Forward-looking statements are often identified by words like “will,” “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” or negatives of these words or similar expressions. Forward-looking statements include, among others, statements regarding the following: statements about our expected financial performance and outlook, including sales volume, revenue, expenses, and tax rates; operators’ expected operating and financial performance, including production, deliveries, mine plans, estimates of mineral resources and mineral reserves, development, cash flows and liquidity, capital requirements, capital expenditures and completion of feasibility studies and permitting activities; receipt of metal deliveries; anticipated liquidity, capital resources, financing and stockholder returns; borrowings and repayments under our revolving credit facility; deliveries of deferred silver ounces from Pueblo Viejo; and prices for gold, silver, copper, nickel and other metals.
Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the following: a lower-price environment for gold, silver, copper, nickel or other metals; operating activities or financial performance of properties on which we hold stream or royalty interests, including variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, operators’ changes to mine plans and mineral reserves and mineral resources (including updated mineral reserve and mineral resource information), liquidity needs, mining and environmental hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, contractual issues involving our stream or royalty agreements, or operational disruptions; the timing of deliveries of metals from operators; risks associated with doing business in foreign countries; the impact of inadequately assessing new acquisitions; increased competition for stream and royalty interests; environmental risks, included those caused by climate change; delays in the completion of the plant expansion at Pueblo Viejo; potential cyber-attacks, including ransomware; our ability to identify, finance, value and complete acquisitions; adverse economic and market conditions; impact of health epidemics and pandemics; changes in laws or regulations governing us, operators or operating properties; changes in management and key employees; and other risk factors described in our reports filed with the Securities and Exchange Commission, including our 2022 10-K. Most of these factors are beyond our ability to predict or control.
Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any
forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.
26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings and cash flows are significantly impacted by changes in the market price of gold and other metals. Gold, silver, copper, and other metal prices can fluctuate significantly and are affected by numerous factors, such as demand, production levels, economic policies of central banks, producer hedging, world political and economic events, inflation and the strength of the U.S. dollar relative to other currencies. Please see the risk factor entitled “Our revenue is subject to volatility in metal prices, which could negatively affect our results of operations or cash flow,” under Part I, Item 1A of our 2022 10-K, for more information about risks associated with metal price volatility.
During the three months ended March 31, 2023, we reported revenue of $170.4 million, with an average gold price for the period of $1,890 per ounce, an average silver price of $22.55 per ounce, and an average copper price of $4.05 per pound. The table below shows the impact that a 10% increase or decrease in the average price of the specified metal would have had on our total reported revenue for the three months ended March 31, 2023:
Percentage of Total Reported Revenue Associated with Specified Metal
Amount by Which Total Reported Revenue Would Have Increased or Decreased If Price of Specified Metal Had Averaged 10% Higher or Lower in Period
$12.4 million
$4.4 million
$1.2 million
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer (the principal executive officer) and Chief Financial Officer (the principal financial and accounting officer), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2023, at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Royal Gold have been detected.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors included in the section entitled “Risk Factors” of our 2022 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Period
(a) Total Number of Shares Purchased(1)
(b) Average Price Paid Per Share
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs
January 2023
February 2023
March 2023
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
ExhibitNumber
Description
3.1
Certificate of Elimination of Series A Junior Participating Preferred Stock (filed as Exhibit 3.1(b) of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
3.2
Certificate of Elimination of Special Voting Preferred Stock (filed as Exhibit 3.1(c) of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
3.3
Certificate of Restatement of Certificate of Incorporation (filed as Exhibit 3.2(d) of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
3.4
Amended and Restated Bylaws of Royal Gold, Inc. (filed as Exhibit 3.1(a) of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
10.1▲
Form of Amended and Restated Indemnification Agreement (filed as Exhibit 10.1 of the Current Report on Form 8-K on February 16, 2023, and incorporated herein by reference)
10.2▲
Form of Restricted Stock Award Agreement for Employees under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.1 of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
10.3▲
Form of Restricted Stock Award Agreement for Nonemployee Directors under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.2 of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
10.4▲
Form of Restricted Stock Unit Agreement for Employees under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.3 of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
10.5▲
Form of Restricted Stock Unit Agreement for Nonemployee Directors under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.4 of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
10.6▲
Form of Performance Share Agreement for Employees under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.5 of the Current Report on Form 8-K on March 8, 2023, and incorporated herein by reference)
31.1*
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1‡
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2‡
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*
The following financial statements from Royal Gold, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL: (a) Consolidated Statements of Cash Flows, (b) Consolidated Statements of Operations, (c) Consolidated Statements of Comprehensive Income, (d) Consolidated Balance Sheets, and (e) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104*
The cover page from Royal Gold, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL (included as Exhibit 101).
*
Filed herewith.
‡
Furnished herewith.
▲Identifies a management contract or compensation plan or arrangement.
30
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 4, 2023
By:
/s/ William Heissenbuttel
William Heissenbuttel
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Paul Libner
Paul Libner
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)