Royal Gold Earnings 2020-12-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

Table of Contents

UNITED STATES
SECURITIES 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 December 31, 2020


☐	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 15^th 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 65,606,496 shares of the Company’s common stock, par value $0.01 per share, outstanding as of January 28, 2021.

Table of Contents

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	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	31

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Mine Safety Disclosure	32

Item 5.	Other Information	32

Item 6.	Exhibits	33

SIGNATURES		34

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ITEM 1. FINANCIAL STATEMENTS

ROYAL GOLD, INC.

Consolidated Balance Sheets

(Unaudited, amounts in thousands except share data)


	December 31,		June 30,
	2020		2020
ASSETS
Cash and equivalents	$	381,859	$	319,128
Royalty receivables		44,316		27,689
Income tax receivable		8,939		2,435
Stream inventory		13,900		11,671
Prepaid expenses and other		1,477		1,227
Total current assets		450,491		362,150
Stream and royalty interests, net (Note 3)		2,231,980		2,318,913
Other assets		81,263		85,224
Total assets	$	2,763,734	$	2,766,287
LIABILITIES
Accounts payable	$	2,587	$	2,484
Dividends payable		19,680		18,364
Income tax payable		23,318		13,323
Other current liabilities		11,569		9,384
Total current liabilities		57,154		43,555
Debt (Note 5)		195,983		300,439
Deferred tax liabilities		85,017		86,439
Uncertain tax positions		13,267		25,427
Other liabilities		7,634		8,308
Total liabilities		359,055		464,168
Commitments and contingencies (Note 13)
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 65,548,415 and 65,531,288 shares outstanding, respectively		656		655
Additional paid-in capital		2,201,076		2,210,429
Accumulated earnings		189,910		61,133
Total Royal Gold stockholders’ equity		2,391,642		2,272,217
Non-controlling interests		13,037		29,902
Total equity		2,404,679		2,302,119
Total liabilities and equity	$	2,763,734	$	2,766,287

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited, amounts in thousands except share data)


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2020		2019		2020		2019
Revenue (Note 7)	$	158,360	$	123,643	$	305,240	$	242,417

Costs and expenses
Cost of sales (excludes depreciation, depletion and amortization)		24,859		21,077		46,760		41,188
General and administrative		6,789		6,665		14,244		14,108
Production taxes		1,401		984		2,756		2,083
Exploration costs		—		1,514		563		4,140
Depreciation, depletion and amortization		47,945		40,096		94,245		78,810
Total costs and expenses		80,994		70,336		158,568		140,329

Gain on sale of Peak Gold JV interest		—		—		33,906		—
Operating income		77,366		53,307		180,578		102,088

Fair value changes in equity securities		(382)		222		2,158		(1,153)
Interest and other income		613		226		1,034		1,001
Interest and other expense		(1,578)		(2,217)		(3,454)		(5,051)
Income before income taxes		76,019		51,538		180,316		96,885

Income tax (expense) benefit		(16,031)		(11,124)		(13,654)		12,401
Net income and comprehensive income		59,988		40,414		166,662		109,286
Net (income) loss and comprehensive (income) loss attributable to non-controlling interests		(99)		907		166		2,488
Net income and comprehensive income attributable to Royal Gold common stockholders	$	59,889	$	41,321	$	166,828	$	111,774
Net income per share attributable to Royal Gold common stockholders:
Basic earnings per share	$	0.91	$	0.63	$	2.55	$	1.70
Basic weighted average shares outstanding		65,546,938		65,495,907		65,542,326		65,480,759
Diluted earnings per share	$	0.91	$	0.63	$	2.54	$	1.70
Diluted weighted average shares outstanding		65,619,241		65,611,567		65,625,965		65,613,406
Cash dividends declared per common share	$	0.300	$	0.280	$	0.580	$	0.545

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended December 31, 2020 and 2019

(unaudited, amounts in thousands except share data)


	Royal Gold Stockholders

				Additional
	Common Shares			Paid-In		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		(Losses) Earnings		Interests		Equity
Balance at September 30, 2020	65,545,606	$	656	$	2,199,705	$	149,702	$	13,158	$	2,363,221
Stock-based compensation and related share issuances	2,809		—		1,371		—		—		1,371
Distributions to non-controlling interests	—		—		—		—		(220)		(220)
Net income and comprehensive income	—		—		—		59,889		99		59,988
Dividends declared	—		—		—		(19,681)		—		(19,681)
Balance at December 31, 2020	65,548,415	$	656	$	2,201,076	$	189,910	$	13,037	$	2,404,679

	Royal Gold Stockholders

				Additional
	Common Shares			Paid-In		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		(Losses) Earnings		Interests		Equity
Balance at September 30, 2019	65,495,787	$	655	$	2,202,350	$	(12,676)	$	31,999	$	2,222,328
Stock-based compensation and related share issuances	217		—		1,214		—		—		1,214
Distributions from (to) non-controlling interests	—		—		1,800		—		(187)		1,613
Net income (loss) and comprehensive income (loss)	—		—		—		41,321		(907)		40,414
Dividends declared	—		—		—		(18,355)		—		(18,355)
Balance at December 31, 2019	65,496,004	$	655	$	2,205,364	$	10,290	$	30,905	$	2,247,214

ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Six months ended December 31, 2020 and 2019

(unaudited, amounts in thousands except share data)


	Royal Gold Stockholders

				Additional
	Common Shares			Paid-In		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		(Losses) Earnings		Interests		Equity
Balance at June 30, 2020	65,531,288	$	655	$	2,210,429	$	61,133	$	29,902	$	2,302,119
Stock-based compensation and related share issuances	17,127		1		1,476		—		—		1,477
Sale of Peak Gold JV interest	—		—		(10,829)		—		(16,218)		(27,047)
Distributions to non-controlling interests	—		—		—		—		(481)		(481)
Net income (loss) and comprehensive income (loss)	—		—		—		166,828		(166)		166,662
Dividends declared	—		—		—		(38,051)		—		(38,051)
Balance at December 31, 2020	65,548,415	$	656	$	2,201,076	$	189,910	$	13,037	$	2,404,679

	Royal Gold Stockholders

				Additional
	Common Shares			Paid-In		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		(Losses) Earnings		Interests		Equity
Balance at June 30, 2019	65,440,492	$	655	$	2,201,773	$	(65,747)	$	33,772	$	2,170,453
Stock-based compensation and related share issuances	55,512		—		891		—		—		891
Distributions from (to) non-controlling interests	—		—		2,700		—		(379)		2,321
Net income (loss) and comprehensive income (loss)	—		—		—		111,774		(2,488)		109,286
Dividends declared	—		—		—		(35,737)		—		(35,737)
Balance at December 31, 2019	65,496,004	$	655	$	2,205,364	$	10,290	$	30,905	$	2,247,214

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)


	Six Months Ended
	December 31,		December 31,
	2020		2019
Cash flows from operating activities:
Net income and comprehensive income	$	166,662	$	109,286
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		94,245		78,810
Gain on sale of Peak Gold JV interest		(33,906)		—
Non-cash employee stock compensation expense		2,892		3,639
Fair value changes in equity securities		(2,158)		1,153
Deferred tax benefit		(8,405)		(36,126)
Other		398		566
Changes in assets and liabilities:
Royalty receivables		(16,627)		(7,714)
Stream inventory		(2,229)		(3,956)
Income tax receivable		(6,504)		(6,968)
Prepaid expenses and other assets		900		(7,020)
Accounts payable		(549)		(929)
Income tax payable		9,995		7,392
Uncertain tax positions		(12,160)		3,230
Other liabilities		1,510		8,133
Net cash provided by operating activities	$	194,064	$	149,496

Cash flows from investing activities:
Acquisition of stream and royalty interests		(48,832)		(72,417)
Proceeds from sale of Peak Gold JV interest		49,154		—
Proceeds from sale of Contango shares		12,146		—
Other		(364)		4,363
Net cash provided by (used in) investing activities	$	12,104	$	(68,054)

Cash flows from financing activities:
Repayment of debt		(105,000)		(85,000)
Net payments from issuance of common stock		(1,415)		(2,747)
Common stock dividends		(36,735)		(34,755)
Other		(287)		2,089
Net cash used in financing activities	$	(143,437)	$	(120,413)
Net increase (decrease) in cash and equivalents		62,731		(38,971)
Cash and equivalents at beginning of period		319,128		119,475
Cash and equivalents at end of period	$	381,859	$	80,504

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS

Royal Gold 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 and six months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021. These interim unaudited financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 filed with the Securities and Exchange Commission on August 6, 2020 (“Fiscal 2020 10-K”).

Recently Adopted Accounting Standards

Current Expected Credit Loss

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which, together with subsequent amendments, changes how an entity records credit losses from an “incurred loss” approach to an “expected loss” approach. This update was effective for annual periods beginning after December 15, 2019 and interim financial statement periods within those years, with early adoption permitted. On July 1, 2020, we adopted the new guidance and, based on our assessment, the adoption of the new guidance did not have any impact on our consolidated financial statements.

2. SALE OF PEAK GOLD JV INTEREST

On September 30, 2020, we entered into an agreement with an affiliate of Kinross Gold Corporation to sell our 40% membership interest in the Peak Gold Project for cash consideration of $49.2 million and to sell our 809,744 common shares in Contango Ore, Inc. (“Contango”), our partner in Peak Gold, LLC, for cash consideration of $12.1 million.

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

●

An incremental 28% net smelter return royalty on silver produced from an area of interest which includes the current Peak Gold Project resource area. Peak Gold, LLC retains the right to acquire 50% of this royalty for consideration of $4.0 million; and

●

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

The royalties were recorded as exploration stage royalty interests in Stream and royalty interests, net in our consolidated balance sheet as of December 31, 2020 and were assigned a combined value of approximately $4.4 million on the date of the transaction. We recorded a gain of $33.9 million on the sale of our 40% membership interest in the Peak Gold Project during the three months ended September 30, 2020. The mark-to-market increase of $3.6 million on the sale of our 809,744 common shares in Contango is included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income and was recognized during the three months ended September 30, 2020.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

3. STREAM AND ROYALTY INTERESTS, NET

The following tables summarize our stream and royalty interests, net as of December 31, 2020 and June 30, 2020.


As of December 31, 2020 (Amounts in thousands):	Cost		Accumulated Depletion		Net
Production stage stream interests:
Mount Milligan	$	790,635	$	(270,370)	$	520,265
Pueblo Viejo		610,405		(226,083)		384,322
Andacollo		388,182		(120,847)		267,335
Rainy River		175,727		(34,820)		140,907
Wassa		146,475		(72,839)		73,636
Total production stage stream interests		2,111,424		(724,959)		1,386,465
Production stage royalty interests:
Voisey's Bay		205,724		(104,850)		100,874
Peñasquito		99,172		(47,263)		51,909
Cortez		80,681		(16,418)		64,263
Other		521,289		(433,800)		87,489
Total production stage royalty interests		906,866		(602,331)		304,535
Total production stage stream and royalty interests		3,018,290		(1,327,290)		1,691,000

Development stage stream interests:
Khoemacau		180,220		—		180,220
Other		12,037		—		12,037
Development stage royalty interests:
Other		69,780		—

Price	125.59	EPS	2
Shares	66	P/E	55
MCap	8,241	P/FCF	37
Net Debt	48	EBIT	139
TEV	8,289	TEV/EBIT	60
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-12-31	Filed 2021-02-04
10-Q	2020-09-30	Filed 2020-11-05
10-K	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-07
10-Q	2019-12-31	Filed 2020-02-06
10-Q	2019-09-30	Filed 2019-11-07
10-K	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-02
10-Q	2018-12-31	Filed 2019-02-07
10-Q	2018-09-30	Filed 2018-11-01
10-K	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-03
10-Q	2017-12-31	Filed 2018-02-08
10-Q	2017-09-30	Filed 2017-11-02
10-K	2017-06-30	Filed 2017-08-10
10-Q	2017-03-31	Filed 2017-05-10
10-Q	2016-12-31	Filed 2017-02-02
10-Q	2016-09-30	Filed 2016-11-03
10-K	2016-06-30	Filed 2016-08-11
10-Q	2016-03-31	Filed 2016-04-28
10-Q	2015-12-31	Filed 2016-02-04
10-Q	2015-09-30	Filed 2015-11-05
10-K	2015-06-30	Filed 2015-08-06
10-Q	2015-03-31	Filed 2015-04-30
10-Q	2014-12-31	Filed 2015-01-29
10-Q	2014-09-30	Filed 2014-10-30
10-K	2014-06-30	Filed 2014-08-07
10-Q	2014-03-31	Filed 2014-05-01
10-Q	2013-12-31	Filed 2014-01-30
10-Q	2013-09-30	Filed 2013-11-07
10-K	2013-06-30	Filed 2013-08-08
10-Q	2013-03-31	Filed 2013-05-02
10-K	2012-06-30	Filed 2012-08-09
10-Q	2012-03-31	Filed 2012-05-03
10-Q	2011-09-30	Filed 2011-11-03
10-K	2011-06-30	Filed 2011-08-18
10-Q	2011-03-31	Filed 2011-05-06
10-Q	2010-12-31	Filed 2011-02-04
10-Q	2010-09-30	Filed 2010-11-05
10-K	2010-06-30	Filed 2010-08-26
10-Q	2010-03-31	Filed 2010-05-07
10-Q	2009-12-31	Filed 2010-02-05

8-K	2020-11-18
8-K	2020-11-04
8-K	2020-10-13
8-K	2020-09-30
8-K	2020-09-30
8-K	2020-09-16
8-K	2020-08-05
8-K	2020-07-07
8-K	2020-05-06
8-K	2020-04-09
8-K	2020-02-05
8-K	2019-12-05
8-K	2019-11-20
8-K	2019-11-06
8-K	2019-10-30
8-K	2019-10-11
8-K	2019-09-26
8-K	2019-08-07
8-K	2019-06-11
8-K	2019-06-03
8-K	2019-05-30
8-K	2019-05-01
8-K	2019-02-25
8-K	2019-02-14
8-K	2019-02-06
8-K	2019-01-01
8-K	2018-11-14
8-K	2018-10-31
8-K	2018-09-19
8-K	2018-08-08
8-K	2018-06-18
8-K	2018-05-30
8-K	2018-05-02
8-K	2018-02-07

EX-31.1	rgld-20201231xex31d1.htm
EX-31.2	rgld-20201231xex31d2.htm
EX-32.1	rgld-20201231xex32d1.htm
EX-32.2	rgld-20201231xex32d2.htm

RGLD 10Q Quarterly Report

Royal Gold Earnings 2020-12-31