UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
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:
(Exact Name of Registrant as Specified in Its Charter)
| ||
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation) | Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol |
| Name of the Exchange on which Registered |
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.
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).
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.
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
There were
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 | |||
3 | ||||
Consolidated Statements of Operations and Comprehensive Income | 4 | |||
5 | ||||
6 | ||||
7 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | |||
32 | ||||
32 | ||||
32 | ||||
32 | ||||
33 | ||||
33 | ||||
33 | ||||
33 | ||||
34 | ||||
35 |
2
ITEM 1. FINANCIAL STATEMENTS
ROYAL GOLD, INC.
Consolidated Balance Sheets
(Unaudited, amounts in thousands except share data)
| September 30, |
| December 31, | |||
| 2022 |
| 2021 | |||
ASSETS | ||||||
Cash and equivalents | $ | | $ | | ||
Royalty receivables | | | ||||
Income tax receivable | | | ||||
Stream inventory | | | ||||
Prepaid expenses and other | | | ||||
Total current assets | | | ||||
Stream and royalty interests, net (Note 3) | | | ||||
Other assets | | | ||||
Total assets | $ | | $ | | ||
LIABILITIES | ||||||
Accounts payable | $ | | $ | | ||
Dividends payable | | | ||||
Income tax payable | | | ||||
Other current liabilities | | | ||||
Total current liabilities | | | ||||
Debt (Note 5) | | — | ||||
Deferred tax liabilities | | | ||||
Other liabilities | | | ||||
Total liabilities | | | ||||
Commitments and contingencies (Note 12) | ||||||
EQUITY | ||||||
Preferred stock, $ | — | — | ||||
Common stock, $ | | | ||||
Additional paid-in capital | | | ||||
Accumulated earnings | | | ||||
Total Royal Gold stockholders’ equity | | | ||||
Non-controlling interests | | | ||||
Total equity | | | ||||
Total liabilities and equity | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
3
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited, amounts in thousands except share data)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Revenue (Note 6) | $ | | $ | | | $ | | |||||
Costs and expenses | ||||||||||||
Cost of sales (excludes depreciation, depletion and amortization) | ||||||||||||
General and administrative | ||||||||||||
Production taxes | ||||||||||||
Depreciation, depletion and amortization | ||||||||||||
Total costs and expenses | ||||||||||||
Operating income | | | | | ||||||||
Fair value changes in equity securities | ( | |||||||||||
Interest and other income | | | | | ||||||||
Interest and other expense | ( | ( | ( | ( | ||||||||
Income before income taxes | | | | | ||||||||
Income tax expense | ( | ( | ( | ( | ||||||||
Net income and comprehensive income | | | | | ||||||||
Net income and comprehensive income attributable to non-controlling interests | ( | ( | ( | ( | ||||||||
Net income and comprehensive income attributable to Royal Gold common stockholders | $ | | $ | | $ | | $ | | ||||
Net income per share attributable to Royal Gold common stockholders: | ||||||||||||
Basic earnings per share | $ | | $ | | $ | | $ | | ||||
Basic weighted average shares outstanding | | | | | ||||||||
Diluted earnings per share | $ | | $ | | $ | | $ | | ||||
Diluted weighted average shares outstanding | | | | | ||||||||
Cash dividends declared per common share | $ | | $ | | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
4
ROYAL GOLD, INC.
Consolidated Statements of Changes in Stockholders’ Equity
Three months ended September 30, 2022, and 2021
(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 June 30, 2022 |
| | $ | |
| $ | | $ | | $ | | $ | | ||||
Stock-based compensation and related share issuances |
| |
| — |
|
| |
| — |
| — |
| | ||||
Distributions to non-controlling interests | — |
| — |
|
| — |
| — |
| ( |
| ( | |||||
Net income and comprehensive income |
| — |
| — |
|
| — | |
| |
| | |||||
Dividends declared |
| — |
| — |
|
| — |
| ( |
| — |
| ( | ||||
Balance at September 30, 2022 |
| | $ | |
| $ | | $ | | $ | | $ | | ||||
Royal Gold Stockholders | |||||||||||||||||
Additional | |||||||||||||||||
Common Shares | Paid-In | Accumulated | Non-controlling | Total | |||||||||||||
Shares | Amount | Capital | Earnings | Interests | Equity | ||||||||||||
Balance at June 30, 2021 |
| | $ | |
| $ | | $ | | $ | | $ | | ||||
Stock-based compensation and related share issuances |
| |
| — |
|
| |
| — |
| — |
| | ||||
Distributions to non-controlling interests | — |
| — |
|
| — |
| — |
| ( |
| ( | |||||
Net income and comprehensive income |
| — |
| — |
|
| — |
| |
| |
| | ||||
Dividends declared |
| — |
| — |
|
| — |
| ( |
| — |
| ( | ||||
Balance at September 30, 2021 |
| | $ | |
| $ | | $ | | $ | | $ | |
ROYAL GOLD, INC.
Consolidated Statements of Changes in Stockholders’ Equity
Nine Months ended September 30, 2022, and 2021
(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, 2021 |
| | $ | |
| $ | | $ | | $ | | $ | | ||||
Stock-based compensation and related share issuances |
| |
| — |
|
| |
| — |
| — |
| | ||||
Distributions to non-controlling interests | — |
| — |
|
| — |
| — |
| ( |
| ( | |||||
Net income and comprehensive income |
| — |
| — |
|
| — |
| |
| |
| | ||||
Dividends declared |
| — |
| — |
|
| — |
| ( |
| — |
| ( | ||||
Balance at September 30, 2022 |
| | $ | |
| $ | | $ | | $ | | $ | | ||||
Royal Gold Stockholders | |||||||||||||||||
Additional | |||||||||||||||||
Common Shares | Paid-In | Accumulated | Non-controlling | Total | |||||||||||||
Shares | Amount | Capital | Earnings | Interests | Equity | ||||||||||||
Balance at December 31, 2020 |
| | $ | |
| $ | | $ | | $ | | $ | | ||||
Stock-based compensation and related share issuances |
| |
| — |
|
| |
| — |
| — |
| | ||||
Distributions to non-controlling interests | — |
| — |
|
| — |
| — |
| ( |
| ( | |||||
Net income and comprehensive income |
| — |
| — |
|
| — |
| |
| |
| | ||||
Dividends declared |
| — |
| — |
|
| — |
| ( |
| — |
| ( | ||||
Balance at September 30, 2021 |
| | $ | |
| $ | | $ | | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
5
ROYAL GOLD, INC.
Consolidated Statements of Cash Flows
(Unaudited, amounts in thousands)
Nine Months Ended | ||||||
September 30, | September 30, | |||||
| 2022 |
| 2021 | |||
Cash flows from operating activities: | ||||||
Net income and comprehensive income | $ | | $ | | ||
Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities: | ||||||
Depreciation, depletion and amortization | | | ||||
Non-cash employee stock compensation expense | | | ||||
Fair value changes in equity securities | | ( | ||||
Deferred tax (benefit) expense | ( | | ||||
Other | | | ||||
Changes in assets and liabilities: | ||||||
Royalty receivables | | ( | ||||
Stream inventory | ( | | ||||
Income tax receivable | ( | | ||||
Prepaid expenses and other assets | ( | ( | ||||
Accounts payable | | | ||||
Income tax payable | | | ||||
Uncertain tax positions | — | ( | ||||
Other liabilities | ( | ( | ||||
Net cash provided by operating activities | $ | | $ | | ||
Cash flows from investing activities: | ||||||
Acquisition of stream and royalty interests | ( | ( | ||||
Khoemacau subordinated debt facility | — | ( | ||||
Proceeds from sale of equity securities | — | | ||||
Other | ( | ( | ||||
Net cash used in investing activities | $ | ( | $ | ( | ||
Cash flows from financing activities: | ||||||
Repayment of debt | ( | ( | ||||
Borrowings from revolving credit facility | | | ||||
Net payments from issuance of common stock | ( | ( | ||||
Common stock dividends | ( | ( | ||||
Other | ( | ( | ||||
Net cash provided by (used in) financing activities | $ | | $ | ( | ||
Net decrease in cash and equivalents | ( | ( | ||||
Cash and equivalents at beginning of period | | | ||||
Cash and equivalents at end of period | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
6
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 and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2022. These interim unaudited consolidated financial statements should be read in conjunction with our Transition Report on Form 10-K for the six months ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on February 17, 2022 (“Transition Report”).
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. ACQUISITIONS
Acquisition of Great Bear Royalties Corporation
On September 9, 2022, we completed the previously announced acquisition of all of the issued and outstanding shares of Great Bear Royalties Corporation (“GBR”) for cash consideration of approximately C$
As part of the acquisition and in exchange for information and access to the project provided by Kinross, we granted an option to Kinross to purchase a
The Great Bear Royalty is the sole material asset of GBR and represents substantially all the fair value of GBR’s gross assets. As a result, the GBR acquisition has been accounted for as an asset acquisition and the fair values of the GBR assets acquired are shown below:
7
(in thousands) | |||
Purchase Price | $ | | |
Cash | | ||
Other assets | | ||
Royalty interests in mineral property (Great Bear royalty) | | ||
Total allocated purchase price | $ | |
The $
Acquisition of Additional Royalty Interest on Cortez Complex
On August 2, 2022, we acquired a sliding scale gross royalty (“Cortez Complex Royalty”) on production from an area including the Cortez mine operational area and the Fourmile development project (the “Cortez Complex”) for cash consideration of $
The acquisition has been accounted for as an asset acquisition and the $
The royalty is payable after cumulative production from the Cortez Complex of
Lawyers Royalty Acquisition
On March 24, 2022, we acquired a
Khoemacau Silver Stream
On February 23, 2022, we made an advance payment of $
8
to
As of September 30, 2022, $
3. STREAM AND ROYALTY INTERESTS, NET
The following tables summarize our stream and royalty interests, net as of September 30, 2022 and December 31, 2021.
As of September 30, 2022 (Amounts in thousands): |
| Cost |
| Accumulated Depletion |
| Net | |||
Production stage stream interests: | |||||||||
Mount Milligan | $ | | $ | ( | $ | | |||
Pueblo Viejo | | ( | | ||||||
Andacollo | | ( | | ||||||
Khoemacau | | ( | | ||||||
Rainy River | | ( | | ||||||
Wassa | | ( | | ||||||
Other | | ( | | ||||||
Total production stage stream interests | | ( | | ||||||
Production stage royalty interests: | |||||||||
Cortez | | ( | | ||||||
Voisey's Bay | | ( | | ||||||
Red Chris | | ( | | ||||||
Peñasquito | | ( | | ||||||
Other | | ( | | ||||||
Total production stage royalty interests | | ( | | ||||||
Total production stage stream and royalty interests | | ( | | ||||||
Development stage stream interests: | |||||||||
Other | | — | | ||||||
Development stage royalty interests: | |||||||||
Côté | | — | | ||||||
Other | | | |||||||
Total development stage stream and royalty interests | | — | | ||||||
Exploration stage stream interests: | |||||||||
NX Gold | | — | | ||||||
Exploration stage royalty interests: | |||||||||
Cortez | | — | | ||||||
Great Bear | | — | | ||||||
Pascua-Lama | | — | | ||||||
Red Chris | | — | | ||||||
Côté | | — | | ||||||
Other | | — | | ||||||
Total exploration stage stream and royalty interests | | — | | ||||||
Total stream and royalty interests, net | $ | | $ | ( | $ | |
9
As of December 31, 2021 (Amounts in thousands): |
| Cost |
| Accumulated Depletion | Net | ||||
Production stage stream interests: | |||||||||
Mount Milligan | $ | | $ | ( | $ | | |||
Pueblo Viejo | | ( | | ||||||
Andacollo | | ( | | ||||||
Khoemacau | | ( | | ||||||
Rainy River | | ( | | ||||||
Wassa | | ( | | ||||||
Other | | ( | | ||||||
Total production stage stream interests | | ( | | ||||||
Production stage royalty interests: | |||||||||
Voisey's Bay | | ( | | ||||||
Red Chris | | < |