Royal Gold Earnings 2021-03-31

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 March 31, 2021


☐	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 April 29, 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	32

Item 4.	Controls and Procedures	32

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosure	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

SIGNATURES		35

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

ROYAL GOLD, INC.

Consolidated Balance Sheets

(Unaudited, amounts in thousands except share data)


	March 31,		June 30,
	2021		2020
ASSETS
Cash and equivalents	$	370,260	$	319,128
Royalty receivables		45,427		27,689
Income tax receivable		14,669		2,435
Stream inventory		14,491		11,671
Prepaid expenses and other		1,475		1,227
Total current assets		446,322		362,150
Stream and royalty interests, net (Note 3)		2,224,435		2,318,913
Other assets		82,769		85,224
Total assets	$	2,753,526	$	2,766,287
LIABILITIES
Accounts payable	$	4,380	$	2,484
Dividends payable		19,680		18,364
Income tax payable		25,660		13,323
Other current liabilities		12,971		9,384
Total current liabilities		62,691		43,555
Debt (Note 5)		146,270		300,439
Deferred tax liabilities		84,079		86,439
Uncertain tax positions		12,957		25,427
Other liabilities		7,404		8,308
Total liabilities		313,401		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 65,550,445 and 65,531,288 shares outstanding, respectively		656		655
Additional paid-in capital		2,202,410		2,210,429
Accumulated earnings		224,254		61,133
Total Royal Gold stockholders’ equity		2,427,320		2,272,217
Non-controlling interests		12,805		29,902
Total equity		2,440,125		2,302,119
Total liabilities and equity	$	2,753,526	$	2,766,287

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

Table of Contents

ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited, amounts in thousands except share data)


	Three Months Ended				Nine Months Ended
	March 31,		March 31,		March 31,		March 31,
	2021		2020		2021		2020
Revenue (Note 7)	$	142,589	$	136,437	$	447,829	$	378,853

Costs and expenses
Cost of sales (excludes depreciation, depletion and amortization)		21,469		21,961		68,230		63,149
General and administrative		6,932		9,551		21,175		23,658
Production taxes		1,835		851		4,591		2,934
Exploration costs		—		565		563		4,705
Depreciation, depletion and amortization		41,296		51,228		135,541		130,038
Total costs and expenses		71,532		84,156		230,100		224,484

Gain on sale of Peak Gold JV interest		—		—		33,906		—
Operating income		71,057		52,281		251,635		154,369

Fair value changes in equity securities		1,902		(3,819)		4,060		(4,972)
Interest and other income		733		620		1,767		1,621
Interest and other expense		(1,820)		(2,088)		(5,274)		(7,139)
Income before income taxes		71,872		46,994		252,188		143,879

Income tax (expense) benefit		(17,679)		(8,702)		(31,332)		3,700
Net income and comprehensive income		54,193		38,292		220,856		147,579
Net (income) loss and comprehensive (income) loss attributable to non-controlling interests		(167)		262		(1)		2,750
Net income and comprehensive income attributable to Royal Gold common stockholders	$	54,026	$	38,554	$	220,855	$	150,329
Net income per share attributable to Royal Gold common stockholders:
Basic earnings per share	$	0.82	$	0.59	$	3.36	$	2.30
Basic weighted average shares outstanding		65,550,400		65,511,878		65,544,978		65,501,678
Diluted earnings per share	$	0.82	$	0.59	$	3.36	$	2.29
Diluted weighted average shares outstanding		65,621,603		65,600,770		65,624,472		65,626,400
Cash dividends declared per common share	$	0.300	$	0.280	$	0.880	$	0.825

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

Table of Contents

ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended March 31, 2021 and 2020

(unaudited, amounts in thousands except share data)


	Royal Gold Stockholders

				Additional
	Common Shares			Paid-In		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		Earnings (Losses)		Interests		Equity
Balance at December 31, 2020	65,548,415	$	656	$	2,201,076	$	189,910	$	13,037	$	2,404,679
Stock-based compensation and related share issuances	2,030		—		1,334		—		—		1,334
Distributions to non-controlling interests	—		—		—		—		(399)		(399)
Net income and comprehensive income	—		—		—		54,026		167		54,193
Dividends declared	—		—		—		(19,682)		—		(19,682)
Balance at March 31, 2021	65,550,445	$	656	$	2,202,410	$	224,254	$	12,805	$	2,440,125

	Royal Gold Stockholders

				Additional
	Common Shares			Paid-In		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		Earnings (Losses)		Interests		Equity
Balance at December, 2019	65,496,004	$	655	$	2,205,364	$	10,290	$	30,905	$	2,247,214
Stock-based compensation and related share issuances	16,244		—		3,134		—		—		3,134
Distributions from (to) non-controlling interests	—		—		600		—		(344)		256
Net income (loss) and comprehensive income (loss)	—		—		—		38,554		(262)		38,292
Dividends declared	—		—		—		(18,361)		—		(18,361)
Balance at March 31, 2020	65,512,248	$	655	$	2,209,098	$	30,483	$	30,299	$	2,270,535

ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Nine months ended March 31, 2021 and 2020

(unaudited, amounts in thousands except share data)


	Royal Gold Stockholders

				Additional
	Common Shares			Paid-In		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		Earnings (Losses)		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	19,157		1		2,810		—		—		2,811
Sale of Peak Gold JV interest	—		—		(10,829)		—		(16,218)		(27,047)
Distributions to non-controlling interests	—		—		—		—		(880)		(880)
Net income and comprehensive income	—		—		—		220,855		1		220,856
Dividends declared	—		—		—		(57,734)		—		(57,734)
Balance at March 31, 2021	65,550,445	$	656	$	2,202,410	$	224,254	$	12,805	$	2,440,125

	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	71,756		—		4,025		—		—		4,025
Distributions from (to) non-controlling interests	—		—		3,300		—		(723)		2,577
Net income (loss) and comprehensive income (loss)	—		—		—		150,329		(2,750)		147,579
Dividends declared	—		—		—		(54,099)		—		(54,099)
Balance at March 31, 2020	65,512,248	$	655	$	2,209,098	$	30,483	$	30,299	$	2,270,535

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

Table of Contents

ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)


	Nine Months Ended
	March 31,		March 31,
	2021		2020
Cash flows from operating activities:
Net income and comprehensive income	$	220,856	$	147,579
Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities:
Depreciation, depletion and amortization		135,541		130,038
Gain on sale of Peak Gold JV interest		(33,906)		—
Non-cash employee stock compensation expense		4,236		8,283
Fair value changes in equity securities		(4,060)		4,972
Deferred tax benefit		(9,050)		(37,117)
Other		684		703
Changes in assets and liabilities:
Royalty receivables		(17,738)		(11,589)
Stream inventory		(2,820)		(567)
Income tax receivable		(12,235)		(8,658)
Prepaid expenses and other assets		998		(5,771)
Accounts payable		1,244		(1,295)
Income tax payable		12,337		14,054
Uncertain tax positions		(12,470)		(132)
Other liabilities		2,681		8,695
Net cash provided by operating activities	$	286,298	$	249,195

Cash flows from investing activities:
Acquisition of stream and royalty interests		(82,488)		(107,855)
Proceeds from sale of Peak Gold JV interest		49,154		—
Proceeds from sale of Contango shares		12,146		—
Other		(451)		2,766
Net cash used in investing activities	$	(21,639)	$	(105,089)

Cash flows from financing activities:
Repayment of debt		(155,000)		(115,000)
Net payments from issuance of common stock		(1,425)		(4,257)
Common stock dividends		(56,417)		(53,111)
Other		(685)		2,502
Net cash used in financing activities	$	(213,527)	$	(169,866)
Net increase (decrease) in cash and equivalents		51,132		(25,760)
Cash and equivalents at beginning of period		319,128		119,475
Cash and equivalents at end of period	$	370,260	$	93,715

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

Table of Contents

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 nine months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021. These interim unaudited consolidated 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 Manh Choh Project (formerly known as the Peak Gold Project) for cash consideration of $49.2 million and to sell our 809,744 common shares in Contango Ore, Inc. (“Contango”), our partner in Peak Gold, LLC, the owner of the Manh Choh Project, for cash consideration of $12.1 million.

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

●

An incremental 28% net smelter return royalty on silver produced from an area of interest which includes the current Manh Choh Project resource area. Peak Gold, LLC retains the right to acquire 50% of this royalty for consideration of $4.0 million; 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 are recorded as exploration stage royalty interests in Stream and royalty interests, net in our consolidated balance sheet as of March 31, 2021 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 Manh Choh Project during the three months ended September 30, 2020. The mark-to-market increase of $3.6 million on the sale of our 809,744

Table of Contents

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

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.

3. STREAM AND ROYALTY INTERESTS, NET

The following tables summarize our stream and royalty interests, net as of March 31, 2021 and June 30, 2020.


As of March 31, 2021 (Amounts in thousands):	Cost		Accumulated Depletion		Net
Production stage stream interests:
Mount Milligan	$	790,635	$	(283,660)	$	506,975
Pueblo Viejo		610,404		(235,169)		375,235
Andacollo		388,182		(124,225)		263,957
Rainy River		175,727		(38,368)		137,359
Wassa		146,475		(76,131)		70,344
Total production stage stream interests		2,111,423		(757,553)		1,353,870
Production stage royalty interests:
Voisey's Bay		205,724		(107,225)		98,499
Peñasquito		99,172		(48,765)		50,407
Cortez		80,681		(17,584)		63,097
Other		442,891		(377,642)		65,249
Total production stage royalty interests		828,468		(551,216)		277,252
Total production stage stream and royalty interests		2,939,891		(1,308,769)		1,631,122

Development stage stream interests:
Khoemacau		212,877		—		212,877
Other		12,037

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	2021-03-31	Filed 2021-05-06
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-20210331xex31d1.htm
EX-31.2	rgld-20210331xex31d2.htm
EX-32.1	rgld-20210331xex32d1.htm
EX-32.2	rgld-20210331xex32d2.htm

RGLD 10Q Quarterly Report

Royal Gold Earnings 2021-03-31