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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 June 30, 2022

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 65,639,660 shares of Royal Gold common stock outstanding as of July 28, 2022.

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

18

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

Item 4.

Controls and Procedures

29

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

SIGNATURES

32

2

ITEM 1.     FINANCIAL STATEMENTS

ROYAL GOLD, INC.

Consolidated Balance Sheets

(Unaudited, amounts in thousands except share data)

    

June 30, 

    

December 31,

    

2022

    

2021

ASSETS

Cash and equivalents

$

280,617

$

143,551

Royalty receivables

36,868

54,088

Income tax receivable

7,712

4,915

Stream inventory

13,172

11,607

Prepaid expenses and other

1,971

1,835

Total current assets

340,340

215,996

Stream and royalty interests, net (Note 3)

2,389,864

2,443,752

Other assets

122,842

97,284

Total assets

$

2,853,046

$

2,757,032

LIABILITIES

Accounts payable

$

7,067

$

6,475

Dividends payable

22,984

22,966

Income tax payable

24,047

19,070

Other current liabilities

9,915

12,917

Total current liabilities

64,013

61,428

Deferred tax liabilities

86,206

87,705

Other liabilities

6,169

6,688

Total liabilities

156,388

155,821

Commitments and contingencies (Note 12)

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 65,569,687 and 65,564,364 shares outstanding, respectively

656

656

Additional paid-in capital

2,210,809

2,206,159

Accumulated earnings

472,764

381,929

Total Royal Gold stockholders’ equity

2,684,229

2,588,744

Non-controlling interests

12,429

12,467

Total equity

2,696,658

2,601,211

Total liabilities and equity

$

2,853,046

$

2,757,032

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

Six Months Ended

June 30, 

June 30, 

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Revenue (Note 6)

$

146,441

$

168,027

$

308,796

$

310,616

Costs and expenses

Cost of sales (excludes depreciation, depletion and amortization)

23,810

24,668

46,450

46,137

General and administrative

9,312

7,212

18,243

14,143

Production taxes

1,425

2,152

3,646

3,987

Depreciation, depletion and amortization

43,989

48,028

91,976

89,324

Total costs and expenses

78,536

82,060

160,315

153,591

Operating income

67,905

85,967

148,481

157,025

Fair value changes in equity securities

(2,191)

1,957

(1,577)

3,859

Interest and other income

1,118

676

2,093

1,409

Interest and other expense

(1,398)

(1,145)

(2,296)

(2,965)

Income before income taxes

65,434

87,455

146,701

159,328

Income tax benefit (expense)

5,911

(5,536)

(9,393)

(23,214)

Net income and comprehensive income

71,345

81,919

137,308

136,114

Net income and comprehensive income attributable to non-controlling interests

(205)

(242)

(492)

(409)

Net income and comprehensive income attributable to Royal Gold common stockholders

$

71,140

$

81,677

$

136,816

$

135,705

Net income per share attributable to Royal Gold common stockholders:

Basic earnings per share

$

1.08

$

1.24

$

2.08

$

2.07

Basic weighted average shares outstanding

65,569,190

65,550,682

65,567,621

65,550,542

Diluted earnings per share

$

1.08

$

1.24

$

2.08

$

2.07

Diluted weighted average shares outstanding

65,678,320

65,636,964

65,661,653

65,629,284

Cash dividends declared per common share

$

0.35

$

0.30

$

0.70

$

0.60

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 June 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 March 31, 2022

 

65,568,799

$

656

 

$

2,208,425

$

424,608

$

12,425

$

2,646,114

Stock-based compensation and related share issuances

 

888

 

 

 

2,384

 

 

 

2,384

Distributions to non-controlling interests

 

 

 

 

 

(201)

 

(201)

Net income and comprehensive income

 

 

 

 

71,140

 

205

 

71,345

Dividends declared

 

 

 

 

 

(22,984)

 

 

(22,984)

Balance at June 30, 2022

 

65,569,687

$

656

 

$

2,210,809

$

472,764

$

12,429

$

2,696,658

Royal Gold Stockholders

Additional

Common Shares

Paid-In

Accumulated

Non-controlling

Total

Shares

Amount

Capital

Earnings

Interests

Equity

Balance at March 31, 2021

 

65,550,445

$

656

 

$

2,202,410

$

224,254

$

12,805

$

2,440,125

Stock-based compensation and related share issuances

 

616

 

 

 

1,453

 

 

 

1,453

Distributions to non-controlling interests

 

 

 

 

 

(400)

 

(400)

Net income and comprehensive income

 

 

 

 

 

81,677

 

242

 

81,919

Dividends declared

 

 

 

 

 

(19,682)

 

 

(19,682)

Balance at June 30, 2021

 

65,551,061

$

656

 

$

2,203,863

$

286,249

$

12,647

$

2,503,415

ROYAL GOLD, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Six Months ended June 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

 

65,564,364

$

656

 

$

2,206,159

$

381,929

$

12,467

$

2,601,211

Stock-based compensation and related share issuances

 

5,323

 

 

 

4,650

 

 

 

4,650

Distributions to non-controlling interests

 

 

 

 

 

(530)

 

(530)

Net income and comprehensive income

 

 

 

 

 

136,816

 

492

 

137,308

Dividends declared

 

 

 

 

 

(45,981)

 

 

(45,981)

Balance at June 30, 2022

 

65,569,687

$

656

 

$

2,210,809

$

472,764

$

12,429

$

2,696,658

Royal Gold Stockholders

Additional

Common Shares

Paid-In

Accumulated

Non-controlling

Total

Shares

Amount

Capital

Earnings

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

 

2,646

 

 

 

2,787

 

 

 

2,787

Distributions to non-controlling interests

 

 

 

 

 

(799)

 

(799)

Net income and comprehensive income

 

 

 

 

 

135,705

 

409

 

136,114

Dividends declared

 

 

 

 

 

(39,366)

 

 

(39,366)

Balance at June 30, 2021

 

65,551,061

$

656

 

$

2,203,863

$

286,249

$

12,647

$

2,503,415

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)

Six Months Ended

June 30, 

June 30,

    

2022

    

2021

Cash flows from operating activities:

Net income and comprehensive income

$

137,308

$

136,114

Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities:

Depreciation, depletion and amortization

91,976

89,324

Non-cash employee stock compensation expense

4,542

2,837

Fair value changes in equity securities

1,577

(3,859)

Deferred tax (benefit) expense

(28,114)

8,861

Other

491

572

Changes in assets and liabilities:

Royalty receivables

17,220

(2,925)

Stream inventory

(1,564)

(3,785)

Income tax receivable

(2,797)

4,419

Prepaid expenses and other assets

(1,359)

(582)

Accounts payable

592

3,786

Income tax payable

4,976

(8,839)

Uncertain tax positions

(12,358)

Other liabilities

(3,519)

(479)

Net cash provided by operating activities

$

221,329

$

213,086

Cash flows from investing activities:

Acquisition of stream and royalty interests

(37,841)

(119,315)

Khoemacau subordinated debt facility

(18,000)

Proceeds from sale of equity securities

8,651

Other

(36)

(177)

Net cash used in investing activities

$

(37,877)

$

(128,841)

Cash flows from financing activities:

Repayment of debt

(200,000)

Net payments from issuance of common stock

108

(50)

Common stock dividends

(45,953)

(39,364)

Other

(541)

(774)

Net cash used in financing activities

$

(46,386)

$

(240,188)

Net increase (decrease) in cash and equivalents

137,066

(155,943)

Cash and equivalents at beginning of period

143,551

381,859

Cash and equivalents at end of period

$

280,617

$

225,916

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

6

Table of Contents

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(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 and six months ended June 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

Lawyers Royalty Acquisition

On March 24, 2022, we acquired a 0.5% net smelter returns royalty (“NSR”) on production from the Lawyers Project, currently operated by Benchmark Metals Inc., which is located in British Columbia, Canada. As part of this transaction, we also acquired a right of first offer (“ROFO”) for an existing 2.0% NSR royalty over the Ranch Project owned by Thesis Gold, Inc. that is located adjacent to the Lawyers Project.  We paid $8.0 million in cash consideration for the royalty and ROFO to Guardsmen Resources Inc. The Lawyers Project acquisition has been accounted for as an asset acquisition. The $8.0 million cash consideration, plus direct acquisition costs, have been recorded as an exploration stage royalty interest (Note 3) within Stream and royalty interests, net on our consolidated balance sheets.

Khoemacau Silver Stream

On February 23, 2022, we made an advance payment of $10.0 million toward the option stream which increased our right to receive payable silver produced from Khoemacau from 90% to 93%, and on March 14, 2022, we made our final advance payment of $16.5 million toward the option stream which increased our right to receive payable silver produced from 93% to 100%. Cumulative advance payments of $265 million, plus direct acquisition costs, have been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets.

As of June 30, 2022, $25.0 million of the subordinated debt facility, and $3.5 million of accrued interest remains outstanding on the Khoemacau subordinated debt facility, and these amounts are included in Other assets in our

7

Table of Contents

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

consolidated balance sheets. Refer to our Transition Report for further details on the Khoemacau silver stream acquisition and subordinated debt facility.

3.    STREAM AND ROYALTY INTERESTS, NET

The following tables summarize our stream and royalty interests, net as of June 30, 2022 and December 31, 2021.

As of June 30, 2022 (Amounts in thousands):

    

Cost

    

Accumulated Depletion

    

Net

Production stage stream interests:

Mount Milligan

$

790,635

$

(369,245)

$

421,390

Pueblo Viejo

610,404

(274,189)

336,215

Andacollo

388,182

(146,235)

241,947

Khoemacau

265,911

(8,055)

257,856

Rainy River

175,727

(56,351)

119,376

Wassa

146,475

(90,625)

55,850

Other

69,101

(8,371)

60,730

Total production stage stream interests

2,446,435

(953,071)

1,493,364

Production stage royalty interests:

Voisey's Bay

205,724

(116,383)

89,341

Red Chris

116,187

(1,797)

114,390

Peñasquito

99,172

(55,399)

43,773

Cortez

80,681

(28,232)

52,449

Other

447,251

(392,962)

54,289

Total production stage royalty interests

949,015

(594,773)

354,242

Total production stage stream and royalty interests

3,395,450

(1,547,844)

1,847,606

Development stage stream interests:

Other

12,038

12,038

Development stage royalty interests:

Côté

45,421

45,421

Other

62,796

62,796

Total development stage stream and royalty interests

120,255

120,255

Exploration stage stream interests:

NX Gold

34,253

34,253

Exploration stage royalty interests:

Pascua-Lama

177,690

177,690

Red Chris

48,895

48,895

Côté

29,610

29,610

Other

131,555

131,555

Total exploration stage stream and royalty interests

422,003

422,003

Total stream and royalty interests, net

$

3,937,708

$

(1,547,844)

$

2,389,864

8

Table of Contents

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

As of December 31, 2021 (Amounts in thousands):

    

Cost

    

Accumulated Depletion

Net

Production stage stream interests:

Mount Milligan

$

790,635

$

(336,921)

$

453,714

Pueblo Viejo

610,405

(260,321)

350,084

Andacollo

388,182

(139,035)

249,147

Khoemacau

239,411

(3,402)

236,009

Rainy River

175,727

(50,115)

125,612

Wassa

146,475

(84,915)

61,560

Other

69,101

(4,193)

64,908

Total production stage stream interests

2,419,936

(878,902)

1,541,034

Production stage royalty interests:

Voisey's Bay

205,724

(113,602)

92,122

Red Chris

116,187

116,187

Peñasquito

99,172

(53,022)

46,150

Cortez

80,681

(23,225)

57,456

Other

447,799

(387,364)

60,435

Total production stage royalty interests

949,563

(577,213)

372,350

Total production stage stream and royalty interests

3,369,499

(1,456,115)

1,913,384

Development stage stream interests:

Other

12,037

12,037

Development stage royalty interests:

Côté

45,421

45,421

Other

54,755

54,755

Total development stage stream and royalty interests

112,213