UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2015
or
o 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)
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Delaware |
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84-0835164 |
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(State or Other Jurisdiction of |
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(I.R.S. Employer |
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Incorporation) |
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Identification No.) |
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1660 Wynkoop Street, Suite 1000 |
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Denver, Colorado |
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80202 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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Registrant’s telephone number, including area code (303) 573-1660 | ||
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
There were 62,260,914 shares of the Company’s common stock, par value $0.01 per share, outstanding as of January 28, 2016.
Table of Contents
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PAGE |
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PART I |
FINANCIAL INFORMATION |
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3 | |
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Consolidated Statements of Operations and Comprehensive (Loss) Income |
4 |
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5 | |
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6 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 | |
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40 | ||
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41 | ||
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42 | ||
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42 | ||
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42 | ||
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43 | ||
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43 | ||
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43 | ||
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43 | ||
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43 | ||
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44 | ||
ROYAL GOLD, INC.
(Unaudited, in thousands except share data)
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December 31, 2015 |
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June 30, 2015 |
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ASSETS |
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Cash and equivalents |
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$ |
117,600 |
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$ |
742,849 |
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Royalty receivables |
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22,913 |
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37,681 |
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Income tax receivable |
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12,828 |
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6,422 |
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Stream inventory |
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8,289 |
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2,287 |
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Prepaid expenses and other |
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1,230 |
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1,511 |
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Total current assets |
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162,860 |
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790,750 |
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Royalty and stream interests, net (Note 3) |
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2,996,421 |
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2,083,608 |
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Available-for-sale securities (Note 4) |
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8,411 |
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6,273 |
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Other assets |
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55,576 |
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44,801 |
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Total assets |
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$ |
3,223,268 |
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$ |
2,925,432 |
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LIABILITIES |
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Accounts payable |
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2,781 |
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4,911 |
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Dividends payable |
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15,010 |
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14,341 |
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Foreign withholding taxes payable |
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— |
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199 |
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Other current liabilities |
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2,727 |
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5,522 |
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Total current liabilities |
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20,518 |
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24,973 |
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Debt (Note 5) |
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677,494 |
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322,110 |
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Deferred tax liabilities |
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140,614 |
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146,603 |
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Uncertain tax positions (Note 9) |
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15,935 |
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15,130 |
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Other long-term liabilities |
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6,489 |
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689 |
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Total liabilities |
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861,050 |
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509,505 |
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Commitments and contingencies (Note 12) |
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EQUITY |
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Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued |
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— |
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— |
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Common stock, $.01 par value, 100,000,000 shares authorized; and 65,082,861 and 65,033,547 shares outstanding, respectively |
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651 |
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650 |
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Additional paid-in capital |
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2,175,845 |
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2,170,643 |
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Accumulated other comprehensive loss |
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(1,154 |
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(3,292 |
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Accumulated earnings |
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125,821 |
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185,121 |
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Total Royal Gold stockholders’ equity |
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2,301,163 |
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2,353,122 |
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Non-controlling interests |
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61,055 |
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62,805 |
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Total equity |
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2,362,218 |
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2,415,927 |
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Total liabilities and equity |
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$ |
3,223,268 |
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$ |
2,925,432 |
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The accompanying notes are an integral part of these consolidated financial statements.
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited, in thousands except share data)
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For The Three Months Ended |
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For The Six Months Ended |
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December 31, |
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December 31, |
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December 31, |
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December 31, |
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2015 |
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2014 |
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2015 |
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2014 |
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Revenue |
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$ |
98,118 |
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$ |
61,304 |
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$ |
172,173 |
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$ |
130,330 |
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Costs and expenses |
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Cost of sales |
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22,572 |
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6,236 |
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34,038 |
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12,910 |
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General and administrative |
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5,841 |
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8,511 |
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15,352 |
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15,652 |
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Production taxes |
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996 |
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1,731 |
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2,588 |
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3,421 |
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Exploration costs |
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1,129 |
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— |
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4,285 |
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— |
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Depreciation, depletion and amortization |
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40,407 |
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20,278 |
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67,555 |
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42,490 |
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Impairment of royalty and stream interests |
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— |
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26,570 |
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— |
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28,339 |
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Total costs and expenses |
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70,945 |
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63,326 |
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123,818 |
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102,812 |
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Operating income (loss) |
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27,173 |
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(2,022 |
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48,355 |
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27,518 |
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Interest and other income |
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386 |
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228 |
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615 |
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279 |
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Interest and other expense |
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(8,899 |
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(6,358 |
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(16,076 |
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(13,070 |
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Income (loss) before income taxes |
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18,660 |
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(8,152 |
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32,894 |
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14,727 |
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Income tax (expense) benefit |
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(4,740 |
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1,827 |
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(63,917 |
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(2,131 |
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Net income (loss) |
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13,920 |
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(6,325 |
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(31,023 |
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12,596 |
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Net loss (income) attributable to non-controlling interests |
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1,194 |
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(223 |
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1,090 |
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(462 |
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Net income (loss) attributable to Royal Gold common stockholders |
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$ |
15,114 |
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$ |
(6,548 |
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(29,933 |
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$ |
12,134 |
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Net income (loss) |
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$ |
13,920 |
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$ |
(6,325 |
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$ |
(31,023 |
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$ |
12,596 |
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Adjustments to comprehensive income (loss) , net of tax |
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Unrealized change in market value of available-for-sale securities |
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2,587 |
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(481 |
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2,138 |
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(1,820 |
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Comprehensive income (loss) |
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16,507 |
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(6,806 |
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(28,885 |
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10,776 |
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Comprehensive loss (income) attributable to non-controlling interests |
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1,194 |
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(223 |
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1,090 |
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(462 |
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Comprehensive income (loss) attributable to Royal Gold stockholders |
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$ |
17,701 |
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$ |
(7,029 |
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$ |
(27,795 |
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$ |
10,314 |
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Net income (loss) per share available to Royal Gold common stockholders: |
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Basic earnings (loss) per share |
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$ |
0.23 |
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$ |
(0.10 |
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$ |
(0.46 |
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$ |
0.19 |
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Basic weighted average shares outstanding |
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65,073,678 |
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65,002,307 |
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65,061,059 |
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64,982,595 |
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Diluted earnings (loss) per share |
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$ |
0.23 |
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$ |
(0.10 |
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$ |
(0.46 |
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$ |
0.19 |
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Diluted weighted average shares outstanding |
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65,121,744 |
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65,002,307 |
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65,061,059 |
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65,122,185 |
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Cash dividends declared per common share |
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$ |
0.23 |
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$ |
0.22 |
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$ |
0.45 |
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$ |
0.43 |
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The accompanying notes are an integral part of these consolidated financial statements.
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited, in thousands except share data)
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For The Six Months Ended |
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December 31, |
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December 31, |
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2015 |
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2014 |
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Cash flows from operating activities: |
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Net (loss) income |
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$ |
(31,023 |
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$ |
12,596 |
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Depreciation, depletion and amortization |
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67,555 |
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42,490 |
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Non-cash employee stock compensation expense |
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5,449 |
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2,824 |
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Amortization of debt discount |
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5,383 |
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5,013 |
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Impairment of royalty and stream interests |
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— |
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28,339 |
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Tax expense (benefit) of stock-based compensation exercises |
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247 |
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(74 |
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Deferred tax benefit |
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(11,767 |
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(17,103 |
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Other |
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(390 |
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— |
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Changes in assets and liabilities: |
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Royalty receivables |
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14,768 |
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9,340 |
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Stream inventory |
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(6,002 |
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1,308 |
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Prepaid expenses and other assets |
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3,100 |
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2,036 |
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Accounts payable |
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(2,092 |
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(1,182 |
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Foreign withholding taxes payable |
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(199 |
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(1,999 |
) | ||
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Income taxes receivable |
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3,530 |
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(1,778 |
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Uncertain tax positions |
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806 |
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1,027 |
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Other liabilities |
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5,231 |
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(563 |
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Net cash provided by operating activities |
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$ |
54,596 |
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$ |
82,274 |
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Cash flows from investing activities: |
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Acquisition of royalty and stream interests |
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(1,324,984 |
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(38,734 |
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Andacollo royalty termination |
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345,000 |
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— |
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Golden Star term loan |
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(20,000 |
) |
— |
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Other |
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(271 |
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(517 |
) | ||
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Net cash used in investing activities |
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$ |
(1,000,255 |
) |
$ |
(39,251 |
) |
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Cash flows from financing activities: |
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Borrowings from revolving credit facility |
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350,000 |
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— |
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Net proceeds from issuance of common stock |
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— |
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775 |
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Common stock dividends |
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(28,699 |
) |
(27,369 |
) | ||
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Distribution to non-controlling interests |
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(636 |
) |
(911 |
) | ||
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Tax (benefit) expense of stock-based compensation exercises |
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(247 |
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74 |
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Other |
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(8 |
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— |
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Net cash provided by (used in) financing activities |
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$ |
320,410 |
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$ |
(27,431 |
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Net (decrease) increase in cash and equivalents |
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(625,249 |
) |
15,592 |
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Cash and equivalents at beginning of period |
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742,849 |
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659,536 |
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Cash and equivalents at end of period |
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$ |
117,600 |
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$ |
675,128 |
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The accompanying notes are an integral part of these consolidated financial statements.
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING STANDARDS
Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties (or “royalty interests”), metal streams (or “stream interests”), and similar interests. Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any. 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.
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, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2016. These interim unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015 filed with the Securities and Exchange Commission on August 6, 2015 (“Fiscal 2015 10-K”).
Certain amounts in the prior period financial statements have been reclassified for comparative purposes to conform with the presentation in the current period financial statements. Reclassified amounts were not material to the financial statements.
Asset Impairment
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts of an asset or group of assets may not be recoverable. The recoverability of the carrying value of royalty and stream interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each royalty and stream interest property using estimates of proven and probable reserves and other relevant information received from the operators. We evaluate the recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in the price of gold, silver, copper, nickel and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur or may be reduced in the future, thus potentially affecting the future recoverability of our royalty or stream interests. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows.
Estimates of gold, silver, copper, nickel and other metal prices, operators’ estimates of proven and probable reserves or mineralized material related to our royalty or streaming properties, and operators’ estimates of operating and capital costs are subject to certain risks and uncertainties which may affect the recoverability of our investment in these royalty and stream interests in mineral properties. It is possible
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these royalty and stream interests.
Recently Issued Account Standards
In January 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the recognition and measurement of financial instruments. The amended guidance requires, among other things, that equity securities classified as available-for-sale to be measured at fair value with changes in fair value recognized in net income rather than other comprehensive income as required under previous guidance. The new guidance is effective for the Company’s fiscal year beginning July 1, 2018. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In November 2015, the FASB issued guidance on the presentation of deferred income taxes that requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as non-current on the balance sheet. As a result, each tax jurisdiction will now only have one net non-current deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The new guidance is effective for the Company’s fiscal year beginning July 1, 2017 and will only result in a change in presentation of these deferred taxes on our consolidated balance sheets. Early adoption is permitted, and we are currently evaluating the impact of this guidance on our consolidated financial statements.
2. ACQUISITIONS
Acquisition and Amendment of Gold Stream on Wassa, Bogoso and Prestea
On July 28, 2015, RGLD Gold AG (“RGLD Gold”), a wholly-owned subsidiary of the Company, closed a $130 million gold stream transaction with a wholly-owned subsidiary of Golden Star Resources Ltd. (together “Golden Star”). On December 30, 2015, the parties executed an amendment providing for an additional $15 million investment (for a total investment of $145 million) by RGLD Gold. At Golden Star’s option, RGLD Gold will increase its investment by a further $5 million (for a total investment of $150 million) subject to satisfaction of certain conditions, including Golden Star’s procurement of a minimum of $5 million of third party investment.
Also on July 28, 2015 and separate from the stream transaction by RGLD Gold, the Company also funded a $20 million, 4-year term loan to Golden Star and received warrants to purchase 5 million shares of Golden Star common stock, with a grant date fair value of approximately $0.8 million. Interest under the term loan is due quarterly at a rate equal to 62.5% of the average daily gold price for the relevant quarter divided by 10,000, but not to exceed 11.5%. The warrants have a term of four years and an exercise price of $0.27.
Pursuant to the stream transaction and subject to certain conditions, RGLD Gold will make $145 million in advance payments to Golden Star in stages. As of December 31, 2015, RGLD Gold has advanced $75 million, including $20 million advanced at closing of the amendment. RGLD Gold expects to advance the balance in four quarterly payments as follows: (i) $20 million on each of April 1, July 1 and October 1, 2016, and (ii) $10 million on January 1, 2017; however funds will be advanced on a pro rata basis with spending on the Wassa and Prestea underground projects and subject to satisfaction of certain conditions. Golden Star will deliver to RGLD Gold 9.25% of gold produced from the Wassa, Bogoso and Prestea mines, until the earlier of (i) December 31, 2017 or (ii) the date at which the Wassa and Prestea underground projects achieve commercial production. At that point, the stream percentage will increase
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
to 10.5% (or to 10.9% if the total investment increases to $150 million) of gold produced from the Wassa, Bogoso and Prestea projects until an aggregate 240,000 ounces have been delivered (or 250,000 ounces if the total investment increases to $150 million). Once the applicable delivery threshold is met, the stream percentage will decrease to 5.5% for the remaining life of the mines.
RGLD Gold will pay Golden Star a cash price equal to 20% of the spot price for each ounce of gold delivered at the time of delivery until the applicable delivery threshold is met, and 30% of the spot price for each ounce of gold delivered thereafter.
The Wassa, Bogoso and Prestea gold stream acquisition has been accounted for as an asset acquisition. The $75 million paid as part of the aggregate advance payments of $145 million, plus direct acquisition costs, has been recorded as separate components of Royalty and stream interests, net on our consolidated balance sheets. Accordingly, approximately $62.5 million and $13.7 million was allocated to production stage and exploration stage stream interest, respectively, as of December 31, 2015. Future advance payments, plus any direct acquisition costs incurred, will be recorded as a production stage or an exploration stream interest accordingly. The acquisition costs of the production stage stream interest will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves for Wassa, Bogoso and Prestea, as provided by Golden Star.
The $20 million four-year term loan and the received warrants have been recorded within Other assets on our consolidated balance sheets. The warrants have been classified as a financial asset instrument and are recorded at fair value at each reporting period using the Black-Scholes model. Any change in the fair value of the warrants at subsequent reporting periods will be recorded within Interest and other on our consolidated statements of operations and comprehensive income.
Acquisition of Gold and Silver Stream at Pueblo Viejo
On September 29, 2015, RGLD Gold closed its Precious Metals Purchase and Sale Agreement with Barrick Gold Corporation (“Barrick”) and its wholly-owned subsidiary, BGC Holdings Ltd. (“BGC”) for a percentage of the gold and silver production attributable to Barrick’s 60% interest in the Pueblo Viejo mine located in the Dominican Republic. Pursuant to the Precious Metals Purchase and Sale Agreement, RGLD Gold made a single advance payment of $610 million to BGC as part of the closing. The transaction is effective as of July 1, 2015 for the gold stream and January 1, 2016 for the silver stream.
BGC will deliver gold to RGLD Gold in amounts equal to 7.50% of Barrick’s interest in the gold produced at the Pueblo Viejo mine from July 1, 2015 until 990,000 ounces of gold have been delivered, and 3.75% of Barrick’s interest in gold produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of gold delivered until 550,000 ounces of gold have been delivered, and 60% of the spot price per ounce delivered thereafter. RGLD Gold began receiving gold deliveries during the quarter ended December 31, 2015.
BGC will deliver silver to RGLD Gold in amounts equal to 75% of Barrick’s interest in the silver produced at the Pueblo Viejo mine beginning on January 1, 2016 until 50 million ounces of silver have been delivered, and 37.50% of Barrick’s interest in silver produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of silver delivered until 23.10 million ounces of silver have been delivered, and 60% of the spot price per ounce of silver delivered thereafter.
The Pueblo Viejo gold and silver stream acquisition has been accounted for as an asset acquisition. The advance payment of $610 million, plus direct transaction costs, have been recorded as a production stage stream interest within Royalty and stream interests, net on our consolidated balance sheets. The acquisition cost of the Pueblo Viejo gold and silver stream interest will be depleted using the units of
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
production method, which is estimated using aggregate proven and probable reserves, as provided by Barrick.
Acquisition of Gold and Silver Stream at Rainy River
On July 20, 2015, RGLD Gold entered into a $175 million Purchase and Sale Agreement with New Gold, Inc. (“New Gold”), for a percentage of the gold and silver production from the Rainy River Project located in Ontario, Canada (“Rainy River”). Pursuant to the Purchase and Sale Agreement, RGLD Gold made an advance payment to New Gold, consisting of $100 million on July 20, 2015, and will make an additional advance payment of $75 million once capital spending at Rainy River is 60% complete (currently expected by mid-calendar 2016). Also under the Purchase and Sale Agreement, New Gold will deliver to RGLD Gold 6.50% of the gold produced at Rainy River until 230,000 gold ounces have been delivered, and 3.25% thereafter. New Gold also will deliver 60% of the silver produced at Rainy River until 3.10 million silver ounces have been delivered, and 30% thereafter. RGLD Gold will pay New Gold 25% of the spot price per ounce of gold and silver at the time of delivery.
The Rainy River gold and silver stream acquisition has been accounted for as an asset acquisition. The $100 million paid as part of the aggregate advance payments of $175 million, plus direct transaction costs, have been recorded as a development stage stream interest within Royalty and stream interests, net on our consolidated balance sheets.
Acquisition of Gold Stream at Carmen de Andacollo
On July 9, 2015, RGLD Gold entered into a Long Term Offtake Agreement (the “Andacollo Stream Agreement”) with Compañía Minera Teck Carmen de Andacollo (“CMCA”), a 90% owned subsidiary of Teck Resources Limited (“Teck”). Pursuant to the Andacollo Stream Agreement, CMCA will sell and deliver to RGLD Gold 100% of payable gold from the Carmen de Andacollo (“Andacollo”) copper-gold mine located in Chile until 900,000 ounces have been delivered, and 50% thereafter, subject to a fixed payable percentage of 89%. RGLD Gold made a $525 million advance payment in cash to CMCA upon entry into the Andacollo Stream Agreement, and RGLD Gold will also pay CMCA 15% of the monthly average gold price for the month preceding the delivery date for all gold purchased under the Andacollo Stream Agreement.
The transaction encompasses certain of CMCA’s presently owned mining concessions on the Andacollo mine, as well as any other mining concessions presently owned or acquired by CMCA or any of its affiliates within a 1.5 kilometer area of interest, and certain other mining concessions that CMCA or its affiliates may acquire. The Andacollo Stream Agreement is effective July 1, 2015, and applies to all final settlements of gold received on or after that date. Deliveries to RGLD Gold will be made monthly, and RGLD Gold began receiving gold deliveries during the quarter ended September 30, 2015.
The Company accounted for the acquisition of the stream interest at Andacollo as an asset acquisition. For US GAAP financial reporting purposes on the date of acquisition, the Company’s new consolidated carrying value in its stream interest at Andacollo was approximately $388.2 million, which included direct acquisition costs, and has been recorded as a production stage stream interest within Royalty and stream interests, net on our consolidated balance sheets. The Andacollo gold stream interest will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Teck.
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Termination of Royalty Interest at Carmen de Andacollo
On July 9, 2015, Royal Gold Chile Limitada (“RG Chile”), a wholly owned subsidiary of the Company, entered into a Royalty Termination Agreement with CMCA. The Royalty Termination Agreement terminated an amended Royalty Agreement originally dated January 12, 2010, which provided RG Chile with a royalty equivalent to 75% of the gold produced from the sulfide portion of the Andacollo mine until 910,000 payable ounces have been produced, and 50% of the gold produced thereafter. CMCA paid total consideration of $345 million to RG Chile in connection with the Royalty Termination Agreement. The net carrying value of the Andacollo royalty on the date of termination was approximately $207.5 million. The royalty termination transaction was taxable in Chile and the United States.
3. ROYALTY AND STREAM INTERESTS
The following tables summarize the Company’s royalty and stream interests as of December 31, 2015 and June 30, 2015.
|
As of December 31, 2015 (Amounts in thousands): |
|
Cost |
|
Accumulated |
|
Net |
| |||
|
Production stage royalty interests: |
|
|
|
|
|
|
| |||
|
Voisey’s Bay |
|
$ |
150,138 |
|
$ |
(82,897 |
) |
$ |
67,241 |
|
|
Peñasquito |
|
99,172 |
|
(28,334 |
) |
70,838 |
| |||
|
Holt |
|
34,612 |
|
(15,656 |
) |
18,956 |
| |||
|
Cortez |
|
10,630 |
|
(9,970 |
) |
660 |
| |||
|
Other |
|
531,734 |
|
(324,204 |
) |
207,530 |
| |||
|
Total production stage royalty interests |
|
826,286 |
|
(461,061 |
) |
365,225 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Production stage stream interests: |
|
|
|
|
|
|
| |||
|
Mount Milligan |
|
783,046 |
|
(55,980 |
) |
727,066 |
| |||
|
Pueblo Viejo |
|
610,400 |
|
(5,612 |
) |
604,788 |
| |||
|
Andacollo |
|
388,182 |
|
(6,514 |
) |
381,668 |
| |||
|
Wassa/Bogoso/Prestea |
|
62,507 |
|
(4,620 |
) |
57,887 |
| |||
|
Total production stage stream interests |
|
1,844,135 |
|
(72,726 |
) |
1,771,409 |
| |||
|
Production stage royalty and stream interests |
|
2,670,421 |
|
(533,787 |
) |
2,136,634 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Development stage royalty interests: |
|
|
|
|
|
|
| |||
|
Pascua-Lama |
|
380,657 |
|
— |
|
380,657 |
| |||
|
Other |
|
66,415 |
|
— |
|
66,415 |
| |||
|
Total development stage royalty interests |
|
447,072 |
|
— |
|
447,072 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Development stage stream interests: |
|
|
|
|
|
|
| |||
|
Rainy River |
|
100,684 |
|
— |
|
100,684 |
| |||
|
Other |
|
87,822 |
|
(86 |
) |
87,736 |
| |||
|
Total development stage stream interests |
|
188,506 |
|
(86 |
) |
188,420 |
| |||
|
Development stage royalty and stream interests |
|
635,578 |
|
(86 |
) |
635,492 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Exploration stage royalty interests |
|
210,584 |
|
— |
|
210,584 |
| |||
|
Exploration stage stream interests |
|
13,711 |
|
— |
|
13,711 |
| |||
|
Total royalty and stream interests |
|
$ |
3,530,294 |
|
$ |
(533,873 |
) |
$ |
2,996,421 |
|
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
|
As of June 30, 2015 (Amounts in thousands): |
|
Cost |
|
Accumulated |
|
Impairments |
|
Net |
| ||||
|
Production stage royalty interests: |
|
|
|
|
|
|
|
|
| ||||
|
Andacollo |
|
$ |
272,998 |
|
$ |
(65,467 |
) |
$ |
— |
|
$ |
207,531 |
|
|
Voisey’s Bay |
|
150,138 |
|
(76,141 |
) |
— |
|
73,997 |
| ||||
|
Peñasquito |
|
99,172 |
|
(24,555 |
) |
— |
|
74,617 |
| ||||
|
Mulatos |
|
48,092 |
|
(32,313 |
) |
|
|
15,779 |
| ||||
|
Holt |
|
34,612 |
|
(13,950 |
) |
— |
|
20,662 |
| ||||
|
Robinson |
|
17,825 |
|
(12,748 |
) |
|
|
5,077 |
| ||||
|
Cortez |
|
10,630 |
|
(9,933 |
) |
— |
|
697 |
| ||||
|
Other |
|
495,763 |
|
(265,727 |
) |
(27,586 |
) |
202,450 |
| ||||
|
Total production stage royalty interests |
|
1,129,230 |
|
(500,834 |
) |
(27,586 |
) |
600,810 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Production stage stream interests: |
|
|
|
|
|
|
|
|
| ||||
|
Mount Milligan |
|
783,046 |
|
(35,195 |
) |
— |
|
747,851 |
| ||||
|
Production stage royalty and stream interests |
|
1,912,276 |
|
(536,029 |
) |
(27,586 |
) |
1,348,661 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Development stage royalty interests: |
|
|
|
|
|
|
|
|
| ||||
|
Pascua-Lama |
|
372,105 |
|
— |
|
— |
|
372,105 |
| ||||
|
Other |
|
67,017 |
|
— |
|
— |
|
67,017 |
| ||||
|
Total development stage royalty interests |
|
439,122 |
|
— |
|
— |
|
439,122 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Development stage stream interests: |
|
|
|
|
|
|
|
|
| ||||
|
Phoenix Gold |
|
75,843 |
|
— |
|
— |
|
75,843 |
| ||||
|
Other |
|
8,183 |
|
— |
|
(603 |
) |
7,580 |
| ||||
|
Total development stage stream interests |
|
84,026 |
|
— |
|
(603 |
) |
83,423 |
| ||||
|
Development stage royalty and stream interests |
|
523,148 |
|
— |
|
(603 |
) |
522,545 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Exploration stage royalty interests |
|
212,552 |
|
— |
|
(150 |
) |
212,402 |
| ||||
|
Total royalty and stream interests |
|
$ |
2,647,976 |
|
$ |
(536,029 |
) |
$ |
(28,339 |
) |
$ |
2,083,608 |
|
Impairment of royalty and stream interests
In accordance with our impairment accounting policy discussed in Note 1, impairments in the carrying value of each royalty or stream interest are measured and recorded to the extent that the carrying value in each royalty or stream interest exceeds its estimated fair value, which is generally calculated using estimated future discounted cash-flows. As part of the Company’s regular asset impairment analysis, the Company did not record any impairment charges for the three and six months ended December 31, 2015. See Note 13 for further discussion on our Phoenix Gold streaming interest. The Company recorded impairment charges for the fiscal year ended June 30, 2015, as discussed further in the Company’s Fiscal 2015 10-K.
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
4. AVAILABLE-FOR-SALE SECURITIES
The Company’s available-for-sale securities as of December 31, 2015 and June 30, 2015 consist of the following:
|
|
|
As of December 31, 2015 |
| ||||||||||
|
|
|
|
|
(Amounts in thousands) |
|
|
| ||||||
|
|
|
|
|
Unrealized |
|
|
| ||||||
|
|
|
Cost Basis |
|
Gain |
|
Loss |
|
Fair Value |
| ||||
|
Non-current: |
|
|
|
|
|
|
|
|
| ||||
|
Seabridge |
|
$ |
9,565 |
|
— |
|
(1,154 |
) |
$ |
8,411 |
| ||
|
|
|
$ |
9,565 |
|
$ |
— |
|
$ |
(1,154 |
) |
$ |
8,411 |
|
|
|
|
As of June 30, 2015 |
| ||||||||||
|
|
|
|
|
(Amounts in thousands) |
|
|
| ||||||
|
|
|
|
|
Unrealized |
|
|
| ||||||
|
|
|
Cost Basis |
|
Gain |
|
Loss |
|
Fair Value |
| ||||
|
Non-current: |
|
|
|
|
|
|
|
|
| ||||
|
Seabridge |
|
$ |
9,565 |
|
— |
|
(3,292 |
) |
$ |
6,273 |
| ||
|
|
|
$ |
9,565 |
|
$ |
— |
|
$ |
(3,292 |
) |
$ |
6,273 |
|
Our only available-for-sale security is the investment in Seabridge Gold, Inc. (“Seabridge”) common stock, acquired in June 2011. The Company’s policy for determining whether declines in fair value of available-for-sale securities are other than temporary includes a quarterly analysis of the investments and a review by management of all investments for which the cost exceeds the fair value. Any temporary declines in fair value are recorded as a charge to other comprehensive income. If such impairment is determined by the Company to be other than temporary, the investment’s cost basis is written down to fair value and recorded in net income during the period the Company determines such impairment to be other than temporary. Based on the Company’s quarterly analysis of its investments and our ability and intent to hold these investments for a reasonable period of time, there were no write downs on our available-for-sale securities during the three and six months ended December 31, 2015. The Company will continue to evaluate its investment in Seabridge common stock considering additional facts and circumstances as they arise, including, but not limited to, the progress of development of Seabridge’s KSM project.
5. DEBT
The Company’s non-current debt as of December 31, 2015 and June 30, 2015 consists of the following:
|
|
|
As of |
|
As of |
| ||
|
|
|
December 31, 2015 |
|
June 30, 2015 |
| ||
|
|
|
Non-current |
|
Non-current |
| ||
|
|
|
(Amounts in thousands) |
| ||||
|
Convertible notes due 2019, net |
|
$ |
327,494 |
|
$ |
322,110 |
|
|
Revolving credit facility |
|
350,000 |
|
— |
| ||
|
Total debt |
|
$ |
677,494 |
|
$ |
322,110 |
|
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Convertible Senior Notes Due 2019
In June 2012, the Company completed an offering of $370 million aggregate principal amount of 2.875% convertible senior notes due 2019 (“2019 Notes”). The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is required to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year, beginning December 15, 2012. The 2019 Notes mature on June 15, 2019. Interest expense recognized on the 2019 Notes for the three and six months ended December 31, 2015, was $5.7 million and $11.3 million, respectively, compared to $5.5 million and $10.9 million, respectively, for the three and six months ended December 31, 2014, and included the contractual coupon interest, the accretion of the debt discount and amortization of the debt issuance costs.
Revolving credit facility
The Company maintains a $650 million revolving credit facility. As of December 31, 2015, the Company had $350.0 million outstanding and $300.0 million available under the revolving credit facility. Borrowings under the revolving credit facility bear interest at a floating rate of LIBOR plus a margin of 1.25% to 3.00%, based on Royal Gold’s defined leverage ratio. As of December 31, 2015, the interest rate on borrowings under the revolving credit facility was LIBOR plus 2.25% for an all-in rate of 2.82%. Royal Gold may repay borrowings under the revolving credit facility at any time without premium or penalty.
As discussed in Note 6 to the notes to consolidated financial statements in the Company’s Fiscal 2015 10-K, the Company has financial covenants associated with its revolving credit facility. At December 31, 2015, the Company was in compliance with each financial covenant.
6. REVENUE
Revenue is comprised of the following:
|
|
|
For The Three Months Ended |
|
For The Six Months Ended |
| ||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| ||||
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
|
|
|
(Amounts in thousands) |
|
(Amounts in thousands) |
| ||||||||
|
Stream interests |
|
$ |
67,312 |
|
$ |
17,318 |
|
$ |
105,168 |
|
$ |
36,975 |
|
|
Royalty interests |
|
30,806 |
|
43,986 |
|
67,005 |
|
93,355 |
| ||||
|
Total revenue |
|
$ |
98,118 |
|
$ |
61,304 |
|
$ |
172,173 |
|
$ |
130,330 |
|
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
7. STOCK-BASED COMPENSATION
The Company recognized stock-based compensation expense as follows:
|
|
|
For The Three Months Ended |
|
For The Six Months Ended |
| ||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| ||||
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
|
|
|
(Amounts in thousands) |
|
(Amounts in thousands) |
| ||||||||
|
Stock options |
|
$ |
115 |
|
$ |
106 |
|
$ |
224 |
|
$ |
219 |
|
|
Stock appreciation rights |
|
424 |
|
338 |
|
816 |
|
693 |
| ||||
|
Restricted stock |
|
774 |
|
157 |
|
2,144 |
|
1,327 |
| ||||
|
Performance stock |
|
(91 |
) |
(226 |
) |
2,265 |
|
585 |
| ||||
|
Total stock-based compensation expense |
|
$ |
1,222 |
|
$ |
375 |
|
$ |
5,449 |
|
$ |
2,824 |
|
Stock-based compensation expense is included within general and administrative in the consolidated statements of operations and comprehensive income.
During the three and six months ended December 31, 2015 and 2014, the Company granted the following stock-based compensation awards:
|
|
|
For The Three Months Ended |
|
For The Six Months Ended |
| ||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
(Number of shares) |
|
(Number of shares) |
| ||||
|
Stock options |
|
1,125 |
|
— |
|
25,437 |
|
19,760 |
|
|
Stock appreciation rights |
|
— |
|
— |
|
97,817 |
|
87,890 |
|
|
Restricted stock |
|
1,125 |
|
— |
|
73,187 |
|
55,589 |
|
|
Performance stock |
|
1,125 |
|
— |
|
48,422 |
|
46,800 |
|
|
Total stock-based compensation expense |
|
3,375 |
|
— |
|
244,863 |
|
210,039 |
|
As of December 31, 2015, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards was as follows:
|
|
|
Unrecognized |
|
Weighted- |
| |
|
Stock options |
|
$ |
735 |
|
2.1 |
|
|
Stock appreciation rights |
|
2,707 |
|
2.0 |
| |
|
Restricted stock |
|
6,817 |
|
3.3 |
| |
|
Performance stock |
|
4,014 |
|
1.6 |
| |
8. EARNINGS PER SHARE (“EPS”)
Basic earnings (loss) per common share were 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
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
are considered participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Company’s unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. The Company’s unexercised stock options, unexercised SSARs and unvested performance stock do not contain rights to dividends. Under the two-class method, the earnings (loss) used to determine basic earnings (loss) per common share 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 earnings (loss) per common share.
The following tables summarize the effects of dilutive securities on diluted EPS for the period:
|
|
|
For The Three Months Ended |
|
For The Six Months Ended |
| ||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| ||||
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
|
|
|
(in thousands, except per share data) |
|
(in thousands, except per share data) |
| ||||||||
|
Net income (loss) available to Royal Gold common stockholders |
|
$ |
15,114 |
|
$ |
(6,548 |
) |
$ |
(29,933 |
) |
$ |
12,134 |
|
|
Weighted-average shares for basic EPS |
|
65,073,678 |
|
65,002,307 |
|
65,061,059 |
|
64,982,595 |
| ||||
|
Effect of other dilutive securities |
|
48,066 |
|
— |
|
— |
|
139,590 |
| ||||
|
Weighted-average shares for diluted EPS |
|
65,121,744 |
|
65,002,307 |
|
65,061,059 |
|
65,122,185 |
| ||||
|
Basic earnings (loss) per share |
|
$ |
0.23 |
|
$ |
(0.10 |
) |
$ |
(0.46 |
) |
$ |
0.19 |
|
|
Diluted earnings (loss) per share |
|
$ |
0.23 |
|
$ |
(0.10 |
) |
$ |
(0.46 |
) |
$ |
0.19 |
|
The calculation of weighted average shares includes all of our outstanding common stock. The Company intends to settle the principal amount of the 2019 Notes in cash. As a result, there will be no impact to diluted earnings per share unless the share price of the Company’s common stock exceeds the conversion price of $105.31.
9. INCOME TAXES
|
|
|
For The Three Months Ended |
|
For The Six Months Ended |
| ||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| ||||
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
|
|
|
(Amounts in thousands, except rate) |
|
(Amounts in thousands, except rate) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income tax (expense) benefit |
|
$ |
(4,740 |
) |
$ |
1,827 |
|
$ |
(63,917 |
) |
$ |
(2,131 |
) |
|
Effective tax rate |
|
25.4 |
% |
22.4 |
% |
194.3 |
% |
14.5 |
% | ||||
The higher effective tax rate for the three months ended December 31, 2015 was primarily related to higher discrete period charges as compared to the three months ended December 31, 2014. The increase in the effective tax rate for the six months ended December 31, 2015 is primarily related to the discrete tax impacts attributable to the Company’s Andacollo transactions (Note 2) and the liquidation of our Chilean subsidiary.
As of December 31, 2015 and June 30, 2015, the Company had $15.9 million and $15.1 million of total gross unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate.
The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At December 31, 2015 and June 30, 2015,
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
the amount of accrued income-tax-related interest and penalties was $5.3 million and $4.6 million, respectively.
10. SEGMENT INFORMATION
The Company manages its business under two reportable segments, consisting of the acquisition and management of royalty interests and the acquisition and management of stream interests. Royal Gold’s long-lived assets (royalty and stream interests, net) are geographically distributed as shown in the following table:
|
|
|
As of December 31, 2015 |
| |||||||
|
|
|
Royalty interest |
|
Stream interest |
|
Total royalty and stream |
| |||
|
Canada |
|
$ |
240,500 |
|
$ |
903,519 |
|
$ |
1,144,019 |
|
|
Chile |
|
453,629 |
|
381,668 |
|
$ |
835,297 |
| ||
|
Dominican Republic |
|
— |
|
604,789 |
|
$ |
604,789 |
| ||
|
Mexico |
|
124,192 |
|
— |
|
$ |
124,192 |
| ||
|
United States |
|
106,893 |
|
— |
|
$ |
106,893 |
| ||
|
Australia |
|
46,667 |
|
— |
|
$ |
46,667 |
| ||
|
Africa |
|
12,727 |
|
71,598 |
|
$ |
84,325 |
| ||
|
Other |
|
38,273 |
|
11,966 |
|
$ |
50,239 |
| ||
|
Total |
|
$ |
1,022,881 |
|
$ |
1,973,540 |
|
$ |
2,996,421 |
|
|
|
|
As of June 30, 2015 |
| |||||||
|
|
|
Royalty interest |
|
Stream interest |
|
Total royalty and stream |
| |||
|
Canada |
|
$ |
251,688 |
|
$ |
823,091 |
|
$ |
1,074,779 |
|
|
Chile |
|
653,019 |
|
— |
|
$ |
653,019 |
| ||
|
Mexico |
|
131,742 |
|
— |
|
$ |
131,742 |
| ||
|
United States |
|
110,286 |
|
— |
|
$ |
110,286 |
| ||
|
Australia |
|
50,119 |
|
— |
|
$ |
50,119 |
| ||
|
Africa |
|
12,760 |
|
— |
|
$ |
12,760 |
| ||
|
Dominican Republic |
|
— |
|
— |
|
$ |
— |
| ||
|
Other |
|
42,720 |
|
8,183 |
|
$ |
50,903 |
| ||
|
Total |
|
$ |
1,252,334 |
|
$ |
831,274 |
|
$ |
2,083,608 |
|
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
The Company’s revenue, cost of sales and net revenue by reportable segment for the three and six months ended December 31, 2015 and 2014, is geographically distributed as shown in the following table:
|
|
|
For The Three Months Ended December 31, 2015 |
| |||||||
|
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
| |||
|
Royalties: |
|
|
|
|
|
|
| |||
|
Mexico |
|
$ |
10,287 |
|
$ |
— |
|
$ |
10,287 |
|
|
United States |
|
8,484 |
|
— |
|
8,484 |
| |||
|
Canada |
|
7,206 |
|
— |
|
7,206 |
| |||
|
Australia |
|
2,325 |
|
— |
|
2,325 |
| |||
|
Africa |
|
474 |
|
— |
|
474 |
| |||
|
Other |
|
2,030 |
|
— |
|
2,030 |
| |||
|
Total royalties |
|
$ |
30,806 |
|
$ |
— |
|
$ |
30,806 |
|
|
|
|
|
|
|
|
|
| |||
|
Streams: |
|
|
|
|
|
|
| |||
|
Canada |
|
$ |
42,418 |
|
$ |
16,860 |
|
$ |
25,558 |
|
|
Africa |
|
9,776 |
|
1,988 |
|
7,788 |
| |||
|
Dominican Republic |
|
9,400 |
|
2,832 |
|
6,568 |
| |||
|
Chile |
|
5,718 |
|
892 |
|
4,826 |
| |||
|
Total streams |
|
$ |
67,312 |
|
$ |
22,572 |
|
$ |
44,740 |
|
|
Total royalties and streams |
|
$ |
98,118 |
|
$ |
22,572 |
|
$ |
75,546 |
|
|
|
|
For The Three Months Ended December 31, 2014 |
| |||||||
|
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
| |||
|
Royalties: |
|
|
|
|
|
|
| |||
|
United States |
|
$ |
10,482 |
|
$ |
— |
|
$ |
10,482 |
|
|
Canada |
|
10,403 |
|
— |
|
10,403 |
| |||
|
Mexico |
|
8,435 |
|
— |
|
8,435 |
| |||
|
Australia |
|
2,031 |
|
— |
|
2,031 |
| |||
|
Africa |
|
562 |
|
— |
|
562 |
| |||
|
Other |
|
12,073 |
|
— |
|
12,073 |
| |||
|
Total royalties |
|
$ |
43,986 |
|
$ |
— |
|
$ |
43,986 |
|
|
|
|
|
|
|
|
|
| |||
|
Streams: |
|
|
|
|
|
|
| |||
|
Canada |
|
$ |
17,318 |
|
$ |
6,236 |
|
$ |
11,082 |
|
|
Chile |
|
— |
|
— |
|
— |
| |||
|
Africa |
|
— |
|
— |
|
— |
| |||
|
Dominican Republic |
|
— |
|
— |
|
— |
| |||
|
Total streams |
|
$ |
17,318 |
|
$ |
6,236 |
|
$ |
11,082 |
|
|
Total royalties and streams |
|
$ |
61,304 |
|
$ |
6,236 |
|
$ |
55,068 |
|
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
For The Six Months Ended December 31, 2015 |
| |||||||
|
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
| |||
|
Royalties: |
|
|
|
|
|
|
| |||
|
Mexico |
|
$ |
21,092 |
|
$ |
— |
|
$ |
21,092 |
|
|
United States |
|
18,697 |
|
— |
|
18,697 |
| |||
|
Canada |
|
17,607 |
|
— |
|
17,607 |
| |||
|
Australia |
|
4,776 |
|
— |
|
4,776 |
| |||
|
Africa |
|
731 |
|
— |
|
731 |
| |||
|
Other |
|
4,102 |
|
— |
|
4,102 |
| |||
|
Total royalties |
|
$ |
67,005 |
|
$ |
— |
|
$ |
67,005 |
|
|
|
|
|
|
|
|
|
| |||
|
Streams: |
|
|
|
|
|
|
| |||
|
Canada |
|
$ |
65,935 |
|
$ |
25,988 |
|
$ |
39,947 |
|
|
Chile |
|
16,433 |
|
2,496 |
|
13,937 |
| |||
|
Africa |
|
13,400 |
|
2,722 |
|
10,678 |
| |||
|
Dominican Republic |
|
9,400 |
|
2,832 |
|
6,568 |
| |||
|
Total streams |
|
$ |
105,168 |
|
$ |
34,038 |
|
$ |
71,130 |
|
|
Total royalties and streams |
|
$ |
172,173 |
|
$ |
34,038 |
|
$ |
138,135 |
|
|
|
|
For The Six Months Ended December 31, 2014 |
| |||||||
|
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
| |||
|
Royalties: |
|
|
|
|
|
|
| |||
|
Mexico |
|
$ |
18,439 |
|
$ |
— |
|
$ |
18,439 |
|
|
Canada |
|
21,730 |
|
— |
|
21,730 |
| |||
|
United States |
|
21,664 |
|
— |
|
21,664 |
| |||
|
Australia |
|
3,924 |
|
— |
|
3,924 |
| |||
|
Africa |
|
1,874 |
|
— |
|
1,874 |
| |||
|
Other |
|
25,724 |
|
— |
|
25,724 |
| |||
|
Total royalties |
|
$ |
93,355 |
|
$ |
— |
|
$ |
93,355 |
|
|
|
|
|
|
|
|
|
| |||
|
Streams: |
|
|
|
|
|
|
| |||
|
Canada |
|
$ |
36,975 |
|
$ |
12,910 |
|
$ |
24,065 |
|
|
Chile |
|
— |
|
— |
|
— |
| |||
|
Africa |
|
— |
|
— |
|
— |
| |||
|
Dominican Republic |
|
— |
|
— |
|
— |
| |||
|
Total streams |
|
$ |
36,975 |
|
$ |
12,910 |
|
$ |
24,065 |
|
|
Total royalties and streams |
|
$ |
130,330 |
|
$ |
12,910 |
|
$ |
117,420 |
|
11. FAIR VALUE MEASUREMENTS
FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1: Quoted prices for identical instruments in active markets;
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
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
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 the Company’s financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy.
|
|
|
At December 31, 2015 |
| |||||||||||||
|
|
|
Carrying |
|
Fair Value |
| |||||||||||
|
|
|
Amount |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||
|
Assets (In thousands): |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Marketable equity securities(1) |
|
$ |
8,411 |
|
$ |
8,411 |
|
$ |
8,411 |
|
$ |
— |
|
$ |
— |
|
|
Warrants(2) |
|
$ |
414 |
|
$ |
414 |
|
$ |
— |
|
$ |
414 |
|
$ |
— |
|
|
Total assets |
|
|
|
$ |
8,825 |
|
$ |
8,411 |
|
$ |
414 |
|
$ |
— |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Liabilities (In thousands): |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Debt(3) |
|
$ |
404,494 |
|
$ |
335,313 |
|
$ |
335,313 |
|
$ |
— |
|
$ |
— |
|
|
Total liabilities |
|
|
|
$ |
335,313 |
|
$ |
335,313 |
|
$ |
— |
|
$ |
— |
| |
(1) Included in Available for sale securities on the Company’s consolidated balance sheets.
(2) Included in Other assets on the Company’s consolidated balance sheets.
(3) Included in the carrying amount is the equity component of our 2019 Notes in the amount of $77 million, which is included within Additional paid-in capital on the Company’s consolidated balance sheets.
The Company’s marketable equity securities classified within Level 1 of the fair value hierarchy are valued using quoted market prices in active markets. The fair value of the Level 1 marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company. The Company’s debt classified within Level 1 of the fair value hierarchy is valued using quoted prices in an active market. The carrying value of the Company’s revolving credit facility (Note 5) approximates fair value as of December 31, 2015. During the six months ended December 31, 2015, the warrants issued by Golden Star (Note 2) were added to the Level 2 fair value hierarchy.
As of December 31, 2015, the Company also had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with royalty and stream 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.
12. COMMITMENTS AND CONTINGENCIES
Rainy River Gold and Silver Stream Acquisition
As of December 31, 2015, the Company has a remaining commitment, subject to certain conditions, of $75.0 million as part of its Rainy River gold and silver stream acquisition in August 2015 (Note 2).
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Wassa, Bogoso and Prestea Gold Stream Acquisition and Amendment
As of December 31, 2015, the Company has a remaining commitment, subject to certain conditions, of $70.0 million as part of its Wassa, Bogoso and Prestea gold stream acquisition (July 2015) and amendment (December 2015) as discussed further in Note 2.
Ilovica Gold Stream Acquisition
As of December 31, 2015, the Company has a remaining commitment, subject to certain conditions, of $163.75 million as part of its Ilovica gold stream acquisition in October 2014.
Voisey’s Bay
The Company indirectly owns a royalty on the Voisey’s Bay mine in Newfoundland and Labrador owned by Vale Newfoundland & Labrador Limited (“VNL”). The royalty is directly owned by the Labrador Nickel Royalty Limited Partnership (“LNRLP”), in which the Company’s wholly-owned indirect subsidiary, Canadian Minerals Partnership, is the general partner and 89.99% owner. The remaining interests in LNRLP are owned by Altius Investments Ltd. (10%), a company unrelated to Royal Gold, and the Company’s wholly-owned indirect subsidiary, Voisey’s Bay Holding Corporation (0.01%).
On December 5, 2014, LNRLP filed amendments to its October 16, 2009 Statement of Claim in the Supreme Court of Newfoundland and Labrador Trial Division against Vale Inco Limited, now known as Vale Canada Limited (“Vale Canada”) and its wholly-owned subsidiaries, Vale Inco Atlantic Sales Limited and VNL, related to calculation of the NSR on the sale of concentrates, including nickel concentrates, from the Voisey’s Bay mine. LNRLP asserts that the defendants have incorrectly calculated the NSR since production at Voisey’s Bay began in late 2005, have indicated an intention to calculate the NSR in a manner LNRLP believes will violate the royalty agreement as Voisey’s Bay concentrates are processed at Vale’s new Long Harbour processing facility, and have breached their contractual duties of good faith and honest performance in several ways. LNRLP requests an order in respect of the correct calculation of future payments, and unspecified damages for non-payment and underpayment of past royalties to the date of the claim, together with additional damages until the date of trial, interest, costs and other damages. The litigation is in the discovery phase.
13. SUBSEQUENT EVENT
Phoenix Gold
RGLD Gold owns the right to purchase 6.30% of any gold produced from the Phoenix Gold Project until 135,000 ounces have been delivered, and 3.15% thereafter. The Phoenix Gold Project is located in Red Lake, Ontario, Canada, and operated by Rubicon Minerals Corporation (“Rubicon”). The Company’s carrying value for its stream interest at Phoenix Gold is $75.8 million as of December 31, 2015.
On January 11, 2016, Rubicon provided an updated geologic model and mineralized material statement for the Phoenix Gold Project, which included a significant reduction in mineralized material compared to previous statements provided by Rubicon. Rubicon also announced that they are evaluating strategic alternatives, including merger and divestiture opportunities either at the corporate or asset level, obtaining new financing or capital restructurings.
A significant reduction in mineralized material, along with recent decreases in the long-term metal price assumptions used by the industry, are indicators of potential impairment. The Company is currently
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
evaluating the updated geologic model and mineralized material statement in an effort to properly assess the recoverability of our carrying value. The Company’s technical evaluation will include a detailed review of the geological model and mineralized material statement by internal and external qualified personnel. Other factors under consideration by the Company as part of its recoverability analysis include any developments with respect to Rubicon’s stragetic alternatives, which may have implications on RGLD Gold’s $75 million security interest on the assets of the Phoenix Gold Project.
The Company anticipates that it will conclude its technical evaluation of the revised geologic model and mineralized material statement prior to the release of our financial results for the period ended March 31, 2016. Upon completion of our evaluation and upon consideration of any strategic developments with Rubicon or the Phoenix Gold Project, the Company could determine that an impairment in the near future is necessary.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
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 our financial condition and results of operations. Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), recommends that you 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 our Annual Report on Form 10-K for the fiscal year ended June 30, 2015 filed with the Securities and Exchange Commission (the “SEC”) on August 6, 2015 (the “Fiscal 2015 10-K”).
This MD&A contains forward-looking information. You should review our important note about forward-looking statements following this MD&A.
We refer to “GSR,” “NSR,” “metal stream” and other types of royalty or similar interests throughout this MD&A. These terms are defined in our Fiscal 2015 10-K.
Overview
Royal Gold, together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, metal streams, and similar interests. Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any. 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. We seek to acquire existing royalty and stream interests or to finance projects that are in production or in the development stage in exchange for royalty or stream interests. In the ordinary course of business, we engage in a continual review of opportunities to acquire existing royalty and stream interests, establishing new streams on operating mines, to create new royalty and stream interests through the financing of mine development or exploration, or to acquire companies that hold royalty and stream interests. We currently, and generally at any time, have acquisition opportunities in various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular opportunities, analysis of technical, financial and other confidential information, submission of indications of interest, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes.
As of December 31, 2015, the Company owned stream interests on four producing properties and three development stage properties and owned royalty interests on 34 producing properties, 21 development stage properties and 135 exploration stage properties, of which the Company considers 49 to be evaluation stage projects. The Company uses “evaluation stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. We do not conduct mining operations on the properties in which we hold royalty and streaming interests, and except for our interest in Peak Gold, LLC joint venture, we are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties. During the three months ended December 31, 2015, we focused on the management of our existing royalty and stream interests and the acquisition of additional royalty and stream interests.
Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver, copper and nickel, together with the amounts of production from our producing stage royalty and stream interests. The price of gold, silver, copper, nickel and other metals has fluctuated widely in recent years and most recently has experienced declines from highs experienced in the first half of our fiscal year 2013. The marketability and the price of metals are influenced by numerous factors beyond the control of
the Company and significant declines in the price of gold, silver, copper or nickel could have a material and adverse effect on the Company’s results of operations and financial condition.
For the three and six months ended December 31, 2015 and 2014, gold, silver, copper and nickel price averages and percentage of revenue by metal were as follows:
|
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||||||||||
|
|
|
December 31, 2015 |
|
December 31, 2014 |
|
December 31, 2015 |
|
December 31, 2014 |
| ||||||||||||
|
Metal |
|
Average |
|
Percentage of |
|
Average |
|
Percentage of |
|
Average |
|
Percentage of |
|
Average |
|
Percentage of |
| ||||
|
Gold ($/ounce |
|
$ |
1,106 |
|
90 |
% |
$ |
1,201 |
|
78 |
% |
$ |
1,116 |
|
86 |
% |
$ |
1,243 |
|
77 |
% |
|
Silver ($/ounce) |
|
$ |
14.77 |
|
2 |
% |
$ |
16.50 |
|
3 |
% |
$ |
14.84 |
|
2 |
% |
$ |
18.14 |
|
4 |
% |
|
Copper ($/pound) |
|
$ |
2.22 |
|
3 |
% |
$ |
3.00 |
|
5 |
% |
$ |
2.30 |
|
4 |
% |
$ |
3.09 |
|
8 |
% |
|
Nickel ($/pound) |
|
$ |
4.28 |
|
2 |
% |
$ |
7.17 |
|
10 |
% |
$ |
4.54 |
|
4 |
% |
$ |
7.80 |
|
7 |
% |
|
Other |
|
N/A |
|
3 |
% |
N/A |
|
4 |
% |
N/A |
|
4 |
% |
N/A |
|
4 |
% | ||||
Recent Business Developments
Acquisition and Amendment of Gold Stream on Wassa, Bogoso and Prestea
On July 28, 2015, RGLD Gold AG (“RGLD Gold”), a wholly-owned subsidiary of the Company, closed a $130 million gold stream transaction with a wholly-owned subsidiary of Golden Star Resources Ltd. (together “Golden Star”). On December 30, 2015, the parties executed an amendment providing for an additional $15 million investment (for a total investment of $145 million) by RGLD Gold. At Golden Star’s option, RGLD Gold will increase its investment by a further $5 million (for a total investment of $150 million) subject to satisfaction of certain conditions, including Golden Star’s procurement of a minimum of $5 million of third party investment.
Funds will be used for ongoing development of Golden Star’s Wassa, Bogoso and Prestea mines in Ghana, including underground development at Wassa and Prestea. As of December 31, 2015, RGLD Gold has advanced $75 million, including $20 million advanced at closing of the amendment. RGLD Gold expects to advance the balance in four quarterly payments as follows: (i) $20 million on each of April 1, July 1 and October 1, 2016, and (ii) $10 million on January 1, 2017; however funds will be advanced on a pro rata basis with spending on the Wassa and Prestea underground projects and subject to satisfaction of certain conditions.
In return, Golden Star will deliver to RGLD Gold 9.25% of gold produced from the Wassa, Bogoso and Prestea mines, until the earlier of (i) December 31, 2017 or (ii) the date at which the Wassa and Prestea underground projects achieve commercial production. At that point, the stream percentage will increase to 10.5% (or to 10.9% if the total investment increases to $150 million) of gold produced from the Wassa, Bogoso and Prestea mines until an aggregate 240,000 ounces have been delivered (or 250,000 ounces if the total investment increases to $150 million). Once the applicable delivery threshold is met, the stream percentage will decrease to 5.5% for the remaining term of the transaction.
RGLD Gold will pay Golden Star a cash price equal to 20% of the spot price for each ounce of gold delivered at the time of delivery until the applicable delivery threshold is met, and 30% of the spot price for each ounce of gold delivered thereafter.
RGLD Gold sold approximately 12,000 ounces of gold delivered from Golden Star during the six months ended December 31, 2015, and has approximately 700 ounces of gold remaining in inventory as of such date.
The Wassa mine is located approximately 90 miles west of Accra and has operated continuously since 2005. Golden Star forecasts calendar 2016 production of 100,000 to 110,000 ounces of gold from the single Wassa open pit. Open pit proven and probable reserves are 812,000 ounces at 1.42 grams per
tonne, as of December 31, 2014. RGLD Gold’s investment will fund development of the Wassa underground deposit, which has 746,000 ounces of proven and probable gold reserves at 4.27 grams per tonne. Once the underground deposit is in production, Golden Star expects average annual gold production of 150,000 ounces of gold over the life of mine from the combined open pit and underground at Wassa.
Bogoso and Prestea are located approximately 125 miles west of Accra and have produced over 9 million ounces of gold from both open pit and underground sources over the last 100 years. Golden Star forecasts calendar 2016 production of 60,000 to 70,000 ounces of gold from the open pit operations. Underground development at Prestea is already well advanced and Golden Star plans to modify the Bogoso plant to process Prestea material. Golden Star expects to spend $63 million of capital investment on Prestea, which includes hoist and shaft upgrades, electrical infrastructure, ventilation and a process plant upgrade. Once in full production, Golden Star expects annual production of approximately 75,000 ounces from Prestea, with estimated life of mine production of 450,000 ounces. Golden Star forecasts underground gold production from the Wassa and Prestea mines by mid-calendar 2016 and early calendar 2017, respectively.
Also on July 28, 2015 and separate from the stream transaction by RGLD Gold, the Company funded a $20 million, 4-year term loan to a wholly-owned subsidiary of Golden Star and received warrants to purchase 5 million shares of Golden Star common stock. Interest under the term loan is due quarterly at a rate equal to 62.5% of the average daily gold price for the relevant quarter divided by 10,000, but not to exceed 11.5%. The warrants have a term of four years and an exercise price of $0.27.
Acquisition of Gold and Silver Stream at Pueblo Viejo
On September 29, 2015, RGLD Gold entered into a Precious Metals Purchase and Sale Agreement with Barrick Gold Corporation (“Barrick”) and its wholly-owned subsidiary, BGC Holdings Ltd. (“BGC”) for a percentage of the gold and silver production attributable to Barrick’s 60% interest in the Pueblo Viejo mine located in the Dominican Republic. Pursuant to the Precious Metals Purchase and Sale Agreement, RGLD Gold made a single advance payment of $610 million to BGC as part of the closing. The transaction is effective as of July 1, 2015 for the gold stream and January 1, 2016 for the silver stream.
BGC will deliver gold to RGLD Gold in amounts equal to 7.50% of Barrick’s interest in the gold produced at the Pueblo Viejo mine from July 1, 2015 until 990,000 ounces of gold have been delivered, and 3.75% of Barrick’s interest in gold produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of gold delivered until 550,000 ounces of gold have been delivered, and 60% of the spot price per ounce delivered thereafter. RGLD Gold received its first delivery of approximately 20,600 ounces of gold from Pueblo Viejo on December 15, 2015, for gold production during the period July 1, 2015 to November 30, 2015.
BGC will deliver silver to RGLD Gold in amounts equal to 75% of Barrick’s interest in the silver produced at the Pueblo Viejo mine beginning on January 1, 2016 until 50.0 million ounces of silver have been delivered, and 37.50% of Barrick’s interest in silver produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of silver delivered until 23.10 million ounces of silver have been delivered, and 60% of the spot price per ounce of silver delivered thereafter.
The Pueblo Viejo mine is an open-pit mining operation located approximately 60 miles northwest of Santo Domingo, in the Dominican Republic, and is owned by a joint venture in which Barrick owns a 60% interest and is responsible for operations, and in which Goldcorp Inc. (“Goldcorp”) owns a 40% interest. The mine began production in 2013. Barrick reported preliminary calendar 2015 production, on a 60% basis of 572,000 ounces of gold. Barrick also reported proven and probable gold reserves attributable to Barrick of 9.3 million contained ounces at 3.30 grams per tonne, and attributable proven
and probable silver reserves of 58.3 million contained ounces grading 20.7 grams per tonne, in each case as of December 31, 2014.
Acquisition of Gold and Silver Stream at Rainy River
On July 20, 2015, RGLD Gold entered into a $175 million Purchase and Sale Agreement with New Gold, Inc. (“New Gold”), for a percentage of the gold and silver production from the Rainy River Project located in Ontario, Canada (“Rainy River”). Pursuant to the Purchase and Sale Agreement, RGLD Gold made an advance payment to New Gold, consisting of $100 million on July 20, 2015, and will make an additional payment of $75 million once capital spending at Rainy River is 60% complete (currently expected by mid-calendar 2016). Also under the Purchase and Sale Agreement, New Gold will deliver to RGLD Gold 6.50% of the gold produced at Rainy River until 230,000 gold ounces have been delivered, and 3.25% thereafter. New Gold also will deliver 60% of the silver produced at Rainy River until 3.10 million silver ounces have been delivered, and 30% thereafter. RGLD Gold will pay New Gold 25% of the spot price per ounce of gold and silver at the time of delivery.
The Rainy River Project is located approximately 40 miles northwest of Fort Frances in western Ontario, Canada. Over its first nine years of full production, the 21,000 tonne per day, combined open pit-underground operation is scheduled to produce an average of 325,000 ounces of gold per year. Construction was initiated in calendar 2015 and at the end of the third quarter of calendar 2015 detailed engineering was complete, site earthworks over 50% complete and key initial mining equipment successfully commissioned and 19%% of the total development capital estimate of $877 million has been spent. Rainy River has an estimated fourteen year mine life based on current reserves and is projected by New Gold to start-up in mid-calendar 2017.
Acquisition of Gold Stream at Carmen de Andacollo
On July 9, 2015, RGLD Gold entered into a Long Term Offtake Agreement (the “Andacollo Stream Agreement”) with Compañía Minera Teck Carmen de Andacollo (“CMCA”), a 90% owned subsidiary of Teck Resources Limited (“Teck”). Pursuant to the Andacollo Stream Agreement, CMCA will sell and deliver to RGLD Gold 100% of payable gold from the Carmen de Andacollo (“Andacollo”) copper-gold mine until 900,000 ounces have been delivered, and 50% thereafter, subject to a fixed payable percentage of 89%. RGLD Gold made a $525 million advance payment in cash to CMCA upon entry into the Andacollo Stream Agreement, and RGLD Gold will also pay CMCA 15% of the monthly average gold price for the month preceding the delivery date for all gold purchased under the Andacollo Stream Agreement.
The transaction encompasses certain of CMCA’s presently owned mining concessions on the Andacollo mine, as well as any other mining concessions presently owned or acquired by CMCA or any of its affiliates within a 1.5 kilometer area of interest, and certain other mining concessions that CMCA or its affiliates may acquire. The Andacollo Stream Agreement is effective as of July 1, 2015, and applies to all final settlements of gold received on or after that date. RGLD Gold sold approximately 14,700 ounces of gold delivered from CMCA during the six months ended December 31, 2015, and has approximately 5,200 ounces of gold remaining in inventory as of such date.
Termination of Royalty Interest at Carmen de Andacollo
On July 9, 2015, Royal Gold Chile Limitada (“RG Chile”), a wholly owned subsidiary of the Company, entered into a Royalty Termination Agreement with CMCA. The Royalty Termination Agreement terminated an amended Royalty Agreement originally dated January 12, 2010, which provided RG Chile with a royalty equivalent to 75% of the gold produced from the sulfide portion of the Andacollo mine until 910,000 payable ounces have been produced, and 50% of the gold produced thereafter. CMCA paid
total consideration of $345 million to RG Chile in connection with the Royalty Termination Agreement. The royalty termination transaction was taxable in Chile and the United States.
Principal Royalty and Stream Interests
The Company considers both historical and future potential revenues in determining which royalty and stream interests in our portfolio are principal to our business. Estimated future potential revenues from both producing and development properties are based on a number of factors, including reserves subject to our royalty and stream interests, production estimates, feasibility studies, metal price assumptions, mine life, legal status and other factors and assumptions, any of which could change and could cause the Company to conclude that one or more of such royalty and stream interests are no longer principal to our business. Our principal producing and development royalty and stream interests are listed alphabetically in the following tables.
Please refer to our Fiscal 2015 10-K for further discussion of our principal producing and development royalty and stream interests.
Principal Producing Properties
|
|
|
|
|
|
|
Royalty or stream interests |
|
Mine |
|
Location |
|
Operator |
|
(Gold unless otherwise stated) |
|
Andacollo |
|
Region IV, Chile |
|
Compañía Minera Teck Carmen de Andacollo |
|
Gold stream - 100% of gold produced (until 900,000 ounces delivered; 50% thereafter) |
|
Cortez |
|
Nevada, USA |
|
Barrick |
|
GSR1: 0.40% to 5.0% sliding-scale GSR |
|
|
|
|
|
|
|
GSR2: 0.40% to 5.0% sliding-scale GSR |
|
|
|
|
|
|
|
GSR3: 0.71% GSR |
|
|
|
|
|
|
|
NVR1: 1.014% NVR; 0.618% NVR (Crossroads) |
|
Holt |
|
Ontario, Canada |
|
Kirkland Lake Gold, Inc. (“Kirkland Lake”) |
|
0.00013 x quarterly average gold price NSR |
|
Mt. Milligan |
|
British Columbia, Canada |
|
Thompson Creek Metals Company Inc. (“Thompson Creek”) |
|
Gold stream - 52.25% of payable gold |
|
Peñasquito |
|
Zacatecas, Mexico |
|
Goldcorp |
|
2.0% NSR (gold, silver, lead, zinc) |
|
Pueblo Viejo(1) |
|
Domincan Republic |
|
Barrick (60%) |
|
Gold stream - 7.5% of gold produced (until 990,000 ounces delivered; 3.75% thereafter) Silver stream - 75% of silver produced (until 50.0 million ounces delivered; 37.5% thereafter) |
|
Voisey’s Bay |
|
Newfoundland and Labrador, Canada |
|
Vale Newfoundland & Labrador Limited (“Vale”) |
|
2.7% NSR (nickel, copper, cobalt) |
|
Wassa/Bogoso/Prestea(1) |
|
Western Region of Ghana |
|
Golden Star |
|
Gold stream - 8.5% of gold produced for the six months ended December 31, 2015; 9.25% of the gold produced effective January 1, 2016. |
(1) The gold and silver stream at Pueblo Viejo and the gold stream at Wassa/Bogoso/Prestea were acquired during the three months ended September 30, 2015. Please refer to “Recent Business Developments” above for further discussion on these acquisitions.
Principal Development Properties
|
|
|
|
|
|
|
Royalty or stream interests |
|
Mine |
|
Location |
|
Operator |
|
(Gold unless otherwise stated) |
|
Rainy River(1) |
|
Ontario, Canada |
|
New Gold |
|
Gold stream - 6.5% of gold produced (until 230,000 ounces delivered; 3.25% thereafter) Silver stream - 60% of silver produced (until 3.1 million ounces delivered; 30% thereafter) |
|
Pascua-Lama(1) |
|
Region III, Chile |
|
Barrick |
|
0.78% to 5.45% sliding-scale NSR 1.09% fixed rate royalty (copper) |
(1) The gold and silver stream at Rainy River and the additional royalty interest at Pascua-Lama were acquired during the three months ended September 30, 2015. Please refer to “Recent Business Developments” above for further discussion on these acquisitions.
Operators’ Production Estimates by Royalty and Stream Interest for Calendar 2015
We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2015. The following table shows such production estimates for our principal producing properties for calendar 2015 as well as the actual production reported to us by the various operators through December 31, 2015. The estimates and production reports are prepared by the operators of the mining properties. We do not participate in the preparation or calculation of the operators’ estimates or production reports and have not independently assessed or verified the accuracy of such information. Please refer to “Property Developments” below within this MD&A for further discussion on our principal producing or development properties.
Operators’ Estimated and Actual Production by Royalty and Stream Interest for Calendar 2015
Principal Producing Properties
For the period January 1, 2015 through December 31, 2015
|
|
|
Calendar 2015 Operator’s Production |
|
Calendar 2015 Operator’s Production |
| ||||||||
|
|
|
Gold |
|
Silver |
|
Base Metals |
|
Gold |
|
Silver |
|
Base Metals |
|
|
Royalty/Stream |
|
(oz.) |
|
(oz.) |
|
(lbs.) |
|
(oz.) |
|
(oz.) |
|
(lbs.) |
|
|
Andacollo(5) |
|
52,200 |
|
— |
|
— |
|
47,600 |
|
— |
|
— |
|
|
Cortez GSR1 |
|
104,100 |
|
— |
|
— |
|
113,700 |
|
— |
|
— |
|
|
Cortez GSR2 |
|
27,900 |
|
— |
|
— |
|
35,000 |
|
— |
|
— |
|
|
Cortez GSR3 |
|
132,000 |
|
— |
|
— |
|
148,700 |
|
— |
|
— |
|
|
Cortez NVR1 |
|
97,200 |
|
— |
|
— |
|
110,100 |
|
— |
|
— |
|
|
Holt |
|
64,000 |
|
— |
|
— |
|
63,000 |
|
— |
|
— |
|
|
Mount Milligan(6) |
|
200,000-220,000 |
|
— |
|
— |
|
218,100 |
|
— |
|
— |
|
|
Penasquito(7),(8) |
|
700,000-750,000 |
|
24-26 million |
|
— |
|
690,400 |
|
19.5 million |
|
— |
|
|
Lead(7),(8) |
|
|
|||||||||||