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1. THE COMPANY
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 streams, royalties and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine at a price determined for the life of the transaction by the purchase agreement. Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Summary of Significant Accounting Policies
Use of Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates.
Our most critical accounting estimates relate to our assumptions regarding future gold, silver, copper, and other metal prices and the estimates of reserves, production and recoveries of third‑party mine operators. We rely on reserve estimates reported by the operators on the properties in which we have stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long‑lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts could differ significantly and are recorded in the period that the actual amounts are known.
Basis of Consolidation
The consolidated financial statements include the accounts of Royal Gold, Inc., its wholly‑owned subsidiaries and an entity over which control is achieved through means other than voting right (see Note 3). The Company follows the Accounting Standards Codification (“ASC”) guidance for identification and reporting for entities over which control is achieved through means other than voting rights. All intercompany accounts, transactions, income and expenses, and profits or losses have been eliminated on consolidation.
Cash and Equivalents
Cash and equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Cash and equivalents were primarily held in cash deposit accounts as of June 30, 2017 and 2016.
Stream and Royalty Interests
Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset under the ASC guidance.
Acquisition costs of production stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as sales occur under stream interests or royalty payments are recognized), which are estimated using proven and probable reserves as provided by the operator. Acquisition costs of stream and royalty interests on development stage mineral properties, which are not yet in production, are not amortized until the property begins production. Acquisition costs of stream or royalty interests on exploration stage mineral properties, where there are no proven and probable reserves, are not amortized. At such time as the associated exploration stage mineral interests are converted to proven and probable reserves, the cost basis is amortized over the remaining life of the mineral property, using proven and probable reserves. The carrying values of exploration stage mineral interests are evaluated for impairment at such time as information becomes available indicating that the production will not occur in the future. Exploration costs are expensed when incurred.
Available‑for‑sale Securities
Investments in securities that management does not have the intent to sell in the near term and that have readily determinable fair values are classified as available‑for‑sale securities. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity, except that declines in market value judged to be other than temporary are recognized in determining net income. When investments are sold, the realized gains and losses on these investments, determined using the specific identification method, are included in determining net income.
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 (loss). This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, and management’s ability and intent to hold the securities until fair value recovers. 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. The new cost basis is not changed for subsequent recoveries in fair value. The carrying value of the Company’s available-for-sale securities as of June 30, 2017 and 2016 was $3.7 million and $0, respectively, and is included in Other assets on our consolidated balance sheets. During the fiscal year ended June 30, 2016, the Company sold its available-for-sale securities, resulting in a realized gain of approximately $2.3 million.
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 stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest 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, 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 stream or royalty 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, and other metal prices, operators’ estimates of proven and probable reserves or mineralized material related to our stream or royalty 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 stream and royalty interests in mineral properties. It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests. Refer to Note 4 for discussion and the results of our impairment assessments for the fiscal years ended June 30, 2017, 2016 and 2015.
Revenue Recognition
Revenue is recognized pursuant to guidance in ASC 605 and based upon amounts contractually due pursuant to the underlying streaming or royalty agreement. Specifically, revenue is recognized in accordance with the terms of the underlying stream or royalty agreements subject to (i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred; (iii) the stream or royalty being fixed or determinable; and (iv) the collectability being reasonably assured. For our streaming agreements, we recognize revenue when the metal is sold.
Metal Sales
Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between 10 days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. Revenue from gold, silver and copper sales is recognized on the date of the settlement, which is also the date that title to the metal passes to the purchaser.
Cost of Sales
Cost of sales is specific to our stream agreements and is the result of our purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.
Production taxes
Certain royalty payments are subject to production taxes (or mining proceeds taxes), which are recognized at the time of revenue recognition. Production taxes are not income taxes and are included within the costs and expenses section in the Company’s consolidated statements of operations and comprehensive income (loss).
Exploration Costs
Exploration costs are specific to the Peak Gold LLC joint venture (“Peak Gold JV”) for the exploration and advancement of the Peak Gold Project, as discussed further in Note 3. Costs associated with the Peak Gold JV for the exploration and advancement of the Peak Gold Project are expensed when incurred.
Stock‑Based Compensation
The Company accounts for stock‑based compensation in accordance with the guidance of ASC 718. The Company recognizes all share‑based payments to employees, including grants of employee stock options, stock‑settled stock appreciation rights (“SSARs”), restricted stock and performance shares, in its financial statements based upon their fair values.
Reportable Segments and Geographical Information
The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long‑lived assets (stream and royalty interests, net) as of June 30, 2017 and 2016 are geographically distributed as shown in the following table:
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As of June 30, 2017 |
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As of June 30, 2016 |
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Stream interest |
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Royalty interest |
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Total stream |
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Stream interest |
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Royalty |
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Total stream |
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Canada |
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$ |
852,035 |
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$ |
221,618 |
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$ |
1,073,653 |
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$ |
809,692 |
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$ |
228,566 |
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$ |
1,038,258 |
Dominican Republic |
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543,256 |
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— |
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543,256 |
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588,502 |
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— |
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588,502 |
Chile |
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348,778 |
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453,369 |
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802,147 |
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369,896 |
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453,629 |
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823,525 |
Africa |
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123,760 |
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572 |
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124,332 |
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88,596 |
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697 |
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89,293 |
Mexico |
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— |
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105,889 |
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105,889 |
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— |
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118,899 |
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118,899 |
United States |
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— |
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168,378 |
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168,378 |
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— |
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102,385 |
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102,385 |
Australia |
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— |
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37,409 |
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37,409 |
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— |
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42,547 |
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42,547 |
Other |
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12,030 |
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25,162 |
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37,192 |
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12,029 |
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32,649 |
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44,678 |
Total |
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$ |
1,879,859 |
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$ |
1,012,397 |
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$ |
2,892,256 |
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$ |
1,868,715 |
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$ |
979,372 |
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$ |
2,848,087 |
The Company’s revenue, cost of sales and net revenue by reportable segment for our fiscal years ended June 30, 2017, 2016 and 2015 are geographically distributed as show in the following tables:
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Fiscal Year Ended June 30, 2017 |
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Fiscal Year Ended June 30, 2016 |
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Revenue |
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Cost of sales |
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Net revenue |
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Revenue |
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Cost of sales |
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Net revenue |
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Streams: |
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Canada |
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$ |
136,736 |
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$ |
45,954 |
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$ |
90,782 |
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$ |
125,755 |
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$ |
47,417 |
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$ |
78,338 |
Dominican Republic |
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91,589 |
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27,191 |
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64,398 |
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39,684 |
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11,625 |
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28,059 |
Chile |
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60,251 |
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9,037 |
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51,214 |
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49,243 |
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7,280 |
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41,963 |
Africa |
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25,435 |
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5,083 |
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20,352 |
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23,346 |
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4,657 |
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18,689 |
Total streams |
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$ |
314,011 |
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$ |
87,265 |
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$ |
226,746 |
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$ |
238,028 |
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$ |
70,979 |
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$ |
167,049 |
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Royalties: |
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Mexico |
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$ |
41,945 |
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$ |
— |
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$ |
41,945 |
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$ |
35,267 |
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$ |
— |
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$ |
35,267 |
United States |
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|
35,282 |
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|
— |
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|
35,282 |
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|
35,483 |
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|
— |
|
|
35,483 |
Canada |
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|
23,208 |
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|
— |
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|
23,208 |
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|
30,676 |
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|
— |
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30,676 |
Australia |
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12,943 |
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|
— |
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12,943 |
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10,462 |
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|
— |
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10,462 |
Africa |
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|
3,131 |
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|
— |
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|
3,131 |
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|
1,868 |
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|
— |
|
|
1,868 |
Chile |
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|
1,648 |
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|
— |
|
|
1,648 |
|
|
84 |
|
|
— |
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|
84 |
Other |
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|
8,646 |
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|
— |
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|
8,646 |
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|
7,922 |
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|
— |
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|
7,922 |
Total royalties |
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$ |
126,803 |
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$ |
— |
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$ |
126,803 |
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$ |
121,762 |
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$ |
— |
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$ |
121,762 |
Total streams and royalties |
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$ |
440,814 |
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$ |
87,265 |
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$ |
353,549 |
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$ |
359,790 |
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$ |
70,979 |
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$ |
288,811 |
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Fiscal Year Ended June 30, 2016 |
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Fiscal Year Ended June 30, 2015 |
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Revenue |
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Cost of sales |
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Net revenue |
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Revenue |
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Cost of sales |
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Net revenue |
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Streams: |
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|
|
|
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|
|
|
|
|
|
|
|
|
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Canada |
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$ |
125,755 |
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$ |
47,417 |
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$ |
78,338 |
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$ |
94,104 |
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$ |
33,450 |
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$ |
60,654 |
Chile |
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49,243 |
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7,280 |
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|
41,963 |
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|
— |
|
|
— |
|
|
— |
Dominican Republic |
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39,684 |
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11,625 |
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|
28,059 |
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|
— |
|
|
— |
|
|
— |
Africa |
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23,346 |
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|
4,657 |
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18,689 |
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|
— |
|
|
— |
|
|
— |
Total streams |
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$ |
238,028 |
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$ |
70,979 |
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$ |
167,049 |
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$ |
94,104 |
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$ |
33,450 |
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$ |
60,654 |
Royalties: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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United States |
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$ |
35,483 |
|
$ |
— |
|
$ |
35,483 |
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$ |
42,675 |
|
$ |
— |
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$ |
42,675 |
Mexico |
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35,267 |
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|
— |
|
|
35,267 |
|
|
43,008 |
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|
— |
|
|
43,008 |
Canada |
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30,676 |
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|
— |
|
|
30,676 |
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|
37,496 |
|
|
— |
|
|
37,496 |
Australia |
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|
10,462 |
|
|
— |
|
|
10,462 |
|
|
8,494 |
|
|
— |
|
|
8,494 |
Africa |
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|
1,868 |
|
|
— |
|
|
1,868 |
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|
3,075 |
|
|
— |
|
|
3,075 |
Chile |
|
|
84 |
|
|
— |
|
|
84 |
|
|
39,508 |
|
|
— |
|
|
39,508 |
Other |
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|
7,922 |
|
|
— |
|
|
7,922 |
|
|
9,659 |
|
|
— |
|
|
9,659 |
Total royalties |
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$ |
121,762 |
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$ |
— |
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$ |
121,762 |
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$ |
183,915 |
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$ |
— |
|
$ |
183,915 |
Total streams and royalties |
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$ |
359,790 |
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$ |
70,979 |
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$ |
288,811 |
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$ |
278,019 |
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$ |
33,450 |
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$ |
244,569 |
Income Taxes
The Company accounts for income taxes in accordance with the guidance of ASC 740. The Company’s annual tax rate is based on income, statutory tax rates in effect and tax planning opportunities available to us in the various jurisdictions in which the Company operates. Significant judgment is required in determining the annual tax expense, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate or unpredicted results from the final determination of each year’s liability by taxing authorities.
The Company’s deferred income taxes reflect the impact of temporary differences between the reported amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. In evaluating the realizability of the deferred tax assets, management considers both positive and negative evidence that may exist, such as earnings history, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies in each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning strategies.
The Company has asserted the indefinite reinvestment of certain foreign subsidiary earnings as determined by management’s judgment about and intentions concerning the future operations of the Company. As a result, the Company does not record a U.S. deferred tax liability for the excess of the book basis over the tax basis of its investments in foreign corporations to the extent that the basis difference results from earnings that meet the indefinite reversal criteria. Refer to Note 10 for further discussion on our assertion.
The Company’s operations may involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company adjusts these reserves in light of changing facts and circumstances, such as the progress of a tax audit; however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period which they are determined. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Comprehensive Income (Loss)
In addition to net income, comprehensive income (loss) includes changes in equity during a period associated with cumulative unrealized changes in the fair value of marketable securities held for sale, net of tax effects.
Earnings per Share
Basic earnings (loss) per share is computed by dividing net income (loss) available to Royal Gold common stockholders by the weighted average number of outstanding common shares for the period, considering the effect of participating securities. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts that may require issuance of common shares were converted. Diluted earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the diluted weighted average number of common shares outstanding during each fiscal year.
Reclassifications
Certain income tax amounts in the prior period consolidated balance sheet and consolidated statement of cash flows have been reclassified to conform with the presentation in the current period consolidated balance sheet and consolidated statement of cash flows. The reclassifications had no effect on reported net income (loss).
Recently Issued and Recently Adopted Accounting Standards
Recently Issued
In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU guidance clarifying the definition of a business and providing additional guidance for determining whether transactions should be accounted for as acquisitions of assets or businesses. The new guidance is effective for the Company July 1, 2018 and early adoption is permitted. The new guidance is required to be applied on a prospective basis. The Company is evaluating the new guidance.
In March 2016, the FASB issued ASU guidance to simplify several aspects of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation with actual forfeitures as they occur, as well as certain classifications on the statement of cash flows. The new guidance is effective for the Company’s fiscal year beginning July 1, 2017. We are currently evaluating the impact this guidance will have on our consolidated financial statements and footnote disclosures.
In May 2014, the FASB issued ASU guidance for the recognition of revenue from contracts with customers. This ASU superseded virtually all of the revenue recognition guidance in generally accepted accounting principles in the United States. The core principle of the five–step model is that an entity will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Entities can choose to apply the standard using either the full retrospective approach or a modified retrospective approach, and is effective for the Company’s fiscal year beginning July 1, 2018. Early adoption is permitted.
We plan to implement the new ASU revenue recognition guidance as of July 1, 2018, using the modified retrospective method with the cumulative effect, if any, of initial adoption to be recognized in Accumulated earnings at the date of initial application. We are in the initial stages of our evaluation of the impact of the new standard on our accounting policies, processes, and financial reporting. Based on the evaluation performed to-date, we expect to identify similar performance obligations as compared with deliverables and separate units of account previously identified. We will continue to assess the impact of adopting this ASU throughout the remainder of calendar 2017.
Recently Adopted
In August 2014, the FASB issued ASU guidance for disclosure of uncertainties about an entity’s ability to continue as a going concern. The new guidance requires management of the Company to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern. The new guidance was effective, and the Company adopted this standard, effective January 1, 2017.
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3. ACQUISITIONS
Acquisition of Additional Royalty Interests at Cortez
On September 19, 2016, Royal Gold, through its wholly-owned subsidiary, Denver Mining Finance Company, Inc., acquired a 3.75% Net Value Royalty (“NVR”) covering a significant area of Barrick Gold Corporation’s (“Barrick”) Cortez mine, including the Crossroads deposit, from a private party seller for total consideration of $70 million. Giving effect to this acquisition, Royal Gold’s interests at Cortez Crossroads comprise a 4.52% NVR and a 5% sliding-scale Gross Smelter Return (“GSR”) royalty at current gold prices. Royal Gold’s interests on production from the Pipeline and South Pipeline deposits as well as portions of the Gap deposit are comprised of a 4.91% NVR and a 5.71% GSR royalty at current gold prices.
The acquisition of the additional royalty interests at Cortez has been accounted for as an asset acquisition. The portion of the acquisition, plus direct transaction costs, attributable to the Pipeline and South Pipeline deposits as well as portions of the Gap deposit ($10.2 million) has been recorded as a production stage royalty interest while the portion of the acquisition attributable to the Crossroads deposit ($59.8 million) has been recorded as a development stage royalty interest. Both are included within Stream and royalty interests, net, on our consolidated balance sheets.
Acquisition of Gold and Silver Stream at Pueblo Viejo
On September 29, 2015, RGLD Gold AG (“RGLD Gold”), a wholly-owned subsidiary of the Company, closed its Precious Metals Purchase and Sale Agreement with 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 was 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 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, subject to a minimum silver recovery of 70%, 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. RGLD Gold began receiving silver deliveries during the quarter ended March 31, 2016.
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 Stream and royalty 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 production method, which is estimated using aggregate proven and probable reserves, as provided by Barrick.
Acquisition and Amendment of Gold Stream on Wassa and Prestea
On July 28, 2015, RGLD Gold 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.
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.
Funds are being used for ongoing development of Golden Star’s Wassa and Prestea mines in Ghana. As of June 30, 2016, RGLD Gold had advanced $95 million. During the fiscal year ended June 30, 2017, RGLD Gold funded the remaining $55 million of upfront payments to Golden Star. The Company has no remaining upfront deposit payments associated with the Wassa and Prestea gold stream.
Under the terms of the stream transaction, Golden Star will deliver to RGLD Gold 9.25% of gold produced from the Wassa 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% of gold produced from the Wassa and Prestea projects until an aggregate 240,000 ounces have been delivered. 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 and Prestea gold stream acquisition has been accounted for as an asset acquisition. The aggregate advance payments of $145 million, plus direct acquisition costs, have been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. The acquisition cost of the Wassa and Prestea gold stream interest will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, 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 income on our consolidated statements of operations and comprehensive income (loss).
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 made the final scheduled payment of $75 million in November 2016. The Company has no further upfront deposit payments associated with the Rainy River gold and silver stream as of June 30, 2017.
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 to RGLD Gold 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 aggregate advance payments of $175 million, plus direct transaction costs, have been recorded as a development stage stream interest within Stream and royalty interests, net on our consolidated balance sheets.
Acquisition of Gold Stream and Termination of Royalty Interest 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 an approximate 1.5 kilometer area of interest, and certain other mining concessions that CMCA or its affiliates may acquire. The Andacollo Stream Agreement was 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.
Also 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.
In accordance with relevant guidance from the ASC, the Company determined it should account for the Andacollo Stream Agreement and the Royalty Termination Agreement as a single transaction because both transactions closed on the same date, both transactions were with the same counterparty, and the same mineral interest (gold) was part of both transactions. As the Company accounted for the Andacollo Stream Agreement and Royalty Termination Agreement as a single transaction, it was further determined, based on the relevant ASC guidance, that no gain will be recognized as part of the transactions.
The Company accounted for the acquisition of the gold 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 Stream and royalty 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.
Peak Gold Joint Venture and Royalty Acquisition
On January 8, 2015, Royal Gold, through its wholly‑owned subsidiary, Royal Alaska, LLC (“Royal Alaska”), and Contango ORE, Inc., through its wholly‑owned subsidiary CORE Alaska, LLC (together, “Contango”), entered into a limited liability company agreement for the Peak Gold JV, a joint venture for exploration and advancement of the Peak Gold Project located near Tok, Alaska. Contango contributed all of its assets relating to the Peak Gold Project to the Peak Gold JV, including a mining lease and certain state of Alaska mining claims. Royal Alaska contributed $5.0 million in cash to the Peak Gold JV. Contango initially held a 100% membership interest in the Peak Gold JV. Royal Alaska has the right to obtain up to 40% of the membership interest in the Peak Gold JV by making contributions of up to $30.0 million (including Royal Alaska’s initial $5.0 million contribution) in cash to the Peak Gold JV by October 31, 2018. As of June 30, 2017 and 2016, Royal Alaska has contributed $18.0 million and $5.7 million, respectively, and obtained a 29.5% and 11%, respectively, membership interest in the Peak Gold JV.
Royal Alaska will act as the manager of the Peak Gold JV and will be responsible for managing, directing and controlling the overall operations during the earn‑in period, and thereafter, provided Royal Alaska holds at least a 40% interest. Royal Alaska will act as manager unless and until it fails to earn at least a 40% interest during the earn-in priod, is unanimously removed or resigns that position in the manner provided in the Peak Gold JV limited liability company agreement.
The Company follows the ASC guidance for identification and reporting of entities for which control is achieved through means other than voting rights. The guidance defines such entities as Variable Interest Entities (“VIEs”). The Company has identified the Peak Gold JV as a VIE, with Royal Alaska as the primary beneficiary, due to the legal structure and certain related factors of the limited liability company agreement for the Peak Gold JV. The Company determined that the Peak Gold JV should be fully consolidated at fair value initially. The fair value of the Company’s non‑controlling interest is $45.7 million and is based on the underlying value of the mineral property assigned to the Peak Gold JV, which is recorded as an exploration stage property within Stream and royalty interests, net on our consolidated balance sheets.
On September 30, 2014, Royal Gold acquired a 2.0% net smelter return (“NSR”) royalty and a 3.0% NSR royalty held by private parties over areas comprising the Peak Gold Project located near Tok, Alaska, for total consideration of $6.0 million. The acquisition of the Peak Gold Project royalties has been accounted for as an asset acquisition. The total purchase price, plus direct transaction costs, has been recorded as an exploration stage royalty interest within Stream and royalty interests, net on our consolidated balance sheets.
|
4. STREAM AND ROYALTY INTERESTS, NET
The following summarizes the Company’s stream and royalty interests as of June 30, 2017 and 2016:
As of June 30, 2017 (Amounts in thousands): |
|
Cost |
|
Accumulated Depletion |
|
Net |
|||
Production stage stream interests: |
|
|
|
|
|
|
|
|
|
Mount Milligan |
|
$ |
790,635 |
|
$ |
(114,327) |
|
$ |
676,308 |
Pueblo Viejo |
|
|
610,404 |
|
|
(67,149) |
|
|
543,255 |
Andacollo |
|
|
388,182 |
|
|
(39,404) |
|
|
348,778 |
Wassa and Prestea |
|
|
146,475 |
|
|
(22,715) |
|
|
123,760 |
Total production stage stream interests |
|
|
1,935,696 |
|
|
(243,595) |
|
|
1,692,101 |
Production stage royalty interests: |
|
|
|
|
|
|
|
|
|
Voisey's Bay |
|
|
205,724 |
|
|
(85,671) |
|
|
120,053 |
Peñasquito |
|
|
99,172 |
|
|
(34,713) |
|
|
64,459 |
Holt |
|
|
34,612 |
|
|
(19,669) |
|
|
14,943 |
Cortez |
|
|
20,873 |
|
|
(10,633) |
|
|
10,240 |
Other |
|
|
483,643 |
|
|
(337,958) |
|
|
145,685 |
Total production stage royalty interests |
|
|
844,024 |
|
|
(488,644) |
|
|
355,380 |
Total production stage stream and royalty interests |
|
|
2,779,720 |
|
|
(732,239) |
|
|
2,047,481 |
|
|
|
|
|
|
|
|
|
|
Development stage stream interests: |
|
|
|
|
|
|
|
|
|
Rainy River |
|
|
175,727 |
|
|
- |
|
|
175,727 |
Other |
|
|
12,031 |
|
|
- |
|
|
12,031 |
Total development stage stream interests |
|
|
187,758 |
|
|
- |
|
|
187,758 |
|
|
|
|
|
|
|
|
|
|
Development stage royalty interests: |
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
380,657 |
|
|
— |
|
|
380,657 |
Cortez |
|
|
59,803 |
|
|
— |
|
|
59,803 |
Other |
|
|
63,811 |
|
|
— |
|
|
63,811 |
Total development stage royalty interests |
|
|
504,271 |
|
|
— |
|
|
504,271 |
Total development stage stream and royalty interests |
|
|
692,029 |
|
|
— |
|
|
692,029 |
Total exploration stage royalty interests |
|
|
152,746 |
|
|
— |
|
|
152,746 |
Total stream and royalty interests |
|
$ |
3,624,495 |
|
$ |
(732,239) |
|
$ |
2,892,256 |
As of June 30, 2016 (Amounts in thousands): |
|
Cost |
|
Accumulated Depletion |
|
Impairments |
|
Net |
||||
Production stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Mount Milligan |
|
$ |
783,046 |
|
$ |
(74,060) |
|
$ |
— |
|
$ |
708,986 |
Pueblo Viejo |
|
|
610,404 |
|
|
(21,902) |
|
|
— |
|
|
588,502 |
Andacollo |
|
|
388,182 |
|
|
(18,286) |
|
|
— |
|
|
369,896 |
Wassa and Prestea |
|
|
96,413 |
|
|
(7,816) |
|
|
— |
|
|
88,597 |
Total production stage stream interests |
|
|
1,878,045 |
|
|
(122,064) |
|
|
— |
|
|
1,755,981 |
Production stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Voisey's Bay |
|
|
205,724 |
|
|
(85,671) |
|
|
- |
|
|
120,053 |
Peñasquito |
|
|
99,172 |
|
|
(29,898) |
|
|
- |
|
|
69,274 |
Holt |
|
|
34,612 |
|
|
(17,124) |
|
|
- |
|
|
17,488 |
Cortez |
|
|
10,630 |
|
|
(10,000) |
|
|
- |
|
|
630 |
Other |
|
|
531,735 |
|
|
(342,460) |
|
|
(18,605) |
|
|
170,670 |
Total production stage royalty interests |
|
|
881,873 |
|
|
(485,153) |
|
|
(18,605) |
|
|
378,115 |
Total production stage stream and royalty interests |
|
|
2,759,918 |
|
|
(607,217) |
|
|
(18,605) |
|
|
2,134,096 |
Development stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Rainy River |
|
|
100,706 |
|
|
- |
|
|
- |
|
|
100,706 |
Other |
|
|
87,883 |
|
|
(153) |
|
|
(75,702) |
|
|
12,028 |
Total development stage stream interests |
|
|
188,589 |
|
|
(153) |
|
|
(75,702) |
|
|
112,734 |
Development stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
380,657 |
|
|
— |
|
|
— |
|
|
380,657 |
Other |
|
|
66,414 |
|
|
— |
|
|
— |
|
|
66,414 |
Total development stage royalty interests |
|
|
447,071 |
|
|
— |
|
|
— |
|
|
447,071 |
Total development stage stream and royalty interests |
|
|
635,660 |
|
|
(153) |
|
|
(75,702) |
|
|
559,805 |
Total exploration stage royalty interests |
|
|
155,997 |
|
|
— |
|
|
(1,811) |
|
|
154,186 |
Total stream and royalty interests |
|
$ |
3,551,575 |
|
$ |
(607,370) |
|
$ |
(96,118) |
|
$ |
2,848,087 |
Phoenix Gold
On December 20, 2016, the owner of the Phoenix Gold Project, Rubicon Minerals Corporation (“Rubicon”), announced a restructuring transaction under Canadian regulations. As part of the restructuring transaction, RGLD Gold’s gold stream interest was terminated. As discussed further below, the Company’s stream interest on the Phoenix Gold Project was written down to zero during the quarter ended March 31, 2016. In exchange for termination of the gold stream, RGLD Gold received approximately three million common shares of Rubicon and three Net Smelter Return (“NSR”) royalties on properties owned by Rubicon, including a 1.0% NSR on the Phoenix Gold Project.
The fair value of the Rubicon common shares upon exchange was $3.4 million and is recorded within Other assets on our consolidated balance sheets and is accounted for under our available-for-sale accounting policy, which is also discussed in Note 2. The Company also recognized a corresponding gain on the fair value of the Rubicon common shares received upon exchange. The gain is recorded within Interest and other income on our consolidated statements of operations and comprehensive income (loss).
The Company did not recognize any value for the 1.0% NSR on the Phoenix Gold Project received upon exchange as our interest on the Phoenix Gold Project was previously fully impaired. No value was assigned to the other royalties received upon exchange as no mineralization is attributable to the area subject to the royalty interests at the time of the exchange.
Amendment to Mount Milligan
On October 20, 2016, Centerra Gold Inc. (“Centerra”) and Thompson Creek Metals Company Inc. (“Thompson Creek”) completed the Plan of Arrangement (the “Arrangement”) previously announced on July 5, 2016, pursuant to which Centerra acquired all of the issued and outstanding common shares of Thompson Creek. RGLD Gold’s streaming interest at Mount Milligan was amended (the “amendment”) concurrently with the closing of the Arrangement.
Under the terms of the amendment, RGLD Gold’s 52.25% gold stream at Mount Milligan was amended to a 35% gold stream and an 18.75% copper stream. RGLD Gold will continue to pay the lesser of $435 per ounce of gold delivered or the prevailing market price when purchased and will pay 15% of the spot price per metric tonne of copper delivered. Mount Milligan gold in concentrate in transit prior to October 20, 2016, was delivered to RGLD Gold under the previous 52.25% stream. Under the terms of both the original and amended agreements, there is a maximum of five months between concentrate shipment and final settlement. Accordingly, RGLD Gold began receiving gold and copper deliveries reflecting the amended stream agreement in April 2017. The Company incurred approximately $7.7 million in direct transaction costs associated with the amendment. These direct transaction costs have been capitalized as part of the Mount Milligan streaming interest within Stream and royalty interests, net on our consolidated balance sheets.
Impairment of stream and royalty interests and royalty receivables
In accordance with our impairment accounting policy discussed in Note 1, impairments in the carrying value of each stream or royalty interest are measured and recorded to the extent that the carrying value in each stream or royalty 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 determined no impairment indicators were present as of June 30, 2017. The Company determined the presence of impairment indicators and recorded impairment charges for the fiscal years ended June 30, 2016 and 2015 as summarized in the following table and discussed in detail below:
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Phoenix Gold(1) |
|
$ |
— |
|
$ |
75,702 |
|
$ |
— |
Inata(2) |
|
|
— |
|
|
11,982 |
|
|
— |
Wolverine(2) |
|
|
— |
|
|
5,307 |
|
|
25,967 |
Other |
|
|
— |
|
|
3,127 |
|
|
2,372 |
Total impairment of stream and royalty interests |
|
$ |
— |
|
$ |
96,118 |
|
$ |
28,339 |
Inata royalty receivable |
|
|
— |
|
|
2,855 |
|
|
— |
Wolverine royalty receivable |
|
|
— |
|
|
(385) |
|
|
2,996 |
Total impairment of stream and royalty interests and royalty receivables |
|
$ |
— |
|
$ |
98,588 |
|
$ |
31,335 |
(1) |
Included in Other development stage stream interests in the above stream and royalty interests table. |
(2) |
Included in Other production stage royalty interests in the above stream and royalty interests table. |
Phoenix Gold
RGLD Gold previously owned the right to purchase 6.30% of any gold produced from the Phoenix Gold Project until 135,000 ounces were delivered, and 3.15% thereafter. The Phoenix Gold Project is located in Red Lake, Ontario, Canada, and owned by Rubicon. 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 were 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 impairment.
During the quarter ended March 31, 2016, the Company independently evaluated 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 was completed by internal and external personnel and included an economic analysis of the Phoenix Gold Project and a detailed review of the geological model and mineralized material statement.
Based upon the results of the Company’s review of the updated geological model and mineralized material statement, and other factors, it was determined that our stream interest at the Phoenix Gold Project should be written down to zero as of March 31, 2016.
Inata
The Company owns a 2.5% gross smelter return royalty on all gold and silver produced from the Inata mine, located in Burkina Faso, West Africa, and operated by a subsidiary of Avocet Mining PLC (“Avocet”). The Company’s carrying value for its royalty interest at Inata was approximately $12.0 million as of December 31, 2015. As part of the Company’s impairment assessment for the three months ended March 31, 2016, the Company was notified of an updated mine plan at Inata, which included a significant reduction in the life of the mine. Based upon our review of the updated mine plan, our royalty interest was written down to zero as of March 31, 2016.
The Company also had a royalty receivable of approximately $2.8 million associated with past due royalty payments on the Inata interest. As a result of Avocet’s financial and operational difficulties and our review of the updated mine plan at Inata, the Company believes payment of the receivable is uncertain and provided for an allowance against the entire royalty receivable as of March 31, 2016. The Company continues to pursue collection of all past due payments.
Wolverine
The Company owns a 0.00% to 9.445% sliding‑scale NSR royalty on all gold and silver produced from the Wolverine underground mine and milling operation located in Yukon Territory, Canada, and operated by Yukon Zinc Corporation (“Yukon Zinc”). As part of the Company’s impairment assessment for the three months ended December 31, 2014, the Company was notified of an updated mine plan at Wolverine, which included a significant reduction in reserves and resources when compared to the previous mine plan. A significant reduction in reserves and resources, along with decreases in the long‑term metal price assumptions used by the industry, are indicators of impairment.
As part of the impairment determination, the fair value for Wolverine was estimated by calculating the net present value of the estimated future cash‑flows expected to be generated by the mining of the Wolverine deposits subject to our royalty interest. The estimates of future cash‑flows were derived from a life‑of‑mine model developed by the Company using Yukon Zinc’s updated mine plan information. The metal price assumptions used in the Company’s model were supported by consensus price estimates obtained from a number of industry analysts. The future cash‑flows were discounted using a discount rate which reflects specific market risk factors the Company associates with the Wolverine royalty interest. Following the impairment charge during the three months ended December 31, 2014, the Wolverine royalty interest has a carrying value of $5.3 million as of June 30, 2015.
The Company had a royalty receivable of approximately $3.0 million associated with past due royalty payments on the Wolverine interest. As a result of financial and operational results experienced by Yukon Zinc and their decision to put the mine on care and maintenance, the Company determined that payment of the receivable is uncertain and provided for an allowance against the entire receivable as of June 30, 2015. The expense associated with the allowance is recorded within General and administrative expense on the Company’s consolidated statements of operations and comprehensive income (loss).
During the second half of calendar 2015, Yukon Zinc completed bankruptcy proceedings in the Supreme Court of British Columbia and during the quarter ended March 31, 2016, we were made aware of no further intentions to recommission the mine. Based upon the updated developments and limited remaining mineralized material at Wolverine, the Company wrote down the remaining carrying value at Wolverine to zero as of March 31, 2016.
Other
As part of the Company’s regular asset impairment analysis during the three months ended March 31, 2016, including consideration of recent operator/property updates and developments, the Company determined that one production stage royalty interest and three exploration stage royalty interests should be written down to zero for a total impairment of approximately $3.1 million.
As part of the Company’s regular asset impairment analysis during the three months ended September 30, 2014, the Company determined that one production stage royalty interest and one exploration stage royalty interest should be written down to zero for a total impairment of $1.8 million. As part of the termination of the Tulsequah Chief gold and silver stream, as discussed below, the Company wrote‑off approximately $0.6 million of direct acquisition costs during the three months ended December 31, 2014.
Termination of the Tulsequah Chief Gold and Silver Stream
On December 22, 2014, RGLD Gold terminated the Amended and Restated Gold and Silver Purchase and Sale Agreement (the “Tulsequah Agreement”), between RGLD Gold, the Company, Chieftain Metals Inc. and Chieftain Metals Corp. (together, “Chieftain”), relating to Chieftain’s Tulsequah Chief mining project located in British Columbia, Canada. Pursuant to the terms of the Agreement, Chieftain repaid RGLD Gold’s original $10.0 million advance payment. As a result of the termination of the Tulsequah Agreement and repayment of our investment, the carrying value of the Tulsequah Chief gold and silver stream, which included our $10.0 million investment and approximately $0.6 million of direct acquisition costs, was reduced to zero during the three months ended December 31, 2014.
|
5. DEBT
The Company’s debt as of June 30, 2017 and 2016 consists of the following:
|
|
As of June 30, 2017 |
|
As of June 30, 2016 |
||||||||||||||||||||
|
|
Principal |
|
Unamortized Discount |
|
Debt Issuance Costs |
|
Total |
|
Principal |
|
Unamortized Discount |
|
Debt Issuance Costs |
|
Total |
||||||||
|
|
|
(Amounts in thousands) |
|
|
(Amounts in thousands) |
||||||||||||||||||
Convertible notes due 2019 |
|
$ |
370,000 |
|
$ |
(25,251) |
|
$ |
(2,646) |
|
$ |
342,103 |
|
$ |
370,000 |
|
$ |
(36,943) |
|
$ |
(3,934) |
|
$ |
329,123 |
Revolving credit facility |
|
|
250,000 |
|
|
— |
|
|
(5,933) |
|
|
244,067 |
|
|
275,000 |
|
|
— |
|
|
(3,438) |
|
|
271,562 |
Total debt |
|
$ |
620,000 |
|
$ |
(25,251) |
|
$ |
(8,579) |
|
$ |
586,170 |
|
$ |
645,000 |
|
$ |
(36,943) |
|
$ |
(7,372) |
|
$ |
600,685 |
Convertible Senior Notes Due 2019
In June 2012, the Company completed an offering of $370 million aggregate principal amount of 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 fiscal years ended June 30, 2017, 2016 and 2015 was approximately $23.6 million, $22.8 million and $22.1 million, respectively. Interest expense recognized includes the contractual coupon interest, the accretion of the debt discount and amortization of the debt issuance costs, and is recorded in Interest and other expense consolidated statements of operations and comprehensive income (loss).
Revolving credit facility
On June 2, 2017, the Company entered into a new $1 billion, 5-year revolving credit facility (“New Credit Facility”) with a final maturity in June 2022. The New Credit Facility replaces the Company’s prior $650 million credit facility under the Sixth Amended & Restated Credit Agreement, dated as of January 29, 2014 (as amended) (“Prior Credit Facility”) that was set to mature in March 2021. The Company repaid the Prior Credit Facility using a combination of cash on hand of $50 million and a borrowing under the New Credit Facility of $250 million. Royal Gold may repay borrowings under the New Credit Facility at any time without premium or penalty. The Company has $750 million of availability under the New Credit Facility as of June 30, 2017.
The New Credit Facility was entered into by Royal Gold as borrower, a wholly-owned subsidiary of Royal Gold as guarantor, and the Bank of Nova Scotia (“BNS”), as administrative agent, and BNS, HSBC Bank USA, National Association (“HSBC”), Canadian Imperial Bank of Commerce (“CIBC”), Bank of America, N.A., Goldman Sachs Bank USA, The Bank of Montreal, National Bank Financial, and Royal Bank of Canada, as lenders. Other agents under the New Credit Facility include BNS, HSBC and CIBC as Co-Lead Arrangers and Joint Bookrunners, HSBC as Syndication Agent and CIBC as Documentation Agent.
Features of the New Credit Facility include: (1) a $350 million increase in maximum aggregate commitments over the Prior Credit Facility from $650 million to $1.0 billion; (2) a final maturity of June 2022 as compared to March 2021 under the Prior Credit Facility; (3) a $250 million accordion feature, which allows the Company to increase commitments under the facility, subject to satisfaction of certain conditions and receipt of additional commitments from existing or new lenders, to an aggregate commitment amount of up to $1.25 billion; (4) commitment fees on undrawn amounts ranging from 0.25% per annum to 0.55% per annum based on the Company’s leverage ratio (as defined therein); (5) an interest rate, as selected by the Company, based on the Company’s leverage ratio, which rates range from either (i) LIBOR + 1.25% per annum to LIBOR + 2.75% per annum or (ii) the “base rate” plus an applicable margin of 0.25% per annum to 1.75% per annum, where the “base rate” is equal to the greatest of (A) the applicable annual interest rate charged by BNS for U.S. Dollar loans, (B) the aggregate of the Federal Funds Effective Rate (as defined therein) plus 0.5% per annum and (C) LIBOR for an interest period of one month plus 1.0% per annum; (6) a minimum interest coverage ratio (as defined therein) of 3.0 to 1.0, and (7) a maximum leverage ratio (as defined therein) of 3.5 to 1.0, increasing to 4.0 to 1.0 for two quarters following completion of a material permitted acquisition of $250 million or more (as further defined therein).
As of June 30, 2017, the interest rate on borrowings under the New Credit Facility was LIBOR plus 1.75% for an all-in rate of 2.97%. The Company was in compliance with each financial covenant (leverage ratio and interest coverage ratio) under the New Credit Facility as of June 30, 2017. Interest expense recognized on the revolving credit facility for the fiscal years ended June 30, 2017, 2016 and 2015 was approximately $9.9 million, $8.1 million and $0.6 million, respectively, and included interest on the outstanding borrowings and the amortization of the debt issuance costs.
|
6. REVENUE
Revenue is comprised of the following:
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
|
(Amounts in thousands) |
||||||
Stream interests |
|
$ |
314,011 |
|
$ |
238,028 |
|
$ |
94,104 |
Royalty interests |
|
|
126,803 |
|
|
121,762 |
|
|
183,915 |
Total revenue |
|
$ |
440,814 |
|
$ |
359,790 |
|
$ |
278,019 |
|
7. STOCK‑BASED COMPENSATION
In November 2015, shareholders of the Company approved the 2015 Omnibus Long‑Term Incentive Plan (“2015 LTIP”). Under the 2015 LTIP, 2,500,000 shares of common stock have been authorized for future grants to officers, directors, key employees and other persons. The 2015 LTIP provides for the grant of stock options, unrestricted stock, restricted stock, dividend equivalent rights, SSARs and cash awards. Any of these awards may, but need not, be made as performance incentives. Stock options granted under the 2015 LTIP may be non‑qualified stock options or incentive stock options.
The Company recognized stock‑based compensation expense as follows:
|
|
For the Fiscal Year Ended |
|||||||
|
|
June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
|
(Amounts in thousands) |
||||||
Stock options |
|
$ |
393 |
|
$ |
454 |
|
$ |
417 |
Stock appreciation rights |
|
|
1,851 |
|
|
1,687 |
|
|
1,422 |
Restricted stock |
|
|
3,840 |
|
|
3,686 |
|
|
2,511 |
Performance stock |
|
|
3,899 |
|
|
4,212 |
|
|
791 |
Total stock-based compensation expense |
|
$ |
9,983 |
|
$ |
10,039 |
|
$ |
5,141 |
Stock‑based compensation expense is included within General and administrative expense on the consolidated statements of operations and comprehensive income (loss).
Stock Options and Stock Appreciation Rights
Stock option and SSARs awards are granted with an exercise price equal to the closing market price of the Company’s stock at the date of grant. Stock option and SSARs awards granted to officers, key employees and other persons vest based on one to three years of continuous service. Stock option and SSARs awards have 10 year contractual terms.
To determine stock‑based compensation expense for stock options and SSARs, the fair value of each stock option and SSAR is estimated on the date of grant using the Black‑Scholes‑Merton (“Black‑Scholes”) option pricing model for all periods presented. The Black‑Scholes model requires key assumptions in order to determine fair value. Those key assumptions during the fiscal year 2017, 2016 and 2015 grants are noted in the following table:
|
|
Stock Options |
|
SSARs |
|
||||||||
|
|
2017 |
|
2016 |
|
2015 |
|
2017 |
|
2016 |
|
2015 |
|
Weighted-average expected volatility |
|
41.7 |
% |
36.9 |
% |
37.3 |
% |
41.1 |
% |
36.9 |
% |
36.6 |
% |
Weighted-average expected life in years |
|
5.5 |
|
5.5 |
|
5.5 |
|
5.8 |
|
5.4 |
|
5.3 |
|
Weighted-average dividend yield |
|
1.11 |
% |
1.06 |
% |
1.00 |
% |
1.11 |
% |
1.00 |
% |
1.00 |
% |
Weighted-average risk free interest rate |
|
1.2 |
% |
1.6 |
% |
1.7 |
% |
1.3 |
% |
1.6 |
% |
1.7 |
% |
The Company’s expected volatility is based on the historical volatility of the Company’s stock over the expected option term. The Company’s expected option term is determined by historical exercise patterns along with other known employee or company information at the time of grant. The risk free interest rate is based on the zero‑coupon U.S. Treasury bond at the time of grant with a term approximate to the expected option term.
Stock Options
A summary of stock option activity for the fiscal year ended June 30, 2017, is presented below.
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Weighted- |
|
Average |
|
|
|
|
|
|
|
|
Average |
|
Remaining |
|
Aggregate |
||
|
|
Number of |
|
Exercise |
|
Contractual |
|
Intrinsic Value |
||
|
|
Shares |
|
Price |
|
Life (Years) |
|
(in thousands) |
||
Outstanding at July 1, 2016 |
|
117,823 |
|
$ |
59.04 |
|
|
|
|
|
Granted |
|
7,200 |
|
$ |
83.29 |
|
|
|
|
|
Exercised |
|
(17,198) |
|
$ |
37.30 |
|
|
|
|
|
Forfeited |
|
— |
|
$ |
— |
|
|
|
|
|
Outstanding at June 30, 2017 |
|
107,825 |
|
$ |
64.13 |
|
6.2 |
|
$ |
1,551 |
Exercisable at June 30, 2017 |
|
77,310 |
|
$ |
63.32 |
|
5.5 |
|
$ |
1,148 |
The weighted‑average grant date fair value of options granted during the fiscal years ended June 30, 2017, 2016 and 2015, was $29.54, $18.05 and $24.86, respectively. The total intrinsic value of options exercised during the fiscal years ended June 30, 2017, 2016 and 2015, were $0.5 million, $0.1 million, and $0.7 million, respectively.
As of June 30, 2017, there was approximately $0.3 million of total unrecognized stock‑based compensation expense related to non‑vested stock options, which is expected to be recognized over a weighted‑average period of 1.5 years.
SSARs
A summary of SSARs activity for the fiscal year ended June 30, 2017, is presented below.
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Weighted- |
|
Average |
|
|
|
|
|
|
|
|
Average |
|
Remaining |
|
Aggregate |
||
|
|
Number of |
|
Exercise |
|
Contractual |
|
Intrinsic Value |
||
|
|
Shares |
|
Price |
|
Life (Years) |
|
(in thousands) |
||
Outstanding at July 1, 2016 |
|
367,805 |
|
$ |
62.58 |
|
|
|
|
|
Granted |
|
63,340 |
|
$ |
83.29 |
|
|
|
|
|
Exercised |
|
(7,000) |
|
$ |
30.96 |
|
|
|
|
|
Forfeited |
|
— |
|
$ |
— |
|
|
|
|
|
Outstanding at June 30, 2017 |
|
424,145 |
|
$ |
66.19 |
|
6.6 |
|
$ |
5,404 |
Exercisable at June 30, 2017 |
|
269,987 |
|
$ |
63.62 |
|
5.6 |
|
$ |
3,928 |
The weighted‑average grant date fair value of SSARs granted during the fiscal years ended June 30, 2017, 2016 and 2015 was $29.76, $18.35 and $24.42, respectively. The total intrinsic value of SSARs exercised during the fiscal years ended June 30, 2017, 2016 and 2015, were $0.2 million, $0.3 million, and $0.2 million, respectively.
As of June 30, 2017, there was approximately $2.0 million of total unrecognized stock‑based compensation expense related to non‑vested SSARs, which is expected to be recognized over a weighted‑average period of 1.7 years.
Other Stock‑based Compensation
Performance Shares
During fiscal 2017, officers and certain employees were granted 29,830 shares of restricted common stock that can be earned only upon the Company’s achievement of certain pre‑defined performance measures. Specifically, for performance shares granted in fiscal 2017, one‑half of the shares awarded may vest upon the Company’s achievement of annual growth in Net Gold Equivalent Ounces (“Net GEOs”) (“GEO Shares”). The second one‑half of performance shares granted in fiscal 2017 may vest based on the Company’s total shareholder return (“TSR”) compared to the TSRs of other members of the Market Vectors Gold Miners ETF (GDX) (“TSR Shares”). GEO Shares and TSR Shares may vest by linear interpolation in a range between zero shares if neither threshold Net GEO and TSR metric is met; to 100% of GEO Shares and TSR Shares awarded if both target Net GEO and TSR metrics are met; to 200% of the Net GEO and TSR shares awarded if both the maximum Net GEO and TSR metrics are met. The GEO Shares will expire in five years from the date of grant if the performance measure is not met, while the TSR Shares will expire in three years from the date of grant if the TSR market condition and three year service condition are not met.
The Company measures the fair value of the GEO Shares based upon the market price of our common stock as of the date of grant. In accordance with ASC 718, the measurement date for the GEO Shares will be determined at such time that the performance goals are attained or that it is probable they will be attained. At such time that it is probable that a performance condition will be achieved, compensation expense will be measured by the number of shares that will ultimately be earned based on the grant date market price of our common stock. For shares that were previously estimated to be probable of vesting and are no longer deemed to be probable of vesting, compensation expense is reversed during the period in which it is determined they are no longer probable of vesting. Interim recognition of compensation expense will be made at such time as management can reasonably estimate the number of shares that will be earned.
In accordance with ASC 718, provided the market condition within the TSR Shares, the Company measured the grant date fair value using a Monte Carlo valuation model. The fair value of the TSR Shares ($53.65 per share) is multiplied by the target number of TSR Shares granted to determine total stock‑based compensation expense. Total stock‑based compensation expense of the TSR Shares is amortized on a straight‑line basis over the requisite service period, or three years. Stock‑based compensation expense for the TSR Shares is recognized provided the requisite service period is rendered, regardless of when, if ever, the TSR market condition is satisfied. The Company will reverse previously recognized stock‑based compensation expense attributable to the TSR Shares only if the requisite service period is not rendered.
A summary of the status of the Company’s non‑vested Performance Shares for the fiscal year ended June 30, 2017, is presented below:
|
|
|
|
Weighted- |
|
|
|
|
|
Average |
|
|
|
Number of |
|
Grant Date |
|
|
|
Shares |
|
Fair Value |
|
Non-vested at July 1, 2016 |
|
210,178 |
|
$ |
63.78 |
Granted |
|
29,830 |
|
$ |
68.47 |
Vested |
|
(45,774) |
|
$ |
65.57 |
Expired |
|
(29,550) |
|
$ |
68.18 |
Forfeited |
|
— |
|
$ |
— |
Non-vested at June 30, 2017 |
|
164,684 |
|
$ |
68.53 |
As of June 30, 2017, total unrecognized stock‑based compensation expense related to Performance Shares was approximately $1.4 million, which is expected to be recognized over the average remaining vesting period of 1.8 years.
Restricted Stock
Officers, non‑executive directors and certain employees may be granted shares of restricted stock that vest on continued service alone (“Restricted Stock”). During fiscal 2017, officers and certain employees were granted 31,380 shares of Restricted Stock. Restricted Stock awards granted to officers and certain employees vest over three years beginning after a two‑year holding period from the date of grant with one‑third of the shares vesting in years three, four and five, respectively. Also during fiscal year 2017, our non‑executive directors were granted 13,510 shares of Restricted Stock. The non‑executive directors’ shares of Restricted Stock vest 50% immediately and 50% one year after the date of grant.
The Company measures the fair value of the Restricted Stock based upon the market price of our common stock as of the date of grant. Restricted Stock is amortized over the applicable vesting period using the straight‑line method. Unvested shares of Restricted Stock are subject to forfeiture upon termination of employment or service with the Company.
A summary of the status of the Company’s non‑vested Restricted Stock for the fiscal year ended June 30, 2017, is presented below:
|
|
|
|
Weighted- |
|
|
|
|
|
Average |
|
|
|
Number of |
|
Grant Date |
|
|
|
Shares |
|
Fair Value |
|
Non-vested at July 1, 2016 |
|
176,522 |
|
$ |
63.46 |
Granted |
|
44,890 |
|
$ |
83.29 |
Vested |
|
(54,603) |
|
$ |
64.08 |
Forfeited |
|
— |
|
$ |
— |
Non-vested at June 30, 2017 |
|
166,809 |
|
$ |
68.60 |
As of June 30, 2017, total unrecognized stock‑based compensation expense related to Restricted Stock was approximately $5.4 million, which is expected to be recognized over the weighted‑average vesting period of 3.0 years.
|
8. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has 10,000,000 authorized and unissued shares of $.01 par value Preferred Stock as of June 30, 2017 and 2016.
Common Stock Issuances
During the fiscal years ended June 30, 2017, 2016 and 2015, options to purchase 17,198, 2,500 and 20,488 shares, respectively, were exercised, resulting in proceeds of approximately $0.5 million, $0.1 million and $0.8 million, respectively.
Stockholders’ Rights Plan
On September 10, 2007, the Company entered into the First Amended and Restated Rights Agreement, dated September 10, 2007 (the “Rights Agreement”). The Rights Agreement was approved by the Company’s board of directors (the “Board”). The Rights Agreement expires on September 10, 2017, and an amended or new stockholder rights plan may or may not be implemented in the future.
The Rights Agreement is intended to deter coercive or abusive tender offers and market accumulations. The Rights Agreement is designed to encourage an acquirer to negotiate with the Board and to enhance the Board’s ability to act in the best interests of all the Company’s stockholders.
Under the Rights Agreement, each stockholder of the Company holds one preferred stock purchase right (a “Right”) for each share of Company common stock held. The Rights generally become exercisable only in the event that an acquiring party accumulates 15 percent or more of the Company’s outstanding shares of common stock. If this were to occur, subject to certain exceptions, each Right (except for the Rights held by the acquiring party) would allow its holders to purchase one one‑thousandth of a newly issued share of Series A junior participating preferred stock of Royal Gold or the Company’s common stock with a value equal to twice the exercise price of the Right, initially set at $175 under the terms and conditions set forth in the Rights Agreement.
|
9. 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 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 table summarizes the effects of dilutive securities on diluted EPS for the period:
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|||
|
|
(in thousands, except per share data) |
|
|||||||
Net income (loss) available to Royal Gold common stockholders |
|
$ |
101,530 |
|
$ |
(77,149) |
|
$ |
51,965 |
|
Weighted-average shares for basic EPS |
|
|
65,152,782 |
|
|
65,074,455 |
|
|
65,007,861 |
|
Effect of other dilutive securities |
|
|
125,171 |
|
|
- |
|
|
117,312 |
|
Weighted-average shares for diluted EPS |
|
|
65,277,953 |
|
|
65,074,455 |
|
|
65,125,173 |
|
Basic earnings (loss) per share |
|
$ |
1.55 |
|
$ |
(1.18) |
|
$ |
0.80 |
|
Diluted earnings (loss) per share |
|
$ |
1.55 |
|
$ |
(1.18) |
|
$ |
0.80 |
|
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 initial conversion price of $105.31.
|
10. INCOME TAXES
For financial reporting purposes, Income (loss) before income taxes includes the following components:
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
United States |
|
$ |
15,253 |
|
$ |
(230) |
|
$ |
17,569 |
Foreign |
|
|
103,613 |
|
|
(21,528) |
|
|
44,675 |
|
|
$ |
118,866 |
|
$ |
(21,758) |
|
$ |
62,244 |
The Company’s Income tax expense consisted of:
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Current: |
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
13,975 |
|
$ |
45,878 |
|
$ |
22,418 |
State |
|
|
308 |
|
|
135 |
|
|
(36) |
Foreign |
|
|
10,602 |
|
|
19,650 |
|
|
14,835 |
|
|
$ |
24,885 |
|
$ |
65,663 |
|
$ |
37,217 |
Deferred and others: |
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(1,443) |
|
$ |
(6,986) |
|
$ |
(5,506) |
State |
|
|
(18) |
|
|
(78) |
|
|
(49) |
Foreign |
|
|
3,017 |
|
|
2,081 |
|
|
(22,096) |
|
|
$ |
1,556 |
|
$ |
(4,983) |
|
$ |
(27,651) |
Total income tax expense |
|
$ |
26,441 |
|
$ |
60,680 |
|
$ |
9,566 |
The provision for income taxes for the fiscal years ended June 30, 2017, 2016 and 2015, differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre‑tax income (net of non‑controlling interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences:
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Total expense computed by applying federal rates |
|
$ |
41,603 |
|
$ |
(7,615) |
|
$ |
21,786 |
State and provincial income taxes, net of federal benefit |
|
|
78 |
|
|
(1) |
|
|
25 |
Excess depletion |
|
|
(1,517) |
|
|
(882) |
|
|
(1,429) |
Estimates for uncertain tax positions |
|
|
2,870 |
|
|
1,866 |
|
|
1,404 |
Statutory tax attributable to non-controlling interest |
|
|
3,162 |
|
|
1,838 |
|
|
(211) |
Effect of foreign earnings |
|
|
3,046 |
|
|
61,576 |
|
|
6,536 |
Effect of foreign earnings indefinitely reinvested |
|
|
(22,922) |
|
|
3,406 |
|
|
(7,601) |
Canadian rate adjustment |
|
|
— |
|
|
— |
|
|
4,070 |
Chilean tax reform |
|
|
— |
|
|
— |
|
|
(2,481) |
Unrealized foreign exchange gains |
|
|
(746) |
|
|
(2,439) |
|
|
(10,949) |
Changes in estimates |
|
|
(3,676) |
|
|
1,641 |
|
|
(359) |
Valuation allowance |
|
|
4,374 |
|
|
849 |
|
|
— |
Other |
|
|
169 |
|
|
441 |
|
|
(1,225) |
|
|
$ |
26,441 |
|
$ |
60,680 |
|
$ |
9,566 |
The effective tax rate includes the impact of certain undistributed foreign subsidiary earnings for which we have not provided U.S. taxes because we plan to reinvest such earnings indefinitely outside the United States. The Company has the ability and intent to indefinitely reinvest these foreign earnings based on revenue and cash projections of our other investments, current cash on hand, and availability under our revolving credit facility. No deferred tax has been provided on the difference between the tax basis in the stock of the consolidated subsidiary and the amount of the subsidiary’s net equity determined for financial reporting purposes.
The tax effects of temporary differences and carryforwards, which give rise to our deferred tax assets and liabilities at June 30, 2017 and 2016, are as follows:
|
|
2017 |
|
2016 |
||
|
|
(Amounts in thousands) |
||||
Deferred tax assets: |
|
|
|
|
|
|
Stock-based compensation |
|
$ |
5,979 |
|
$ |
5,691 |
Net operating losses |
|
|
5,341 |
|
|
12,385 |
Foreign tax credits |
|
|
19,869 |
|
|
— |
Other |
|
|
7,382 |
|
|
4,610 |
Total deferred tax assets |
|
|
38,571 |
|
|
22,686 |
Valuation allowance |
|
|
(6,474) |
|
|
(2,100) |
Net deferred tax assets |
|
$ |
32,097 |
|
$ |
20,586 |
Deferred tax liabilities: |
|
|
|
|
|
|
Mineral property basis |
|
$ |
(122,870) |
|
$ |
(127,337) |
Unrealized foreign exchange gains |
|
|
(1,097) |
|
|
(1,273) |
2019 Notes |
|
|
(8,634) |
|
|
(12,639) |
Investment in the Peak Gold JV |
|
|
(5,475) |
|
|
— |
Other |
|
|
(595) |
|
|
(124) |
Total deferred tax liabilities |
|
|
(138,671) |
|
|
(141,373) |
Total net deferred taxes |
|
$ |
(106,574) |
|
$ |
(120,787) |
The Company reviews the measurement of its deferred tax assets at each balance sheet date. All available evidence, both positive and negative, is considered in determining whether, based upon the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2017 and 2016, the Company had $6.5 million and $2.1 million of valuation allowances recorded, respectively. The valuation allowance remaining at June 30, 2017 is attributable to US foreign tax credits and capital loss carryforwards in non‑US subsidiaries.
At June 30, 2017 and 2016, the Company had $32.1 million and $59.5 million of net operating loss carry forwards, respectively. The decrease in the net operating loss carry forwards is primarily attributable to the utilization of net operating losses by non‑U.S. subsidiaries. The majority of the tax loss carry forwards are in jurisdictions that allow a twenty year carry forward period. As a result, these losses do not begin to expire until the 2028 tax year, and the Company anticipates the losses will be fully utilized.
As of June 30, 2017 and 2016, the Company had $28.5 million and $26.9 million of unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Total gross unrecognized tax benefits at beginning of year |
|
$ |
26,960 |
|
$ |
26,120 |
|
$ |
23,956 |
Additions / Reductions for tax positions of current year |
|
|
1,394 |
|
|
840 |
|
|
2,421 |
Additions / Reductions for tax positions of prior years |
|
|
188 |
|
|
— |
|
|
— |
Reductions due to settlements with taxing authorities |
|
|
— |
|
|
— |
|
|
(257) |
Reductions due to lapse of statute of limitations |
|
|
— |
|
|
— |
|
|
— |
Total amount of gross unrecognized tax benefits at end of year |
|
$ |
28,542 |
|
$ |
26,960 |
|
$ |
26,120 |
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal, state and local, and non‑U.S. income tax examinations by tax authorities for fiscal years before 2013. As a result of (i) statutes of limitation that will begin to expire within the next 12 months in various jurisdictions, (ii) possible settlements of audit‑related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, and (iii) additional accrual of exposure and interest on existing items, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will not decrease in the next 12 months.
The Company’s continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At June 30, 2017 and 2016, the amount of accrued income‑tax‑related interest and penalties was $6.8 million and $5.7 million, respectively. The gross unrecognized tax benefits reflected in the tabular reconciliation do not include interest and penalties and are not reduced by advanced deposits of $9.7 million made to taxing authorities.
|
11. SUPPLEMENTAL CASH FLOW INFORMATION
The Company’s supplemental cash flow information for the fiscal years ending June 30, 2017, 2016 and 2015 is as follows:
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
18,999 |
|
$ |
17,691 |
|
$ |
10,638 |
Income taxes, net of refunds |
|
$ |
26,835 |
|
$ |
76,072 |
|
$ |
20,272 |
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Dividends declared |
|
$ |
62,066 |
|
$ |
59,388 |
|
$ |
56,715 |
|
12. FAIR VALUE MEASUREMENTS
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;
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.
|
|
As of June 30, 2017 |
|||||||||||||
|
|
Carrying |
|
Fair Value |
|||||||||||
|
|
Amount |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||||
Assets (In thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants(1) |
|
$ |
2,194 |
|
$ |
2,194 |
|
$ |
— |
|
$ |
2,194 |
|
$ |
— |
Total assets |
|
|
|
|
$ |
2,194 |
|
$ |
— |
|
$ |
2,194 |
|
$ |
— |
Liabilities (In thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt(2) |
|
$ |
421,749 |
|
$ |
400,029 |
|
$ |
400,029 |
|
$ |
— |
|
$ |
— |
Total liabilities |
|
|
|
|
$ |
400,029 |
|
$ |
400,029 |
|
$ |
— |
|
$ |
— |
(1) |
Included in Other assets on the Company’s consolidated balance sheets. |
(2) |
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 in the Company’s consolidated balance sheets. |
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 June 30, 2017. The warrants issued by Golden Star (Note 3) classified within Level 2 of the fair value hierarchy are model-derived (Black-Scholes) valuations in which the significant inputs are observable in active markets.
As of June 30, 2017, 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 stream and royalty 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. Refer to Note 4 for discussion of inputs used to develop fair value for those stream and royalty interests that were determined to be impaired during the twelve months ended June 30, 2016 and 2015.
|
13. MAJOR SOURCES OF REVENUE
Operators that contributed greater than 10% of the Company’s total revenue for any of fiscal years 2017, 2016 or 2015 were as follows (revenue amounts in thousands):
|
|
Fiscal Year 2017 |
|
Fiscal Year 2016 |
|
Fiscal Year 2015 |
|
|||||||||
|
|
|
|
|
Percentage of |
|
|
|
|
Percentage of |
|
|
|
|
Percentage of |
|
|
|
|
|
|
total |
|
|
|
|
total |
|
|
|
|
total |
|
Operator |
|
Revenue |
|
revenue |
|
Revenue |
|
revenue |
|
Revenue |
|
revenue |
|
|||
Centerra |
|
$ |
136,737 |
|
31.0 |
% |
$ |
125,438 |
|
34.9 |
% |
$ |
94,104 |
|
33.8 |
% |
Barrick |
|
|
104,009 |
|
23.6 |
% |
|
49,683 |
|
13.8 |
% |
|
24,849 |
|
8.9 |
% |
Teck |
|
|
60,251 |
|
13.7 |
% |
|
49,243 |
|
13.7 |
% |
|
38,033 |
|
13.7 |
% |
|
14. COMMITMENTS AND CONTINGENCIES
Ilovica Gold Stream Acquisition
As of June 30, 2017, the Company’s conditional funding schedule, of $163.75 million as part of its Ilovica gold stream acquisition in October 2014 remains subject to certain conditions.
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, Voisey’s Bay Holding Corporation, is the general partner and 90% owner. The remaining 10% interest in LNRLP is owned by Altius Royalty Corporation, a company unrelated to Royal Gold.
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, and trial is expected to commence in the second half of calendar 2018.
|
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of selected quarterly financial information (unaudited). Some amounts in the below table may not sum‑up in total as a result of rounding.
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
attributable to |
|
Basic earnings |
|
Diluted earnings |
||||
|
|
|
|
|
income |
|
Royal Gold |
|
(loss) per |
|
(loss) per |
||||
|
|
Revenue |
|
(loss) |
|
stockholders |
|
share |
|
share |
|||||
|
|
(Amounts in thousands except per share data) |
|||||||||||||
Fiscal year 2017 quarter-ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
$ |
117,947 |
|
$ |
40,891 |
|
$ |
29,787 |
|
$ |
0.46 |
|
$ |
0.46 |
December 31, |
|
|
106,961 |
|
|
34,481 |
|
|
28,062 |
|
|
0.43 |
|
|
0.43 |
March 31, |
|
|
106,972 |
|
|
35,951 |
|
|
23,661 |
|
|
0.36 |
|
|
0.36 |
June 30, |
|
|
108,934 |
|
|
34,619 |
|
|
20,020 |
|
|
0.31 |
|
|
0.31 |
|
|
$ |
440,814 |
|
$ |
145,942 |
|
$ |
101,530 |
|
$ |
1.55 |
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year 2016 quarter-ended: |
|
(Amounts in thousands except per share data) |
|||||||||||||
September 30, |
|
$ |
74,056 |
|
$ |
21,185 |
|
$ |
(45,046) |
|
$ |
(0.69) |
|
$ |
(0.69) |
December 31, |
|
|
98,118 |
|
|
27,173 |
|
|
15,114 |
|
|
0.23 |
|
|
0.23 |
March 31, |
|
|
93,487 |
|
|
(72,058) |
|
|
(67,656) |
|
|
(1.04) |
|
|
(1.04) |
June 30, |
|
|
94,129 |
|
|
28,516 |
|
|
20,439 |
|
|
0.32 |
|
|
0.32 |
|
|
$ |
359,790 |
|
$ |
4,816 |
|
$ |
(77,149) |
|
$ |
(1.18) |
|
$ |
(1.18) |
|
Use of Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates.
Our most critical accounting estimates relate to our assumptions regarding future gold, silver, copper, and other metal prices and the estimates of reserves, production and recoveries of third‑party mine operators. We rely on reserve estimates reported by the operators on the properties in which we have stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long‑lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts could differ significantly and are recorded in the period that the actual amounts are known.
Basis of Consolidation
The consolidated financial statements include the accounts of Royal Gold, Inc., its wholly‑owned subsidiaries and an entity over which control is achieved through means other than voting right (see Note 3). The Company follows the Accounting Standards Codification (“ASC”) guidance for identification and reporting for entities over which control is achieved through means other than voting rights. All intercompany accounts, transactions, income and expenses, and profits or losses have been eliminated on consolidation.
Cash and Equivalents
Cash and equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Cash and equivalents were primarily held in cash deposit accounts as of June 30, 2017 and 2016.
Stream and Royalty Interests
Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset under the ASC guidance.
Acquisition costs of production stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as sales occur under stream interests or royalty payments are recognized), which are estimated using proven and probable reserves as provided by the operator. Acquisition costs of stream and royalty interests on development stage mineral properties, which are not yet in production, are not amortized until the property begins production. Acquisition costs of stream or royalty interests on exploration stage mineral properties, where there are no proven and probable reserves, are not amortized. At such time as the associated exploration stage mineral interests are converted to proven and probable reserves, the cost basis is amortized over the remaining life of the mineral property, using proven and probable reserves. The carrying values of exploration stage mineral interests are evaluated for impairment at such time as information becomes available indicating that the production will not occur in the future. Exploration costs are expensed when incurred.
Available‑for‑sale Securities
Investments in securities that management does not have the intent to sell in the near term and that have readily determinable fair values are classified as available‑for‑sale securities. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity, except that declines in market value judged to be other than temporary are recognized in determining net income. When investments are sold, the realized gains and losses on these investments, determined using the specific identification method, are included in determining net income.
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 (loss). This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, and management’s ability and intent to hold the securities until fair value recovers. 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. The new cost basis is not changed for subsequent recoveries in fair value. The carrying value of the Company’s available-for-sale securities as of June 30, 2017 and 2016 was $3.7 million and $0, respectively, and is included in Other assets on our consolidated balance sheets. During the fiscal year ended June 30, 2016, the Company sold its available-for-sale securities, resulting in a realized gain of approximately $2.3 million.
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 stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest 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, 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 stream or royalty 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, and other metal prices, operators’ estimates of proven and probable reserves or mineralized material related to our stream or royalty 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 stream and royalty interests in mineral properties. It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests. Refer to Note 4 for discussion and the results of our impairment assessments for the fiscal years ended June 30, 2017, 2016 and 2015.
Revenue Recognition
Revenue is recognized pursuant to guidance in ASC 605 and based upon amounts contractually due pursuant to the underlying streaming or royalty agreement. Specifically, revenue is recognized in accordance with the terms of the underlying stream or royalty agreements subject to (i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred; (iii) the stream or royalty being fixed or determinable; and (iv) the collectability being reasonably assured. For our streaming agreements, we recognize revenue when the metal is sold.
Metal Sales
Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between 10 days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. Revenue from gold, silver and copper sales is recognized on the date of the settlement, which is also the date that title to the metal passes to the purchaser.
Cost of Sales
Cost of sales is specific to our stream agreements and is the result of our purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.
Production taxes
Certain royalty payments are subject to production taxes (or mining proceeds taxes), which are recognized at the time of revenue recognition. Production taxes are not income taxes and are included within the costs and expenses section in the Company’s consolidated statements of operations and comprehensive income (loss).
Exploration Costs
Exploration costs are specific to the Peak Gold LLC joint venture (“Peak Gold JV”) for the exploration and advancement of the Peak Gold Project, as discussed further in Note 3. Costs associated with the Peak Gold JV for the exploration and advancement of the Peak Gold Project are expensed when incurred.
Stock‑Based Compensation
The Company accounts for stock‑based compensation in accordance with the guidance of ASC 718. The Company recognizes all share‑based payments to employees, including grants of employee stock options, stock‑settled stock appreciation rights (“SSARs”), restricted stock and performance shares, in its financial statements based upon their fair values.
Reportable Segments and Geographical Information
The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long‑lived assets (stream and royalty interests, net) as of June 30, 2017 and 2016 are geographically distributed as shown in the following table:
|
|
As of June 30, 2017 |
|
As of June 30, 2016 |
||||||||||||||
|
|
Stream interest |
|
Royalty interest |
|
Total stream |
|
Stream interest |
|
Royalty |
|
Total stream |
||||||
Canada |
|
$ |
852,035 |
|
$ |
221,618 |
|
$ |
1,073,653 |
|
$ |
809,692 |
|
$ |
228,566 |
|
$ |
1,038,258 |
Dominican Republic |
|
|
543,256 |
|
|
— |
|
|
543,256 |
|
|
588,502 |
|
|
— |
|
|
588,502 |
Chile |
|
|
348,778 |
|
|
453,369 |
|
|
802,147 |
|
|
369,896 |
|
|
453,629 |
|
|
823,525 |
Africa |
|
|
123,760 |
|
|
572 |
|
|
124,332 |
|
|
88,596 |
|
|
697 |
|
|
89,293 |
Mexico |
|
|
— |
|
|
105,889 |
|
|
105,889 |
|
|
— |
|
|
118,899 |
|
|
118,899 |
United States |
|
|
— |
|
|
168,378 |
|
|
168,378 |
|
|
— |
|
|
102,385 |
|
|
102,385 |
Australia |
|
|
— |
|
|
37,409 |
|
|
37,409 |
|
|
— |
|
|
42,547 |
|
|
42,547 |
Other |
|
|
12,030 |
|
|
25,162 |
|
|
37,192 |
|
|
12,029 |
|
|
32,649 |
|
|
44,678 |
Total |
|
$ |
1,879,859 |
|
$ |
1,012,397 |
|
$ |
2,892,256 |
|
$ |
1,868,715 |
|
$ |
979,372 |
|
$ |
2,848,087 |
The Company’s revenue, cost of sales and net revenue by reportable segment for our fiscal years ended June 30, 2017, 2016 and 2015 are geographically distributed as show in the following tables:
|
|
Fiscal Year Ended June 30, 2017 |
|
Fiscal Year Ended June 30, 2016 |
||||||||||||||
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
|
Revenue |
|
Cost of sales |
|
Net revenue |
||||||
Streams: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
136,736 |
|
$ |
45,954 |
|
$ |
90,782 |
|
$ |
125,755 |
|
$ |
47,417 |
|
$ |
78,338 |
Dominican Republic |
|
|
91,589 |
|
|
27,191 |
|
|
64,398 |
|
|
39,684 |
|
|
11,625 |
|
|
28,059 |
Chile |
|
|
60,251 |
|
|
9,037 |
|
|
51,214 |
|
|
49,243 |
|
|
7,280 |
|
|
41,963 |
Africa |
|
|
25,435 |
|
|
5,083 |
|
|
20,352 |
|
|
23,346 |
|
|
4,657 |
|
|
18,689 |
Total streams |
|
$ |
314,011 |
|
$ |
87,265 |
|
$ |
226,746 |
|
$ |
238,028 |
|
$ |
70,979 |
|
$ |
167,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico |
|
$ |
41,945 |
|
$ |
— |
|
$ |
41,945 |
|
$ |
35,267 |
|
$ |
— |
|
$ |
35,267 |
United States |
|
|
35,282 |
|
|
— |
|
|
35,282 |
|
|
35,483 |
|
|
— |
|
|
35,483 |
Canada |
|
|
23,208 |
|
|
— |
|
|
23,208 |
|
|
30,676 |
|
|
— |
|
|
30,676 |
Australia |
|
|
12,943 |
|
|
— |
|
|
12,943 |
|
|
10,462 |
|
|
— |
|
|
10,462 |
Africa |
|
|
3,131 |
|
|
— |
|
|
3,131 |
|
|
1,868 |
|
|
— |
|
|
1,868 |
Chile |
|
|
1,648 |
|
|
— |
|
|
1,648 |
|
|
84 |
|
|
— |
|
|
84 |
Other |
|
|
8,646 |
|
|
— |
|
|
8,646 |
|
|
7,922 |
|
|
— |
|
|
7,922 |
Total royalties |
|
$ |
126,803 |
|
$ |
— |
|
$ |
126,803 |
|
$ |
121,762 |
|
$ |
— |
|
$ |
121,762 |
Total streams and royalties |
|
$ |
440,814 |
|
$ |
87,265 |
|
$ |
353,549 |
|
$ |
359,790 |
|
$ |
70,979 |
|
$ |
288,811 |
|
|
Fiscal Year Ended June 30, 2016 |
|
Fiscal Year Ended June 30, 2015 |
||||||||||||||
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
|
Revenue |
|
Cost of sales |
|
Net revenue |
||||||
Streams: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
125,755 |
|
$ |
47,417 |
|
$ |
78,338 |
|
$ |
94,104 |
|
$ |
33,450 |
|
$ |
60,654 |
Chile |
|
|
49,243 |
|
|
7,280 |
|
|
41,963 |
|
|
— |
|
|
— |
|
|
— |
Dominican Republic |
|
|
39,684 |
|
|
11,625 |
|
|
28,059 |
|
|
— |
|
|
— |
|
|
— |
Africa |
|
|
23,346 |
|
|
4,657 |
|
|
18,689 |
|
|
— |
|
|
— |
|
|
— |
Total streams |
|
$ |
238,028 |
|
$ |
70,979 |
|
$ |
167,049 |
|
$ |
94,104 |
|
$ |
33,450 |
|
$ |
60,654 |
Royalties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
35,483 |
|
$ |
— |
|
$ |
35,483 |
|
$ |
42,675 |
|
$ |
— |
|
$ |
42,675 |
Mexico |
|
|
35,267 |
|
|
— |
|
|
35,267 |
|
|
43,008 |
|
|
— |
|
|
43,008 |
Canada |
|
|
30,676 |
|
|
— |
|
|
30,676 |
|
|
37,496 |
|
|
— |
|
|
37,496 |
Australia |
|
|
10,462 |
|
|
— |
|
|
10,462 |
|
|
8,494 |
|
|
— |
|
|
8,494 |
Africa |
|
|
1,868 |
|
|
— |
|
|
1,868 |
|
|
3,075 |
|
|
— |
|
|
3,075 |
Chile |
|
|
84 |
|
|
— |
|
|
84 |
|
|
39,508 |
|
|
— |
|
|
39,508 |
Other |
|
|
7,922 |
|
|
— |
|
|
7,922 |
|
|
9,659 |
|
|
— |
|
|
9,659 |
Total royalties |
|
$ |
121,762 |
|
$ |
— |
|
$ |
121,762 |
|
$ |
183,915 |
|
$ |
— |
|
$ |
183,915 |
Total streams and royalties |
|
$ |
359,790 |
|
$ |
70,979 |
|
$ |
288,811 |
|
$ |
278,019 |
|
$ |
33,450 |
|
$ |
244,569 |
Income Taxes
The Company accounts for income taxes in accordance with the guidance of ASC 740. The Company’s annual tax rate is based on income, statutory tax rates in effect and tax planning opportunities available to us in the various jurisdictions in which the Company operates. Significant judgment is required in determining the annual tax expense, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate or unpredicted results from the final determination of each year’s liability by taxing authorities.
The Company’s deferred income taxes reflect the impact of temporary differences between the reported amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. In evaluating the realizability of the deferred tax assets, management considers both positive and negative evidence that may exist, such as earnings history, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies in each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning strategies.
The Company has asserted the indefinite reinvestment of certain foreign subsidiary earnings as determined by management’s judgment about and intentions concerning the future operations of the Company. As a result, the Company does not record a U.S. deferred tax liability for the excess of the book basis over the tax basis of its investments in foreign corporations to the extent that the basis difference results from earnings that meet the indefinite reversal criteria. Refer to Note 10 for further discussion on our assertion.
The Company’s operations may involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company adjusts these reserves in light of changing facts and circumstances, such as the progress of a tax audit; however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period which they are determined. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Comprehensive Income (Loss)
In addition to net income, comprehensive income (loss) includes changes in equity during a period associated with cumulative unrealized changes in the fair value of marketable securities held for sale, net of tax effects.
Earnings per Share
Basic earnings (loss) per share is computed by dividing net income (loss) available to Royal Gold common stockholders by the weighted average number of outstanding common shares for the period, considering the effect of participating securities. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts that may require issuance of common shares were converted. Diluted earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the diluted weighted average number of common shares outstanding during each fiscal year.
Reclassifications
Certain income tax amounts in the prior period consolidated balance sheet and consolidated statement of cash flows have been reclassified to conform with the presentation in the current period consolidated balance sheet and consolidated statement of cash flows. The reclassifications had no effect on reported net income (loss).
Reclassifications
Certain income tax amounts in the prior period consolidated balance sheet and consolidated statement of cash flows have been reclassified to conform with the presentation in the current period consolidated balance sheet and consolidated statement of cash flows. The reclassifications had no effect on reported net income (loss).
Recently Issued and Recently Adopted Accounting Standards
Recently Issued
In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU guidance clarifying the definition of a business and providing additional guidance for determining whether transactions should be accounted for as acquisitions of assets or businesses. The new guidance is effective for the Company July 1, 2018 and early adoption is permitted. The new guidance is required to be applied on a prospective basis. The Company is evaluating the new guidance.
In March 2016, the FASB issued ASU guidance to simplify several aspects of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation with actual forfeitures as they occur, as well as certain classifications on the statement of cash flows. The new guidance is effective for the Company’s fiscal year beginning July 1, 2017. We are currently evaluating the impact this guidance will have on our consolidated financial statements and footnote disclosures.
In May 2014, the FASB issued ASU guidance for the recognition of revenue from contracts with customers. This ASU superseded virtually all of the revenue recognition guidance in generally accepted accounting principles in the United States. The core principle of the five–step model is that an entity will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Entities can choose to apply the standard using either the full retrospective approach or a modified retrospective approach, and is effective for the Company’s fiscal year beginning July 1, 2018. Early adoption is permitted.
We plan to implement the new ASU revenue recognition guidance as of July 1, 2018, using the modified retrospective method with the cumulative effect, if any, of initial adoption to be recognized in Accumulated earnings at the date of initial application. We are in the initial stages of our evaluation of the impact of the new standard on our accounting policies, processes, and financial reporting. Based on the evaluation performed to-date, we expect to identify similar performance obligations as compared with deliverables and separate units of account previously identified. We will continue to assess the impact of adopting this ASU throughout the remainder of calendar 2017.
Recently Adopted
In August 2014, the FASB issued ASU guidance for disclosure of uncertainties about an entity’s ability to continue as a going concern. The new guidance requires management of the Company to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern. The new guidance was effective, and the Company adopted this standard, effective January 1, 2017.
|
|
|
As of June 30, 2017 |
|
As of June 30, 2016 |
||||||||||||||
|
|
Stream interest |
|
Royalty interest |
|
Total stream |
|
Stream interest |
|
Royalty |
|
Total stream |
||||||
Canada |
|
$ |
852,035 |
|
$ |
221,618 |
|
$ |
1,073,653 |
|
$ |
809,692 |
|
$ |
228,566 |
|
$ |
1,038,258 |
Dominican Republic |
|
|
543,256 |
|
|
— |
|
|
543,256 |
|
|
588,502 |
|
|
— |
|
|
588,502 |
Chile |
|
|
348,778 |
|
|
453,369 |
|
|
802,147 |
|
|
369,896 |
|
|
453,629 |
|
|
823,525 |
Africa |
|
|
123,760 |
|
|
572 |
|
|
124,332 |
|
|
88,596 |
|
|
697 |
|
|
89,293 |
Mexico |
|
|
— |
|
|
105,889 |
|
|
105,889 |
|
|
— |
|
|
118,899 |
|
|
118,899 |
United States |
|
|
— |
|
|
168,378 |
|
|
168,378 |
|
|
— |
|
|
102,385 |
|
|
102,385 |
Australia |
|
|
— |
|
|
37,409 |
|
|
37,409 |
|
|
— |
|
|
42,547 |
|
|
42,547 |
Other |
|
|
12,030 |
|
|
25,162 |
|
|
37,192 |
|
|
12,029 |
|
|
32,649 |
|
|
44,678 |
Total |
|
$ |
1,879,859 |
|
$ |
1,012,397 |
|
$ |
2,892,256 |
|
$ |
1,868,715 |
|
$ |
979,372 |
|
$ |
2,848,087 |
|
|
Fiscal Year Ended June 30, 2017 |
|
Fiscal Year Ended June 30, 2016 |
||||||||||||||
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
|
Revenue |
|
Cost of sales |
|
Net revenue |
||||||
Streams: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
136,736 |
|
$ |
45,954 |
|
$ |
90,782 |
|
$ |
125,755 |
|
$ |
47,417 |
|
$ |
78,338 |
Dominican Republic |
|
|
91,589 |
|
|
27,191 |
|
|
64,398 |
|
|
39,684 |
|
|
11,625 |
|
|
28,059 |
Chile |
|
|
60,251 |
|
|
9,037 |
|
|
51,214 |
|
|
49,243 |
|
|
7,280 |
|
|
41,963 |
Africa |
|
|
25,435 |
|
|
5,083 |
|
|
20,352 |
|
|
23,346 |
|
|
4,657 |
|
|
18,689 |
Total streams |
|
$ |
314,011 |
|
$ |
87,265 |
|
$ |
226,746 |
|
$ |
238,028 |
|
$ |
70,979 |
|
$ |
167,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico |
|
$ |
41,945 |
|
$ |
— |
|
$ |
41,945 |
|
$ |
35,267 |
|
$ |
— |
|
$ |
35,267 |
United States |
|
|
35,282 |
|
|
— |
|
|
35,282 |
|
|
35,483 |
|
|
— |
|
|
35,483 |
Canada |
|
|
23,208 |
|
|
— |
|
|
23,208 |
|
|
30,676 |
|
|
— |
|
|
30,676 |
Australia |
|
|
12,943 |
|
|
— |
|
|
12,943 |
|
|
10,462 |
|
|
— |
|
|
10,462 |
Africa |
|
|
3,131 |
|
|
— |
|
|
3,131 |
|
|
1,868 |
|
|
— |
|
|
1,868 |
Chile |
|
|
1,648 |
|
|
— |
|
|
1,648 |
|
|
84 |
|
|
— |
|
|
84 |
Other |
|
|
8,646 |
|
|
— |
|
|
8,646 |
|
|
7,922 |
|
|
— |
|
|
7,922 |
Total royalties |
|
$ |
126,803 |
|
$ |
— |
|
$ |
126,803 |
|
$ |
121,762 |
|
$ |
— |
|
$ |
121,762 |
Total streams and royalties |
|
$ |
440,814 |
|
$ |
87,265 |
|
$ |
353,549 |
|
$ |
359,790 |
|
$ |
70,979 |
|
$ |
288,811 |
|
|
Fiscal Year Ended June 30, 2016 |
|
Fiscal Year Ended June 30, 2015 |
||||||||||||||
|
|
Revenue |
|
Cost of sales |
|
Net revenue |
|
Revenue |
|
Cost of sales |
|
Net revenue |
||||||
Streams: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
125,755 |
|
$ |
47,417 |
|
$ |
78,338 |
|
$ |
94,104 |
|
$ |
33,450 |
|
$ |
60,654 |
Chile |
|
|
49,243 |
|
|
7,280 |
|
|
41,963 |
|
|
— |
|
|
— |
|
|
— |
Dominican Republic |
|
|
39,684 |
|
|
11,625 |
|
|
28,059 |
|
|
— |
|
|
— |
|
|
— |
Africa |
|
|
23,346 |
|
|
4,657 |
|
|
18,689 |
|
|
— |
|
|
— |
|
|
— |
Total streams |
|
$ |
238,028 |
|
$ |
70,979 |
|
$ |
167,049 |
|
$ |
94,104 |
|
$ |
33,450 |
|
$ |
60,654 |
Royalties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
35,483 |
|
$ |
— |
|
$ |
35,483 |
|
$ |
42,675 |
|
$ |
— |
|
$ |
42,675 |
Mexico |
|
|
35,267 |
|
|
— |
|
|
35,267 |
|
|
43,008 |
|
|
— |
|
|
43,008 |
Canada |
|
|
30,676 |
|
|
— |
|
|
30,676 |
|
|
37,496 |
|
|
— |
|
|
37,496 |
Australia |
|
|
10,462 |
|
|
— |
|
|
10,462 |
|
|
8,494 |
|
|
— |
|
|
8,494 |
Africa |
|
|
1,868 |
|
|
— |
|
|
1,868 |
|
|
3,075 |
|
|
— |
|
|
3,075 |
Chile |
|
|
84 |
|
|
— |
|
|
84 |
|
|
39,508 |
|
|
— |
|
|
39,508 |
Other |
|
|
7,922 |
|
|
— |
|
|
7,922 |
|
|
9,659 |
|
|
— |
|
|
9,659 |
Total royalties |
|
$ |
121,762 |
|
$ |
— |
|
$ |
121,762 |
|
$ |
183,915 |
|
$ |
— |
|
$ |
183,915 |
Total streams and royalties |
|
$ |
359,790 |
|
$ |
70,979 |
|
$ |
288,811 |
|
$ |
278,019 |
|
$ |
33,450 |
|
$ |
244,569 |
|
As of June 30, 2017 (Amounts in thousands): |
|
Cost |
|
Accumulated Depletion |
|
Net |
|||
Production stage stream interests: |
|
|
|
|
|
|
|
|
|
Mount Milligan |
|
$ |
790,635 |
|
$ |
(114,327) |
|
$ |
676,308 |
Pueblo Viejo |
|
|
610,404 |
|
|
(67,149) |
|
|
543,255 |
Andacollo |
|
|
388,182 |
|
|
(39,404) |
|
|
348,778 |
Wassa and Prestea |
|
|
146,475 |
|
|
(22,715) |
|
|
123,760 |
Total production stage stream interests |
|
|
1,935,696 |
|
|
(243,595) |
|
|
1,692,101 |
Production stage royalty interests: |
|
|
|
|
|
|
|
|
|
Voisey's Bay |
|
|
205,724 |
|
|
(85,671) |
|
|
120,053 |
Peñasquito |
|
|
99,172 |
|
|
(34,713) |
|
|
64,459 |
Holt |
|
|
34,612 |
|
|
(19,669) |
|
|
14,943 |
Cortez |
|
|
20,873 |
|
|
(10,633) |
|
|
10,240 |
Other |
|
|
483,643 |
|
|
(337,958) |
|
|
145,685 |
Total production stage royalty interests |
|
|
844,024 |
|
|
(488,644) |
|
|
355,380 |
Total production stage stream and royalty interests |
|
|
2,779,720 |
|
|
(732,239) |
|
|
2,047,481 |
|
|
|
|
|
|
|
|
|
|
Development stage stream interests: |
|
|
|
|
|
|
|
|
|
Rainy River |
|
|
175,727 |
|
|
- |
|
|
175,727 |
Other |
|
|
12,031 |
|
|
- |
|
|
12,031 |
Total development stage stream interests |
|
|
187,758 |
|
|
- |
|
|
187,758 |
|
|
|
|
|
|
|
|
|
|
Development stage royalty interests: |
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
380,657 |
|
|
— |
|
|
380,657 |
Cortez |
|
|
59,803 |
|
|
— |
|
|
59,803 |
Other |
|
|
63,811 |
|
|
— |
|
|
63,811 |
Total development stage royalty interests |
|
|
504,271 |
|
|
— |
|
|
504,271 |
Total development stage stream and royalty interests |
|
|
692,029 |
|
|
— |
|
|
692,029 |
Total exploration stage royalty interests |
|
|
152,746 |
|
|
— |
|
|
152,746 |
Total stream and royalty interests |
|
$ |
3,624,495 |
|
$ |
(732,239) |
|
$ |
2,892,256 |
As of June 30, 2016 (Amounts in thousands): |
|
Cost |
|
Accumulated Depletion |
|
Impairments |
|
Net |
||||
Production stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Mount Milligan |
|
$ |
783,046 |
|
$ |
(74,060) |
|
$ |
— |
|
$ |
708,986 |
Pueblo Viejo |
|
|
610,404 |
|
|
(21,902) |
|
|
— |
|
|
588,502 |
Andacollo |
|
|
388,182 |
|
|
(18,286) |
|
|
— |
|
|
369,896 |
Wassa and Prestea |
|
|
96,413 |
|
|
(7,816) |
|
|
— |
|
|
88,597 |
Total production stage stream interests |
|
|
1,878,045 |
|
|
(122,064) |
|
|
— |
|
|
1,755,981 |
Production stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Voisey's Bay |
|
|
205,724 |
|
|
(85,671) |
|
|
- |
|
|
120,053 |
Peñasquito |
|
|
99,172 |
|
|
(29,898) |
|
|
- |
|
|
69,274 |
Holt |
|
|
34,612 |
|
|
(17,124) |
|
|
- |
|
|
17,488 |
Cortez |
|
|
10,630 |
|
|
(10,000) |
|
|
- |
|
|
630 |
Other |
|
|
531,735 |
|
|
(342,460) |
|
|
(18,605) |
|
|
170,670 |
Total production stage royalty interests |
|
|
881,873 |
|
|
(485,153) |
|
|
(18,605) |
|
|
378,115 |
Total production stage stream and royalty interests |
|
|
2,759,918 |
|
|
(607,217) |
|
|
(18,605) |
|
|
2,134,096 |
Development stage stream interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Rainy River |
|
|
100,706 |
|
|
- |
|
|
- |
|
|
100,706 |
Other |
|
|
87,883 |
|
|
(153) |
|
|
(75,702) |
|
|
12,028 |
Total development stage stream interests |
|
|
188,589 |
|
|
(153) |
|
|
(75,702) |
|
|
112,734 |
Development stage royalty interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Pascua-Lama |
|
|
380,657 |
|
|
— |
|
|
— |
|
|
380,657 |
Other |
|
|
66,414 |
|
|
— |
|
|
— |
|
|
66,414 |
Total development stage royalty interests |
|
|
447,071 |
|
|
— |
|
|
— |
|
|
447,071 |
Total development stage stream and royalty interests |
|
|
635,660 |
|
|
(153) |
|
|
(75,702) |
|
|
559,805 |
Total exploration stage royalty interests |
|
|
155,997 |
|
|
— |
|
|
(1,811) |
|
|
154,186 |
Total stream and royalty interests |
|
$ |
3,551,575 |
|
$ |
(607,370) |
|
$ |
(96,118) |
|
$ |
2,848,087 |
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Phoenix Gold(1) |
|
$ |
— |
|
$ |
75,702 |
|
$ |
— |
Inata(2) |
|
|
— |
|
|
11,982 |
|
|
— |
Wolverine(2) |
|
|
— |
|
|
5,307 |
|
|
25,967 |
Other |
|
|
— |
|
|
3,127 |
|
|
2,372 |
Total impairment of stream and royalty interests |
|
$ |
— |
|
$ |
96,118 |
|
$ |
28,339 |
Inata royalty receivable |
|
|
— |
|
|
2,855 |
|
|
— |
Wolverine royalty receivable |
|
|
— |
|
|
(385) |
|
|
2,996 |
Total impairment of stream and royalty interests and royalty receivables |
|
$ |
— |
|
$ |
98,588 |
|
$ |
31,335 |
(1) |
Included in Other development stage stream interests in the above stream and royalty interests table. |
(2) |
Included in Other production stage royalty interests in the above stream and royalty interests table. |
|
|
|
As of June 30, 2017 |
|
As of June 30, 2016 |
||||||||||||||||||||
|
|
Principal |
|
Unamortized Discount |
|
Debt Issuance Costs |
|
Total |
|
Principal |
|
Unamortized Discount |
|
Debt Issuance Costs |
|
Total |
||||||||
|
|
|
(Amounts in thousands) |
|
|
(Amounts in thousands) |
||||||||||||||||||
Convertible notes due 2019 |
|
$ |
370,000 |
|
$ |
(25,251) |
|
$ |
(2,646) |
|
$ |
342,103 |
|
$ |
370,000 |
|
$ |
(36,943) |
|
$ |
(3,934) |
|
$ |
329,123 |
Revolving credit facility |
|
|
250,000 |
|
|
— |
|
|
(5,933) |
|
|
244,067 |
|
|
275,000 |
|
|
— |
|
|
(3,438) |
|
|
271,562 |
Total debt |
|
$ |
620,000 |
|
$ |
(25,251) |
|
$ |
(8,579) |
|
$ |
586,170 |
|
$ |
645,000 |
|
$ |
(36,943) |
|
$ |
(7,372) |
|
$ |
600,685 |
|
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
|
(Amounts in thousands) |
||||||
Stream interests |
|
$ |
314,011 |
|
$ |
238,028 |
|
$ |
94,104 |
Royalty interests |
|
|
126,803 |
|
|
121,762 |
|
|
183,915 |
Total revenue |
|
$ |
440,814 |
|
$ |
359,790 |
|
$ |
278,019 |
|
|
|
For the Fiscal Year Ended |
|||||||
|
|
June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
|
(Amounts in thousands) |
||||||
Stock options |
|
$ |
393 |
|
$ |
454 |
|
$ |
417 |
Stock appreciation rights |
|
|
1,851 |
|
|
1,687 |
|
|
1,422 |
Restricted stock |
|
|
3,840 |
|
|
3,686 |
|
|
2,511 |
Performance stock |
|
|
3,899 |
|
|
4,212 |
|
|
791 |
Total stock-based compensation expense |
|
$ |
9,983 |
|
$ |
10,039 |
|
$ |
5,141 |
|
|
Stock Options |
|
SSARs |
|
||||||||
|
|
2017 |
|
2016 |
|
2015 |
|
2017 |
|
2016 |
|
2015 |
|
Weighted-average expected volatility |
|
41.7 |
% |
36.9 |
% |
37.3 |
% |
41.1 |
% |
36.9 |
% |
36.6 |
% |
Weighted-average expected life in years |
|
5.5 |
|
5.5 |
|
5.5 |
|
5.8 |
|
5.4 |
|
5.3 |
|
Weighted-average dividend yield |
|
1.11 |
% |
1.06 |
% |
1.00 |
% |
1.11 |
% |
1.00 |
% |
1.00 |
% |
Weighted-average risk free interest rate |
|
1.2 |
% |
1.6 |
% |
1.7 |
% |
1.3 |
% |
1.6 |
% |
1.7 |
% |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Weighted- |
|
Average |
|
|
|
|
|
|
|
|
Average |
|
Remaining |
|
Aggregate |
||
|
|
Number of |
|
Exercise |
|
Contractual |
|
Intrinsic Value |
||
|
|
Shares |
|
Price |
|
Life (Years) |
|
(in thousands) |
||
Outstanding at July 1, 2016 |
|
117,823 |
|
$ |
59.04 |
|
|
|
|
|
Granted |
|
7,200 |
|
$ |
83.29 |
|
|
|
|
|
Exercised |
|
(17,198) |
|
$ |
37.30 |
|
|
|
|
|
Forfeited |
|
— |
|
$ |
— |
|
|
|
|
|
Outstanding at June 30, 2017 |
|
107,825 |
|
$ |
64.13 |
|
6.2 |
|
$ |
1,551 |
Exercisable at June 30, 2017 |
|
77,310 |
|
$ |
63.32 |
|
5.5 |
|
$ |
1,148 |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Weighted- |
|
Average |
|
|
|
|
|
|
|
|
Average |
|
Remaining |
|
Aggregate |
||
|
|
Number of |
|
Exercise |
|
Contractual |
|
Intrinsic Value |
||
|
|
Shares |
|
Price |
|
Life (Years) |
|
(in thousands) |
||
Outstanding at July 1, 2016 |
|
367,805 |
|
$ |
62.58 |
|
|
|
|
|
Granted |
|
63,340 |
|
$ |
83.29 |
|
|
|
|
|
Exercised |
|
(7,000) |
|
$ |
30.96 |
|
|
|
|
|
Forfeited |
|
— |
|
$ |
— |
|
|
|
|
|
Outstanding at June 30, 2017 |
|
424,145 |
|
$ |
66.19 |
|
6.6 |
|
$ |
5,404 |
Exercisable at June 30, 2017 |
|
269,987 |
|
$ |
63.62 |
|
5.6 |
|
$ |
3,928 |
|
|
|
|
Weighted- |
|
|
|
|
|
Average |
|
|
|
Number of |
|
Grant Date |
|
|
|
Shares |
|
Fair Value |
|
Non-vested at July 1, 2016 |
|
210,178 |
|
$ |
63.78 |
Granted |
|
29,830 |
|
$ |
68.47 |
Vested |
|
(45,774) |
|
$ |
65.57 |
Expired |
|
(29,550) |
|
$ |
68.18 |
Forfeited |
|
— |
|
$ |
— |
Non-vested at June 30, 2017 |
|
164,684 |
|
$ |
68.53 |
|
|
|
|
Weighted- |
|
|
|
|
|
Average |
|
|
|
Number of |
|
Grant Date |
|
|
|
Shares |
|
Fair Value |
|
Non-vested at July 1, 2016 |
|
176,522 |
|
$ |
63.46 |
Granted |
|
44,890 |
|
$ |
83.29 |
Vested |
|
(54,603) |
|
$ |
64.08 |
Forfeited |
|
— |
|
$ |
— |
Non-vested at June 30, 2017 |
|
166,809 |
|
$ |
68.60 |
|
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|
|||
|
|
(in thousands, except per share data) |
|
|||||||
Net income (loss) available to Royal Gold common stockholders |
|
$ |
101,530 |
|
$ |
(77,149) |
|
$ |
51,965 |
|
Weighted-average shares for basic EPS |
|
|
65,152,782 |
|
|
65,074,455 |
|
|
65,007,861 |
|
Effect of other dilutive securities |
|
|
125,171 |
|
|
- |
|
|
117,312 |
|
Weighted-average shares for diluted EPS |
|
|
65,277,953 |
|
|
65,074,455 |
|
|
65,125,173 |
|
Basic earnings (loss) per share |
|
$ |
1.55 |
|
$ |
(1.18) |
|
$ |
0.80 |
|
Diluted earnings (loss) per share |
|
$ |
1.55 |
|
$ |
(1.18) |
|
$ |
0.80 |
|
|
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
United States |
|
$ |
15,253 |
|
$ |
(230) |
|
$ |
17,569 |
Foreign |
|
|
103,613 |
|
|
(21,528) |
|
|
44,675 |
|
|
$ |
118,866 |
|
$ |
(21,758) |
|
$ |
62,244 |
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Current: |
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
13,975 |
|
$ |
45,878 |
|
$ |
22,418 |
State |
|
|
308 |
|
|
135 |
|
|
(36) |
Foreign |
|
|
10,602 |
|
|
19,650 |
|
|
14,835 |
|
|
$ |
24,885 |
|
$ |
65,663 |
|
$ |
37,217 |
Deferred and others: |
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(1,443) |
|
$ |
(6,986) |
|
$ |
(5,506) |
State |
|
|
(18) |
|
|
(78) |
|
|
(49) |
Foreign |
|
|
3,017 |
|
|
2,081 |
|
|
(22,096) |
|
|
$ |
1,556 |
|
$ |
(4,983) |
|
$ |
(27,651) |
Total income tax expense |
|
$ |
26,441 |
|
$ |
60,680 |
|
$ |
9,566 |
|
|
Fiscal Year Ended June 30, |
|||||||
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Total expense computed by applying federal rates |
|
$ |
41,603 |
|
$ |
(7,615) |
|
$ |
21,786 |
State and provincial income taxes, net of federal benefit |
|
|
78 |
|
|
(1) |
|
|
25 |
Excess depletion |
|
|
(1,517) |
|
|
(882) |
|
|
(1,429) |
Estimates for uncertain tax positions |
|
|
2,870 |
|
|
1,866 |
|
|
1,404 |
Statutory tax attributable to non-controlling interest |
|
|
3,162 |
|
|
1,838 |
|
|
(211) |
Effect of foreign earnings |
|
|
3,046 |
|
|
61,576 |
|
|
6,536 |
Effect of foreign earnings indefinitely reinvested |
|
|
(22,922) |
|
|
3,406 |
|
|
(7,601) |
Canadian rate adjustment |
|
|
— |
|
|
— |
|
|
4,070 |
Chilean tax reform |
|
|
— |
|
|
— |
|
|
(2,481) |
Unrealized foreign exchange gains |
|
|
(746) |
|
|
(2,439) |
|
|
(10,949) |
Changes in estimates |
|
|
(3,676) |
|
|
1,641 |
|
|
(359) |
Valuation allowance |
|
|
4,374 |
|
|
849 |
|
|
— |
Other |
|
|
169 |
|
|
441 |
|
|
(1,225) |
|
|
$ |
26,441 |
|
$ |
60,680 |
|
$ |
9,566 |
|
|
2017 |
|
2016 |
||
|
|
(Amounts in thousands) |
||||
Deferred tax assets: |
|
|
|
|
|
|
Stock-based compensation |
|
$ |
5,979 |
|
$ |
5,691 |
Net operating losses |
|
|
5,341 |
|
|
12,385 |
Foreign tax credits |
|
|
19,869 |
|
|
— |
Other |
|
|
7,382 |
|
|
4,610 |
Total deferred tax assets |
|
|
38,571 |
|
|
22,686 |
Valuation allowance |
|
|
(6,474) |
|
|
(2,100) |
Net deferred tax assets |
|
$ |
32,097 |
|
$ |
20,586 |
Deferred tax liabilities: |
|
|
|
|
|
|
Mineral property basis |
|
$ |
(122,870) |
|
$ |
(127,337) |
Unrealized foreign exchange gains |
|
|
(1,097) |
|
|
(1,273) |
2019 Notes |
|
|
(8,634) |
|
|
(12,639) |
Investment in the Peak Gold JV |
|
|
(5,475) |
|
|
— |
Other |
|
|
(595) |
|
|
(124) |
Total deferred tax liabilities |
|
|
(138,671) |
|
|
(141,373) |
Total net deferred taxes |
|
$ |
(106,574) |
|
$ |
(120,787) |
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Total gross unrecognized tax benefits at beginning of year |
|
$ |
26,960 |
|
$ |
26,120 |
|
$ |
23,956 |
Additions / Reductions for tax positions of current year |
|
|
1,394 |
|
|
840 |
|
|
2,421 |
Additions / Reductions for tax positions of prior years |
|
|
188 |
|
|
— |
|
|
— |
Reductions due to settlements with taxing authorities |
|
|
— |
|
|
— |
|
|
(257) |
Reductions due to lapse of statute of limitations |
|
|
— |
|
|
— |
|
|
— |
Total amount of gross unrecognized tax benefits at end of year |
|
$ |
28,542 |
|
$ |
26,960 |
|
$ |
26,120 |
|
|
|
2017 |
|
2016 |
|
2015 |
|||
|
|
(Amounts in thousands) |
|||||||
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
18,999 |
|
$ |
17,691 |
|
$ |
10,638 |
Income taxes, net of refunds |
|
$ |
26,835 |
|
$ |
76,072 |
|
$ |
20,272 |
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Dividends declared |
|
$ |
62,066 |
|
$ |
59,388 |
|
$ |
56,715 |
|
|
|
As of June 30, 2017 |
|||||||||||||
|
|
Carrying |
|
Fair Value |
|||||||||||
|
|
Amount |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||||
Assets (In thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants(1) |
|
$ |
2,194 |
|
$ |
2,194 |
|
$ |
— |
|
$ |
2,194 |
|
$ |
— |
Total assets |
|
|
|
|
$ |
2,194 |
|
$ |
— |
|
$ |
2,194 |
|
$ |
— |
Liabilities (In thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt(2) |
|
$ |
421,749 |
|
$ |
400,029 |
|
$ |
400,029 |
|
$ |
— |
|
$ |
— |
Total liabilities |
|
|
|
|
$ |
400,029 |
|
$ |
400,029 |
|
$ |
— |
|
$ |
— |
(1) |
Included in Other assets on the Company’s consolidated balance sheets. |
(2) |
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 in the Company’s consolidated balance sheets. |
|
Operators that contributed greater than 10% of the Company’s total revenue for any of fiscal years 2017, 2016 or 2015 were as follows (revenue amounts in thousands):
|
|
Fiscal Year 2017 |
|
Fiscal Year 2016 |
|
Fiscal Year 2015 |
|
|||||||||
|
|
|
|
|
Percentage of |
|
|
|
|
Percentage of |
|
|
|
|
Percentage of |
|
|
|
|
|
|
total |
|
|
|
|
total |
|
|
|
|
total |
|
Operator |
|
Revenue |
|
revenue |
|
Revenue |
|
revenue |
|
Revenue |
|
revenue |
|
|||
Centerra |
|
$ |
136,737 |
|
31.0 |
% |
$ |
125,438 |
|
34.9 |
% |
$ |
94,104 |
|
33.8 |
% |
Barrick |
|
|
104,009 |
|
23.6 |
% |
|
49,683 |
|
13.8 |
% |
|
24,849 |
|
8.9 |
% |
Teck |
|
|
60,251 |
|
13.7 |
% |
|
49,243 |
|
13.7 |
% |
|
38,033 |
|
13.7 |
% |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
attributable to |
|
Basic earnings |
|
Diluted earnings |
||||
|
|
|
|
|
income |
|
Royal Gold |
|
(loss) per |
|
(loss) per |
||||
|
|
Revenue |
|
(loss) |
|
stockholders |
|
share |
|
share |
|||||
|
|
(Amounts in thousands except per share data) |
|||||||||||||
Fiscal year 2017 quarter-ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
$ |
117,947 |
|
$ |
40,891 |
|
$ |
29,787 |
|
$ |
0.46 |
|
$ |
0.46 |
December 31, |
|
|
106,961 |
|
|
34,481 |
|
|
28,062 |
|
|
0.43 |
|
|
0.43 |
March 31, |
|
|
106,972 |
|
|
35,951 |
|
|
23,661 |
|
|
0.36 |
|
|
0.36 |
June 30, |
|
|
108,934 |
|
|
34,619 |
|
|
20,020 |
|
|
0.31 |
|
|
0.31 |
|
|
$ |
440,814 |
|
$ |
145,942 |
|
$ |
101,530 |
|
$ |
1.55 |
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year 2016 quarter-ended: |
|
(Amounts in thousands except per share data) |
|||||||||||||
September 30, |
|
$ |
74,056 |
|
$ |
21,185 |
|
$ |
(45,046) |
|
$ |
(0.69) |
|
$ |
(0.69) |
December 31, |
|
|
98,118 |
|
|
27,173 |
|
|
15,114 |
|
|
0.23 |
|
|
0.23 |
March 31, |
|
|
93,487 |
|
|
(72,058) |
|
|
(67,656) |
|
|
(1.04) |
|
|
(1.04) |
June 30, |
|
|
94,129 |
|
|
28,516 |
|
|
20,439 |
|
|
0.32 |
|
|
0.32 |
|
|
$ |
359,790 |
|
$ |
4,816 |
|
$ |
(77,149) |
|
$ |
(1.18) |
|
$ |
(1.18) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|