Royal Gold(RGLD) - 2023 Q4 - Annual Report

PART I Business Royal Gold, Inc. acquires and manages precious metal streams and royalties, reporting $605.7 million in revenue and $415.8 million in operating cash flow for FY 2023 - The company's business model focuses on acquiring and managing precious metal streams and royalties, avoiding direct mining operations and associated capital or operating costs[14] Key Financial and Operational Highlights for FY 2023 | Metric | Value | Change | | :--- | :--- | :--- | | Revenue | $605.7 million | +0.4% YoY | | Net Operating Cash Flow | $415.8 million | -0.4% YoY | | Credit Facility Repayment | $325 million | N/A | | Calendar Year 2024 Dividend | $1.60 per share | +7% vs 2023 | Revenue Contribution by Segment (FY 2023) | Segment | Revenue Contribution | | :--- | :--- | | Stream Interests | 69% | | Royalty Interests | 31% | Revenue Contribution by Metal (FY 2023) | Metal | Revenue Contribution | | :--- | :--- | | Gold | 76% | | Silver | 12% | | Copper | 9% | | Other Minerals | 3% | - The company employs 30 people, emphasizing human capital management through diversity, inclusion, safety, and community support strategies[44][45][46] Risk Factors The company faces significant risks from volatile metal prices, reliance on third-party operators, revenue concentration, foreign operations, and financial covenants - Revenue is highly sensitive to metal price volatility, particularly gold, with declines potentially reducing revenue, impacting royalty rates, and causing production suspensions[58][59][60] - As a non-operating interest holder, the company lacks control over third-party mine operators' decisions, which may not always align with Royal Gold's interests[61] - A significant portion of revenue is concentrated in a small number of properties, with approximately 72% of 2023 revenue derived from six key sites: Mount Milligan, Cortez, Pueblo Viejo, Andacollo, Khoemacau, and Peñasquito[69] - Approximately 80% of 2023 revenue originated from properties outside the United States, exposing the company to political, economic, and regulatory risks in foreign jurisdictions[79] - The company faces financing risks related to its credit facility, with $250 million outstanding as of December 31, 2023, and financial covenants that could restrict business activities[97] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[111] Cybersecurity Royal Gold integrates cybersecurity into its enterprise risk management, with the CFO and Treasurer managing the program under Board oversight - Cybersecurity risk is managed as part of the company's overall enterprise risk management program[113] - The CFO and Treasurer manage the cybersecurity program, overseen by the Board's Audit and Finance Committee, utilizing external consultants and regular employee training[114] Properties This section details Royal Gold's portfolio of stream and royalty interests, including six material properties, and relies on operator-provided data for disclosures Summary of Properties As of December 31, 2023, Royal Gold's portfolio included 9 stream interests and 169 royalty interests, with 80% of revenue from non-U.S. properties - The company has identified six material properties under SK1300 regulations: Andacollo, Cortez, Khoemacau, Mount Milligan, Peñasquito, and Pueblo Viejo[116] Portfolio Composition as of Dec 31, 2023 | Interest Type | Production Stage | Development Stage | Exploration Stage | Total | | :--- | :--- | :--- | :--- | :--- | | Stream Interests | 8 | 1 | 0 | 9 | | Royalty Interests | 29 | 21 | 119 | 169 | - The company provides summary tables of mineral resources and reserves for its interests, based on data from operators[151][157] Andacollo Andacollo, a Chilean copper-gold mine, saw decreased gold deliveries in 2023 due to lower grades and drought, with Royal Gold holding a 100% gold stream until 900,000 ounces are delivered - Royal Gold's interest is a 100% gold stream until 900,000 ounces have been delivered, stepping down to 50% thereafter, with approximately 349,100 ounces delivered as of December 31, 2023[173] - Gold deliveries decreased to approximately 22,400 ounces in 2023 due to lower grades, recoveries, and tonnage, with ongoing extreme drought conditions impacting production[191][192] Khoemacau Khoemacau, a Botswana copper-silver mine, achieved its target production rate in December 2022, with Royal Gold holding a 100% silver stream until 40 million ounces are delivered - Royal Gold's interest is a 100% silver stream until 40.0 million ounces have been delivered, stepping down to 50% thereafter, with approximately 2.7 million ounces delivered as of December 31, 2023[203] - The mine achieved its target production rate of 3.65 Mtpa (10,000 tpd) in December 2022[204] - In November 2023, the operator's parent company, Cuprous Capital Ltd, entered an agreement to be acquired by MMG Limited[233] Mount Milligan Mount Milligan, a Canadian copper-gold mine, saw lower deliveries in 2023, but a new Cost Support Agreement aims to extend its mine life to 2035 - Royal Gold's interest is a stream for 35% of payable gold and 18.75% of payable copper[244] - A Cost Support Agreement was signed in February 2024 with operator Centerra to incentivize investment and extend the mine life, now expected to continue to 2035[244][273] - Gold and copper stream deliveries decreased in 2023 compared to 2022, primarily due to mine sequencing through a lower-grade ore-waste transition zone[271] Pueblo Viejo Pueblo Viejo, a Dominican Republic gold-silver mine, completed a major plant expansion in late 2023, expected to extend its mine life into the mid-2040s despite lower 2023 deliveries - Royal Gold's stream on Barrick's 60% interest includes 7.5% of payable gold (stepping down to 3.75% after 990k oz) and 75% of payable silver (stepping down to 37.5% after 50M oz)[287] - A plant expansion project to increase throughput to 14 Mtpa was substantially completed by the end of 2023, expected to reach full capacity in Q2 2024 and extend the mine life into the mid-2040s[289][322] - Gold deliveries decreased in 2023 due to lower ore grades and mill expansion commissioning impacts, while silver deliveries were also lower due to actual recovery rates falling below the contractual 70%[320][321] Cortez The Cortez Complex saw significantly increased production attributable to Royal Gold's royalty interests in 2023, driven by new acquisitions and the Goldrush project's Record of Decision - Royal Gold holds multiple royalty interests, simplified into two zones: the Legacy Zone (approximately 9.4% GSR on Pipeline and Crossroads) and the CC Zone (approximately 1.6% GSR on Cortez Hills, Goldrush, etc.)[337] - Production attributable to the company's royalty interests increased to 890,700 ounces of gold in 2023 from 414,100 ounces in 2022, mainly due to new royalties acquired in 2022[382] - The Bureau of Land Management (BLM) issued the Record of Decision (ROD) for the Goldrush mine in December 2023, allowing production to ramp up in 2024[383] Peñasquito Peñasquito, a Mexican mine, experienced a significant production decrease in 2023 across all metals due to a four-month labor strike - Royal Gold owns a 2.0% Net Smelter Return (NSR) royalty on all metal production from the Peñasquito mine[400] - A labor strike by the National Union of Mine and Metal Workers suspended operations from June 7, 2023, to October 13, 2023[425] Production Decrease due to Strike (2023 vs 2022) | Metal | 2023 Production | 2022 Production | % Change | | :--- | :--- | :--- | :--- | | Gold (oz) | ~129,600 | ~573,000 | -77% | | Silver (oz) | ~16.7 million | ~29.7 million | -44% | | Lead (lbs) | ~107 million | ~147 million | -27% | | Zinc (lbs) | ~222 million | ~373 million | -40% | Legal Proceedings The company reports no material legal proceedings - None[426] Mine Safety Disclosure This section is not applicable to the company - Not applicable[427] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Royal Gold's common stock trades on Nasdaq under "RGLD", and the company increased its annual dividend by 7% for 2024, marking 23 consecutive years of increases - The company's common stock is listed on the Nasdaq Global Select Market under the trading symbol "RGLD"[436] - On November 14, 2023, the company increased its annual dividend for calendar year 2024 by 7% to $1.60 per share, marking the 23rd consecutive annual dividend increase[437] Reserved This item is intentionally left blank Management's Discussion and Analysis of Financial Condition and Results of Operations For FY 2023, revenue slightly increased to $605.7 million, net income remained flat, and the company maintained strong liquidity despite a strike at Peñasquito Financial Performance Comparison (FY 2023 vs. FY 2022) | Metric (in thousands) | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Total Revenue | $605,717 | $603,206 | | Cost of Sales | $90,523 | $94,642 | | Depreciation, Depletion & Amortization | $164,937 | $178,935 | | Operating Income | $303,202 | $283,709 | | Net Income | $239,440 | $238,982 | - The slight revenue increase was primarily due to higher gold production at the Cortez Legacy Zone, new Cortez royalties acquired in 2022, and higher metal prices, offset by the Peñasquito strike and lower Mount Milligan sales volumes[457][459] - Net cash from operating activities was $415.8 million, with cash used in financing primarily for $325 million of debt repayment and $98.6 million in dividends[473][476] - As of December 31, 2023, the company had total liquidity of approximately $845 million, comprising $95 million in working capital and $750 million available under its revolving credit facility[468][469] Quantitative and Qualitative Disclosures About Market Risk The company's financial results are highly sensitive to metal price fluctuations, with gold, silver, and copper comprising the majority of its 2023 revenue - The company's financial results are significantly impacted by changes in the market prices of gold, silver, and copper[497] Revenue Sensitivity to a 10% Metal Price Change (FY 2023) | Metal | % of Total Revenue | Revenue Impact | | :--- | :--- | :--- | | Gold | 76% | $46.5 million | | Silver | 12% | $4.2 million | | Copper | 9% | $10.3 million | Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for FY 2023, showing total assets of $3.36 billion, net income of $239.4 million, and operating cash flow of $415.8 million Consolidated Balance Sheet Highlights (as of Dec 31) | Account (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Total Current Assets | $167,426 | $185,833 | | Stream and royalty interests, net | $3,075,574 | $3,237,402 | | Total Assets | $3,361,057 | $3,534,522 | | Total Current Liabilities | $72,422 | $63,587 | | Debt | $245,967 | $571,572 | | Total Liabilities | $460,416 | $781,053 | | Total Equity | $2,900,641 | $2,753,469 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | Account (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $605,717 | $603,206 | | Operating Income | $303,202 | $283,709 | | Income Before Income Taxes | $282,140 | $272,868 | | Net Income | $240,132 | $239,942 | Consolidated Cash Flow Highlights (Year Ended Dec 31, 2023) | Activity (in thousands) | Amount | | :--- | :--- | | Net Cash Provided by Operating Activities | $415,792 | | Net Cash Used in Investing Activities | $(2,829) | | Net Cash Used in Financing Activities | $(427,382) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure matters - None[628] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified auditor opinion - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[629] - Management concluded that internal control over financial reporting was effective as of December 31, 2023, supported by an attestation report from Ernst & Young LLP[631][632] - No changes in internal control over financial reporting occurred during Q4 2023 that materially affected, or are reasonably likely to materially affect, these controls[633] Other Information The company reports no Rule 10b5-1 trading arrangement adoptions or terminations by directors or officers during Q4 2023 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended December 31, 2023[643] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reports no applicable disclosures for this item - None[644] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance will be incorporated by reference from the company's 2024 proxy statement - Information is incorporated by reference from the company's 2024 proxy statement[646] Executive Compensation Information regarding executive compensation will be incorporated by reference from the company's 2024 proxy statement - Information is incorporated by reference from the company's 2024 proxy statement[647] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership will be incorporated by reference from the company's 2024 proxy statement - Information is incorporated by reference from the company's 2024 proxy statement[648] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence will be incorporated by reference from the company's 2024 proxy statement - Information is incorporated by reference from the company's 2024 proxy statement[649] Principal Accountant Fees and Services Information regarding principal accountant fees and services will be incorporated by reference from the company's 2024 proxy statement - Information is incorporated by reference from the company's 2024 proxy statement[650] PART IV Exhibits and Financial Statement Schedules This section provides an index to the financial statements and a comprehensive list of all exhibits filed with the Form 10-K report - This item contains the index to the financial statements and a comprehensive list of all exhibits filed with the annual report[652][653][655] Form 10-K Summary The company has elected not to include a summary of the Form 10-K information in this item - The company has elected not to include a summary[661]